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/raid1/www/Hosts/bankrupt/TCR_Public/981016.MBXT R O U B L E D C O M P A N Y R E P O R T E R Friday, October 16, 1998, Vol. 2, No. 203 Headlines AIRSTAR TECHNOLOGIES: Files For Chapter 11 Protection ALLIANCE ENTERTAINMENT: Concord Records' Hearing ASPEN MOUNTAIN AIR: Halts Some Operations ATLAS: Conolog Acquires Assets of Atlas Design BOSTON CHICKEN: Agreement With Morgan Stanley Terminated BOSTON CHICKEN: Hearing On Final DIP Approval October 26 BOSTON CHICKEN: PwCoopers Replaces Arthur Andersen BOSTON CHICKEN: Seeks To Pay Prepetition Trade Vendors COGENERATION: NRG Energy Responds CRAGAR INDUSTRIES: De-Listed By NASDAQ CROWN BOOKS: Seeks To Reject Leases FPA MEDICAL: Publishes General Claims Bar Date HAYES CORP: Announces New Modems Right After Filing HAYES CORP: Dismisses Suits KENAR: Seeks "Stay-Put" Agreements KIA MOTORS: Kia and Hanwha Asset Sales Fail LIBERTY HOUSE: Exceeds EBITDA Goals, Sales Lag LONG JOHN SILVER'S: Taps Special Real Estate Consultants MC LIQUIDATING: Order Confirming Plan Filed With SEC OXFORD HEALTH: Agrees To Sell Pa. Operations For $10.4M PERK DEVELOPMENT: Seeks To Reject Four Leases PITTSBURGH PENGUINS: Mayor Seeks Investigation of Co-owners PRECISION AUTO: 4th Quarter-Restated 3rd Quarter Results R&S/STRAUSS: Seeks Court Approval To Close 17 Stores RAYTECH CORP: Tentative Settlement With Creditors & Equity RIVER OAKS: Reaches Agreement With Lender SOUTHEAST BANKING: Suspension of $100M to Creditors STRATOSHPHERE: Reorganization Becomes Effective SUN TV: Committee Taps Ernst & Young Accountants SUN TV: Committee Taps Otterbourg, Steindler - Attorneys TEARDROP GOLF: Assignment of Agreement with Couples UNISON HEALTHCARE: Applies For Appointment of Examiner DLS CAPITAL PARTNERS: Bond Pricing for Week of October 12 ************* AIRSTAR TECHNOLOGIES: Files For Chapter 11 Protection ----------------------------------------------------- Airstar Technologies (OTCBB:ASTG) announced that it has filed a voluntary petition in the U.S. Bankruptcy Court for the Central District of California for protection and reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company's wholly-owned subsidiary, Select Switch Systems Inc., filed for Chapter 11 protection at the same time. The filing was made to facilitate the restructuring of its operations and financing arrangements. A company spokesperson said that it remains to be seen what effect, if any, this will have on Select Switch's contractual relationship with Sprint. The company has asked the NASD to suspend trading in its stock for one day so that the news can be properly disseminated. ALLIANCE ENTERTAINMENT: Concord Records' Hearing ------------------------------------------------ The hearing on the Disclosure Statement of Concord Records, Inc., one of the debtors in the above referenced case will be held on November 4, 1998 at 10:00 am at the United States Bankruptcy Court, Alexander Hamilton United States Custom House, One Bowling Green New York, NY 10004-1408. Objections and responses to the Disclosure Statement, if any, must be received by October 28, 1998. ASPEN MOUNTAIN AIR: Halts Some Operations ----------------------------------------- Aspen Mountain Air, which is in Chapter 11 bankruptcy, halted many of its flight operations Friday, including service between Denver International Airport and both Aspen and Bozeman, Mont. Executives for the carrier said they would be returning all four of the airline's leased 30-seat Dornier turboprops to the manufacturer, Fairchild Dornier. Aspen Mountain Air's service between Dallas and Aspen also was halted. The commuter carrier has had joint-ticketing code-share relationships with both Frontier and American airlines. A spokeswoman for Frontier said passengers who bought tickets on her airline that included a code-share leg on Aspen Mountain Air should call Frontier's reservations line to seek re-accommodation. Aspen Mountain Air Chief Executive Officer Ron Stone said his carrier is working with a new investor group that might inject capital in the venture and help resume service from DIA and Dallas using another type of airplane. (The Denver Post 13-Oct-98) ATLAS: Conolog Acquires Assets of Atlas Design ---------------------------------------------- Conolog Corp. reports to the SEC on October 14, 1998 that the company purchased all of the assets of Atlas Design, Inc., a provider of short and long term qualified engineering and technical staff to leading companies as well as human resource consulting. The assets include furniture, fixtures, records, resumes, corporate files, software, computers, contracts, billing rights to contracts in progress, trade names, licenses, goodwill, and subsidiary. The assets were acquired from Robert P. Gibbons, Trustee of the bankruptcy estate of Atlas Design, Inc. This acquisition is part of the Company's expansion plans through mergers and acquisitions and will allow the Company to provide the engineers and software designers to support the Company's obligations under its longer term contracts. The total acquisition cost of $145,000,000 was paid for with proceeds from the company's January 1998 offering of 700,000 Units, each Unit consisting of one share of Common Stock and four Redeemable Class A Common Stock Purchase Warrants. (Copyright States News Service, 10/14/98) BOSTON CHICKEN: Agreement With Morgan Stanley Terminated -------------------------------------------------------- In a Form 8-K filed with the Securities and Exchange Commission, Einstein/Noah Bagel Corp. reports that Boston Chicken has terminated its engagement of Morgan Stanley & Co., Incorporated to find a buyer for Boston Chicken's majority equity interest. (Boston Chicken Bankruptcy News Issue 2; Bankruptcy Creditors' Service 10- 14-98) BOSTON CHICKEN: Hearing On Final DIP Approval October 