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/raid1/www/Hosts/bankrupt/TCR_Public/980113.MBX T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, January 13, 1998, Vol. 2, No. 8 Headlines 2CONNECT: Files for Bankruptcy Protection CUSTOM DISTRIBUTION: $2 Million Property Tax Reduction FARM FRESH: Ratings Lowered by S&P FOXMEYER: Trustee Seeks Settlement With Dupont Merck FOXMEYER: Trustee May Have Some Multi-Million $$ Claims MIDCOM COMMUNICATIONS: To Reject Real Property Leases OLD AMERICA: Motion to Sell Substantially All Assets OLD AMERICA: Proposed Cure Payments PHOENIX INFORMATION: Equity Seeks Release Confidential Info RDM SPORTS: Collection of Accounts Receivable THE WIZ: Seeking Authority to Sell Excess Inventory TOWN & COUNTRY: Names Ronald F. Stengel Interim CEO UNISON HEALTHCARE: Three Subsidiaries File VITALE: Interim Order Authorizing Use of Cash Collateral WESTERN PACIFIC: A Lot of Finger Pointing WESTERN PACIFIC: Court Authorizes Rejection of Contracts WESTERN PACIFIC: MAX Wants Administrative Expense Meetings, Conferences and Seminars --------- 2CONNECT: Files for Bankruptcy Protection ----------------------------------------- 2 Connect Express, Inc. (OTC Bulletin Board: CNTCU) today announced that it has filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code, in order to protect the interests of its creditors and shareholders. The Company expects to reorganize its business affairs, including closing non-productive stores, relocating selected stores and reducing overhead expenses. The Company plans to file a plan of reorganization. 2Connect Express, Inc., is a specialty retailer and direct consultative marketer of communications related products and services under the name "2Connect, America's Total Communications Store". 2Connect is the first independent retailer and direct sales provider offering one stop shopping for communications related products and services to the individual and business community. The Company currently operates ten stores in South Florida. 2Connect Express Inc. says it has filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code, in order to protect the interests of its creditors and shareholders. CUSTOM DISTRIBUTION: $2 Million Property Tax Reduction ------------------------------------------------------ Chief U.S. Bankruptcy Judge William Gindin ruled last month in Custom Distribution Services, Inc. v. City of Perth Amboy Tax Assessor that the city over assessed a 23-acre Superfund Site by $2 million partly because it failed to consider cleanup costs or the "stigma" attached to the contaminated property. The Judge ruled that the city should reduce the assessment on the site by one-tenth of the expected cleanup costs of $1.39 million annually over ten years, plus another 20 percent annually for "contamination stigma." "This is the first time that any court in New Jersey has actually reduced an assessment based upon contamination stigma," states Robert J. Cirafesi, partner in the Woodbridge, NJ-based law firm of Wilentz, Goldman & Spitzer, P.A., the company's trial counsel before Judge Gindin. Cirafesi, who specializes in real property tax appeals, states that while the New Jersey State Supreme Court recognized the potential impact of stigma on environmentally challenged sites in re Inmar in 1988, this decision is the first to quantify it. According to the city's tax assessor, the State Street property was assessed at $3.8 million. However, at the conclusion of trial, Judge Gindin estimated the property's valuation closer to $1.02 million. The industrial property was used by National Lead Industries/Dutch Boy Paint Facility for metal and smelting refining and paint manufacturing from 1904 to 1980. State and federal authorities have determined that high levels of hazardous metals and organic compounds were discharged onto the property. A 1990 and 1991 initial tax assessment of $8.1 million had already been settled by Cirafesi and the city resulting in a reduction to $4.03 million. This most recent case was for the years 1992 through 1996. The excessive real estate tax burden forced CDS to file for bankruptcy. "If the company had not filed for bankruptcy, the state's statute of limitations for real property tax appeals would have run out," said Louis T. DeLucia, another partner in the Wilentz firm and the company's bankruptcy counsel. FARM FRESH: Ratings Lowered by S&P ---------------------------------- Standard & Poor's lowered its ratings on Farm Fresh Inc.'s $15.2 million convertible subordinated debentures and FF Holdings Corp.'s $81 million 14.25% senior notes to 'D' from single-'C'following the announcement that both companies filed for Chapter 11 bankruptcy protection on Jan. 7, 1998. Standard & Poor's also affirmed its 'D' rating on Farm Fresh Inc.'s $165.0 million 12.25% senior notes due Oct. 1, 2000. Additionally, Standard & Poor's revised its corporate credit rating on Farm Fresh and FF Holdings Corp. to not meaningful from double-'C'. The Chapter 11 bankruptcy protection filing was made in association with the company's September 1997 agreement to sell most of its assets to Richfood