/raid1/www/Hosts/bankrupt/TCR_Public/990218.MBX
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, February 18, 1999, Vol. 3, No. 33
Headlines
AHERF: Hearing Postponed On Transferring Employee Payroll
CAI WIRELESS: Releases Third Quarter and Nine Month Results
COMPASS PLASTICS: Negotiating With Lenders
DOW CORNING: Judge Sets May 14 As Date For Vote
ENTEX INFORMATION: Quarterly Report Filed With SEC
FRANKEL'S HOME FURNISHINGS: Files Chapter 11
GOLDEN BOOKS: Announces Negotiations Toward Agreement
HAYES: Ron Howard and Competitors Bid At Auction
HILLS STORES: Special Meeting of Stockholders
J.PETERMAN: Needs Buyer By Tuesday
MOBILEMEDIA: New Generation To Pursue Alternate Plan
PHILIP SERVICES: Texans Sue Morgan Stanley Over Stock
SANTA FE GAMING: Announces Increase In Revenues
PREMIS CORP: Proposes Liquidation To Shareholders
SITE TECHNOLOGIES: Reports Bankruptcy Filing to SEC
SMARTALK: Court Appointed Lead Counsel Files Complaint
TELEGROUP: Immediate Access To Cash Collateral
THE J. PETERMAN: Case Summary & 20 Largest Creditors
WORLDCORP: World Airways Says "We Aren't Bankrupt"
XATA CORP: Files Quarterly Report With SEC
*********
AHERF: Hearing Postponed On Transferring Employee Payroll
----------------------------------------------------------
The federal judge overseeing the Allegheny Health,
Education and Research Foundation's $1.5 billion bankruptcy
reorganization has postponed a hearing at which members of
the executive committee of the foundation's board had been
ordered to appear. The hearing, which had been scheduled
for today, was to sort out the reasons why so many key
AHERF employees, including former President Anthony Sanzo,
had been transferred to the payrolls of the foundation's
Western Pennsylvania hospitals, known collectively as AUH-
West, prior to the sale of its bankrupt Philadelphia
hospitals. Judge M. Bruce McCullough postponed the hearing
until April 21 at the request of the trustee who is running
AHERF and the foundation's creditors.
CAI WIRELESS: Releases Third Quarter and Nine Month Results
-----------------------------------------------------------
CAI Wireless Systems, Inc. (OTC:CWSS) released results for
the third quarter of its fiscal year ending March 31, 1999.
The third quarter results reflect the consummation of the
Company's previously announced Chapter 11 reorganization on
October 14, 1998. The Reorganization has significantly
reduced the amount of CAI's indebtedness. The
Reorganization included a $207,793,000 reduction of debt
carried by CAI. The $204,345,000 extraordinary gain
resulting from the extinguishment of such debt produces net
income in the third quarter. CAI, however, continues to
operate at a loss, and posted a net loss for the period
from October 14, 1998 to December 31, 1998 of
$(16,668,000), or $(0.97) per share.
For the third quarter ended December 31, 1998, sales were
$4,120,000 versus $6,591,000 for the comparable year-ago
quarter.
The loss before extraordinary gain mentioned above for the
quarter ended December 31, 1998 was $19,030,000 versus a
loss of $40,926,000 for the prior year quarter. The primary
factors for the overall decrease include (i)decreased
interest expense, (ii) lower amortization due to the
goodwill write-down at March 31, 1998 and (iii) a reduction
in the equity loss attributable to the Company's investment
in CS Wireless as a result of such investment being written
down to zero.
As a result of the extraordinary gain from extinguishment
of debt of $204,345,000 in connection with the consummation
of the Reorganization on October 14, 1998, CAI posted net
income for the most recent fiscal quarter of $185,315,000
versus a net loss of $(40,926,000) for the comparable year-
ago quarter. CAI had a net loss for the post-Reorganization
period of $(16,668,000), or $(0.97) per share. For the nine
months ended December 31, 1998, sales were $14,972,000
versus $21,977,000 for the nine months ended December 31,
1997.