26 -------------------------------------------------------- To provide the Debtors with an on-going source of working capital financing during the chapter 11 proceedings, the Debtors solicited proposals from Norwest Bank, Chase Manhattan, and Foothill Capital for DIP lending facilities in the weeks prior to the Petition Date. Those negotiations ended when General Electric Capital Corporation and Bank of America agreed to extend $70,000,000 of post-petition credit on competitive and favorable terms. Moreover, a DIP Facility underwritten by these pre-petition lenders avoids protracted and contested hearings over priming liens and collateral valuation. The proceeds of the DIP Facility will be used initially to roll-up the Debtors' $35,000,000 obligations under the 1998 Liquidity Facility. Further borrowings will be made as necessary to provide additional liquidity in the event there are any material deviations from the Debtors' operating budget. Evan Flaschen, Esq., of Hebb & Gitlin, took the opportunity to indicate that the pre-petition Ad Hoc Committee is highly supportive of the Debtors, their management, and their professionals. While the members of the Ad Hoc Committee have no particular objection to the Interim relief requested, Mr. Flaschen wanted to clarify that no party-in-interest's rights By this Motion, the Debtors have sought and obtained authority to borrow up to $41,900,000 on an interim basis under the DIP Facility, of which $35,000,000 will be drawn immediately to pay-off the Debtors' obligations under the 1998 Liquidity Facility. Judge Case directed that the Court will hold a hearing on October 26, 1998, to consider entry of an order granting final approval of the DIP Facility. (Boston Chicken Bankruptcy News Issue 2; Bankruptcy Creditors' Service 10- 14-98) BOSTON CHICKEN: PwCoopers Replaces Arthur Andersen -------------------------------------------------- On October 2, 1998, Boston Chicken's Board of Directors approved the engagement of PricewaterhouseCoopers LLP as principal accountant to audit the Company's consolidated financial statements. The same day, Arthur Andersen LLP was dismissed, by the Company's Board of Directors and the Company's audit committee, as the Company's principal accountant and as principal accountant for the Company's subsidiaries other than Einstein/Noah Bagel Corp. (which is expected to make its own decision). Arthur Andersen LLP's reissued report on the Company's consolidated financial statements for the fiscal year ended December 28, 1997 includes a qualification which states there is substantial doubt about the Company's ability to continue as a going concern. Boston Chicken and Arthur Andersen state that there have been no disagreements between management and Arthur Andersen LLP during the Company's two most recent fiscal years and any subsequent interim period preceding the engagement of PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure of a nature which if not resolved to the satisfaction of Arthur Andersen LLP would have caused it to make reference in connection with its report to the subject matter of the disagreements. (Boston Chicken Bankruptcy News Issue 2; Bankruptcy Creditors' Service 10-14-98) BOSTON CHICKEN: Seeks To Pay Prepetition Trade Vendors ------------------------------------------------------ The Debtors have sought and obtained the Court's authority to pay, in the ordinary course of business, all pre- petition claims held by approximately 10,000 trade vendors, aggregating approximately $13,000,000, on the condition that a trade vendor continue to extend credit during the chapter 11 process on ordinary credit terms. "If you don't take care of your vendors," Mr. Jenkins said, "you won't make it," stressing the importance of the relief requested by this Motion. If Boston Chicken were to lose the support of vendors, the Company would collapse, Mr. Jenkins predicts. Mr. Jenkins explained that Marriott Distribution -- owed approximately $7,000,000 at the time of filing -- handles nearly 100% of all products delivered to the stores, acting as a conduit for purchases from Tyson, Coca-Cola and thousands of other suppliers. "It would be impossible," Mr. Jenkins is convinced, to replace vendors like Tyson or Coca-Cola. And, if local service providers are not paid, it would be nearly impossible to establish new relationships to support the Debtors' on-going operations. Mr. Stroube indicated that the Debtors will view this constituency as a convenience class under a plan of reorganization. Mr. Jenkins confirmed for Judge Case that he believes most trade creditors will continue to extend post-petition credit to the Debtors. With respect to smaller creditors who do not, Mr. Jenkins believes that they can be replaced. Mr. Stroube confirmed that Marriott has agreed to extend credit post-petition if paid the balance of its pre- petition claim. Moreover, Mr. Stroube indicated, Marriott is party to a contract which the Debtors would seek to enforce if Marriott contracted credit terms post-petition. Richard L. Wasserman, Esq., of Baltimore-based Venable, Baetjer and Howard, LLP, representing Marriott, indicated that Marriott and the Debtors are engaged in conversation about whether, post-petition, Marriott will extend 7 or 30 day terms to the Debtors under the terms of their Fixed Fee Distribution Agreement. Mr. Wasserman noted that Marriott delivers approximately $1,000,000 per day to Boston Chicken's stores. Judge Case Granted the Debtors' Motion subject to a $15,000,000 cap in the aggregate. Judge Case made it clear that his intention is to keep the Debtors' ship afloat, maintain the status quo to the extent possible, and not prejudice any party's rights to revisit the propriety of this first day relief. Judge Case opined, given that trade creditors' claims rank pari passu with the Bondholders' claims