Holdings Inc. for $220 million in cash, $30 million in assumed leases and 1.5 million warrants to purchase Richfood's common stock. Richfood, a food wholesaler based in Richmond, Virginia and Farm Fresh's largest supplier intends to continue operating 44 of Farm Fresh's 47 supermarkets after the transaction closes. FOXMEYER: Trustee Seeks Settlement With Dupont Merck ---------------------------------------------------- Bart A. Brown, Jr., the chapter 7 trustee for Foxmeyer Corporation et al. is seeking entry of an order settling chargeback and reclamation claims with Dupont Merck Pharmaceutical Co. The material provisions of the agreement are as follows: The estates' chargeback claim is allowed in full. $423,145 to offset prepetition general unsecured claim of DMP and $473,765 used as dolllar for dollar reduction against and satisfaction of reclamation claim of DMP. DMP's Administravtive Claim. The remaining reclamation claim of $435,501 and Chapter 11 administrative claim of $68,960 DMP's Unsecured Claim. Allowed unsecured claim in the amount of $5,295,029 (scheduled amount of $6,627,440 less reclamation component of $909,266 less chargeback offset of $423,145). Estates' Claim Preservation. The Trustee reserves any and all rights he or the estates have in connection with any potential actions against DMP for preferences, fraudulent conveyances and fraudulent transfers. The Trustee will seek any recovery on a Recovery Action from DMP and not from the assignees of DMP's claims. FOXMEYER: Trustee May Have Some Multi-Million $$ Claims ------------------------------------------------------- In 1993, FoxMeyer retained Woltz & Associates, Inc. to assist it in specifically defining FoxMeyer's needs in an integrated computer system. Woltz prepared joint requirements development reports. Foxmeyer then solicited proposals from various information technology providers. SAP America, Inc. was chosen and paid several million dollars for an operating system and software. Andersen Consulting LLP was paid approximately $20 million to install and implement the SAP system. Pinnacle Automation, Inc. and its subsidiaries provided FoxMeyer with the hardware, information and logistical support for the Washington Courthouse warehouse. In late 1995 FoxMeyer began operating the SAP sysetm. However, the system was not able to handle the normal volume of information that FoxMeyer generated on a daily basis. It frequently shut down, leaving FoxMeyer without any computer systems to perform its sales and administrative tasks. The warehouse was not properly implemented and/or integrated into the SAP system. In early 1996 there were multi-million dollar inventory discrepancies. The Trustee is evaluating all potentially meritorious claims that could result in increasing the size of the distributable assets of the estate upon liquidation. The Trustee is asking for the court to enter an order requiring additional document and information in the control of SAP., Andersen, Pinnacle and Woltz, to be provided to the Trustee. He is also seeking examination of their employees with respect to information relating to the computer systems. The Trustee is seeking examination of the entities relating to the debtors' potential claims, which in this case could be worth millions of dollars. MIDCOM COMMUNICATIONS: To Reject Real Property Leases ----------------------------------------------------- Judge Walter Shapero entered an order on January 5, 1998 authorizing rejection of nine real estate leases with total monthly base rents of over $7,000. The leases were in Georgia, Texas, California, Connecticut, New York, Virginia, Illinois, New Jersey, and Indiana. The occupants were PacNet Sales, M/C Sales, and Carrier Sales. OLD AMERICA: Motion to Sell Substantially All Assets ----------------------------------------------------- Old America Stores, Inc., Old America Wholesale, Inc. and Old America Stores, Inc., debtors, filed a motion seeking an order authorizing the debtors to enter into an asset purchase agreement for the sale of the debtors' retail business operations and related non-cash assets, or alternatively, an agency agreement to conduct store closing sales at all locations, authorizing the conduct of an auction and approving bidding procedures, protections and a break-up fee. The debtors subsequently modified the Sale Motion to seek authority to establish a two-track bidding and auction procedure to solicit competitive bids to the asset purchase offer made by Robert E. Kirkland and to solicit liquidation bids. January 16, 1998 is set as the hearing date. Any "Qualified Purchaser" must submit a certified check in the amount of $600,000. Any overbid at the Sale Auction must be in an amount that is not less than $750,000 higher than the purchase price set forth by Robert E. Kirkland, and subsequent bids must be in additional increments of not less than $50,000. OLD AMERICA: Proposed Cure Payments ----------------------------------- A hearing on the proposed assumption and assignment of certain unexpired leases and executory contracts is scheduled for January 16, 1998. The records of the