COMPASS PLASTICS: Negotiating With Lenders
------------------------------------------
In a press release dated February 11, 1999, Compass
Plastics & Technologies, Inc. announced that it is
negotiating with its lenders, Manufacturers Bank and
California Bank & Trust, to restructure the terms of
indebtedness of the Company and its subsidiaries that is in
default due to failure to comply with certain financial
covenants. The Company received notice from the banks on
February 2, 1999 of acceleration and demand for immediate
payment in full of all amounts due under the loan
agreement, aggregating approximately $12,000,000.
(States SEC; 02/17/99)
DOW CORNING: Judge Sets May 14 As Date For Vote
-----------------------------------------------
A U.S. judge has set a May 14 deadline for the
thousands of women worldwide suing Dow Corning Corp. over
silicone gel breast implants to vote on a $3.2 billion
settlement proposal, a company spokesman said Tuesday.
The complicated deal, which could end years of legal
fighting, is part of a larger, $4.5 billion bankruptcy
reorganization plan first developed in 1995 to help Dow
Corning, a 50-50 joint venture of Dow Chemical Co. and
Corning Inc., cope with the thousands of suits filed
against it over the implants.
U.S. Bankruptcy Judge Arthur Spector in Michigan approved
the plan, which calls for Dow Corning to send creditors,
including the plaintiffs, a description of the settlement
and ballots for voting by March 15, Dow Corning
spokesman Kevin Wiggins said. The ballots must then be
returned by May 14.
"All claimants will have to accept or reject the settlement
proposal," Wiggins said. The plan describes how the
Midland, Mich.-based company will pay off about
a 600,000 creditors, including the implant plaintiffs. Dow
Corning filed the plan with the judge Nov. 9. Spector
ruled Feb. 4 that ballots must be returned by the
plaintiffs and creditors by May 14, Wiggins said.
Two-thirds of voters must approve the plan for it to go
forward, Wiggins said. A confirmation hearing is scheduled
for June 28 to allow opponents to air their views, after
which the judge will issue a final ruling. Dow Corning,
once the world's largest maker of silicone gel breast
implants, expects the hearings to last about two weeks,
Wiggins said.
The proposed settlement gives women three settlement
options with payments ranging from $2,000 to more than
$300,000 under certain conditions. Women who opt out of
the settlement have six months to decide if they want
to sue the company separately.
ENTEX INFORMATION: Quarterly Report Filed With SEC
--------------------------------------------------
ENTEX INFORMATION SERVICES INC filed a quarterly report
with the SEC for the quarterly period ended December 27,
1998. The net loss for the three months ended December 27,
1998 was $34.8 million as compared to net income of $8.5
million for the three months ended December 28, 1997. Net
loss for the six months ended December 27, 1998 was $48.6
million as compared to net income of $13.2 million for the
six months ended December 28, 1997.
Product revenues were $938.5 million for the six months
ended December 27, 1998 as compared to $1,044.7 million for
the six months ended December 28, 1997, a decrease of
$106.2 million or 10.2%.
Service revenues were $241.3 million for the six months
ended December 27, 1998 as compared to $216.5 million for
the six months ended December 28, 1997, an increase of
$24.8 million or 11.4%.
FRANKEL'S HOME FURNISHINGS: Files Chapter 11
--------------------------------------------
Frankel's Home Furnishings, Inc. filed a voluntary petition
for protection under Chapter 11 of the Bankruptcy Code.
Frankel's has taken this step with the support
of its traditional lender, BankBoston. The bank has
agreed, subject to approval of the Bankruptcy Court, to
provide Frankel's with a new $9 million credit facility to
fund the operations of Frankel's during the Chapter 11
proceeding.
Joseph Nusim, President and CEO of Frankel's, the Chapter
is part of the new management team hired by Frankel's in
August 1998. Frankel's current financial difficulties have
resulted primarily from events dating back to 1996. Among
other things, since 1996, Frankel's, by virtue of the
bankruptcies of Rickel and Handy Andy stores, lost 86
licensed departments. During the same period, Frankel's
opened approximately 60 linen departments in a major home
center chain of stores. In addition, in May of 1998 the
company acquired the Dean Floor Covering Company, a chain
of leased flooring departments in the same home center
chain. The new outlets lost money during the start-up. Most
recently, as a result of the disclosure of such losses,
vendors have limited credit terms, resulting in a drastic
effect on Frankel's ability to obtain fresh inventory
despite significant sales improvements.
