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/raid1/www/Hosts/bankrupt/TCR_Public/980227.MBXT R O U B L E D C O M P A N Y R E P O R T E R Friday, February 27, 1998, Vol. 2, No. 40 Headlines ATKINSON: Closes on Sale of Certain Assets to Clark CAJUN ELECTRIC: Final Auction Proposed CRAIG CONSUMER: Debtors and Professionals Seek Surcharge FOOD WORLD: Judge Delays Dismissing Chapter 11 GATEWAY DATA: Software Company Files Bankruptcy GLEN IVY RESORTS: Bankruptcy Court OKs Settlement GULF RESOURCES: Trustee Applies to Employ Counsel JACKSON BROOK: Hospital Seeks Employee Wage Delay LEVITZ: 6.7% Decrease for Same Store Sales L'IL THINGS: Order Authorizes Employ of Keen Realty MAX: Air Wisconsin gets MAX and United Express flights MIDCOM COMMUNICATIONS: Creditor Panel Seeks Ok To File Plan MIDCON: Comment of LDNG on Motion of Trustee MOBILEMEDIA: Lessor Objects to Time for Lease Assumption MONTGOMERY WARD: Fights for $20.3 Million NIAGRA MOHAWK: Plan to Avoid Bankruptcy NYTEST ENVIRONMENTAL: Petition Dismissed OXFORD HEALTH: Texas Pacific to Invest $350 Million PAYLESS CASHWAYS: Order Disallowing Late Proofs of Claim PROCTOR AND GAMBLE VIETNAM: Solution to Venture Deadlocked REEVES INDUSTRIES: Rescheduling of Hearing on Joint Plan RICKEL HOME: Staples to Buy 41 Rickel Leases SMITH TECHNOLOGY: 90-Day Extension of Exclusivity THE SINGING MACHINE: Hearing Set for Confirmation of Plan XL CARE AGENCY: Files for Chapter 11 Protection DLS CAPITAL PARTNERS: Bond Pricing For Week of 2/23/98 ********* ATKINSON: Closes on Sale of Certain Assets to Clark --------------------------------------------------- Atkinson announced on February 26, 1998, the closing of the sale of certain assets to Clark Construction Group, Inc. under the Asset Purchase Agreement approved by the Bankruptcy Court on February 6, 1998. Clark acquired the assets through a newly formed subsidiary named Guy F. Atkinson Construction Corporation, which will do business in Atkinson's traditional construction markets. The Atkinson Estate will retain control of Commonwealth Construction Company, based in Burnaby, British Columbia, Atkinson Dynamics Company, a South San Francisco-based manufacturer of industrial intercoms, and various other assets including 15 construction projects and certain real estate holdings. Atkinson provided heavy construction services for power, infrastructure, industrial process, pulp and paper, mining, transportation, and water and wastewater treatment, in the United States and overseas. The company is not entering into contracts for new work. Clark, a privately held company, is one of the nation's largest general building contractors and is headquartered in the Washington D.C. area with regional offices and job sites throughout the country. CAJUN ELECTRIC: Final Auction Proposed -------------------------------------- Cajun Electric Power Cooperative's Chapter 11 Trustee, Ralph R. Mabey, has proposed a final auction for Cajun's non-nuclear assets where parties could appear in court and make oral cash bids. Mabey, who made the proposal in his latest status report to the court, suggested that the auction should be held following a ruling on the all- requirements contract litigation so that bidders will be apprised of the status of these assets prior to final bidding. (Federal Filings, Inc. 25-Feb-98) CRAIG CONSUMER: Debtors and Professionals Seek Surcharge -------------------------------------------------------- The debtor, Craig Consumer Electronics, joined by its general and local counsel and financial advisors are seeking entry of an order approving a surcharge against the proceeds of the collateral held by BT Commercial Corporation. The debtors and professionals claim that a surcharge is appropriate in this case. They state that the Lenders took a calculated risk allowing the company to continue to operate in Chapter 11, which the lenders hoped would benefit their position by ultimately increasing the return on their collateral. Unfortunately, the applicants claim, the Lender's decision to continue to operate the company was ultimately a "bad bet." The debtor and the professionals state that BT Commercial insisted that the company remain in Chapter 11 and that the lenders received the benefit of their bargain -- the maintenance of Craig as a going concern. They argue that this strategy enabled the lenders to maximize their options as to disposing of the collateral. In addition, the lenders insulated themselves from warranty claims. The applicants believe that the court should find that a surcharge of the lenders collateral is appropriate under the circumstances of this case. The professionals are seeking a surcharge in an amount equal to the shortfall between the final carve-out amount allocated to each debtor's professional and the final award of fees and expenses approved by the court for each such professional. FOOD WORLD: Judge Delays Dismissing Chapter 11 ---------------------------------------------- Food World could close its doors forever if a deal to put new investors in place doesn't work, a federal bankruptcy judge suggested Monday. Judge Brett Dorian, in approving a delay to give prospective investors more time to work out a deal, said the Chapter 11 case filed by the grocery store in August 1996 will probably be dismissed if investors do not step in. The investors, whose identities haven't been revealed, are considering buying out a $200,000 position held by food wholesaler Fleming Foods. The debt would then be restructured to slash monthly payments by $5,000. Details of the investment were still being worked out, so Dorian on Monday granted a request to postpone until next Monday any decision on the dismissal. (FresnoBee-24-Feb-1998) GATEWAY DATA: Software Company Files Bankruptcy ----------------------------------------------- Gateway Data Sciences Corp., which has been fighting to collect millions from a big customer, said the legal dispute has landed the company in Bankruptcy Court. The Phoenix-based software company, which specializes in point-of-sale systems for retailers, Monday filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The case was filed in U.S. District Court in Phoenix. In a statement, the company said the filing was precipitated by "cash flow problems following the ongoing litigation between the company and a large customer over payments totaling more than $3.8 million." The company has had operational problems, too, and reported a loss of $7.5 million on sales of $12.7 million for the nine months that ended Oct. 31. Last year, its stock plummeted 96 percent, to 50 cents from $16. The shares were de-listed by Nasdaq and now trade on the OTC Bulletin Board. In 1996, the year the stock debuted, the company was one of the top 10 performers among Arizona stocks, with a gain of 137 percent. (Arizona Republic- 02/24/98) GLEN IVY RESORTS: Bankruptcy Court OKs Settlement ------------------------------------------------- The U.S. Bankruptcy Court has approved a settlement involving Glen Ivy Resorts Inc. of Corona, the bankrupt company that in the early 1990s was the nation's largest timeshare resort operator. Under the settlement, $33.8 million will be distributed to a number of groups involved in the case. An estimated $12.4 million will be paid to the homeowners' associations of the 15 remaining timeshare properties; about $10 million to various plaintiff attorneys, and the remaining $11.4 million to participating lenders and to the trustee overseeing Glen Ivy Resorts. All assets of the Glen Ivy estate have been liquidated except for 1,900 defaulted notes and intervals held in 11 of the 15 timeshare resorts, according to U.S. Trustee Thomas P. Williams, who was assigned by the court to take over and sort out Glen Ivy operations following its bankruptcy in April, 1992. All deeding and recording activities should be completed by Sept. 30, Williams said. Glen Ivy companies filed for bankruptcy or went out of business amid charges that some of its executives oversold timeshare intervals, forged documents and covered up numerous consumer complaints. Peter Giummo, the former chief financial officer of Glen Ivy Holdings, and his wife, Rhonda Giummo, pleaded no contest in 1994 to felony charges in connection with illegal sales of timeshare intervals.(Press Enterprise Riverside 02/24/98) GULF RESOURCES: Trustee Applies to Employ Counsel ------------------------------------------------- Charles E. Bearden, Chapter 11 Trustee for the Debtors Gulf Resources Corporation and Mustang Oil & Gas Corporation filed an application to employ Jason R. Searcy, P.C. as counsel for the Trustee, to be used for general legal matters, concerning the Trustee's rights and remedies with regard to certain of the estate's assets and claims of creditors. JACKSON BROOK: Hospital Seeks Employee Wage Delay ------------------------------------------------- Because of continued cash-flow problems, Jackson Brook Institute is again offering employees incentives to delay cashing their paychecks. Maine's only for-profit psychiatric hospital has also stopped depositing paychecks directly into employees' bank accounts, hoping that more workers will use the incentive program. The financial health of Jackson Brook is of concern to state officials and others concerned with mental-health services in Maine. The hospital is the state's largest private provider of acute-care psychiatric treatment to mentally ill adults and children. As of early this year, Jackson Brook owed $400,000 in rent, was about $64,000 behind in taxes to the city of South Portland, and faced a foreclosure action in court. Several times in December, it asked employees to wait a few days before cashing their checks. A spokesman for the hospital said Jackson Brook is "very close to working out a payment plan" with BancBoston Real Estate Capital Corp., which holds the mortgage on the hospital. BancBoston has filed a foreclosure action, demanding the entire $2.3 million still owed on the property. A dispute with the state is a large part of the hospital's financial problems. The state cut its weekly payment to the hospital last year from $300,000 to less than $200,000. Jackson Brook also says it is waiting to collect $2.3 million from the state for unpaid bills. But the state says the hospital owes it $8 million for overpayments in recent years. (Portland Press Herald 02/25/98) LEVITZ: 6.7% Decrease for Same Store Sales ------------------------------------------ Levitz Furniture Inc. reported net sales of $232.6 million for the three month period ended December 31, 1997. This was a decrease of $39.4 million or 14.5% over net sales of $272.0 million in the same period for the prior year. Sales on a comparable store basis decreased 6.7%. The decrease in net sales of 14.5% is primarily attributable to the closing of eighteen stores in under-performing markets during October 1997. Loss before reorganization items and income taxes for the three month period ended December 31, 1997 amounted to $7.9 million or 3.4% of net sales as compared to a loss of $3.1 million or 1.1% of net sales for the same period of the prior year. For the nine months ended December 31, 1997, sales on a comparable store basis decreased 8.0% compared to the nine months ended December 31, 1996. L'IL THINGS: Order Authorizes Employ of Keen Realty --------------------------------------------------- LiL' Things, Inc., as debtor-in-possession was authorized by Judge Harold C. Abramson to employ and retain Keen Realty Consultants, Inc., as its special real estate consultants. MAX: Purchase by Air Wisconsin Approved --------------------------------------- U.S. Bankruptcy Judge Sidney Brooks of Denver, Colo., approved Friday the sale of Mountain Air Express to Air Wisconsin Airlines Corp. for $1.5 million. Acquisition of the regional carrier will allow Air Wisconsin to expand its service from Denver to about 12 cities in the Rocky Mountain area, officials said earlier this week. Air Wisconsin, based in Appleton, operates as United Express and schedules its flights to feed United Airlines operations through hubs at Denver and Chicago, both of which it serves non-stop from Milwaukee. Air Wisconsin has said it will take over lease payments on Mountain Air's four 31-seat Dornier 328 turboprop planes and lease six more. {Milwaukee Sentinel Journal 21-Feb-1998) MIDCOM COMMUNICATIONS: Creditor Panel Seeks Ok To File Plan ----------------------------------------------------------- The Midcom Communications, Inc. Creditors'Committee has asked the court to modify the company's exclusivity so that the panel may file its own liquidating reorganization plan. The committee argued that modifying Midcom's exclusive periods would expedite the plan confirmation process, reduce administrative expenses, and increase the input of the unsecured creditors who possess the true economic stake in Midcom. (Federal Filings, Inc. 25-Feb-1998) MIDCON: Comment of LDNG on Motion of Trustee -------------------------------------------- In the case of Midcon Offshore, Inc., creditor Louis Dreyfus Natural Gas Corp. (LDNG) filed a comment on the Trustee's motion seeking appointment of a mediator. LDNG agrees with the Trustee that mediation may lead to the confirmation of a consensual plan of liquidation. LDNG does not share the Trustee's belief that a contested plan may be confirmed in this case. In the event the mediation is not successful, LDNG will proceed with its motion to convert the case to a Chapter 7. MOBILEMEDIA: Lessor Objects to Time for Lease Assumption -------------------------------------------------------- Stoneridge Associates Limited Partnership, Lessor of the debtors, Mobilemedia Communications, Inc. et al., objects to the debtor's fourth motion for extension of time for assumption or rejection of leases of non-residential property. The Lessor leases to the debtor the "nerve center" of the debtor's operations, the largest telemarketing facility at which the debtor employs 1,100 people. The Lessor states that the circumstances of this lease are factually different from the 300 building leases and 4,000 tower leases of the debtors. The Lessor states that the debtor has had ample opportunity to evaluate the Dallas telemarketing center and is able to make its decision to either assume or reject the Stoneridge Lease by the current deadline of March 2, 1998. The Lessor states that the only reason for the debtor to delay its decision at this time is merely to be sure that its stand alone plan is confirmed. MONTGOMERY WARD: Fights for $20.3 Million ------------------------------------------ On February 23, 1998 the Bankruptcy Court approved a sale at auction affecting 31 leases and 24 landlords. The auction resulted in an increase in the upfront cash purchase price for the properties from $13.1 million to $20.3 million. The objecting landlords claim that the transaction is violative of the bankruptcy code. The debtors claim that the Agreement is clearly an agreement for the sale of the property, that the debtors are not now seeking to assume or reject the leases, and that the debtors have shown cause for an extension to assume or reject leases. NIAGRA MOHAWK: Plan to Avoid Bankruptcy --------------------------------------- Niagara Mohawk Power Corp. (NiMo) got the heart of its rate restructuring plan approved Tuesday. After more than two years of dealing with NiMo, the Public Service Commission embraced the economic theory that big, healthy corporations benefit the broader community and approved a schedule of rate reductions favoring them that should take effect this year. The commission agreed to allow the utility's rate restructuring plan to go forward -- minus an unpopular service-charge increase that the utility desired. The utility said the increase was warranted so that all users would pay a fairer share of NiMo's expenses. The rate plan provides an average discount of 25 percent to 250 large users of electricity -- big manufacturers, hospitals or universities. All other customers -- about 1.5 million commercial and residential ratepayers -- will get 3.2 percent cuts. Niagara Mohawk will shoulder $2 billion in debt costs during the next few years, rather than make rate payers responsible for an estimated total of $8 billion. As part of the plan, Niagara Mohawk must sell all of its fossil- fuel and hydro plants but can retain the rights to the electricity produced at the auctioned-off plants for a few years. The company will keep its nuclear facilities until a plan is worked out on divestiture by all utilities. The company predicted bankruptcy in the event the plan was not approved. (Albany Times Union 02/25/98) NYTEST ENVIRONMENTAL: Petition Dismissed ---------------------------------------- Nytest Environmental Inc. (0TC Bulletin Board: NYTS) announced that at its request on February 12, 1998 the U.S. Bankruptcy Court dismissed the Chapter 11 petition. On February 25, 1998, Nytest gave peaceful possession of all its assets to its secured lender, The CIT Group/Credit Finance. Consequently, Nytest has no assets and ceased all operations. OXFORD HEALTH: Texas Pacific to Invest $350 Million --------------------------------------------------- Oxford Health Plans, Inc. (NASDAQ: OXHP) announced today that the investment firm Texas Pacific Group has signed a definitive agreement to invest $350 million in Oxford and that the company intends to raise an additional $350 million in debt financing. Upon the closing of the transaction, Texas Pacific will be represented with four seats on Oxford's board of directors. Under the terms of the definitive agreement, Texas Pacific will purchase $350 million in preferred stock issued as Series A and Series B with dividend rates of 8% and 9% respectively. Oxford also announced year-end results, indicating that the company will post a fourth quarter net loss of $284.7 million, or $3.58 per share, resulting in a net loss of $291.3 million, or $3.70 per share for the year ended December 31, 1997. The fourth quarter loss resulted primarily from approximately $239.0 million added to reserves for payment of medical costs ($200 million of which was included in the company's December announcement) and approximately $75 million in write-offs of accounts receivable and additions to valuation reserves. PAYLESS CASHWAYS: Order Disallowing Late Proofs of Claim -------------------------------------------------------- In the case of Payless Cashways, Inc., Judge Arthur B. Federman has entered an order stating that all proofs of claim filed after January 20, 1998 shall be disallowed and the claimant shall be forever barred from recovery on the claim. Those wishing to object to the order shall file a motion to file proof of claim out of time. PROCTOR AND GAMBLE VIETNAM: Solution to Venture Deadlocked ----------------------------------------------------------- Attempts to find a solution to Proctor and Gamble Co.'s troubled Vietnam venture remain deadlocked, an official said Thursday just two days before a deadline for the company to declare bankruptcy. The two partners in the joint venture held a meeting Monday in a last-ditch effort to decide on the company's fate but remained deadlocked over a proposal by Proctor and Gamble's US parent to buy out the local partner. Insiders say that if a solution is not found within the next two days, the Ho Chi Minh City-based consumer products joint venture will be forced to declare bankruptcy, Such an outcome could deal a blow to commercial relations between Vietnam and the United States, and the US embassy has been closely involved with the negotiations as has the ministry of planning and investment. Proctor and Gamble has requested official permission to buy out the 30-percent interest held by the local partner, Phuong Dong Company, controlled by the Vietnam Chemical Corp. (Vinachem), to inject new capital into the venture. Vinachem has only agreed to only sell 15 percent, leaving Proctor and Gamble with 85 percent, Nguyen Xuan Thuy, Vinachem general director said, "The decision was said to be "a final concession" by Vinachem to save the troubled plant from closure, but it fell short of Proctor and Gamble expectations. They still want a 100 percent stake, but 85 percent was our final concession." Proctor and Gamble has informed its local partner that the Ho Chi Minh City-based plant would be compelled to shut down after February 28 unless a solution was found. The two sides had earlier agreed to increase the investment in the joint venture from 37 million dollars to 80 million dollars and extend the duration of the joint venture from 30 to 40 years, the official said. Proctor and Gamble Vietnam, which is currently capitalised at 36 million dollars, has accumulated losses of more than 35 million dollars since it was licenced in 1994. Late last month, Proctor and Gamble's two principal bankers in Vietnam, Citibank and ABN Amro, were instructed by the State Bank of Vietnam to refuse to roll over any of its loans. (AgenceFrancePresse 02/26/98) REEVES INDUSTRIES: Rescheduling of Hearing on Joint Plan -------------------------------------------------------- The hearing on confirmation of the Amended Joint Plan of Reorganization of the debtor Reeves Industries, Inc. and Reeves, Inc. originally scheduled for February 26, 1998 will be held on March 10, 1998. RICKEL HOME: Staples to Buy 41 Rickel Leases -------------------------------------------- Staples Inc. has agreed to buy the leaseholds on 41 of 52 stores formerly occupied by bankrupt buildings materials retailer Rickel Home Centers Inc. Rickel will seek bankruptcy court approval for the sale at the U.S. Bankruptcy Court for the District of Delaware Thursday, said Rickel spokesman John Henry. Last month, commercial property broker Grubb & Ellis Co., which handled the sale for Rickel, said it was contacted by 300 to 500 prospective buyers. The properties are mainly in New Jersey. SMITH TECHNOLOGY: 90-Day Extension of Exclusivity -------------------------------------------------- Smith Technology Corp. won a 90-day extension of its exclusive periods to file a reorganization plan and solicit plan acceptances through May 6 and July 6. Although the company had sought a 120-day extension, the creditors' committee objected to the request, contending that Smith has made no efforts to negotiate a plan with the committee and has instead been acting as the liquidating agent for secured creditors. (Federal Filings Inc. 25-Feb- 1998) THE SINGING MACHINE: Hearing Set for Confirmation of Plan --------------------------------------------------------- As reported in its most recent Form 10-KSB filed with the SEC, The Singing Machine Co., Inc., stated that the Bankruptcy Court has set a hearing to consider confirmation of its Reorganization Plan for February 26, 1998. The significant elements of the Plan include (i) additional estimated administrative costs of $100,000 for the Company's bankruptcy counsel, (ii) the secured claim by Bankers Capital, the Company's factor, of $124,000 shall be paid according to the terms of its contract with the company, which is current, (iii) general unsecured creditors whose claims are equal to or less than $300 shall receive a cash payment of 15% of the amount of their allowed claim, and (iv) general unsecured creditors whose claims exceed $300 shall be given the option of receiving a cash payment of 10% of the amount of their allowed claim or receiving one share of new common stock in the reorganized company for each $2.00 of an allowed claim. Any cash payments to unsecured creditors would be paid in two equal installments, ten days after the Plan is confirmed and six months thereafter. Holders of existing common shares of the Company, equity interest holders, will have their interest diluted by ninety percent (90%) at confirmation under the Plan, so that for each ten shares of common stock owned they will receive one share of new common stock in the reorganized company. For fiscal 1997 and fiscal 1996, the Company's total revenues were approximately $10.7 million and $5.2 million, respectively. Although total revenues more than doubled in fiscal 1997, the Company had a net loss of approximately $3.9 million which equaled its net loss in fiscal 1996. As a result of historical losses, a net working capital deficiency and lack of financing, the Company's auditors expressed substantial doubt about the Company's ability to continue as a going concern based on their audit of the Company's financial statements for the fiscal year ended March 31, 1997. The Chapter 11 filing and related reorganization, provided such is confirmed by the Bankruptcy Court, will have a significant positive impact on the Company's cash flow and liquidity. It is projected that the reorganization will reduce the Company's liabilities in excess of $4 million, thereby returning the Company to solvency. A full-text copy of the filing is available via the Internet at: http://www.sec.gov/Archives/edgar/data/singing machine.txt XL CARE AGENCY: Files for Chapter 11 Protection ----------------------------------------------- A home health agency's bankruptcy filing has raised new questions about the firm, already under scrutiny by the Federal Bureau of Investigation. XL Care Agency Inc., a Winter Park-based home health agency, filed petitions this month seeking protection from creditors under Chapter 11 of the federal bankruptcy code. Among its 273 listed creditors: the Florida Department of Children & Families. "They were billing Medicaid for some of our clients, but we hear they weren't providing the services," explains Stuart Doyle, spokesman for the department's Central Florida region. "The question is whether or not they were providing the services or overbilling Medicaid." It's not known if the state's concerns about Medicaid bills - which are partly paid by federal money - are linked to a recent seizure of company records by the FBI. Last December, federal agents carted boxes of company records and documents away. Among the other listed creditors: the Internal Revenue Service, Medicare, the Florida Department of Revenue, Orange County tax collector, Osceola County tax collector and the city of Houston tax collector. (Orlando Business-13-Feb-1998) DLS CAPITAL PARTNERS: Bond Pricing For Week of 2/23/98 ------------------------------------------------------ Following are indicated prices for selected issues: Amer Rice 13 '02 78 - 82 (f) Amer Telecasting 0/14 1/2 '04 24 - 26 APS 11 7/8 '06 22 - 24 (f) Boston Chicken 7 3/4 '04 69 1/2 - 71 Bradlees 11 '02 6 - 7 (f) Brunos 10 1/2 '05 23 - 24 (f) CAI Wireless 12 1/4 '02 25 - 27 Cityscape 12 3/4 '04 36 - 38 Grand Union 12 '04 53 - 54 (f) Harrah's Jazz 14 1/4 '01 30 - 32 (f) Hechinger 9.45 '12 76 - 78 Hills 12 1/2 '03 85 - 86 Great Bay 10 7/8 '04 85 - 86 (f) Levitz 9 5/8 '03 41 - 43 (f) Liggett 11 1/2 '99 65 - 68 Marvel 0 '98 5 - 5 1/2 Mobilemedia 9 3/8 '07 11 - 13 (f) Mosler 11 '03 83 - 85 Penn Traffic 9 5/8 '05 45 - 47 Royal Oak 11 '06 67 - 69 Trump Castle 11 3/4 '03 97 - 98 Wickes 11 7/8 '03 94 - 96 ********* A listing of meetings, conferences and seminars appears each 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 and Lexy Mueller, Editors. 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 * * *