debtors, Old America Stores, Inc., Old America Wholesale, Inc. and Old America Stores, Inc. indicate that the cure payments are in connection with the potential assumption and assignment of the Designated Agreement. Payments of the proposed cure amounts will be made, with respect to any Designated Agreement on the Closing. The Lease Cure Amounts total about $500,000 and the executory contract cure amounts total about $120,000. PHOENIX INFORMATION: Equity Asks Release Confidential Info ---------------------------------------------------------- The Official Committee of Equity Security Holders of Phoenix Information Systems Corp. is asking the court to direct the debtor to release certain proprietary information of the debtor. The Committee has a confidentiality agreement pursuant to which the debtor has agreed to release certain proprietary information to the Committee. The committee can not pass that information to third parties, including potential buyers or investors. The debtor has refused to permit the information to be passed to third parties saying it would be a potential breach of that certain Agreement of Sale entered into by the debtor. The Committee alleges that the Agreement of Sale contains certain provisions that are onerous to the estate in that the potential buyer has a "lockup" provision that prohibits the debtor from continuing to shop the company and/or its assets. Thus the Committee states that it is hampered in performing its role to investigate and obtain, if possible, other potential bidders and/or buyers who may have an interest in the assets of the debtor. RDM SPORTS: Collection of Accounts Receivable ---------------------------------------------- RDM Sports Group et al. and Foothill Capital Corporation, as agent for a group of lenders filed a joint emergency motion seeking approval of certain parameters to enhance the collection of accounts receivable. They are asking the court for the next available hearing date, as they believe that the longer the accounts are not collected, the less of a chance there will be to maximize the amount collected. Foothill and the debtors seek authorization to compromise and/or settle certain receivables without having to file a separate motion in each instance. Proposed parameters are in the process of being submitted to the respective committees for final approval. In addition, Montgomery Ward owes the debtors in excess of $520,000, and the debtors seek authority to sell their Montgomery Ward account receivable at the highest possible price and in the exercise of the debtors' reasonable business judgment. Such sale would be separate and apart from the collection parameters that will be presented to the court in connection with this joint motion. THE WIZ: Seeking Authority to Sell Excess Inventory --------------------------------------------------- By an order to show cause why their motion should not be entered, the debtors, The Wiz, Inc. et al. state that it is critical that they obtain authority as soon as possible to sell certain Excess Inventory, consisting primarily of room air conditioners. The motion is set for January 15, 1998. TOWN & COUNTRY: Names Ronald F. Stengel Interim CEO --------------------------------------------------- Town & Country Corporation is pleased to announce the appointment of Ronald F. Stengel as interim Chief Executive Officer and a member of the Board of Directors. Mr. Stengel is one of the foremost turnaround managers in the country. Mr. Stengel is the President and Chief Executive Officer of R.F. Stengel & Co., Inc., a company organized in 1985 with its principal focus in crisis management and turnaround or reorganization consulting services. His clients have included the Rytex Company, Storage Technology Corporation and, most recently, Smith Corona Corporation, where he engineered the transformation of the typewriter company into a marketing and distribution oriented vendor of small office/home office products. Previously, Mr. Stengel was a partner in the reorganization advisory services practice of Touche Ross & Co. Town & Country Corp. voluntarily filed a pre-arranged plan to reorganize under Chapter 11 of the Bankruptcy Code last November. The financial restructuring is taking place at the holding company level only and does not affect the Company's operating subsidiaries or their relationships with employees, customers and suppliers. The Company expects the Bankruptcy Court to confirm its plan within the next month. "We are pleased with the progress we have made, and Ron's expertise will enable us to accelerate the final implementation of out strategic turnaround plan. As we emerge from the court processes, we will have the necessary capital and direction to allow us to concentrate on growing and developing our core business," said Veronica Zsolcsak, Chief Financial Officer of Town & Country. The Board is actively recruiting a permanent Chief Executive Officer to guide the Company longer-term. Town & Country Corp. is an international manufacturer of fine jewelry, with facilities in Massachusetts, New York, Texas, Hong Kong and Thailand. Town & Country Corp. has