In recent months, as a result of new management's
turnaround initiatives, Frankel's sales performance has
been consistently and materially improved over
the same period last year. Ironically, however, as a result
of the tightening of credit terms from its vendors,
Frankel's existing loan facility with BankBoston became
insufficient to finance the acquisition of sufficient
inventories to continue Frankel's business and continue the
sales growth.
Mr. Nusim reports that, despite the Chapter 11 filing,
Frankel's intends to conduct its business as usual.
Frankel's has 15 stand-alone stores in the New York area
which will be open for business as usual. Frankel's also
operates 179 leased departments in the Laneco and Scotty's
chains in Pennsylvania, Florida, Georgia and Alabama. All
those departments will continue to be open for business as
usual. It is not anticipated that as a result of this
filing, Frankel's will terminate employees or otherwise
change its operations, which have in recent months produced
double-digit sales increases over last year.
GOLDEN BOOKS: Announces Negotiations Toward Agreement
-----------------------------------------------------
On February 17, 1999 Golden Books Family Entertainment,
Inc. (Nasdaq: GBFE) announced that it was negotiating an
agreement in principal with its major creditors pursuant to
which it will significantly reduce its existing long-term
debt, pay all trade debt in full and, under the direction
of its current management team, proceed with its publishing
and entertainment operations.
Pursuant to the negotiations, existing preferred and common
shareholders will surrender their stock for out-of-the
money warrants to purchase a small percentage of the new
company stock to be issued post-recapitalization. Such
recapitalization will be effectuated pursuant to a "pre-
arranged" plan. The Company also stated that the report
yesterday on CNBC generally reflected the current state of
the negotiations.
There can be no assurance that the Company will reach an
agreement with its institutional creditors, what the terms
of the agreement will be, or whether any agreed-upon plan
will obtain the requisite court approval.
The Company is the leading publisher of children's books in
North America and owns one of the largest libraries of
family entertainment copyrights. The Company creates,
publishes and markets entertainment products for children
and families through all media.
HAYES: Ron Howard and Competitors Bid At Auction
------------------------------------------------
As reported by Newsbytes News on February 16, 1999, rival
modem vendors and former Hayes chief executive Ron Howard
were among those submitting bids for assets of bankrupt
Hayes Corp. in an auction conducted Friday.
On Friday, Hayes' assets were auctioned in 24 packages. The
sales are to be made final in court at the end of this
week. Ron Howard, the last chairman and chief executive of
Hayes, submitted an "acceptable bid" for a package of
Hayes' Century Remote Access Server (RAS) products,
including design and development materials for three
shipping products, the Century 2000, 9200, and 9400.
Modem Express, a Texas-based company that sells new and
refurbished modems and multiplexors and bills itself as a
leading supplier of discontinued Hayes brands, submitted
the only acceptable bids for Hayes' warranty and repair
inventory, its warranty list, its DEVTEST program for
testing communications devices, and the hayes.com and
practical.com Internet domain names.
Modem manufacturer Zoom Telephonics bid for Hayes Europe
and for the company's asynchronous digital subscriber line
(ADSL) testing and development laboratory.
Xircom, Inc., a California-based maker of modems and
networking products with a focus on mobile technology,
submitted the only bid for EZ-Jack, Hayes'
telecommunications connector for PC Card devices, and for
the company's Federal Communications Commission (FCC)
testing and development lab.
