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/raid1/www/Hosts/bankrupt/TCR_Public/981019.MBXT R O U B L E D C O M P A N Y R E P O R T E R Monday, October 19, 1998, Vol. 2, No. 204 Headlines AHERF: Drexel Nixes Management of Hospitals' Academic Hub ARCON HEALTHCARE: Closing Soddy Daisy Clinic BRUNO'S: Wins Approval of Plan CITYSCAPE FINANCIAL: Notes Due 2008 Are Exempt CITYSCAPE FINANCIAL: Wins Nod For $86M Interim DIP COLUMBIA/HCA: Sues Former Executive Alleging Racketeering CRIIMI MAE: Ronald B. Rubin Announces Class Action EUROWEB INTERNATIONAL: Private Placements of Stock HAYES CORP: Interim $5 Million Dip Pact With NationsCredit LOGAN GENERAL: Bankruptcy To Stop Takeover of Hospital LOGAN GENERAL: Haden Recuses Himself From Case MARVEL ENTERTAINMENT: Names New Chairman OWENS CORNING: 51% Interest Sale of Adv Glassfiber Yarns PETRIE RETAIL: Committee Withdraws Plan Support PITTSBURGH PENGUINS: The Red Line SOUTHERN PACIFIC: Mortgage Certificates on Rating Watch STRATOSPHERE CORP: Cancels Stock THE WOODLANDS: Bankruptcy Judge Postpones Sale UNITED INFORMATION SYSTEMS: Files Voluntary Chapter 11 WESTMORELAND COAL: Can It Survive? ************* AHERF: Drexel Nixes Management of Hospitals' Academic Hub ---------------------------------------------------------- In an action that could jeopardize the sale of Allegheny Health Education and Research Foundation's bankrupt Philadelphia hospitals, trustees at Drexel University yesterday voted down a proposal to take over management of the hospitals' academic hub. Tenet Healthcare Corp.'s $345 million offer had been contingent on Drexel entering a management contract to run the Allegheny University of the Health Sciences, an academic center that AHERF stitched together with the acquisition of two Philadelphia medical schools in the past decade. Tenet quickly said it was working to find another academic partner. It has maintained in the past that an academic affiliation is essential to its plans. Dr. Barbara Atkinson, dean of the medical school at AUHS, said the university will continue working on a reorganization plan for how it can survive on its own. "Tenet has indicated they intend to go forward, so that's what we're assuming. There's nothing else we can assume," said David Heiman, who serves as legal counsel to the committee of unsecured creditors. The committee is scheduled to meet in Philadelphia today. Still Drexel's decision raises uncertainties. "This opens the door for Tenet to back out," said Dr. James Wilberger, vice dean for education and student affairs. Under Tenet's preliminary agreement to buy AHERF's hospitals, the company would provide the university with $60 million in endowment money and $30 million in working capital. The company has also pledged $33 million of ongoing support in each of the next three years. That annual support is linked with the university providing medical residents to help staff the hospitals, Atkinson said. Wilberger said AGH remains committed for the next two years to teaching the AUHS students who have already made plans to study in Pittsburgh. (Pittsburgh Post Gazette--10/14/98) ARCON HEALTHCARE: Closing Soddy Daisy Clinic -------------------------------------------- Arcon Healthcare, the Nashville-based rural-clinic chain that filed for bankruptcy only to announce last week it had decided reorganizing was "impossible," yesterday informed employees in at least one of its five remaining clinics that it will close the facility. Chief Executive Officer Hud Connery Jr. told employees at Arcon's Soddy Daisy, Tenn., clinic of the company's decision, though a date has yet to be announced, clinic administrator Jim Perkins said. The company was to meet today with the two real estate investment trusts that are its landlords, and also is meeting with other creditors "to discuss an orderly transition," Arcon attorney Wallace Dietz said. The company, which last week told Assistant U.S. Trustee Beth Derrick that it had failed to attract the additional capital it needs to continue, has few options. One would be to continue operating the clinics while REITs Capstone Capital Corp. of Birmingham, Ala., and Nationwide Health Properties of Santa Barbara, Calif., which own the buildings, look for new companies to operate them. Another would be to simply shut them down and surrender the assets back to those that own them. Arcon which leases much of its equipment and its facilities owes the REITs about $50 million. Aside from Soddy Daisy, Arcon's remaining clinics envisioned as outpatient "hospitals without beds" are in Cedar Park, Texas; Pflugerville, Texas; Destin, Fla., and Santa Rosa Beach, Fla. It earlier shut down facilities in Rockwood, Tenn.; Heflin, Ala.; DeFuniak Springs Fla.; and Mesquite, Nev. The company filed last month for protection from its creditors while it reorganized under Chapter 11 of the Bankruptcy Act. But last Friday, Arcon representatives failed to show up for a Nashville meeting with creditors. A note from Dietz was left on a door, saying, "We have determined it is impossible for the debtors in