approximately 1,000 employees worldwide. UNISON HEALTHCARE: Three Subsidiaries File ------------------------------------------ Unison HealthCare Corp. announced yesterday that three of its subsidiaries have filed for bankruptcy protection in Arizona. The filings, which involve 26 nursing homes in Texas and Indiana, came after Omega Healthcare Investors terminated the facilities' leases. Oakwood Health Care of Arlington is included in the properties. It and the other affected nursing homes will operate as usual until a ruling is made in the bankruptcy case, spokeswoman Lisa Turner said. The bankruptcy filings will not affect Unison's operations in other states, company officials said. Unison provides health services including nursing care, rehabilitation therapy and pharmaceutical services. VITALE: Interim Order Authorizing Use of Cash Collateral -------------------------------------------------------- By a court order entered December 22, 1997 the debtors, Vitale Enterprises, Inc., et al. are authorized to continue to use cash collateral in which First Union and NCB claim an interest, until January 31, 1998. Pursuant to the entry of a separate order, Twin County Grocers, Inc. is to be granted a first priority lien and security interest in and to debtors' inventory to secure a maximum of $100,000 per week (up to a maximum of $850,000 in the aggregate) in purchase price of goods sold and delivered by Twin County to the debtors after the date of this order. The next hearing with respect to use of cash collateral has been scheduled for January 27, 1998. WESTERN PACIFIC: A Lot of Finger Pointing ----------------------------------------- The RockyMountainNews reported on January 10, 1998 that Western Pacific founder Ed Beauvais broke a year's silence Friday, saying he blames Chief Executive Robert Peiser for running the airline into bankruptcy. Beauvais, stripped of his title as chairman and his $355,000 salary at a board meeting Tuesday, said he can now respond to "cheap shots" from Peiser over the past year. "I have opposed all the decisions that Peiser's management has made," Beauvais said. "I hold Peiser and his management responsible for all the losses since he arrived and hold him responsible for the fact that Western Pacific is in Chapter 11." Peiser, a turnaround artist who replaced Beauvais as chief executive officer, has said the upstart airline was broke when he arrived in December 1996. Peiser blamed most of the losses in 1997 on Beauvais' business plan. He also called some of the "flying billboard" paint schemes Beauvais pioneered on his jets "tacky." Beauvais said the board's decision Tuesday to remove him as chairman came as a surprise. Two representatives of Western Pacific's new investor, Smith Management Co., joined Beauvais, Peiser and Chief Financial Officer George Leonard on the board for the first time this week. Smith Management will invest up to $50 million to help Western Pacific reorganize and emerge from bankruptcy, possibly in early March. By then, Smith will own virtually all the equity and take the airline private. Beauvais said he expects to lose his board seat at that point. After losing his job as chief executive officer in 1996, Beauvais continued to draw a salary as chairman and maintained an office with a secretary. But he was shut out of operational decisions. "Number 1, Western Pacific was not broke," Beauvais said. "And so I think, to a significant degree, if I had been allowed to follow the policies that we were developing with some financial assistance in the fourth quarter of 1996, the company would be quite successful today." Beauvais said he would not have moved the airline's operations to Denver, as Peiser did last summer. Pointing to December 1996 load factors of 63.7 percent that were 7.1 points higher than last month in Denver, Beauvais said the smaller Colorado Springs market could have continued to support the airline. "The other thing that I think is important to emphasize is I agreed to step down when the Hunt and Gaylord people assured me that they would not let Western Pacific fail," Beauvais said. The Hunt Petroleum Co. of Texas and the Gaylord family of Oklahoma were the original financial backers of Western Pacific. Four board members representing the two families resigned on Oct. 3 when they learned that the airline would file for bankruptcy. Beauvais said the Hunts and Gaylords assured him that they would invest up to $40 million more in the airline. WESTERN PACIFIC: Court Authorizes Rejection of Contracts -------------------------------------------------------- Judge Sidney Brooks has approved rejection of certain ground handling agreements airport security service agreements, the Alliance Agreement between Western Pacific and MAX, a brokers services contract, a licensing of software products contract, a reservations and marketing agreement with Thrifty Rent-A-Car, a letter agreement with respect to media services and an ESPN Thoroughbred racing sponsorship. In addition, by separate order, the court approved the Stipulation between Western Pacific and Executive Tower, and Western Pacific shall