HILLS STORES: Special Meeting of Stockholders
---------------------------------------------
A special meeting of stockholders of Hills Stores
Company, a Delaware corporation is planned for a yet
undisclosed date in March, 1999, at 2418 Main Street, Rocky
Hill,Connecticut for the following purposes:
1. To consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Merger, dated as of November
12, 1998 by and among the Company, HSC Acquisition Corp., a
Delaware corporation, and Ames Department Stores, Inc., a
Delaware corporation, in connection with the proposed
merger of Purchaser with and into the Company. As a result
of the Merger, the Company will survive the Merger and
become a wholly-owned subsidiary of Parent and
each issued and outstanding share of common stock, par
value $0.01 per share, and each issued and outstanding
share of Series A convertible preferred stock, par value
$0.10 per share of the Company in each case together with
the associated rights to purchase shares of Series B
Participating Cumulative Preferred Stock, par value $0.10
issued pursuant to the Rights Agreement dated as of August
16, 1994, between the Company and Chemical Bank, as Rights
Agent, will be cancelled and converted automatically into
the right to receive $1.50 per Share, in cash, without
interest, plus a Deferred Contingent Cash Right described
more fully in the Information Statement. The Merger and the
Merger Agreement are more fully described in the attached
Information Statement which forms a part of this notice.
On November 11, 1998, the Board of Directors of the Company
determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer (as defined
below) and the Merger, are fair to and in the best
interests of the stockholders of the Company, and approved
the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger.
J.PETERMAN: Needs Buyer By Tuesday
----------------------------------
The J. Peterman Co. has until next Tuesday to find a
buyer. If the upscale retailer doesn't, it must liquidate
its assets to pay nearly 1,000 creditors, according to an
agreement signed by a bankruptcy judge.
The order issued Tuesday allows Heller Financial Inc. in
Chicago to lend J. Peterman $361,000 to remain in operation
for one week. Heller also lent the company $1.96 million
last month and an additional $408,000 earlier this month.
Heller attorney Ronald Gold told a judge Tuesday that
Heller cannot keep lending the company money. Heller is J.
Peterman's only secured creditor and is owed an additional
$7 million in debts incurred before the high-end retailer
filed for Chapter 11 protection last month.
In its Chapter 11 petition, J. Peterman listed $35 million
in assets and $40 million in liabilities. Chapter 11 allows
a company to remain in operation while reorganizing its
finances.
John Peterman, who founded the catalog and retail company
12 years ago, refused to comment about the company's chance
of finding a buyer.
"We'll just see how it plays out," he said.
A possible scenario: The company will liquidate its assets
and the largest creditors will oversee that process,
putting the money from sales in an escrow account to be
evenly distributed among the creditors.
MOBILEMEDIA: New Generation To Pursue Alternate Plan
----------------------------------------------------
New Generation Advisers, Inc., a Boston-based investment
manager, announced that it plans to take advantage of the
adjournment of the hearing on confirmation of MobileMedia's
proposed Plan of Reorganization to actively pursue an
alternative plan of reorganization.
The current Plan of Reorganization calls for the merger of
MobileMedia with Arch Communications Group, Inc.
On Feb. 12, the U.S. Bankruptcy Court for the District of
Delaware adjourned MobileMedia's confirmation hearing and
directed the company to prepare a supplemental disclosure
statement with respect to the proposed merger with Arch.
The Court found that additional disclosure was necessary to
provide more financial information on the proposed merger
and more information on the securities holdings of certain
key parties to the transaction.
Unsecured creditors will have another opportunity to vote
on the proposed Plan of Reorganization after they receive
the supplemental disclosure material.
The Court also ruled that New Generation, which has been in
contact with an informal group of MobileMedia bondholders
who oppose the Arch merger, may undertake due diligence so
as to actively pursue an alternative plan of
reorganization. The Court directed that potential plan
funders or strategic purchasers, acting through New
Generation, be given access to the books and
records of MobileMedia.
George Putnam, III, president of New Generation Advisers,
said, "We believe we can come up with an alternative plan
of reorganization that provides more value to MobileMedia's
unsecured creditors. We intend to utilize the adjournment
of the confirmation hearing and the opportunity to pursue
due diligence to assure that unsecured creditors receive
the best possible recoveries. MobileMedia's financial
results have improved dramatically during its bankruptcy,
and we believe it is a stronger stand-alone competitor or
a better merger partner than it was only a few months
ago."
On Aug. 19, 1998, MobileMedia executed an agreement to
merge with Arch Communications Group, Inc., based in
Westborough, Mass., which is one of MobileMedia's principal
competitors in the paging business. The agreement (as
modified in September and December) formed the basis for
the Plan of Reorganization that was the subject of a
confirmation hearing which began on Feb. 3, 1999. On Feb.
12, the hearing was adjourned pending the preparation and
dissemination of a supplemental disclosure statement and a
new vote on the proposed Plan of Reorganization.
PHILIP SERVICES: Texans Sue Morgan Stanley Over Stock
-----------------------------------------------------
Former Texas stakeholders in U.S.- based Allwaste Inc., now
an arm of Canada's Philip Services Corp., are suing
U.S. investment house Morgan Stanley Dean Witter & Co.,
saying it should have known Philip was in financial trouble
before it arranged a 1997 marriage between it and Allwaste.
New York-based Morgan Stanley, one of the largest
brokerages in America, has been targeted by former
employees and executives of U.S.-based Allwaste,
now part of Hamilton, Ontario-based Philip, a company that
recovers metals from scrap and provides industrial waste
disposal services.
The employees and executives they say they have watched the
worth of their options in the Houston, Texas-based waste
management company plunge with the dwindling value of
Philip stock after the deal. Allwaste stock options were
rolled into Philip options as part of the July 31, 1997
merger.
Their suit says Morgan Stanley breached its fiduciary
duties. Morgan Stanley did not respond to calls Tuesday.
The action is the latest in a long list of lawsuits
involving Philip Services. The company has gone from a
high-flying waste management firm and acquisition artist to
a company ravaged by unexpected losses, a copper trading
scandal and legal actions.
The case of James A. Collins and co-plaintiffs versus
Morgan Stanley Dean Witter and employee Ian Pereira, who
helped clinch the deal, was filed in the Galveston division
of the U.S. District Court for the Southern District of
Texas. The document was stamped in January.
The lawsuit seeks class action status on behalf of all
Allwaste employees who owned stock options in the
industrial services firm at the time it merged
with Philip in 1997.
The plaintiffs allege that Morgan Stanley, the successor of
Morgan Stanley & Co. Inc., conducted a cursory
investigation of Philip before telling Allwaste
and its stakeholders that the deal was fair. Pereira signed
the fairness opinion.
If it had investigated, Morgan Stanley would have known
that "there were substantial questions regarding Philip and
the integrity of its management. In fact, Philip had
dramatically overstated its revenues and assets or failed
to state many of its liabilities," the lawsuit stated.
As a result, Morgan Stanley and Pereira breached their
fiduciary duties, it said.
The suit said Morgan Stanley gave a fairness opinion based
on a few calls and a "pretend" investigation. If it had dug
deeper, it would have seen public reports questioning the
integrity of Philips' management and the value of Philip.
Philip shares, worth as much as C$27 in September 1997,
closed at C$0.43 on the Toronto Stock Exchange Tuesday.
Patrick Zummo, one of the lawyers representing the
plaintiffs, told Reuters Monday that Allwaste wasn't
involved in Philip's plummeting stock price.
"Allwaste, as far as we can see, is not the reason that the
Philip stock price has declined so badly. Those problems
all appeared (before) or pre-existed the merger," Zummo
said.
Philip, which is attempting to put together a restructuring
plan to satisfy all debtholders, suffered a year of turmoil
in 1998. Rogue copper trading forced it to restate
corporate results from 1995 to 1997, and then it uncovered
more losses. It has also has been hit by a number of
lawsuits from shareholders. ($1=$1.50 Canadian)
SANTA FE GAMING: Announces Increase In Revenues
-----------------------------------------------
Santa Fe Gaming Corporation (Amex: SGM), a
diversified gaming company headquartered in Las Vegas,
announced today the results of its operations for the
quarter ended December 31, 1998.
Santa Fe Gaming reported total revenues, less promotional
allowances, for the quarter ended December 31, 1998 of
$30.2 million, a 10.2% increase over the prior year period.
Earnings before interest, taxes, depreciation,
amortization, rents and corporate charges (EBITDA)
increased by 24.4% to $8.0 million compared to $6.5 million
for the prior year period. Operating income rose 131.4% to
$3.7 million. The increases in revenues, EBITDA and
operating income are attributed to improved operating
performances at both the Santa Fe Hotel and Casino in
Northwest Las Vegas and the Pioneer Hotel and Gambling Hall
in Laughlin.
The Santa Fe Hotel and Casino in Northwest Las Vegas posted
total revenue, less promotional allowances of $19.4
million, an increase of 13.2% over the prior
year quarter. Santa Fe's EBITDA rose by 20.3% to $6.0
million from $5.0 million for the prior year period. The
property's operating margin (EBITDA margin) increased to
31.0% from 29.2% for the prior year period.
The Pioneer Hotel and Gambling Hall in Laughlin increased
total revenue, less promotional allowances, by 7.1% over
the prior year period to $10.6 million. EBITDA grew by
24.0% to $2.1 million from $1.7 million for the prior year
period. Operating income rose to $917, 314 from a loss of
$320,156 for the prior year period. During the quarter
ended December 31, 1998, Pioneer recorded, as Other
Expense, an approximate $532,000 charge to earnings for
costs and expenses incurred in connection with an offering
of debt securities, which was not consummated.
The Company reported a net loss of $3.9 million or 0.62 per
common share in the current quarter compared to a net loss
of $4.8 million or 0.78 per common share in the same period
last year. The improvement is primarily the result
of improved operating results of the Santa Fe and Pioneer
operations.
Selected financial data including a discussion of the
results of operations for the Santa Fe and the Pioneer are
included in the Company's' Quarterly Report on Form 10-Q,
filed with the Securities and Exchange Commission.
Additional information concerning potential factors that
could affect the Company's financial results are included
in the Company's Form 10-Q for the period ended December
31, 1998, including previously announced information
related to bankruptcy proceedings related to debt not paid
at maturity by the Company's subsidiary Pioneer Finance
Corp.
As also previously announced, the Company has been advised
by the American Stock Exchange that it no longer meets the
continued listing requirements for its common and preferred
stock. As a result, no assurance can be given that
the common and preferred stock will continue to be listed
on the American Stock Exchange.
Santa Fe Gaming Corporation owns and operates the Santa Fe
Hotel and Casino in northwest Las Vegas and the Pioneer
Hotel and Gambling Hall in Laughlin, Nevada. In addition,
the Company holds several real estate parcels for future
development within or in the area surrounding Las Vegas,
Nevada.
PREMIS CORP: Proposes Liquidation To Shareholders
-------------------------------------------------
The board of directors of PREMIS Corporation (OTC Bulletin
Board:PMIS) announced on February 8, 1998 in Minneapolis,
Mn. that it will propose the liquidation of the company to
its shareholders. To protect shareholder assets, the
company will wind down its Canadian subsidiary and
consolidate its operations in the United States pending a
shareholder vote on liquidation of the company's assets.
The company expects to mail proxy materials regarding the
proposal no later than March 22.
This decision follows the unsuccessful exploration of
various options by the company, including a search for a
corporate partner, strategic alliance or buyer for the
company.
The company's initial strategy was the development of
OpenEnterprise, which has three primary components:PREMIS
OpenStore, a comprehensive in-store-point-of-sale and back
office system; PREMIS OpenNet, a unified family of
communications and PREMIS networking products to expand
headquarters operations out to the stores; and PREMIS
OpenOffice, an integrated head office retail management
system.
"We believe we have a competitive product offering under
development but we have reluctantly concluded we lack the
resources to complete development and build a strong sales
and marketing effort simultaneously," said Fritz Biermeier,
president and chief executive officer. "We will continue
to seek a buyer for the software technology. We expect the
net assets in the near timeframe to be not less than 90
cents per share, which is the current market valuation of
the company at the close of business on Feb. 5, 1999. This
per share estimate includes the receipt of the second
payment of $3.25 million under the company's contract with
NCR Corporation, a payment which is expected but not
guaranteed."
The per-share estimate may also be affected by the tax
treatment of distributions by the U. S. and Canadian tax
authorities, the company said.
Pending approval to liquidate, the company intends to lay
off most of its employees by the end of May 1999 and
complete the majority of its wind-down efforts by the end
of July 1999. The company currently employs 31 people in
its Canadian operations, 11 in the United States.
The company said its obligations to creditors will be
satisfied with existing resources. The company anticipates
that the members of the board of directors and management
will resign upon the completion of the process of winding
down operations.
SITE TECHNOLOGIES: Reports Bankruptcy Filing to SEC
---------------------------------------------------
On February 2, 1999, Site Technologies, Inc. filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy
Reform Act of 1978. The petition was filed in the United
States Bankruptcy Court for the Northern District of
California. Jeffrey F. Ait has been named as the officer
of the Company in possession subject to the supervision
and orders of the court. Copyright States News Service,
02/17/99
SMARTALK: Court Appointed Lead Counsel Files Complaint
------------------------------------------------------
Court appointed Lead Counsel in the SmarTalk Teleservices,
Inc. Securities Litigation has filed an amended
complaint on behalf of purchasers of SmarTalk Teleservices,
Inc. ("SmarTalk") (Nasdaq: SMTK, SMTKQ) securities between
August 13, 1997 and January 7, 1999. The amended complaint
consolidates the pending class actions previously filed
against SmarTalk during August 1998, and also includes
defendants' ongoing fraudulent conduct perpetrated after
the August 1998 complaints were filed.
The initial complaints filed by Lead Counsel charge
SmarTalk and certain of its officers and directors, and its
outside auditors, with violations of the Securities
Exchange Act of 1934 during a class period of May 13, 1997
to August 10, 1998. The amended complaint includes
defendants' ongoing misconduct subsequent to August 10,
1998, including defendants' financial fraud which
culminated with defendants restating not only SmarTalk's
fiscal 1997, first quarter 1998 and second quarter 1998
results, but also its third quarter 1998 results as
detailed in SmarTalk's January 7, 1999 announcement. The
January 7, 1999 announcement caused SmarTalk's stock price
to further collapse to $1-1/2 per share. The Company has
declared bankruptcy and the stock is no longer
trading. The amended complaint continues to name
SmarTalk's officers and directors and SmarTalk's outside
auditor, PricewaterhouseCoopers, LLP, with
violations of the securities laws.
Since August 1998, Lead Counsel have spent hundreds of
hours investigating the facts and prosecuting this
litigation and are taking all necessary steps to
protect the interests of SmarTalk investors in this action
and in the bankruptcy proceedings. Nevertheless, at least
three complaints have been filed during January and
February, 1999 by other law firms purporting to
represent class members in this action. These actions have
not been filed by Court Appointed Lead Counsel in this
action, but rather by other counsel who were not involved
in prosecuting and investigating this action from its
inception. The allegations contained in these recently
filed complaints appear to only cover the last few months
of the Period covered by Lead Counsel's February 16, 1999
Amended Complaint.
TELEGROUP: Immediate Access To Cash Collateral
----------------------------------------------
The Des Moines Register reports on February 12, 1999 that
Telegroup Inc., which provides national and international
long-distance telecommunications services, Thursday said it
voluntarily filed for Chapter 11 bankruptcy to facilitate a
restructuring.
The Fairfield-based company, which serves residential
customers as well as small-and medium-size businesses in
more than 200 countries, said its foreign subsidiaries were
not part of the filing. The court filing was made late
Wednesday in New Jersey.
The company said a general downturn in the capital markets
caused it to begin looking for alternative sources of
capital to refinance its maturing loans and to fully fund
its business plans.
"Filing under Chapter 11 now is in the best interest of
Telegroup and its creditors," said Clifford Rees,
Telegroup's chief executive officer. "This allows the
company to develop a plan of reorganization that puts it
back on the right track with a reduced debt burden and
improved profitability."
Telegroup said it hired New York-based corporate turnaround
specialists Alvarez & Marsal to guide it through the
restructuring process and develop restructuring and other
strategic alternatives including the possible sale
of the company.
Subject to bankruptcy court approval, the company will
receive immediate access to its cash collateral, which is
adequate to support the ongoing operations, it said. In
addition, the company expects to receive additional
operating funds in the form of Debtor in Possession
financing.
Telegroup shares closed at 69 cents, down 19 cents,
Thursday in trading on the Nasdaq market.
THE J. PETERMAN: Case Summary & 20 Largest Creditors
----------------------------------------------------
Debtor: The J. Peterman Company
1318 Russell Cave Road
Lexington, Kentucky 40505
Type of business: Retail sales of apparel and home items
through direct mail catalogs and 13 stores.
Court: Eastern District of Kentucky
Case No.: 99-50142 Chapter: 11
Debtor's Counsel: Gregory D. Pavey
Stoll, Keenan & Park LLP
201 East Main Street, Suite 1000
Lexington, Kentucky 40507
(608) 231-3000
Total Assets: $35,000,000
Total Liabilities: $40,000,000
No. of shares of common stock 5,565,527
20 Largest Unsecured Creditors:
Name Nature Amount
---- ------ ------
GE Capital Subordinated Debt $8,233,333
BMO Nesbittt Burns Subordinated Debt $5,211,447
Brand Equity Ventures Subordinated Debt $2,135,335
World Color Press Trade Debt $1,924,191
Genesis Direct Subordinated Debt $699,201
First National Bank/Chicago Returned Check $640,000
MSAS Customs Logistics Inc. Trade Debt $541,375
National Retail Construction Trade Debt $308,721
Design Fabricators Trade Debt $283,244
First American Trade Finance Trade Debt $261,366
Tainan Textiles/PSpot Trade Debt $236,294
United Parcel Service Shipping Charges $235,238
Holland Brothers Trade Debt $213,625
Dickinson Cameron Construction Trade Debt $201,541
Prepress Service Inc. Trade Debt $187,975
IBM Trade Debt $184,881
Golden Heights/PSpot Trade Debt $183,274
Richter Systems Int'l Inc. Trade Debt $182,197
STR, Inc. Trade Debt $160,952
Cyril-Scott Company Trade Debt $134,590
Prime Spot Investment Trade Debt $128,490
WORLDCORP: World Airways Says "We Aren't Bankrupt"
--------------------------------------------------
World Airways, a Herndon, Va.-based commercial cargo and
military airlift carrier, said yesterday that it will not
be significantly affected by its parent company's chapter
11 filing; late last week WorldCorp, its major shareholder,
filed chapter 11, according to The Washington Post. World
Airways Chairman Russell L. Ray Jr. said, "They went
bankrupt; we didn't." World Airways has not guaranteed any
of WorldCorp's debt, although it lent the holding
company $1.4 million. Ray said that as a senior secured
lender, "We are not in danger of not getting paid."
WorldCorp is a holding company that also holds a stake in
InteliData, another Herndon company that makes home banking
software, and in the Atlas Cos., a paper company.
According to an industry analyst, the reorganization is
expected to be completed within 60 days, since most of the
creditors have agreed to take in-kind payments in the form
of equity rather than cash.
XATA CORP: Files Quarterly Report With SEC
------------------------------------------
XATA Corporation's net sales for the three months ended
December 31, 1998 were $2,352,334, a decrease of 8%,
compared to sales of $2,557,797 for the comparable three
month period ended December 31, 1997, but a 6% increase
compared to the three month period ended September 30,
1998.
Net loss for the three month period ended December 31,
1998, was $77,596 compared to net loss of $199,072 for the
comparable fiscal 1998 period.
On February 4, 1999, the Company sold its Peoria,
Illinois operation to Mobile Security Communications,
Incorporated (MSC), a privately held company located in
Roswell, Georgia. The transaction was an asset purchase
with all of the employees of the operation hired by MSC. In
addition, all lease obligations were assumed by MSC. The
sale price was approximately $415,000. The Company will
record a small gain from the sale of these assets.
On February 8, 1998, the Company's Board of Directors named
Edward T. Michalek as President and Chief Executive Officer
to replace Dennis R. Johnson. Mr. Johnson will remain as a
member of the Company's Board of Directors.
*********
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Troubled Company Reporter is a daily newsletter, co-
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Debra Brennan and Lexy Mueller, Editors. Copyright 1999.
All rights reserved. ISSN 1520-9474.
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