these cases to reorganize under Chapter 11." (Copyright Tennessean-10/13/98) BRUNO'S: Wins Approval of Plan ------------------------------ Bruno's Inc. has won approval of a plan that might help it emerge from bankruptcy protection. The plan calls for Bruno's to be independent and debt- free in three years. It was approved in Atlanta by members of the bankruptcy court's creditors committee. The Birmingham-based grocery chain filed for Chapter 11 protection earlier this year, listing debts of more than $1.1 billion. (Copyright The Atlanta Journal / The Atlanta Constitution 10-15-98) CITYSCAPE FINANCIAL: Notes Due 2008 Are Exempt ---------------------------------------------- Cityscape Financial Corp. reports to the SEC that up to $75 million in aggregate principal amount of 9.25% Senior Notes due 2008 (the "New Debt Securities") to be issued by Cityscape Financial Corp. (the "Company") under the Indenture to be qualified hereby will be offered to holders of the Company's 12 3/4% Series A Senior Notes due 2004 (the "Old Debt Securities"), pursuant to the terms of the plan of reorganization (the "Plan of Reorganization") for all outstanding Old Debt Securities at the exchange ratio of $250 principal amount of the New Debt Securities for each $1,000 principal amount of the Old Debt Securities. The terms of the Plan of Reorganization are contained in the Solicitation and Disclosure Statement dated August 28, 1998. The issuance of the New Debt Securities is exempt from registration under the Securities Act of 1933, as amended pursuant to the exemption provided by the Bankruptcy Code. CITYSCAPE FINANCIAL: Wins Nod For $86M Interim DIP -------------------------------------------------- Cityscape Financial Corp. has interim approval to borrow up to $36 million under a $100 million debtor-in-possession credit agreement with Greenwich Capital Financial Products Inc. and up to $50 million under a $150 million DIP facility from The CIT Group/Equipment Finance Inc. and Nomura Asset Capital Corp., pending an Oct. 27 final hearing. The court concluded in separate orders that, without the loans, the subprime lender would be unable to maintain business relationships with vendors, prospective mortgage borrowers, and customers, or to fund future loan originations, which are essential to Cityscape's ability to reorganize. (Federal Filings Inc. 16-Oct-98) COLUMBIA/HCA: Sues Former Executive Alleging Racketeering --------------------------------------------------------- Columbia/HCA Healthcare Corp. filed a $10 million lawsuit against a former senior vice president alleging a p"pattern of racketeering" as the executive funneled contracts to companies owned or controlled by associates. The lawsuit was filed by Columbia/HCA against Samuel A. Greco, who had been the hospital chain's senior vice president for financial operations. The suit charges fraudulent schemes perpetrated by Greco over a six-year period. The suit alleges that Greco "improperly" too k advantage of his position to enter into unfair and fraudulent contracts. the suit may help Richard Scott, Columbia's former chairman and Chief executive who has been at the center of the government investigation which is intent on showing that Scott and his top executives worked together to defraud Medicare. (The Wall Street Journal 16- Oct-98) CRIIMI MAE: Ronald B. Rubin Announces Class Action ------------------------------------------------- Ronald B. Rubin, Chartered announces that on October 9, 1998, a securities class action lawsuit was filed in the United States District Court for the District of Maryland against certain officers and directors of CRIIMI MAE, Inc, (NYSE: CMM) ("CMM" or the "Company") on behalf of all persons who purchased the Company's securities at artificially inflated prices (the "Class") between June 30, 1998 and October 5, 1998, inclusive (the "Class Period"). The complaint charges certain officers and directors of the Company with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. The Complaint alleges that defendants issued a series of materially false and misleading statements concerning the Company's assets, earnings, and capital position. Because of the issuance of a series of false and misleading statements, the price of CMM securities was artificially inflated during the Class period. EUROWEB INTERNATIONAL: Private Placements of Stock -------------------------------------------------- As of September 16, 1998 Euroweb International Corp. completed a private placement of 533,333 shares of its Common Stock for $400,000 with J.P. Carey Inc., as placement agent. As of September 16, 1998, the company completed a private placement to an investor of 333,333 shares of its Common Stock for $250,000. The company paid no fees or had any direct costs in connection with this sale. In September 1988, the company received $135,000 from the exercise of 135,000 outstanding Options to purchase 135,000 shares of Common Stock at an exercise price of $1 per share. NASDAQ SmallCap Market requires companies to have net tangible assets of at least $2 million