have an extension to assume or reject leases with Executive Tower to and including February 15, 1998. WESTERN PACIFIC: MAX Wants Administrative Expense ------------------------------------------------- Mountain Air Express, Inc., filed a motion for allowance of administrative expense and to compel Western Pacific to comply with its obligations under the Letter Agreement dated October 21, 1997. The letter agreement was an interim agreement outlining the major terms and conditions to be included in a new Code Share Agreement. The Letter Agreement provided that MAX would continue to dedicate two aircrafts to fly up to 186 flights between DEN and Colorado Springs and that WestPac would pay MAX $200,000 per week for the flights. The Agreement also provided that MAX would dedicate 3 additional aircraft to fly as specified by Western Pacific. MAX alleges that Western Pacific improperly set off amounts asserted as flight cancellation charges from the amounts owing to MAX under the agreement. MAX also alleges that Western Pacific has cancelled some of MAX's services including cancellation of MAX's wheelchair service at Denver International Airport, cancellation of MAX's Sky Cap service, reaccomodation of WestPac passengers associated with mis-connecting WestPac flights, failure to notify WestPac passengers of schedule changes and/or sending passengers from canceled WestPac flight to travel on MAX flights, and the Baggage Service office is not assisting MAX passengers. Western Pacific has also failed to comply with its obligation to provide other currently provided services to MAX and has caused damages to MAX. MAX is asking the court to compel Western Pacific to comply with its obligations under the letter agreement. Meetings, Conferences and Seminars ---------------------------------- January 29-February 1, 1998 COMMERCIAL LAW LEAGUE OF AMERICA 37th Southern District Annual Meeting Plaza San Antonio, San Antonio, Texas Contact 1-972-285-0391 February 5-7, 1998 AMERICAN BANKRUPTCY INSTITUTE Rocky Mountain Bankruptcy Conference Westin Tabor Center, Denver, Colorado Contact: 1-703-739-0800 February 19-22, 1998 COMMERICAL LAW LEAGUE OF AMERICA Annual Western District Meeting Universal City Hilton Hotel Los Angeles, California Contact 1-310-470-8487 February 22-25, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW 12th Annual Norton Bankruptcy Litigation Institute I Olympia Park Hotel, Park City, Utah Contact 1-770-535-7722 March 19-20, 1998 TURNAROUND MANAGEMENT ASSOCIATION Spring Leadership Meeting Hotel del Coronado, San Diego, California Contact 1-312-857-7734 March 20, 1998 AMERICAN BANKRUPTCY INSTITUTE Bankruptcy Battleground West Century Plaza Hotel, Los Angeles, California Contact: 1-703-739-0800 March 26-29, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW 10th Annual Norton Bankruptcy Litigation Institute II Flamingo Hilton, Las Vegas, Nevada Contact 1-770-535-7722 April 30-May 3, 1998 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Grand Hyatt, Washington, D.C. Contact: 1-703-739-0800 May 22-25, 1998 COMMERICAL LAW LEAGUE OF AMERICA 50th New England District Annual Meeting Ocean Edge Resort & Golf Club Cape Cod, Massachusetts Contact 1-617-720-1355 May 31-June 5, 1998 COMMERICAL LAW LEAGUE OF AMERICA CLLA Credit Institute Marquette University, Milwaukee, Wisconsin Contact 1-312-781-2000 June 8-9, 1998 TURNAROUND MANAGEMENT ASSOCIATION Advanced Education Workshop & Legislative Conference Radisson Plaza, Charlotte, North Carolina Contact 1-312-857-7734 June 11-14, 1998 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort, Traverse City, Michigan Contact: 1-703-739-0800 July 2-5, 1998 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains Bankruptcy Law Institute Jackson Lake Lodge, Jackson Hole, Wyoming Contact 1-770-535-7722 July 16-19, 1998 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Sea Crest Resort, Falmouth, Massachusetts Contact: 1-703-739-0800 August 6-9-1998 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop Daufuskie Island Club & Resort, Hilton Head, South Carolina Contact: 1-703-739-0800 September 9-13, 1998 NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES Annual Convention Sheraton El Conquistador, Tuscon, Arizona Contact: 1-803-252-5646 September 17-20, 1998 AMERICAN BANKRUPTCY INSTITUTE Southwest Bankruptcy Conference The Inn at Loretta, Santa Fe, New Mexico Contact: 1-703-739-0800 October 16-20, 1998 TURNAROUND MANAGEMENT ASSOCIATION 1998 Annual Conference The Westin Hotel, Chicago, Illinois Contact 1-312-857-7734 December 3-5, 1998 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Westin La Paloma, Tucson, Arizona Contact: 1-703-739-0800 The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. --------- A listing of meetings, conferences and seminars appears every Tuesday. Bond pricing, appearing each Friday, is supplied by DLS Capital Partners, Dallas, Texas. S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter, co- published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Debra Brennan, Editor. Copyright 1998. All rights reserved. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *