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/raid1/www/Hosts/bankrupt/TCR_Public/980401.MBXT R O U B L E D C O M P A N Y R E P O R T E R Wednesday, April 1, 1998, Vol. 2, No. 63 Headlines BIDERMANN: Vestar Capital Partners to Acquire Bidermann CONTEMPORARY INDUSTRIES: Seeks Bonus Program DFS GROUP: Problems Cause Shares of LVMH to Fall GIBSON'S HOLDING: Applies to Retain Special Counsel HAGERSTOWN FIBER: Case Summary & 20 Largest Creditors HARRAH'S JAZZ: New Lease on Life - Maybe HOME HOLDINGS: AmBase to Object to Plan IGI, INC.: Announces Expected Loss for 1997 INTERNATIONAL HERITAGE: Court Prohibits Business Practices KOO KOO ROO: Iacocca Has Work Cut Out for Himself MAXICARE: Files Claims Against Dissident Holder OLD AMERICA: Seeks to Employ the Navarro Group PHELPS TECHNOLOGIES: Order Authorizes Accountants SUN TELEVISION: Big Losses & Still Opening Stores TAL WIRELESS: Enters Merger Negotiations TOWN & COUNTRY: Files Revised Chapter 11 Plan ********* BIDERMANN: Vestar Capital Partners to Acquire Bidermann ------------------------------------------------------- Bidermann Industries, USA, Inc. announced that the United States Bankruptcy Court for the Southern District of New York approved its proposed plan of reorganization valuing the Company at approximately $360 million. When consummated, the plan will complete the Company's bankruptcy proceeding which began on July 17, 1995. Vestar Capital Partners is the plan's primary equity sponsor and will control the Company in return for its investment of over $60 million. The confirmed plan was filed on behalf of the Company by Timothy Coleman of The Blackstone Group who was appointed as Plan Facilitator in the case during January of 1997. The $360 million plan provides for full payment of creditor claims, including post-petition interest. In addition, the Company's existing shareholders will retain a continuing interest in the business, as well as $13 million of senior subordinated notes. Pro forma for the re-capitalization, Vestar, Alvarez & Marsal and management will own approximately 90% of the Company and the existing shareholders will retain the remaining 10%. The reorganization plan is expected to be consummated in early May. This outcome has been facilitated by the Company's successful turnaround under Chief Executive Officer Bryan Marsal. With aggressive cost control measures, the Company has gone from an operating loss of $26.1 million in 1995 to an operating profit of $34.9 million in 1997 on a lower base of sales. These results also reflect the strength of the Gold Toe(TM) sock brand, as well as the ongoing revitalization of the Arrow(TM) shirt business. The Company is a major producer and distributor of men's and women's designer and branded apparel through its three operating subsidiaries: Great American Knitting Mills ("GAKM"), Cluett Peabody and Cluett Designer Group. GAKM is a leading manufacturer and distributor of socks under the industry leading Gold Toe name, as well as under such licensed brands as Nautica, Perry Ellis and Jockey. Cluett Peabody is a leading producer of men's dress and casual shirts under its owned Arrow brand name. Cluett Designer Group is a leading distributor of men's shirts and tailored clothing under the licensed Burberry's and Yves Saint-Laurent names. Management is currently in the process of selecting a new name for the Company. Vestar Capital Partners, headquartered in New York with an office in Denver, Colorado, manages over $1 billion in private equity capital. Founded in 1988, the firm focuses on management buyouts, re-capitalizations and growth capital investments. Previous Vestar investments have included Celestial Seasonings, Inc., Clark-Schwebel, Inc., Sun Apparel, Inc., Insight Communications Company, L.P., Prestone Products Corporation, Pyramid Communications, Inc., Russell-Stanley Corp., and Westinghouse Air Brake Company. Alvarez & Marsal is a turnaround management firm located in New York. The firm has been involved in the successful turnaround of over 20 companies, including Ornda, Phar-Mor, Wherehouse Entertainment, Charter Medical, Anthony Manufacturing, and Long Manufacturing, among others. This transaction is representative of the firm's new emphasis on maintaining a "post-crisis" management role in the companies with which it becomes involved. CONTEMPORARY INDUSTRIES: Seeks Bonus Program -------------------------------------------- Contemporary Industries Corporation, debtor, is seeki8ng approval of the debtor's proposed Retention Bonus Program for employees. In order to cease the loss of the key employees, who are office personnel and store managers, the debtor wishes to institute a bonus program. Office personnel will receive a bonus equal to 5% of their annual salary. Store managers will receive $500 each. The debtor estimates that the cost of the bonus payments will be approximately $134,989. The debtor also wishes to provide a post-petition Vacation Benefits Program. The debtor estimates that the cost of the program would be approximately $70,400. DFS GROUP: Problems Cause Shares of LVMH to Fall ------------------------------------------------ LVMH shares fell Monday after its duty-free unit, DFS Group, Ltd., said it was negotiating a two-month delay in payments to all its 5,000 suppliers to offset slowing sales in Asia. Shares of LVMH Moet Hennessey Louis Vuitton S.A., the maker of luxury goods, fell 27 francs to 1,288 French francs. LVMH bought 61.25 percent of DFS last year to increase its distribution in Asia. That was before falling currencies and stocks in the region worsened an economic slowdown in Japan, whose citizens represent 65 percent of DFS sales. DFS sales in the first two months of this year fell 20 percent from a year earlier. (The New York Times 31-Mar-1998) GIBSON'S HOLDING: Applies to Retain Special Counsel --------------------------------------------------- The debtors, Gibson's Holding Company, et al., filed a n application to employ and retain Hoyle, Morris & Kerr LLP as Special Counsel. The firm will counsel and advise management and the board of directors of the debtors regarding legal aspects of the debtors' business and corporate affairs, prepare corporate documents, and negotiate and draft contracts relating to he debtors' business. The range of hourly rates of associates is $110 to $200 and the range of hourly rates of partners is $215 to $350. The debtors are particularly interested in hiring the firm since F. John Hagele will become a partner as of April 1, 1998. And he has functioned as independent general counsel of the debtors since October of 1996. HAGERSTOWN FIBER: Case Summary & 20 Largest Creditors ------------------------------------------------------ Debtor: Hagerstown Fiber Limited Partnership. c/o Pencor, Inc. 588 Fifth Avenue 37th Floor New York, NY 10103 Court: Southern District of New York Case No.: 98B 41988 Filed: 03/20/98 Chapter: 11 Debtor's Counsel: Albert Togut Frank A. Oswald Togut, Segal & Segal One Penn Plaza Suite 3335 New York, New York 10119 (212) 594-5000 Total Assets: $168,480,580 Total Liabilities: $184,335,064 No. of Amount Holders ------ ------- Fixed, liquidated secured debt $164,600,000 1 Contingent secured debt $0 0 Disputed secured debt $0 0 Unliquidated secured debt(disputed) $10,702,602 7 Fixed, liquidated unsecured debt $9,032,462 67 Contingent unsecured debt $0 0 Disputed unsecured debt $0 0 Unliquidated unsecured debt $0 0 20 Largest Unsecured Creditors: Name Nature Amount ---- ------ ------ City of Hagerstown Electrical $2,350,237 Substation Ballard Spahr Legal Fees & $2,004,433 Andrews & Ingersol Promissory Note Lehman Brothers, Inc. Promissory Note $1,718,786 The Eastern Group, Inc. Promissory Note $651,382 Oppenheimer & Co Professional Fees $200,000 First National Bank of Maryland Promissory Note $199,750 North East Engineering Promissory Note $140,000 R.W. Beck Engineering Services $63,879 CRSS Strategic Consultants Promissory Note $42,643 Perrin & Company Promissory Note $15,000 U.S. Hydrogeolic, Inc. Promissory Note $5,423 Pinkerton Security Security Services $4,750 MasterLift Yale Trade $4,082 Bell Atlantic Telephone Services $2,808 Clean Harbor Maintenance Services $2,588 AT&T Telephone Service $1,137 LaRoche Industries Trade $1,000 Tokai Financial Service Trade $991 City of Hagerstown Water & Sewer $693 Textilease Uniform Service Trade $215 HARRAH'S JAZZ: New Lease on Life - Maybe ---------------------------------------- It was reported in the Washington Times on March 30, 1998 that Harrah's casino has a new lease on life from the Louisiana legislature, but its eventual success, even its opening, seems far from assured. The state gaming board voted two weeks ago to accept a contract Gov. Mike Foster negotiated with gaming bigwig Harrah's Inc. The deal would give the state $100 million, allow Harrah's to finish construction and open within one year, and force the gambling firm to pay millions in contractor and bond- holders' debts in limbo since the project closed its doors in 1996. The gambling board vote came after state attorney general Richard Ieyoub ruled that the board had the power to make the decision on its own, without legislative approval. Nevertheless, anti-casino legislators tried earlier last week to introduce a bill to repeal the 1992 law that originally authorized the huge gambling facility. "Surprisingly enough," Mr. Foster said, "I got 'em (Harrah's) to do everything they originally agreed to do - and then some. I made 'em come up with a rolling guarantee on $100 million in taxes even if they operate for two weeks." Mr. Foster fears that the legislature might now try to dump the deal and "try to make a pro/anti gambling issue out of it," a situation he said would "send a bad, bad message" and eventually cost the state heavily. (Copyright 1998) HOME HOLDINGS: AmBase to Object to Plan --------------------------------------- Home Holdings, Inc. has filed a pre-arranged plan of reorganization under Chapter 11. In connection with the Home Holdings case, AmBase filed a Proof of Claim for all damages, which is significantly in excess of $12,736,000. The Company intends to file an objection to the Plan, and will vigorously contest the Plan, and will seek to collect from all parties the full amount of its claim as set forth in its Proof of Claim. For the fourth quarter ended December 31, 1996, AmBase reported a net loss of $1,056,000 or $0.03 per share. For the full year ended December 31, 1996, AmBase reported net income of $14,032,000 or $0.31 per share. For the full year ended December 31, 1997, AmBase reported a net loss of $1,084,000 or $0.02 per share. The 1997 full year results include a $475,000 income tax benefit and other non- recurring income of $59,000. Excluding these non-recurring items, the Company would have reported a net loss of $1,618,000 or $0.04 per share for the 1997 full year period. IGI, INC.: Announces Expected Loss for 1997 ------------------------------------------- IGI, INC. (Amex: IG) announced today that it expects to report a loss for the year ended December 31, 1997, including a substantial loss for the fourth quarter of 1997. In addition, the Company reported that it is engaged in negotiations with its bank lenders to obtain a waiver of defaults of certain covenants contained in its bank credit agreement at year end 1997 and to extend the expiration date of its credit agreement to December 31, 1998. IGI also announced that the American Stock Exchange has halted the trading of IGI's common stock on the Exchange until the annual report on Form 10-K for 1997 is filed with the SEC and Amex. IGI is unable at this time to state when trading of its stock on Amex will resume. Based on its review of operations to date, the Company expects that it will incur a pretax loss ranging from $2.7 to $3.2 million for the fourth quarter of 1997, resulting in a pretax loss for fiscal 1998 ranging from $1.0 to $1.5 million. The expected loss is attributable primarily to lower than expected poultry vaccine sales during the period, certain inventory write-offs, additional reserves for accounts receivable and notes receivable, and legal and related expenses incurred in connection with the previously announced USDA OIG investigation. The Company cautioned, however, that the estimated loss for 1997 could be lower, or higher if additional write-offs or charges are required in connection with completion of the 1997 audit. In June 1997, the Center for Veterinary Biologics ("CVB") of the United States Department of Agriculture ("USDA") ordered the Company to stop distribution and sale of certain serials and subserials of designated poultry vaccines produced by the Company's Vineland Laboratories Division ("Stop Shipment Order"). The Stop Shipment Order was based on CVB's finding that the Company shipped serials before the Animal and Plant Health Inspection Service division of the USDA ("APHIS") had the opportunity to confirm the Company's testing results, including serials APHIS deemed to be worthless, failed to destroy serials reported to APHIS as destroyed, and in general failed to keep complete and accurate records and to submit accurate reports to APHIS. The Stop Shipment Order affected 36 of the Company's USDA- licensed vaccines. In July 1997, the Officer of Inspector General of the USDA ("OIG") advised the Company of its commencement of an investigation into alleged violations of the Virus Serum Toxin Act and alleged false statements made to APHIS. The Company, based on its investigation to date, terminated the employment of its President and Chief Operating Officer, John P. Gallo, for willful misconduct in the performance of his executive duties. The Company was in default under certain covenants contained in its bank credit agreement at year end 1997. The Company is engaged in negotiating amendments to its credit agreement with its bank lenders, including waivers of its covenant defaults and an extension of the credit agreement through year end 1998. INTERNATIONAL HERITAGE: Court Prohibits Business Practices ---------------------------------------------------------- U.S. District Judge Richard Story told attorneys at the conclusion of a hearing he would issue an order on April 3 to prevent International Heritage, Inc., from engaging in business practices that led to an investigation by the Securities and Exchange Commission. "Based upon that prior conduct, the court is justified in entering a preliminary injunction ... that will affect the future conduct of IHI and its officers, directors and agents," he said. "Specifically, the court is going to enjoin the further use of retail business agreements." The SEC contends that IHI catalogues filled with products ranging from gold jewelry to golf equipment are a smoke- screen for its true business - making money by recruiting salespeople. That would be one of the nation's largest pyramid schemes, which are swindles in which funds from new investors are used to pay off promised returns to other investors. After the order is entered, IHI co-founder and chief executive Stanley Van Etten and two other executives will be allowed to resume their duties, under the watch of a court-appointed monitor, the judge said. Under the ruling, court-appointed receiver Lloyd T. Whitaker, who has been in control of International Heritage Inc. of Raleigh, will be relieved of his duties, Story said. Meanwhile, IHI will be required to post a $5 million bond "to satisfy any judgments that may be rendered as a result of this proceeding," the judge said. Describing itself as a supplier of fine jewelry, luggage, collectibles and golf equipment, the company actually was the front for a fraudulent pyramid scheme that raised more than $150 million from over 155,000 investors, the SEC charged. Last week, Story issued a temporary restraining order and put Whitaker in charge after the SEC accused the company and its founders of three civil counts of fraud, filing false reports and illegal sale of unregistered securities. The SEC complaint filed last Monday against the company and its three founders followed the agency's decision the previous week to suspend trading of the company's stock for 10 business days. International Heritage stock soared and the company's market value rose from $330 million to $1.2 billion. "I want to make it clear that the intent of this order is to permit a retail business operation to continue," he said. (Greensboro News Record - 03/28/98) KOO KOO ROO: Iacocca Has Work Cut Out for Himself ------------------------------------------------- Lee Iacocca, the brash former chairman of Chrysler Corp., has been named acting chairman of chicken restaurant chain Koo Koo Roo Inc. and will begin a major restructuring, the company said Monday. Koo Koo Roo also reported a loss for the fourth quarter and said it expected to take charges of $10 million to $12 million in this year's first quarter for the restructuring, which will include unspecified job cuts. The stock of the company, which also owns the Hamburger Hamlet chain, soared 72 percent, or $1.44, to $3.44 on Nasdaq, where it was by far the most active issue on trading of nearly 29 million shares. Iacocca, 73, a Koo Koo Roo board member, will begin a "major restructuring" of the company with William Allen, Koo Koo Roo's new chief executive officer. The company said the first-quarter charges will be for the closure of its three Washington, D.C.-area restaurants, closing its Arrosto coffee plant and for other items. Koo Koo Roo had announced in November that it would sell its Color Me Mine ceramic craft studios. "We will dispose of non-core assets, inclusive of Color Me Mine and the Arrosto coffee plant, maintain low corporate overhead both as a percentage of sales and in absolute dollars and move toward controlled growth of the Koo Koo Roo California Kitchen concept through 1999," Allen said in a statement. For the fourth quarter, Koo Koo Roo posted a net loss of $14.1 million, or 56 cents a share, including a loss of $7.4 million from discontinued operations. That compared with a net loss of $5.7 million, or 37 cents a share, a year ago. The company's losses from continuing operations were $6.8 million, or 28 cents a share, vs. a loss of $2.8 million, or 33 cents a share, a year earlier. Restaurant revenues rose 81 percent to $20.6 million from $11.3 million. MAXICARE: Files Claims Against Dissident Holder ----------------------------------------------- Maxicare Health Plans, Inc. (Nasdaq:MAXI) announced that it has taken another step to protect the interests of the Company's shareholders from a dissident holder by filing counterclaims in the Delaware Federal Court alleging violations of the U.S. securities laws against Paul R. Dupee, Jr., and his hostile consent solicitation. The claims against Dupee include violations of the anti-fraud and disclosure requirements of Section 14a of the Securities and Exchange Act of 1934 and Rules thereunder. Peter J. Ratican, Maxicare's Chairman, President and Chief Executive Officer said, "Through his consent solicitation and related court actions, Mr. Dupee is trying to circumvent the provisions of the Company's Certificate of Incorporation which provide for a staggered Board and the By laws which govern shareholder nominations and proposals." The Board is concerned that the secretive and coercive tactics employed by Dupee and his group are intended to further their self-interest under the pretense of maximizing shareholder value. Mr. Ratican added that: 1) Dupee initiated the consent solicitation and litigation against the Company without ever consulting with management or the Board; 2) Dupee intends to seek reimbursement for expenses and compensation in an undisclosed amount for overseeing any sale or liquidation of the Company; 3) Dupee's participants in the hostile solicitation have recently engaged in highly speculative trading in the Company's stock, including the sale of put options; and, 4) Mr. Dupee had a consent decree entered against him as a result of an SEC complaint that he violated the anti-fraud provisions of the federal securites laws. OLD AMERICA: Seeks to Employ the Navarro Group ---------------------------------------------- The debtors, Old America Stores, In., Old America Wholesale, Incl., and Old America Stores, Inc., are applying for entry of an order to employ The Navarro Group as liquidation/management consultant. The Navarro Group is to be compensated in the amount of $12,500 per month for the duration of their employment with the debtors. The Navarro Group is will be responsible for the analysis of the debtors' current financial situation, liquidation strategy , bankruptcy plan concept, and maximizing recovery to the estate and unsecured creditors. The firm will assist in developing and structuring a plan of reorganization and will represent the debtors in negotiation and advise the debtors of strategic options available with respect to the estate. PHELPS TECHNOLOGIES: Order Authorizes Accountants ------------------------------------------------- The court has entered an order approving the application for authority to employ Baird, Kurtz & Dobson CPA as accountants to Phelps Technologies, Inc. and Phelps Tool and Die Houston, Inc., debtors. SUN TELEVISION: Big Losses & Still Opening Stores ------------------------------------------------- Still wrestling with losses, Sun Television & Appliances Inc. says it will open 30 more stores - including stores in Hamilton and Marion, Ohio; Richmond, Ky.; and Lebanon, Pa. Thirteen more will open in the Midwest and Northeast this year. Sun plans to increase its stores from 41 to 71 within two years. Among them: three stores closed last year in Buffalo, N.Y. They are to reopen by June. The Columbus- based chain, which has lost $69 million in less than two years, increased its line of credit last fall as it planned the $30-million expansion. Plummeting sales last year prompted closure of nine stores in Buffalo, Rochester, N.Y., and in Dayton, Ohio. The 1998 openings are the continuation of a trend that began in late 1997. Sun opened 10 stores in November and December in Cincinnati and towns in Kentucky, Pennsylvania, Indiana and Virginia. TAL WIRELESS: Enters Merger Negotiations ---------------------------------------- TAL Wireless Networks, Inc. announced that it is engaged in preliminary discussions regarding a potential merger. On March 25, 1998, TALW representatives met with Mr. Jeffery Kinsell of Astrum, Energy Services, Inc. The parties have agreed to hold further discussions regarding a plan of reorganization. Astrum Energy Services, Inc. is a privately held energy management company located in Solana Beach, California. It has contracted with several municipalities throughout California to assist in aggregation of electrical power needs. TALW filed a petition under Chapter 11 of the Bankruptcy Code on October 6, 1997. TOWN & COUNTRY: Files Revised Chapter 11 Plan ---------------------------------------------- Town & Country Corporation, the international jewelry manufacturer, today announced that the Company, with the support of its principal bondholders, has filed an amended Plan of Reorganization and Disclosure Statement. The proposed plan provides for most of the publicly held bonds issued by Town & Country Corporation to be converted into equity of a new holding company for Town & Country Corporation. The new holding company will also receive an $8 million convertible note of Town & Country Corporation. The Bankruptcy Court set April 16, 1998 for a hearing on the adequacy of the Disclosure Statement. As previously announced, Town & Country Corporation filed a voluntary Chapter 11 petition on November 17, 1997. The Company's operating subsidiaries, Town & Country Fine Jewelry Group, Essex International Public Company, Ltd. and Anju Jewelry Limited, are not in bankruptcy. Town & Country Corporation, through its subsidiaries, is an international manufacturer of fine jewelry with facilities in Massachusetts, New York, Texas, Hong Kong and Thailand. YAMAICHI SECURITIES: Shuts Down ------------------------------- Yamaichi Securities, which rocked the financial world by declaring bankruptcy last year, closed its doors today, officially ending 100 years of operations. The former "big four" brokerage house collapsed last November under the weight of massive off-the-book losses, the largest Japanese company ever to fail. On the final day of the Japanese fiscal year, Yamaichi shut its last 40 branches, leaving some 3,000 remaining employees out of work. Yamaichi's collapse had sent shock waves through financial markets around the world because it signified a departure from the usual government practice of coming to the rescue of top-tier Japanese companies. Yamaichi was Japan's largest brokerage house until 1965, when a recession drove it to the brink of bankruptcy and forced it to accept a bailout from the central bank. It was severely weakened and was soon overtaken by Japan's other major brokerages: Nomura, Nikko and Daiwa. Earlier this month, authorities arrested three former Yamaichi officials on suspicion of covering up some $2.1 billion in losses by transferring them from client to client to prevent them from showing on financial statements. ********* 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 * * *