for continued listing on such market. Euroweb International Corp. reported in its 10-QSB for the six month period ended June 30, 1998, its most recent SEC Filing prior to the instant filing, net tangible assets of $1,979,035, or approximately $21,000 below NASDAQ requirements. The same 10-QSB showed for the three month period ended June 30, 1998, a loss of $102,292 of which $ 97,000 represented amortization of goodwill. As a result of the aforesaid transactions, management of the company believes it currently complies with all of the NASDAQ requirements for continued listing. Effective October 1, 1998, Euroweb International Corp. appointed Csaba Toro, a Director and Vice President of the company. Effective October 1, 1998, Registrant approved Robert Genova as its President. Prior thereto Mr. Genova served as a Director of the company and as its Treasurer, which position Mr. Genova will continue to hold. HAYES CORP: Interim $5 Million Dip Pact With NationsCredit ---------------------------------------------------------- As Hayes and lender NationsCredit Commercial Corp. try to reach an agreement that provides permanent debtor-in- possession financing, the company has approval to borrow up to $5 million under a 30-day DIP facility from NationsCredit. Hayes said it plans to use the DIP facility for working capital purposes pursuant to a budget that was filed under seal, first day payments, and restructuring charges associated with outsourcing manufacturing operations and consolidating the company's businesses. The company's operations currently are structured around three core product categories: modems; broadband products; and access systems. A final hearing on the company's emergency motion for approval of the $5 million facility is scheduled for Nov. 6. (Federal Filings Inc. 16-Oct-98) LOGAN GENERAL: Bankruptcy To Stop Takeover of Hospital ------------------------------------------------------ Vowing to stop a court-ordered takeover of Logan General Hospital "in its tracks," administrator C. David Morrison has told his employees that the 132- bed facility will instead file for bankruptcy. Morrison sent a letter to Logan General staff on Tuesday, as a response to Friday's ruling by U.S. District Judge Charles H. Haden II placing the debt-troubled hospital under federal receivership. "We will take what may have been the implied advice in the federal judge's ruling last Friday and seek the protection of the bankruptcy court by filing a petition for a Chapter 11 reorganization," Morrison's letter said. During Friday's hearing, Haden had commented that bankruptcy court could prove "an efficient and accommodating mechanism" for Logan General to resolve its debts. But Haden also noted that the hospital appeared reluctant to file. Haden issued a written order in the case Tuesday stating that he will appoint a receiver. While Haden ordered the takeover of Logan General on Friday, he asked the parties in the case to suggest names by next week before he appoints anyone. Logan General lawyer David Higgins said Tuesday that while Morrison may change his mind, the decision to file for bankruptcy is still his to make. "The judge has made it clear that he'll appoint a receiver. Up until he does that, Mr. Morrison can file under Chapter 11," Higgins said. "That's a consideration. I can't tell you that's going to happen." Chapter 11 would allow Logan General, the state's seventh- largest hospital, to present a bankruptcy judge with a plan to reorganize and address its debts. Chapter 11 could also allow Morrison and his management team to remain in charge. Any receiver appointed by Haden would replace Morrison, who earned more than $316,000 in 1996 - the last year figures were available - as administrator of both the hospital and its sister company, Monterra Development Corp. Logan General's money woes began when it started funneling more than $18 million to Monterra for a strip mall project in the Logan area. At least one of the creditors of the nonprofit hospital has challenged that transfer of hospital funds to a for-profit venture. The creditor, The Bank of New York, contends it violated the terms of a $31.4 million bond issue it has with the hospital. The bank sued for a receiver after Logan General missed payments on the bond issue. If Logan General files for bankruptcy, the bank or another creditor could ask the bankruptcy judge to appoint a trustee who could replace Morrison. With such a filing, "the takeover of our hospital by the Bank of New York will be stopped in its tracks," Morrison wrote. The filing "will give us the breathing room we need," he continued, while saving the more than 300 full-time jobs at the hospital. State tax officials have agreed to a plan to allow Logan General to pay off its $6.7 million tax debt. The hospital's lawyers have presented a similar plan to the Internal Revenue Service, owed between $7 million and $8 million. Morrison's letter said that the hospital will also increase efforts to collect about $16 million owed by Medicare, insurers and individuals. Logan General in turn owes $4.7 million to Medicare for earlier overpayments. Higgins said Morrison has also reduced his combined salary to about $160,000 this year. (Charleston Gazette - 10/14/98) LOGAN GENERAL: Haden Recuses Himself From Case ----------------------------------------------- On October 15, 1998 a report in the Charleston Gazette stated that Federal bankruptcy court may not protect the job of Logan General Hospital Administrator C. David Morrison, if a hospital creditor continues to question its funding of a strip mall and other finances. The Bank of New York will not stop Logan General from filing for bankruptcy, one of its lawyers said Wednesday. But it remains concerned over how the hospital mishandled a $31.4 million bond issue with the bank. "The bank has no interest in seizing the hospital," lawyer Phil Melick said. "The bank and the bondholders and the people of Logan all want to see this hospital continue to operate. Any receiver would replace Morrison and other hospital administrators. Bankruptcy law would allow the bank to request a trustee, who in turn could remove Morrison and his management team. Meanwhile, Haden stepped down from the case Wednesday, citing a letter he received about the bankruptcy plans from "Various Logan General Hospital Employees." Haden quoted the unsigned letter in his order recusing himself. "Now we're hearing from Mr. Morrison that a 'back office' deal has been made in which the hospital will be allowed to file for bankruptcy, and he and his staff will remain in power," the letter said. "He is also making his 'brags' that the bankruptcy attorney is your son-in- law and that "everything is going to work out for him," the letter continued. The in-law, W. Bradley Sorrells, represents the hospital as it considers bankruptcy, Morrison confirmed Wednesday. Morrison rejected the letter's allegations. "There's no back-room deal," he said. "We've thought about and prepared for Chapter 11. It will be a typical Chapter 11. We hoped that we could avoid it, but have not been able to." Haden's order said that he was unaware of any deals. The district judge could not preside over any bankruptcy filing, it noted, and Sorrells does not represent Logan General in any case before him. Haden's order said the anonymous letter, "its contents and its implicit charge represent an improper contact with this court, done in an apparent attempt to influence the court's decision making." Haden decided to recuse himself on his own motion "to assure interested parties and the general public that when difficult decisions must be made that those decisions will not be influenced by improper contacts with the court or by conflicts of interest," the order said. The Bank of New York contends that Logan General violated the bond agreement by missing payments and transferring at least $18 million for the mall built by its sister company, Monterra Development Corp. Morrison administers both Monterra and the hospital. Monterra has developed a number of projects besides the mall, according to Steve Shride, a Milton management consultant hired by Logan General. Logan General's other debts include nearly $2 million it allegedly owes Citicorp Leasing, which filed suit in federal court in New York last month. The suit says the hospital has missed payments since February on a lease for medical, office and landscaping equipment. MARVEL ENTERTAINMENT: Names New Chairman ---------------------------------------- Marvel Enterprises, Inc., the new company formed by toy maker Toy Biz Inc.'s acquisition of Marvel Entertainment Group, Inc. named Morton Handel chairman and said it will seek a chief executive. (The Wall Street Journal 16-Oct-98) OWENS CORNING: 51% Interest Sale of Adv Glassfiber Yarns -------------------------------------------------------- Owens Corning reports to the SEC that on September 30, 1998, Owens Corning, a Delaware corporation (the "Company"), completed the sale (the "Sale Transaction") of a 51% membership interest (the "Transferred Interest") in Advanced Glassfiber Yarns LLC, a Delaware limited liability company ("AGY"), to AGY Holdings, Inc., a Delaware corporation ("Holdings"). Holdings is a wholly-owned subsidiary of Glass Holdings Corp., a Delaware corporation ("GHC") and a wholly-owned subsidiary of Groupe Porcher Industries, a French corporation ("Porcher"). Porcher and its affiliates are existing customers of AGY. The Company has indirectly retained a 49% membership interest in AGY through Jefferson Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company ("Jefferson"). On July 1, 1998, the Company contributed to AGY substantially all of the assets comprising its glass fiber yarns and specialty materials business in exchange for a 100% membership interest in AGY. On July 31, 1998, the Company contributed a 49% membership interest in AGY to Jefferson and entered into an LLC Interest Sale and Purchase Agreement with AGY and GHC pursuant to which the Company agreed to sell the Transferred Interest price of $331,500,000. Upon the closing of the Sale Transaction, AGY made a special pro rata distribution of $390,000,000 to its members, including a $191.1 million distribution to Jefferson. Additionally, in accordance with the Sale Agreement, Jefferson received a further distribution from AGY of $9,262,000 in regard to AGY's estimated closing date net asset valuation. At the conclusion of the Sale Transaction and distributions, the Company and its subsidiaries received aggregate cash proceeds of $529,612,000 (net of certain transaction costs). Simultaneously with the closing of the Sale Transaction, the Company and AGY entered into a number of agreements pursuant to which the Company and AGY have agreed to sell or make available to one another various raw materials, certain services, capital equipment and products over a five to seven-year period on agreed terms and prices. PETRIE RETAIL: Committee Withdraws Plan Support ----------------------------------------------- Doubting that Petrie Retail Inc. will have enough cash on the effective date to satisfy fully priority and administrative claims, the official committee of unsecured creditors has withdrawn as a proponent of the company's joint reorganization plan. The panel's concern is derived from the lower-than-expected sale price of Petrie's G&G Shops Inc. unit and the extensive amounts of administrative and priority tax claims asserted against the estate. Company estimates indicate the existence of $38 million to $48 million of allowed administrative claims (excluding professional fees paid on an interim basis), $4 million to $12 million of allowed priority tax claims, as well as up to $600,000 of miscellaneous secured claims and up to $800,000 of allowed priority claims. All told, Petrie surmised that it would need between $42 million and $61 million on the effective date for plan consummation. (Federal Filings Inc. 16-Oct-98) PITTSBURGH PENGUINS: The Red Line --------------------------------- On October 14, 1998 the Pittsburgh Post-Gazetter reports that the Penguins filed for bankruptcy protection yesterday, beginning a legal odyssey that the owners hope will lead them into a new Pittsburgh arena but that some fear could take them out of town. The immediate effect of the team's filing for Chapter 11 protection in U.S. Bankruptcy Court is to shield it from obligations to creditors, allowing it to stay in business while it sorts out its financial problems. Players, coaches and other team employees will be paid and games will go on as scheduled. The Penguins, who were about to run out of money but insist they were not in danger of failing to meet their payroll, will seek emergency loans as part of the bankruptcy. Resulting legal proceedings and negotiations over the next several months will determine whether the team has a future in Pittsburgh. "Our reason for doing this was to keep the Penguins viable and in Pittsburgh," said Roger Marino, one of the team's two owners. "When you're in protection, you're able to put money into the team rather than worrying about who else is going to come in and grab it. That's what this team needs right now in the short term." Howard Baldwin, Marino's equal partner, agreed, but he added that in the long term, the team will need a new arena to survive here. When the Toronto Maple Leafs move into a new facility in January, the 37-year-old Civic Arena will be the NHL's oldest building. Marino has estimated that he has spent $30 million of his own money in sustaining the franchise since spending $40 million to join the ownership group in May of 1997. A year after saying a $12.9 million infusion of public funds would keep them in the Civic Arena, and happy, until June 2007, the Penguins, by filing for bankruptcy, raise the prospect that the court could dissolve their Civic Arena lease, leaving them free to move. That possibility increases the pressure on city and county officials to accommodate the team's demand for a new arena. Penguins owners yesterday continued to express their anger over a joint lawsuit filed by the Public Auditorium Authority and Civic Arena landlord SMG Pittsburgh Inc. last week, a move that asked for an injunction that bars team officials from having any discussions about moving the team before its lease commitments expire in 2007. Under Chapter 11, the Penguins can ask the bankruptcy judge to break the lease. "It's a shame," SMG President Wes Westley said of the Penguins' bankruptcy. "I hope this works out. I have a lot invested in Pittsburgh. Not just money, but a lot of emotion. The real risk here is that the Penguins get their lease rejected. That's why it's so important that we filed that injunction. It will be much harder for them to break something like that than it would a lease." The Penguins have made progress curing their other financial troubles. They are close to agreement with Fox Sports Network on a revised broadcast rights deal that would bring more revenue to the team, and they have reached a partial agreement with retired center Mario Lemieux in a dispute over nearly $30 million the team owes him. But talks with SMG aimed at reducing the Penguins' annual rent and increasing its take of Civic Arena revenues have gone nowhere. Marino said he considers SMG to be the Penguins' largest remaining obstacle toward financial viability and the main reason the team would want to leave the Civic Arena. As long as the Penguins stay there, they must share in nearly all profits in the building from such things as concessions, or on the immediate surrounding property, where various developments have been proposed. Westley said SMG has been willing to help the team regain its financial footing. He said he wrote a letter that was hand-delivered to the Penguins on Monday, offering concessions he said would help the team become profitable again. The letter offers Marino, "relief by granting you 100 percent of its share of naming rights, purchasing the defunct minor-league team you are holding and working closely with you to maximize your share of arena profits." Based on a five-year, $6 million deal the Penguins had nearly struck with Allegheny Energy for Civic Arena naming rights last year, SMG's total share of such a contract would be worth roughly $3 million. The defunct minor-league team the Penguins hold is the former Cornwall, Ontario, franchise of the American Hockey League, but the Penguins have made plans to place the team in a new arena in Wilkes- Barre next season and they are expecting it to turn a profit. "In legal terms," Marino added, "it's like asking someone to sell their first-born, then offering it back to them." Marino said he expects the **bankruptcy** issues to be resolved by the end of the NHL regular season in June. For now, at least, the city and county officials who negotiate with the Penguins are furious, believing the team has reneged on a commitment barely a year old. In exchange for $12.9 million from the city and county for Civic Arena improvements, the team last year signed an agreement to stay there until June 2007. Baldwin said at the time that the arena was adequate. "A new arena was never part of the discussion," said Steve Leeper, executive director of the Public Auditorium Authority, the city- county agency that owns the Civic Arena. "Think of the absurdity of it. You have a difficult time having serious, businesslike discussions with an organization that behaves in that fashion." In a statement last night, Mayor Murphy said: "In spite of the team's recent financial setbacks, we want to keep the Penguins in Pittsburgh." The statement added that the city "is committed to protecting the taxpayers' contribution that benefitted the team and will act accordingly as the legal proceedings move forward." Two elements had kept the Penguins from declaring bankruptcy as early as two months ago. First, Baldwin vowed in early August that as long as he was an equal partner in the franchise, he would not allow it to go into bankruptcy. Then, NHL Commissioner Gary Bettman made it clear he would exercise his right to seize the franchise should it declare bankruptcy. Bettman, who had been deeply involved in the Penguins' negotiations with their various creditors the past few weeks, was able to perform an about- face on the subject because the NHL bylaws say that an owner "risks forfeiture" of a franchise in the event of bankruptcy. After reviewing the Penguins' situation, however, Bettman chose not to act, an option which also is permitted under the bylaws. "While we are disappointed that this step has become necessary," Bettman said from the league's New York headquarters yesterday, "it results from the inability of the team to negotiate satisfactory arrangements to continue to operate in a financially viable manner under current conditions." Three corporate entities that own the Penguins filed for the bankruptcy protection: Pittsburgh Hockey Associates, Pittsburgh Sports Associates Holding Co. and HBRM LLC. Pittsburgh Sports Associates Holding Co. and Pittsburgh Hockey Associates each reported assets and liabilities of $50 million to $100 million. Pittsburgh Hockey Associates said it had 200 to 999 creditors; the holding company did not list a figure. HBRM said it had 100 to 199 creditors; assets of $500,000 to $1 million; and liabilities of $50 million to $100 million. Lemieux was the largest creditor listed in the filings, which said he was owed nearly $28.7 million. The NHL was second, at nearly $1.5 million. Attorneys for the Penguins said they would be in U.S. Bankruptcy Court later his week with several emergency motions related to the case, including a request that the team be allowed to continue meeting its pre-bankruptcy payroll. Robert Sable, the team's bankruptcy attorney, said the case was filed this week because "the season is starting and payroll demands become heavy at the start of the season." He said the team would have been unable to meet its payroll this week without protection from creditors. Warden said players and employees would have been paid even if the team hadn't filed for bankruptcy protection. "We would've not paid some other things," he said. (Pittsburgh Post Gazette -10/14/98) SOUTHERN PACIFIC: Mortgage Certificates on Rating Watch ------------------------------------------------------- Duff & Phelps Credit Rating Co. (DCR) has placed the classes of Southern Pacific Secured Assets Corp. (SPSAC) Mortgage Loan Asset-Backed Pass-Through Certificates Series 1997-2 on Rating Watch. DCR has reaffirmed its ratings on all classes of 11 other rated, publicly traded residential mortgage-backed series of SPSAC, the securitization vehicle of Southern Pacific Funding Corporation (SPFC). These actions have been prompted by the recent bankruptcy filing by SPFC. Ratings on classes of the following series are reaffirmed: SPSAC 1995-1 SPSAC 1995-2 SPSAC 1996-1 SPSAC 1996-2 SPSAC 1996-3 SPSAC 1996-4 SPSAC 1997-1 SPSAC 1997-3 SPSAC 1997-4 SPSAC 1998-1 SPSAC 1998-2 Series 1997-2 is a senior/subordinated structure, serviced by Advanta Mortgage Corp. USA. This series is experiencing high delinquency, foreclosure and REO rates, which are above DCR's expectations. Realized losses to date have been limited, as few properties have been liquidated. The transaction currently is generating sufficient excess cash flow and building overcollateralization on or close to schedule. DCR has placed the most junior class of each pool of the Series 1997-2 on Rating Watch--Down as it monitors loss severities on the defaulted loans. The other rated classes have been placed on Rating Watch--Uncertain. DCR has reaffirmed the ratings of the other above- referenced SPSAC series based on their 100 percent financial guaranty insurance policies from MBIA Insurance Corporation, although each of these series is also performing worse than DCR's expectations. Advanta Mortgage Corp. USA is the servicer on all except four of the referenced series. Imperial Credit Industries, Inc. is servicing Series 1995-2, and SPFC is servicing Series 1997-4, Series 1998-1 and Series 1998- 2. SPFC faces likely near-term replacement as servicer of the three most recent series. Pursuant to the provisions of a Chapter 11 filing, an automatic stay of interested parties' rights and remedies has been imposed by the bankruptcy court pending its ruling on the case. This ruling will include a determination of the appropriate resolution of servicing responsibilities for the three affected series. While there is always the possibility that a transfer of servicing may give rise to a change in the nature of the cash flows, it would not affect the overall quality of the certificates owing to MBIA's financial guaranty insurance policies. In addition to the concerns noted above, the ability of SPFC to meet repurchase obligations under its representations and warranties is in question as a result of its compromised financial condition. (PR Newswire WallStreet-10/15/98) STRATOSPHERE CORP: Cancels Stock -------------------------------- Stratosphere Corp., which operates the tower casino, Wednesday said it completed reorganization under Chapter 11 bankruptcy. The company's previous stock was canceled, and new shares were issued to bondholders. Financier Carl Icahn controls 85 percent of the 2 million new shares. (Las Vegas Review-Journal; 10/15/98) THE WOODLANDS: Bankruptcy Judge Postpones Sale ---------------------------------------------- U.S. Bankruptcy Judge John T. Flannagan on Wednesday postponed the sale of The Woodlands, saying the procedures for auctioning the western Kansas City, Kan., greyhound and horse racing facility were "stacked in favor of the creditors." The track was to have been auctioned off after Wednesday's hearing. Flannagan scheduled a conference for Nov. 3 to work out sale procedures that he said would be fair to all prospective bidders. Lawyers said a sale could be held late next month. Urging Flannagan to move the sale along as quickly as possible were Eric C. Rajala, whom Flannagan appointed in June as trustee of The Woodlands, and Dale Somers, a lawyer for the Kansas Racing and Gaming Commission. Rajala said the track, which has been operating during the bankruptcy proceedings, has problems with cash flow, maintenance and employee morale. "We need to get this (sale) done as soon as possible," Rajala said. William M. Grace, who holds 85 percent of The Woodlands' $29.7 million mortgage debt and is expected to buy the facility, said he was disappointed at the delay but remained patient. "All we want to do is get the auction done," he said after the brief hearing. "I don't care what is in the bid documents." The track's owner, Hollywood Park Inc., of Inglewood, Calif., contended that several factors reduced the prospect of attracting bidders other than Grace. Those factors included exempting the creditors from requirements for a $3 million minimum bid and $1 million in earnest money. Also, the creditors would have been able to match any other high bid and emerge with the track. On a related matter, Flannagan decided that he had jurisdiction to approve the sale while an appeal of an earlier ruling was pending in another federal court. Hollywood Park is appealing Flannagan's rejection in April of The Woodlands' plan to emerge from bankruptcy in partnership with an American Indian-owned casino. (Kansas City Star - 10/15/98) UNITED INFORMATION SYSTEMS: Files Voluntary Chapter 11 ------------------------------------------------------ On July 22, 1998, United Information Systems, Inc., a Florida corporation, Case No. 98-16621-BKC-AJC, and United Information Systems, Inc., a Delaware Corporation, Case No. 98-16634-BKC-AJC, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the bankruptcy court for the Southern District of Florida, Miami Division. On September 24, 1998, the bankruptcy cases were converted to cases under Chapter 7 of the United States Bankruptcy Code. James S. Feltman was appointed as the Chapter 7 Trustee. The attorneys for the Chapter 7 Trustee are Jerry M. Markowitz and the law firm of Markowitz, Davis, Ringel & Trusty, P.A. WESTMORELAND COAL: Can It Survive? ---------------------------------- Westmoreland Coal Co. heads into bankruptcy court in Denver today for hearings that could determine the survival of the 144-year-old company that only recently moved to Colorado Springs. But however it's resolved, the bankruptcy case won't have a big economic impact locally. Westmoreland, which moved here in 1995, has only 36 employees - 15 in Colorado Springs - and no coal-mining operations in the state. But the bankruptcy scores big in the curiosity category. At issue is the survival of a historic coal company with deep roots in Appalachia that once employed 10,000 miners. Now, Westmoreland is trying to endure by focusing on other energy interests. Westmoreland landed in bankruptcy court in December 1996 because it couldn't meet a $20 million yearly payment to a handful of retired mine workers' pension and health-care funds. After more than a year of talks, company officials failed to negotiate a new payment plan with the United Mine Workers of America and the funds. Much has changed in the past two years, and now Westmoreland wants out of bankruptcy court. "What you see is a company that comes out of this with very strong operating businesses, over $100 million in cash and investments, no debt and very lean, low overhead costs," said Christopher Seglem, Westmoreland president, chairman and chief executive officer, arguing for a dismissal. "It is what we were aiming for back in 1992," when the company's restructuring began. But the company's biggest creditors - the funds that provide lifetime benefits for retired mine workers - won't easily be convinced. During the next two days, Westmoreland will argue its motion to have its bankruptcy dismissed, and a committee of Westmoreland shareholders will press to have the company's Chapter 11 reorganization case converted to a Chapter 7 liquidation. Westmoreland says two important things have occurred since late 1996, when its restructuring was still incomplete. First is an "exceptional improvement in (the company's) financial condition" that has given Westmoreland about $117 million in cash, according to its dismissal motion. The company's coal-mining subsidiary in Montana, for example, shipped a record 7.1 million tons of coal in 1997, the company says. Westmoreland says it now can pay all of the undisputed claims in its bankruptcy case with interest - about $34.7 million. Second is a recent decision in the bankruptcy case of Sunnyside Coal Co., handed down in the 10th circuit U.S. Court of Appeals in Denver. That decision said claims by retiree benefit funds can't include future payments. Westmoreland is arguing that the Sunnyside decision should erase a ruling handed down by the Westmoreland bankruptcy judge in June. That ruling said Westmoreland owes one of the three funds in its case $146 million for past and future payments. The funds have objected to Westmoreland's dismissal motion, as well as to the shareholders' motion to liquidate, said Doug Gibson, UMWA spokesman in Washington D.C. The funds are administered by trustees who are representatives of the UMWA and Bituminous Coal Operators Association. Gibson declined to comment on how the funds ultimately want the case resolved. "We're not sure where (the case) is going," Gibson said. "Our main concern is to preserve retired members' right to health care. Whether Westmoreland survives is not an issue for us." Westmoreland is the nation's oldest independent coal company. In the early 1990s, faced with aging mines and rising operating costs, Seglem began restructuring. Part of that effort involved moving the company's headquarters from Philadelphia to Colorado Springs. Since the late 1980s, Westmoreland has sold or closed all of its East Coast coal operations, cut overhead costs and restructured a power agreement it had with a New York utility, netting the company $30 million. Today, Westmoreland owns interests in eight independent power plants; an 80 percent share of Westmoreland Resources Inc., a surface-mining operation in Montana; and 20 percent of a coal-storage and vessel-loading facility in Newport News, Va. (Gazette - 10/14/98) **************** 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. 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