and the absence of any objection by the Ad Hoc Committee, the relief requested appears appropriate. (Boston Chicken Bankruptcy News Issue 2; Bankruptcy Creditors' Service 10-14-98) COGENERATION: NRG Energy Responds --------------------------------- On October 14, 1998, NRG Energy, Inc. (NRG), the owner of 45 percent of the stock of Cogeneration Corporation of America (Cogeneration), made the following statement with respect to its current proxy and consent solicitation seeking removal of Robert Sherman as a director. NRG is seeking the ability to allow a majority of Cogeneration shareholders to decide who should be on Cogeneration's board of directors. NRG does not understand why Mr. Sherman and the Independent Committee would expend company funds to frustrate an attempt to convene a meeting of Cogeneration's shareholders and to prevent the votes of the majority of Cogeneration's shareholders from determining whether Mr. Sherman should continue as a director. Mr. Sherman and the Independent Committee have not asked for or received authorization from the Board of Cogeneration for the use of corporate funds to resist NRG's proxy or to initiate lawsuits to prevent the shareholders from taking action. The management and certain directors of Cogeneration who collectively hold less than 1/2 of 1 percent of Cogeneration shares are resisting the will of the shareholders. NRG expects that the recently filed lawsuit in New Jersey is just the first of many lawsuits which Mr. Sherman and the Independent Committee will file in order to interfere with the ability of the Cogeneration shareholders to meaningfully participate in the governance of Cogeneration. While Mr. Sherman and the Independent Committee claim their concern is for the welfare of the Cogeneration shareholder, it is clear that their true motivation is to entrench Mr. Sherman. Members of the Independent Committee indicated they would support Mr. Sherman's removal only if he is provided compensation far in excess of his employment contract to the detriment of Cogeneration's shareholders. Last week NRG received a letter from Mr. Sherman's attorney recounting a discussion between Mr. Sherman and a member of the Independent Committee. In that letter the attorney outlined the terms under which Mr. Sherman would depart, including the following: Preferential treatment for Mr. Sherman's options, setting up a potential windfall for Mr. Sherman. Putting Cogeneration up for sale in order to ensure a profit on Mr. Sherman's options. In the absence of such a profit, a guaranteed payment to Mr. Sherman of $1 million cash. NRG put at risk over $100 million in connection with acquiring its position in Cogeneration and bringing Cogeneration out of bankruptcy. Mr. Sherman and the Independent Committee's charge of a conflict of interest on NRG's part are without merit. The two companies generally pursue projects of different scopes. NRG's motivation is to foster Cogeneration's growth and profitability and, as the largest shareholder, NRG has the most to lose if the recent stock price decline continues. NRG is an independent power producer, specializing in the development, construction, operation, maintenance and ownership of power plants. Established in 1989, NRG is involved in over 10,500 MW of projects throughout the United States, Europe, the Pacific Rim and Latin America. CRAGAR INDUSTRIES: De-Listed By NASDAQ -------------------------------------- CRAGAR Industries, Inc. announced that it received correspondence from Nasdaq after the close of the market on October 14, 1998 indicating a decision by the Nasdaq Listing Qualifications Panel to immediately delist the Company's Common Stock and Warrants from the Nasdaq SmallCap Market. Nasdaq has notified the Company that the Common Stock and Warrants will become eligible for trading on the OTC Bulletin Board. This event followed a decision by the Nasdaq Listing Qualifications Panel regarding the Company's appeal for an exemption from the recently adopted requirements for continued listing on the Nasdaq SmallCap Market. The Company was unable to obtain such an exemption because of its failure to meet the net tangible asset/market capitalization/net income requirements. The Company's Common Stock and Warrants continue to be listed on the Boston Stock Exchange under the symbols "CWH" and "CWHW," respectively. There can be no assurance the Company will continue to maintain compliance with the requirements for continued listing on the Boston Stock Exchange with respect to the Common Stock and Warrants. CRAGAR Industries, Inc. is an international designer, producer, and seller of custom wheels and wheel accessories for cars, trucks, vans, sport utility vehicles, racing vehicles, and motorcycles. CROWN BOOKS: Seeks To Reject Leases ----------------------------------- Crown Books seeks court approval to reject leases covering the premises located in Piedmont, California and Lynnwood, Washington. FPA MEDICAL: Publishes General Claims Bar Date ---------------------------------------------- FPA Medical Management, Inc., et al., published an order and notice that November 17, 1998 is the general claims bar date for all persons and entities with claims against any of the more than 100 debtors in the case. The effective rejection date is October 7, 1998. The debtors' believe that prompt rejection of the Closing Store Leases represents the exercise of their reasonable business judgment for several reasons. The accrual of administrative rent will be eliminated, the debtor and Keen Realty have evaluated each of the Closing Store Leases and concluded that there is no value to be obtained for the estates by holding these leases, and going out of business sales have been previously held. HAYES CORP: Announces New Modems Right After Filing --------------------------------------------------- Days after filing for bankruptcy protection, Hayes Corp. has unveiled one of the new modems on which it is pinning its hopes for a turnaround. At a trade show in Massachusetts, the Norcross-based company Tuesday introduced a device meant for use with asymmetric digital subscriber lines ---ADSL --- a technology that promises to provide high-speed Internet access over regular phone lines. Although Hayes has begun making ADSL modems for Alcatel to sell to regional phone companies like BellSouth, this will be the first ADSL device to carry the Hayes name. That brand name has often been mentioned by analysts as one of the key values the company has retained, despite its troubled past. Hayes emerged from its first bout with federal Chapter 11 bankruptcy laws in 1996. After several strong quarters, it struggled as sales of analog modems slumped. After a merger with Access Beyond late last year, Hayes looked to digital as its salvation. But those new technologies --- mainly ADSL and cable modems --- are not yet providing significant revenue, while sales of Hayes' analog modems have been stagnant. The new ADSL modem will be shopped out for high-stakes trials at various phone companies and Internet service providers next month, according to Hayes spokeswoman Marcy Palmer. If all goes well, full-volume shipments of the modem could begin in December. An end user would pay $299 for the device, buying the device from the phone company or ISP, she said. ADSL technology is capable of pumping data about 100 times as fast as a 56 kilobits-per-second modem, currently the fastest on the consumer market. The ADSL device from Hayes will be capable of downloading up to 8 million bits of data per second, the company said. (Copyright 1998 The Atlanta Journal / The Atlanta Constitution 10/14/98) HAYES CORP: Dismisses Suits --------------------------- Hayes Corporation (Nasdaq: HAYZQ) announced that it has dismissed, without prejudice, its lawsuit against the purchasers of its 6% Convertible Preferred Shares. The Company announced that the preferred shareholder countersuits against the Company and its directors has similarly been dismissed without prejudice. The Company also announced as part of the dismissal agreement that Mark D. Brodsky and Jeffrey S. Kaplan of Elliott Associates L.P., a purchaser of Hayes preferred stock, have joined Hayes' Board of Directors, effective October 14, 1998. KENAR: Seeks "Stay-Put" Agreements ---------------------------------- Kenar Enterprises, Ltd. ("Kenar") and Z.Frederick Enterprises Ltd., debtors, seek entry of an order authorizing Kenar to enter into ten "stay-put" agreements with certain of the debtor's key employees. According to the debtor, the loss of any one of these key employees would be devastating to Kenar's ability to sell its remaining inventory, maintain the quality of its merchandise, transport the finished product and ensure the collection of accounts receivables. If all ten employees remain in the employ of the debtor in accordance with the "stay-put" agreements, the total cost to the debtor would be approximately $200,000. KIA MOTORS: Kia and Hanwha Asset Sales Fail ------------------------------------------- The International Herald Tribune reports on September 24, 1998 that Kia Motors Corp., with debts estimated at more than $10 billion, canceled an auction for all its assets for the second time this month, saying South Korea's three other motor-vehicle makers had all demanded larger debt write-offs than Kia's creditors could offer. The Kia announcement came just hours after Hanwha Energy Co. said it had canceled the sale of a thermal power plant to AES Corp. of Arlington, Virginia, which earlier agreed to buy the 1,500-megawatt plant for $874 million The failure of both deals deepened the sense of despair here over whether South Korea's conglomerates, or chaebol, can carry out an agonizing process of restructuring while burdened with at least $150 billion in debts to foreign creditors and debts totaling several times that amount to Korean banks. Kia offered no explanation other than to say that all three groups had attached requests for debt write-offs beyond the $2.1 billion that Kia's creditor banks reluctantly agreed to forgive after the cancellation Sept. 1 of the first auction. Kia did not say whether it would call another auction. The new cancellation opened the possibility that it would have to sell off its facilities piece by piece, leaving most of its debts unpaid. Kia's debts are increasing by about $6 million a day, with more than half of the gain coming from debt servicing. Hanwha Energy, part of the Hanwha group, South Korea's eighth-largest chaebol, said it had failed to come to terms with AES on requests for a government guarantee for bills accrued by Korean Electric Power Corp., a government-backed entity. LIBERTY HOUSE: Exceeds EBITDA Goals, Sales Lag ---------------------------------------------- In support of its exclusivity extension request, Liberty House Inc. said it is exceeding planned EBITDA for the year but sales have fallen short of projections for the last four consecutive months. The Hawaiian retailer attributed the lower sales to disruptions in merchandise flow, which occurred after the March 19 bankruptcy filing, as well as concerns about the state's economy and the continuing deterioration of the Asian economies. Nevertheless, performance has exceeded the projections filed in connection with the company's debtor-in-possession financing due to improved focus and cost cutting measures, which are expected to result in annual savings of about $26 million. (The Daily Bankruptcy Review and ABI Copyright c October 15, 1998) LONG JOHN SILVER'S: Taps Special Real Estate Consultants -------------------------------------------------------- The debtors, Long John Silver's Restaurants, Inc., et al. seek court authority to employ Keen Realty Consultants, Inc. and Trammell Crow/Doppelt Retail Services (Cleveland, OH) as Special Real Estate Consultants for the debtors. The debtors require the services of the Consultants to advise and assist the debtors in connection with a variety of matters relating to the disposition of certain real property. The debtors seek to employ the Consultants to, among other things, develop and implement a marketing program, communicate with interested parties, and make recommendations to the debtors with respect to the advisability of accepting particular offers. MC LIQUIDATING: Order Confirming Plan Filed With SEC ---------------------------------------------------- MC Liquidating Corporation's Official Unsecured Creditors' Committee's Amended Plan of Reorganization, filed with the United States Bankruptcy Court for the Eastern District of Michigan on July 8, 1998, and the Order Confirming the Official Unsecured Creditors' Committee's Plan of Reorganization dated July 10, 1998, are filed as exhibit material with this filing. The Order was entered by the Bankruptcy Court on July 13, 1998." "The chapter 11 case of Midcom Communications Inc. and renamed MC Liquidating Corporation ("Midcom") was substantively consolidated with those of PacNet, Inc., Cel-Tech International Corp. and AdVal, Inc., its subsidiaries. As a result, the combined assets and liabilities of the Debtors are treated as one estate. The Debtors began liquidating their assets before confirmation of the Plan. The Plan provides that those liquidation efforts shall continue under the supervision of the Official Unsecured Creditors' Committee ("Committee"), which filed the Plan. The Plan provides that the Committee will appoint a Disbursing Agent who will, under the direction of the Committee, liquidate the Debtors' assets that have not been liquidated as of the Effective Date and make additional distributions to creditors, net of the expenses of consummating the liquidation, from time to time after the Initial Payment Date, according to the priorities established by the Plan consistent with the provisions of the Bankruptcy Code, until all proceeds of the Debtors' assets have been distributed. The Plan provides that the Disbursing Agent is to have all the rights and duties of a trustee and will be empowered to administer the estate and receive reasonable compensation for services rendered. The Committee shall be deemed the estate representative for pursuing all Causes of Action and Avoidance Actions on behalf of the estate." (Copyright States News Service, 10/14/98) OXFORD HEALTH: Agrees To Sell Pa. Operations For $10.4M ------------------------------------------------------- Oxford Health Plans Inc., agreed to sell its Pennsylvania health-maintenance-organization operations to Health Risk Management Inc. for $10.4 million. The deal, expected to close by year end follows agreement s Oxford reached with either regulators or insurers to withdraw from markets in Chicago and Florida. No money is expected to change hands in those two agreements. The moves are part of its plan to recover from losses after computer and management problems that led Oxford to underestimate its medical costs. PERK DEVELOPMENT: Seeks To Reject Four Leases --------------------------------------------- Perk Development Corporation and Brambury Associates, debtors, seek court approval to reject four leases of nonresidential real property. DJM Realty Services, Inc. ("DJM") is the court approved lease valuation expert. DJM found no value in the leases for stores nos. 26, 27, 35 and 37. The stores covered by the leases are in Newburgh, New York, Vails Gate, New York, Oswego, New York and Watertown, New York. PITTSBURGH PENGUINS: Mayor Seeks Investigation of Co-owners ----------------------------------------------------------- Pittsburgh Mayor Murphy has asked for an investigation of Pittsburgh Penguins co-owners Roger Marino and Howard Baldwin and the possibility that they collected amusement taxes without forwarding the funds to the city treasury, The Pittsburgh Post-Gazette reported. The Penguins' interim CEO said the actions are "preposterous," but the district attorney has opened an investigation. Yesterday the team won approval from the bankruptcy court for a $2.5 million emergency loan from Marino that will enable the team to make payroll today. The court also allowed the city's and county's lawsuit against Marino to proceed; that suit seeks an order barring Marino from having discussions with other cities about moving the Penguins. (ABI 14-Oct- 98) PRECISION AUTO: 4th Quarter-Restated 3rd Quarter Results -------------------------------------------------------- Precision Auto Care, Inc. (Nasdaq: PACI) today announced that the Company reported pro forma combined revenues of $48.0 million and pro forma combined net income of $1.8 million, or $0.32 per share, for the year ended June 30, 1998, compared to pro forma combined revenues of $43.1 million and pro forma combined net income of $1.8 million, or $0.33 per share, for the prior year. Results for the fourth quarter were pro forma combined revenues of $13.6 million and pro forma combined net loss of $0.6 million, or $0.11 per share, compared to pro forma combined revenues of $10.0 million and pro forma combined net income of $0.00 million, or $0.00 per share, for the fourth quarter of the prior year. In its September 21, 1998 press release, the Company announced that the manner in which it must account for sales of certain car washes, a lube center, and fast lube buildings negatively affected results of the fourth quarter and would result in a restatement of its unaudited financial statements for the quarter ended March 31, 1998. The restated results are slightly less than the results the Company had estimated in its prior press release. In its previous press release, the Company stated that it was not in compliance with covenants contained in its bank credit agreement and that the company was in the process of seeking waivers or modifications of the covenants from its bank lenders. These waivers and modifications have been obtained. The Company presently has borrowed approximately $24 million under its bank credit agreement. $14 million of this represents amounts extended under a portion of the bank credit facility that was dedicated to funding acquisitions (the "Acquisition Line of Credit") and $10 million represents funds advanced under a general revolving credit portion of the credit facility (the "Line of Credit Loan"). The Company and the bank have entered into an amendment to its credit agreement pursuant to which amounts available under the Acquisition Line of Credit and the Line of Credit Loan will be reduced to $10 million and $5 million, respectively, for a total of $15 million. The Company expects that these mortgage financings will yield approximately $15 million in net cash proceeds and will require monthly payments of interest (at an annual rate of approximately 8%) and principal (amortized over a 20 year period). The terms of the amendment also require the Company to obtain $2 million in the form of equity financing or debt financing that is subordinate to the bank, in each case on terms acceptable to the bank, no later than October 15, 1998. Substantially all of the Company's Board of Directors have signed pledges to provide the Company with $2 million of subordinated debt financing in order to satisfy this requirement and the Company expects that it will complete this financing by the October 15, 1998 deadline. The Company has not yet received a commitment letter or other binding agreement with respect to such financing and there can be no assurance that the Company will consummate real estate financing on the terms described above. Precision Auto Care, Inc. (Nasdaq: PACI) is the world's largest franchisor of auto care centers, with 651 operating centers as of October 1, 1998. The Company franchises and operates Precision Tune Auto Care, Precision Auto Wash, and Precision Lube Express centers around the world. R&S/STRAUSS: Seeks Court Approval To Close 17 Stores ---------------------------------------------------- R&S/Strauss Inc. is seeking court approval to close 17 stores and hire the joint venture of Hilco Trading Co., Great American Asset Management, and Par International Inc. to conduct going-out-of-business sales at 12 of the locations. The 109-store chain plans to close five stores immediately and transfer some of their inventory to the 12 GOB sale locations: Springfield, Agawam, and Chicopee, Mass.; and Bloomfield, Waterbury, New Britain, Middletown, Bristol, East Hartford, Naugatuck, Manchester, and Torrington, Conn. The stores that have already closed or will close shortly are in Brooklyn, N.Y., and Bayonne, Aberdeen, Lopalcong Township, and Cherry Hill, N.J. Under the agency agreement with the Hilco venture, R&S would receive a guaranteed payment equal to 40.2% of cost value of the GOB store merchandise as well as half of any proceeds in excess of 73% of the cost value of the merchandise. (Federal Filings Inc. 15-Oct-98) RAYTECH CORP: Tentative Settlement With Creditors & Equity ---------------------------------------------------------- Raytech Corp. reports to the SEC that, the Debtor has reached a tentative settlement with representatives for its creditors and equity holders with respect to a consensual plan of reorganization to be filed in its Chapter 11 bankruptcy case which was commenced in the United States Bankruptcy Court for the District of Connecticut in March 1989. The Settlement is by and among Raytech, the Official Creditors' Committee, the Guardian Ad Litem for Future Claimants, the State of Connecticut, Department of Environmental Protection, the United States Department of Justice, Environmental and Natural Resources Division, and the Official Equity Committee. Under the Settlement, the Plan, which is subject to the vote of creditors and equityholders, and confirmation by the Bankruptcy Court, will provide general unsecured creditors, including the present and future asbestos claimants and government claimants, through the vehicle of a trust established pursuant to Section 524(g) of the Bankruptcy Code, with (i) ninety percent (90%) of the stock of reorganized Raytech, (ii) all excess cash not necessary to fund the ongoing operations of reorganized Raytech, and (iii) net recoveries from certain claims against third parties. Under the Plan, the existing Raytech stockholders shall receive ten percent (10%) of the stock of reorganized Raytech. It is estimated that the entire plan confirmation process could take up to a year." The dilution of shareholder value under the Settlement reflects the fact that pursuant to court decisions, Raytech's adjudged liabilities, as successor to Raymark Industries, Inc., appear to substantially exceed the reasonable value of its assets. The corporate restructuring of Raytech approved by the shareholders in 1986 was ruled invalid by a U.S. District Court in Oregon and Raytech was thereby held to have successor liability for Raymark's asbestos tort liabilities. Raytech then filed a voluntary petition in bankruptcy to stay the multiple asbestos tort suits filed against it on theories of successor liability. Thereafter, Raytech sought determination in its bankruptcy case, that it was not bound by the decision in Schmoll. (Schmoll v.Acands, Inc., 703 F. Supp. 868 (D. Ore. 1988), aff'd 977 F.2d 499 (9th Cir.1992)). Raytech then filed a voluntary petition in The U.S. District Court ruled that Raytech was bound under the principles of collateral estoppel by the decision in Schmoll. Raytech then filed an adversary proceeding in the Bankruptcy Court seeking a declaration that its liability as successor to Raymark was limited. The Court granted the creditors' motion for summary judgment against Raytech ruling that under Schmoll and White (Raytech Corporation v. White, No. B-89-623 (D. Conn., August 28, 1991) and that decision was affirmed by the Court of Appeals, 54 F3d 187 (3d Cir. 1995), cert. denied, 516 U.S. 914, 116 S. Ct.302 (1995)) Raytech's liability as Raymark's successor was unlimited in scope (Bkrptcy. Conn Feb 11, 1998)." (Copyright States News Service, all rights reserved 10/14/98) RIVER OAKS: Reaches Agreement With Lender ----------------------------------------- River Oaks Furniture, Inc. (OTC Bulletin Board: OAKSE), a designer and manufacturer of upholstered furniture for major furniture chains, announced today it has reached agreement with BNY Financial Corp. to restructure the Company's debt and present a reorganization plan to the Bankruptcy Court by December 1998 that will clear the way for the Company's successful emergence from Chapter 11. The Company continues to make significant progress in the implementation of its restructuring initiatives, said Len York, a principal of turnaround and corporate renewal firm OSNOS & Company and acting chief executive of River Oaks. "Since filing Chapter 11 in March of this year, River Oaks has made dramatic progress in streamlining its operations, reducing operating costs and enhancing operating efficiencies," he said. Within the past few months, the Company has restructured its operations in Mississippi, and consolidated manufacturing facilities to one plant each in Baldwin, Miss. and Compton, Calif., supported by corporate headquarters in Fulton, Miss., allowing River Oaks to serve its customers more effectively and efficiently. The proposed reorganization has been made possible through successful implementation of aggressive actions aimed at strengthening and rebuilding River Oaks' business, bolstered by continued debtor-in-possession financing approved earlier this year and provided by BNY Financial. As a component of the restructuring, senior executives Stephen Simons, former chairman, and John Nail, former president, have tendered their resignations from River Oaks to pursue other opportunities, and are no longer associated with its board of directors or operations. Mr. York said the Company has completed its search for a permanent chief executive officer, and expects to announce an appointment shortly. "By improving customer service, consolidating our manufacturing capacity, enhancing our delivery capabilities and our product quality, we have strengthened customer relationships which had suffered as a result of the Company's financial difficulties," Mr. York said. "As we move forward into the new season, we are pleased to report that the tough decisions are now behind us, putting River Oaks well on track to emerge from the reorganization process as a streamlined, efficient manufacturer tightly focused on servicing our valued customers. Through our renewed commitment to customer service, our customers can rest assured that River Oaks will be here to serve them for many years to come." Founded in 1987, River Oaks designs and manufactures leather and upholstered furniture under the brand names River Oaks(R), River Crest(TM) and Gaines(TM). River Oaks filed a voluntary petition under Chapter 11 of the Bankruptcy Code on March 3, 1998. It subsequently retained New York- and Charlotte, N.C.-based OSNOS & Company to assist in its restructuring. SOUTHEAST BANKING: Suspension of $100M to Creditors --------------------------------------------------- The bankruptcy trustee for Southeast Banking Corp. today announced that the U.S. Bankruptcy Court has suspended the previously approved distribution of $100 million to creditors of the failed bank holding company. The suspension, ordered at the request of the bankruptcy trustee, comes as a result of a recent ruling from the United States Court of Appeals for the Eleventh Circuit in a dispute between holders of Southeast Banking Corp. senior and subordinated bonds. In an opinion issued on September 28, 1998, the Court of Appeals held that the Bankruptcy Code had eliminated the "Rule of Explicitness" on which lower courts had relied in refusing to direct payment of post-bankruptcy interest, costs and fees to the holders of senior notes. The Bankruptcy Court has scheduled a Status Conference for October 26, 1998, to consider the appeals court decision and whether the distribution can proceed in a lesser amount or on other terms and conditions. If the suspension is lifted following the Status Conference, the distribution will be made by Jeffrey H. Beck, the Fort Lauderdale attorney and bankruptcy trustee appointed in April to succeed William A. Brandt, Jr. Upon his appointment as trustee, Beck also became Successor Agent to the Federal Deposit Insurance Corporation as Receiver for the failed Southeast Bank, N.A. Mr. Beck is represented by Mark D. Bloom of Greenberg Traurig, P.A. in Miami, who made the court filing on his behalf. Southeast Banking Corp. filed for bankruptcy in September of 1991, immediately following the seizure of its wholly- owned subsidiary banks by federal and state regulators. The bankruptcy estate has already made or commenced three prior interim distributions to creditors and bondholders in the total amount of approximately $201 million. STRATOSHPHERE: Reorganization Becomes Effective ----------------------------------------------- Stratosphere Corporation announced the Chapter 11 Reorganization of the Company and its subsidiary, Stratosphere Gaming Corp., became effective. On August 20, 1998, the Nevada gaming authorities licensed Carl C. Icahn and certain of his affiliated companies as controlling persons of the reorganized Company, as contemplated by the Plan of Reorganization. Under the Plan, the Company's stock that was outstanding prior to the effective date was canceled and the Company's First Mortgage Notes ("Notes") that were outstanding prior to the effective date have been exchanged for a total of 2,030,000 shares of new common stock. Approximately 84.66% of the 2,030,000 new shares are issued to Mr. Icahn or entities that he controls. Under the Plan, holders of the Notes are the only persons who received new stock of the Company. The Company has received all necessary regulatory approvals including that of the Nevada State Gaming authorities. SUN TV: Committee Taps Ernst & Young Accountants ------------------------------------------------ The Official Committee of Unsecured Creditors of Sun TV and Appliances, Inc. and Sun Television and Appliances, Inc. applies to the court for authority to employ Ernst & Young, LLP ("E&Y") as accountants to the Committee. E&Y shall conduct a financial investigation in order to substantiate the current financial position of the debtors and to identify and substantiate the business problems that led to the filing of the bankruptcy petitions. The accountants will analyze the debtors' business plans, cash flow projections, store closing programs, and other reports or analyses prepared by the debtors or their professionals; assess and analyze the economic ramifications of proposed transactions, review the debtors' financial statements, review the debtors' real estate portfolio, analyze the debtors' tax position, attend meetings, prepare a hypothetical liquidation analysis, review and analyze transactions with insiders and provide expert testimony. E&Y's current hourly rates range from $90 to $495 per hour. SUN TV: Committee Taps Otterbourg, Steindler - Attorneys -------------------------------------------------------- The Official Committee of Unsecured Creditors seeks court approval to employ the law firm of Otterbourg, Steindler, Houston & Rosen, PC as counsel to the Committee. The firm will, among other things, assist and advise the Committee in its consultation with the debtors relative to the administration of the Chapter 11 cases, attend meetings and negotiate with the representatives of the debtors, assist and advise the Committee in its analysis of the debtors' affairs, assist the Committee in all aspects of review and formulation of a plan, and assist the Committee in all aspects of review and formulation of any financing agreements. The firm charges between $125 and $440 per hour. TEARDROP GOLF: Assignment of Agreement with Couples --------------------------------------------------- TearDrop Golf Company (Nasdaq:TDRP) announces court authorization of the assignment to TearDrop of an endorsement agreement with Fred Couples, internationally- known superstar golf professional, for his services as a corporate and product spokesperson. Announcement of the authorization is being made today as TearDrop also said that it has elected not to pursue further bids to acquire certain assets of Lynx Golf Company. TearDrop submitted an opening bid for Lynx in an auction directed by the U.S. Bankruptcy Court for the Southern District of California on October 14, 1998. At the sale hearing, the court approved the assignment of the endorsement agreement with Mr. Couples from Lynx to TearDrop Golf Company. The authorization will be subject to an order of the court to be issued shortly. Rudy Slucker, President and CEO of TearDrop Golf Company, said: "We're delighted to welcome Fred Couples to our family of companies. Fred will play a lead role as our spokesperson, ensuring that the TearDrop family of brands continues to grow." TearDrop's overall corporate position within the golf community will be enhanced with Fred on board; and our presence will be strengthened on each of the major professional golf tours," Mr. Slucker added. Commenting on his company's decision to terminate participation in the bidding for Lynx Golf, Mr. Slucker said "We have successfully integrated the acquisition of Ram Golf and Tommy Armour Golf into the Company and have been able to add significant value to each of them. We will continue to seek additional acquisition opportunities to enhance shareholder value and further solidify our position as one of the leading manufacturers of premium golf clubs and accessories." The TearDrop Company is the leading manufacturer of premium putters using ROLL-FACE(TM) technology. TearDrop's wholly- owned subsidiaries, Armour(R) Golf and RAM(R) Golf, are manufacturers of golf clubs and accessories. TearDrop is also the exclusive North American distributor of Walter Genuin(TM) golf shoes. UNISON HEALTHCARE: Applies For Appointment of Examiner ------------------------------------------------------ The U.S. Trustee seeks the appointment of Keith J. Shapiro as examiner in the case of Unison Healthcare Corporation, debtor. DLS CAPITAL PARTNERS: Bond Pricing for Week of October 12 --------------------------------------------------------- Following are indicated prices for selected issues: Acme Metal 10 7/8 '07 18 - 20 (f) Amer Pad & Paper 13 '05 42 - 45 Amer Telecasting 0/14 1/2 '04 23 - 25 Asia Pulp & Paper 11 3/4 '05 61 - 63 Boston Chicken 7 3/4 '05 5 - 7 (f) Brazos 10 1/2 '07 28 - 33 Brunos 10 1/2 '05 4 - 8 (f) CAI Wireless 12 1/4 '02 20 - 22 (f) Cityscape 12 3/4 '04 17 - 20 (f) E & S Holdings 10 3/8 '06 56 - 60 Globalstar 11 1/4 '04 55 - 57 Harrah's Jazz 14 1/4 '02 22 - 24 (f) Hechinger 9.45 '12 69 - 71 Hills 12 1/2 '03 39 - 41 Levitz 9 5/8 '03 45 - 55 (f) Liggett 11 1/2 '99 68 - 70 Mobilemedia 9 3/8 '07 10 - 12 (f) Penn Traffic 9 5/8 '05 18 - 19 Royal Oak 12 3/4 '06 46 - 50 Service Merchandise 9 '04 44 - 46 Sunbeam 0 '18 10 - 12 Zenith 6 1/4 '11 20 - 23 (f) **************** 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. ISSN 1520-9474. 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 * * *