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/raid1/www/Hosts/bankrupt/TCR_Public/980514.MBXT R O U B L E D C O M P A N Y R E P O R T E R Thursday, May 14, 1998, Vol. 2, No. 96 Headlines BARNEY'S: Creditors Cancel Dickson Pact to Buy Company BUFFETS, INC: Announces Stock Repurchase Authorization DECORATIVE HOME: $11M Term Loan Amendment Wins Okay DOEHLER-JARVIS: Seeks to Extend Exclusivity FIRST ENTERPRISE FINANCIAL: Seeks Bar Dates GREATE BAY: Extension of Exclusivity Through August 10 HOPE: Court Rejects Bankruptcy Filing HOMEOWNERS MORTGAGE: Case Summary and Unsecured Creditors KIA MOTORS: Former Kia Group Head Arrested in Crisis Probe LESLIE FAY: Reports First Quarter Results MARVEL: If Settlement Approved - Trustee Withdraws Appeal MOBILEMEDIA: Disclosure Statement Hearing Reset For June 2 MOTHERS WORK: To Close, Convert Episode Stores NAL FINANCIAL: Order Approves Committee's Counsel PARAGON TRADE: Hart Corp Tapped as Real Estate Broker PARAGON TRADE: Seeks Special Counsel for Employment Matters RESURGENS COMMUNICATIONS: Acquisition Bid By World Access SEARCH FINANCIAL: Completes Sale of Assets Of MS Financial SONESTA BEACH HOTEL: Turned Over to New Partnership WANG-GLOBAL: Granted Final Stock Distribution WELCOME HOME: Seeks to Extend Exclusivity WHEREHOUSE: In Talks to Buy Blockbuster Music Chain ********* BARNEY'S: Creditors Cancel Dickson Pact to Buy Company ------------------------------------------------------ According to a report on May 13, 1998 in The Wall Street Journal, a committee of unsecured creditors canceled the $322 million contract by Dickson Concepts (International) Ltd. to purchase the company. The unsecured creditors reportedly said that they are close to proposing a reorganization plan of their own for Barney's to emerge as an independent company. The unsecured creditors along with two so-called vulture funds that invested in Barney's debt, Whippoorwill Associates Inc. and Bay Harbour Mangement LC have been discussing the plan for Barney's emergence as an independent company. The article quoted Lawrence Handelsman attorney at the New York law firm of Stroock & Stroock & Lavan LLP who represents the unsecured creditors. He said that Dickson could still make another bid and that the creditors would review any new offers. BUFFETS, INC: Announces Stock Repurchase Authorization ------------------------------------------------------- Buffets, Inc. announced today that its Board of Directors has authorized the expenditure of up to $40,000,000 for the purchase of outstanding shares of Buffets, Inc. common stock, to be effected from time to time in transactions on the Nasdaq National Market or otherwise. The company has approximately 45,398,981 shares of common stock outstanding. The company also announced that it has reached an agreement in principle to purchase 11 Country Harvest Buffet restaurants from Country Harvest Buffet Restaurants, Inc. of Seattle, Washington. Of the 11, 7 are located in California, 2 in Washington, 1 in Colorado and 1 in Montana. The transaction is expected to close in June, 1998, subject to the satisfaction of certain conditions, including bankruptcy court approval . DECORATIVE HOME: $11M Term Loan Amendment Wins Okay --------------------------------------------------- After a hearing Monday, the court approved an amendment to Decorative Home Accent Inc.'s postpetition term loan facility that increases availability under the term loan agreement by up to $11 million. The court noted that the home accessories manufacturer was unable to obtain the credit that the term lenders would provide on an unsecured basis and that the creditors' committee had no objection to the amendment. (Federal Filings Inc. 13-May-1998) DOEHLER-JARVIS: Seeks to Extend Exclusivity ------------------------------------------- The debtors, Doehler-Jarvis, Inc. and its affiliated companies, seek an order further extending their exclusive periods in which to file a plan or plans of reorganization and solicit acceptances thereto. The debtors request that the exclusive proposal period be extended from June 2, 1998 through August 1, 1998 and the exclusive solicitation period be extended from August 1, 1998 through September 30, 1998. The debtors state that they have made substantial progress toward reorganization. They delivered a detailed business plan to the Creditors' Committee. The Creditors' Committee and the debtors have shared data and developed a plan a term sheet and an issue list. The debtors and the Creditors' Committee now have a framework with which to formulate a consensual plan of reorganization. The size and complexity of these cases, as well as the substantial progress made towards stabilizing the debtors' businesses is undisputed and was established in connection with previous extensions of exclusivity. The debtors list many examples of their progress in the case: The debtors' new management team led by Roger Pollazzi is now integrated into the company; most of the debtors' non-core assets have been sold; leases have been assumed, assigned and rejected; unprofitable plants have been closed; the debtors obtained a $25 million subordinated DIP facility; severance plans have been developed and the debtors obtained a February 9, 1998 Bar Date. In addition, the debtors state that creditors will not be prejudiced by the extensions. FIRST ENTERPRISE FINANCIAL: Seeks Bar Dates ------------------------------------------- First Enterprise Financial Group, Inc. and First Enterprise Acceptance Company, debtors, seek to establish deadlines for creditors to file proofs of claim in the debtors' Chapter 11 cases. The debtors request that all creditors holding or wishing to assert claims that arose prior to the filing of the cases be required to file a proof of claim on or before July 22, 1998. Governmental units and administrative claimants must file a proof of claim on or before September 14, 1998. GREATE BAY: Extension of Exclusivity Through August 10 ------------------------------------------------------ Greate Bay Hotel & Casino, Inc. won an extension of its exclusive period for filing a reorganization plan from May 5 through Aug. 10. The creditors' committee did not object to the company's extension request, however, indenture trustee State Street Bank & Trust Co. filed a statement generally supporting a shorter, 75-day extension. (Federal Filings Inc. 13-May-1998) HOPE: Court Rejects Bankruptcy Filing ------------------------------------- The apparently bankrupt High Opportunity Petroleum Enterprises Inc. ("HOPE") just needed one more day to complete its bankruptcy filing, a company lawyer said after a judge dismissed the incomplete petition Monday. Joe Garza, who represents the defunct Arlington-based multilevel marketing company, said the company's list of 5,000 creditors took longer than expected to file with the U.S. Bankruptcy Court in Fort Worth. HOPE filed for Chapter 7 bankruptcy more than two weeks ago. Chapter 7 is straight bankruptcy, meaning remaining assets would be sold off to pay creditors. But because the company failed to file its financial information and mailing matrix of creditors, the petition was automatically dismissed. Famed for attracting people to sell gasoline debit cards at a discount, HOPE swelled to 51,000 national distributors last summer. Lawyers placed the value of HOPE's bank account at $10 million to $13 million. But the company fell hard and fast just six months after its inception. Numerous creditors sued the company for unpaid funds, consumer complaints with the state Attorney General's office soared to the 100s and government investigations ensued. One investigation by the U.S. Postal Inspections Service concluded in March that HOPE was an illegal pyramid scheme that made money off new recruits rather than the sale of a legitimate product. The Postal Service ordered the company to cease and desist. HOMEOWNERS MORTGAGE: Case Summary and Unsecured Creditors --------------------------------------------------------- Debtor: HomeOwners Mortgage & Equity Inc. 6836 Austin center Blvd. Suite 280 Austin, Texas 78731 Type of business: Consumer Finance Originator, seller and purchaser of secondary mortgage and home improvement loans Court: Western District of Texas Case No.: 98-11551 Filed: 05/07/98 Chapter: 11 Debtor's Counsel: D. Michael Dalton, Gary C. Miller, Martha F. McDugald Mayor, Day, Caldwell & Kaeton, LLP 700 Louisiana Suite 1900 Houston, Texas 77002 Total Assets: $32,660,000 (approx.) Total Liabilities: $31,000,000 (approx.) No. of Approximate Amount Holders --------------- ------- Fixed, liquidated secured debt $20,000,000 4 Contingent secured debt $5,925,000 1 Disputed secured debt unknown 1 Unliquidated secured debt unknown 1 Fixed, liquidated unsecured debt $1,025,000 90 Contingent unsecured debt $4,022,000 183 Disputed unsecured debt unknown 1 Unliquidated unsecured debt unknown 1 No. of shares of common stock 5,555 20 Largest Unsecured Creditors: Name Nature Approx. Amount ---- ------ -------- Guaranty Federal Savings Bank Bank Loans unknown First National Bank of Keystone Contract $3,370,000 FNMA Alleged Contact Claim unknown Department of HUD Title 1 Ins. Premiums $190,000 First Plus Financial Contract $179,000 Compulink Loan Services Contract $73,400 Kristin Conroy Unfunded Loan Check $53,300 Homespec of America service fees $48,900 Willoz direct Trade debt $48,800 Curtis T. Johnson Loan Check $44,600 LS Plus Holding Mgemt.Charges $43,500 Kurt Stilling Unfunded Loan Check $43,350 Warren Hendrix Unfunded Loan Check $42,450 V. Keonnella Unfunded Loan Check $42,070 Keith Duncan Unfunded Loan Check $40,270 George Weaver Unfunded Loan Check $36,900 Terrence L. Jones Unfunded Loan Check $36,280 Lewis and Rock LLP Legal Fees $31,460 Harry J. Miller Unfunded Loan Check $31,300 Clark F. Newman Unfunded Loan Check $31,180 KIA MOTORS: Former Kia Group Head Arrested in Crisis Probe ---------------------------------------------------------- South Korean prosecutors said on Wednesday they had arrested the former chairman of Kia Group, Kim Sun-hong, because of illegal debt payment guarantees offered between the group's units. "(Kim) left indiscriminate over- investment by Kia affiliates unchecked and focused instead on efforts to raise the outside credibility of the Kia Group," a statement from the prosecution office said. An official said Kim was arrested on Tuesday. Local media reports said Kim was arrested for using corporate funds to buy shares in Kia affiliates as a way to maintain management of the group and for authorising cross payment guarantees among affiliates for two years between 1995 to 1997. (Reuters - 05/13/98) LESLIE FAY: Reports First Quarter Results ----------------------------------------- The Leslie Fay Company, Inc. reported financial results for its first quarter of 1998, covering the 13 weeks ended April 4. For purposes of comparability, the discussion of year-ago results uses pro forma data that reflect the dispositions of the company's Sassco Fashions and Castleberry product lines and "fresh start" adjustments, both stemming from the company's emergence from Chapter 11 bankruptcy protection on June 4, 1997. The comparability of first quarter 1998 results with first quarter 1997 results is adversely affected by the inclusion in the 1997 period of 14 weeks of operations and the operations of the company's Outlander clothing line, discontinued in the fourth quarter of 1997. For its first quarter of 1998, Leslie Fay reported a 9.3% increase in net sales to $45.3 million from $41.4 million in net sales for the company's year-ago quarter. The company's operating income for the first quarter of 1998 was $5.9 million, compared with $5.6 million for the year- ago period. The company's net income for the first quarter of 1998 increased to $3.8 million, or $1.11 per basic share, from net income of $3.5 million, or $1.02 per basic share, for last year's quarter. The per share (basic) data for both periods has been calculated using 3.4 million outstanding common shares, of which 21 percent are not currently trading due to a hold back by the bankruptcy court. Leslie Fay's earnings before interest, taxes, depreciation and amortization (EBITDA) for its first quarter of 1998 was $5.1 million, compared with $4.6 million for the year-ago quarter. Leslie Fay's EBITDA as a percentage of sales continued strong, at 11.3%, compared with 11.2% for last year's quarter. Trailing 12-month EBITDA was $8.3 million, which was 6.1% of sales. The company's EBITDA also excludes stock-based compensation expense and amortization of excess revalued net assets over equity. MARVEL: If Settlement Approved - Trustee Withdraws Appeal --------------------------------------------------------- Marvel Entertainment and Toy Biz have agreed to the terms of a settlement that calls for an amendment to the proposed reorganization plan so that Marvel stockholders and those entitled to securities litigation claims will receive three series of warrants upon completion of the reorganization plan, entitling them to purchase common and convertible preferred stock issued by the combined company. The first series of 4 million warrants will have a term of six months and will allow the recipients to purchase common stock in the combined company at a price of $12.00 per share. The second series of 3 million warrants will have a term of six months and will allow the recipients to purchase convertible preferred stock in the combined company at a price of $10.65 per share. The final series of 5 million warrants will have a term of four years and will allow the recipients to purchase common stock in the new company at a price of $18.50 per share. If the settlement is approved by the court overseeing Marvel's bankruptcy, Marvel's trustee, which is running the company, has agreed to withdraw an appeal of a March 30 District Court judgment. The judgment declared that Marvel's Marvel Characters Inc. subsidiary had lost voting control over Toy Biz, a Marvel licensee, as of June 20, 1997 when Carl Icahn took control of Marvel from Revlon chief Ron Perelman. Toy Biz has sought to take control of Marvel since then, saying a stock agreement cut Marvel's control in Toy Biz to 26 percent. Meanwhile, Marvel has sought to regain control over Toy Biz's board. Toy Biz sued, saying that the 1995 stock agreement called for Marvel's 7.4 million class B Toy Biz shares, which carried 78 percent voting control in Toy Biz, to be converted if there was a change of control at Marvel. The Stockholders and class securities litigation claimants will be entitled to receive distributions from any recovery on certain future litigation. The senior secured lenders that have agreed to support the reorganization plan must approve the agreement. Toy Biz expects to receive the approval shortly, the statement said. MOBILEMEDIA: Disclosure Statement Hearing Reset For June 2 ---------------------------------------------------------- At a hearing yesterday, the court rescheduled MobileMedia's previously adjourned disclosure statement hearing for June 2. Last month, MobileMedia, the secured lenders' steering committee, and the creditors' committee agreed to adjourn an April 14 disclosure statement hearing to continue to discuss the company's proposed stand-alone reorganization plan. (Federal Filings Inc. 13-May-1998) MOTHERS WORK: To Close, Convert Episode Stores ---------------------------------------------- Mothers Work Inc., a maternity wear retailer, said it will close or convert 21 Episode retail stores to cut losses. Philadelphia-based Mothers Work purchased the Episode stores June 1, 1996, for $11 million, attempting to expand into women's casual and work clothes carried by Episode. The Episode stores were operating under Chapter 11 bankruptcy protection when they were bought. The company said it will lose $5.4 million in the third quarter of this fiscal year, with $1.8 million in cash to be paid out in the fourth quarter, in connection with the store closings. NAL FINANCIAL: Order Approves Committee's Counsel ------------------------------------------------- In the case of NAL Financial Group, Inc. and its affiliates, as debtors, Judge Paul G. Hyman approved the request of the Official Committee of Creditors Holding Unsecured Claims to employ Stroock & Stroock & Lavan LLP as counsel to the Committee. PARAGON TRADE: Hart Corp Tapped as Real Estate Broker ----------------------------------------------------- Paragon Trade Brands, Inc. is seeking an order approving the appointment of Hart Corporation as its real estate broker to sell certain pieces of real estate in Porterville, California and Oneonta, New York under a flat commission arrangement. The commission shall be the greater of $60,000 or 6% of the gross contract sale price of the property in each case. PARAGON TRADE: Seeks Special Counsel for Employment Matters ----------------------------------------------------------- Paragon Trade Brands, Inc. requests court authority to employ Davis Wright & Tremaine as its special litigation counsel to handle certain employment and employee benefit matters. The debtor has agreed to pay the firm its standard hourly rates subject to an agreed 10% discount. RESURGENS COMMUNICATIONS: Acquisition Bid By World Access --------------------------------------------------------- World Access, Inc. announced that it has signed definitive agreements to acquire Cherry Communications Incorporated, d/b/a Resurgens Communications Group, and Cherry Communications U.K. Limited. The agreement is subject to the approval of the Bankruptcy Court. Pursuant to the terms of the agreements, the creditors of Resurgens Communications Group ("RCG") and the shareholders of Cherry U.K. will receive approximately 3.7 million shares of World Access common stock in the aggregate, currently valued at approximately $140 million. In addition, the RCG creditors and Cherry U.K. shareholders have the right to receive additional consideration of up to 7.5 million shares of World Access common stock over the next two and one-half years, contingent upon the achievement of certain EBITDA levels by Resurgens during this timeframe. The transaction is subject to, among other things, Resurgens exceeding pre-defined levels of monthly revenues and gross margin, the receipt of the requisite corporate and regulatory approvals, the confirmation of RCG's Plan of Reorganization and the approval of World Access shareholders. WorldCom, Inc. a major customer and vendor of Resurgens, has subsequently provided Resurgens approximately $26 million of direct financial support through a debtor in possession facility and additional financial support, primarily through trade credits. Upon completion of the Resurgens acquisition, WorldCom is expected to own approximately 15% of World Access on a fully diluted basis. SEARCH FINANCIAL: Completes Sale of Assets Of MS Financial ---------------------------------------------------------- Search Financial Services Inc. announced today that it has completed the sale of the assets of MS Financial, Inc. to Fleet Bank, N.A., as agent for the MSF bank group, in complete satisfaction of MSF's indebtedness to the bank group. That indebtedness was guaranteed by Search. The sale was approved by the Bankruptcy Court for the Northern District of Texas, Dallas Division. As previously reported, MSF will be entitled to receive 65% of the proceeds from the liquidation of MSF's receivables portfolio and other assets sold to Fleet Bank after deducting therefrom an amount equal to the obligations owed under the loan agreement, estimated at approximately $55 million, plus continuing interest and certain costs, including servicing costs. At March 31, 1998, the book value of MSF's assets was approximately $63.7 million, excluding unearned interest of approximately $18 million. At that date, the debt owed to the bank group was approximately $58.6 million. Search announced also that the Bankruptcy Court had denied the motion of Hall Phoenix/Inwood, Ltd. for appointment of a Trustee for Search. SONESTA BEACH HOTEL: Turned Over to New Partnership --------------------------------------------------- Owners of Sonesta Beach Hotel, Key Biscayne, Fla, turned over property to a management firm as part of a Chapter 11 bankruptcy deal. (Miami Herald; 05/02/98 - Copyright - The New York Times Co. 1998) WANG-GLOBAL: Granted Final Stock Distribution --------------------------------------------- Wang Global announced on May 12, 1998 that the United States Bankruptcy Court has granted approval to distribute the remaining 2.5 million shares of common stock to creditors of the predecessor company. The shares have been held in a distribution reserve following Wang's emergence from bankruptcy in 1993. The distribution will not increase the number of Wang Global shares outstanding and therefore will not change the basis upon which Wang Global reports its per share earnings. Wang Global anticipates that the distribution in shares will be completed within the next six to nine months. WELCOME HOME: Seeks to Extend Exclusivity ----------------------------------------- Welcome Home, Inc. represents that May 18, 1998 is the last day on which the debtor has the exclusive right to file a plan. July 14, 1998 is the last day on which the debtor has the exclusive right to obtain acceptance of a plan. The debtor needs additional time to finalize a plan of reorganization. The debtor and the Committee have been actively negotiating the terms of a plan since the beginning of this year. Within the past 10 days they have reached an agreement in principal. Debtor's counsel has prepared a draft of the plan and expects to share it with the Committee shortly. The debtor request entry of an order extending to and including July 17, 1998 the time in which debtor retains the exclusive right to file and plan, and extending to and including September 11, 1998, the time in which the debtor has to obtain acceptance of a plan. WHEREHOUSE: In Talks to Buy Blockbuster Music Chain --------------------------------------------------- Music store chain Wherehouse Entertainment has held talks to buy Viacom Inc.'s nearly 400-store Blockbuster Music chain, sources close to the talks said Tuesday. Wherehouse, a 220-store chain that recently emerged from Chapter 11 bankruptcy, first approached Viacom months ago and opened discussions regarding the Blockbuster chain, a source familiar with Wherehouse said. Other industry sources cited rumors that Wherehouse had recently made an offer -- estimated at around $200 million -- for the troubled chain, which had sales of about $600 million last year. "When they came out of bankruptcy, they planned to use $35 million to rebuild their stores but have kept the money in a war chest," another industry source said. "The first company they went after was the Camelot music store chain and Spec's music chain, and it's been on the prowl ever since," said the source familiar with Wherehouse. According to news reports, Viacom has retained investment bank Wasserstein & Perella to sell the music chain. (Reuters: Financial - 05/12/98) ********* The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. 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 * * *