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/raid1/www/Hosts/bankrupt/TCR_Public/990519.MBX T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, May 19, 1999, Vol. 3, No. 96 Headlines AAMES FINANCIAL: Announces Third Quarter Results ACME METALS INC: Continuing Problems AMERICAN RICE: Seeks Time To Assume/Reject Leases BORDEN CHEMICALS & PLASTICS LTD: Experiences Decline in Revenues BROTHERS GOURMET: Committee Objects To Motion of BGC CALCOMP TECHNOLOGY INC: Late Filing CENTENNIAL COAL: Hearing to Approve Sale CFI MORTGAGE: Seeks To Disband Committee CHASTAIN CAPITAL CORP: Selling Off Assets to Satisfy Debts DISCOVERY ZONE: Seeks Authorization for Auction Agreement EDISON BROTHERS: Announces Agreement To Sell 485 Stores ELECTRO CATHETER: Files Chapter 11 Petition ENERGY WEST INC: Reports New Minority Interest ESSEX CORP: Lagging Use of Expertise Invites Lower Revenues FINE HOST: Interim Funding Agreement for Defense Expenses FINE HOST: Reorganized Board of Directors FRACMASTER: Canadian Judge Rejects Bids for Fracmaster Assets HOMEPLACE STORES: Commitment Letter With BankBoston HOSPITAL STAFFING: Trustee's Motion To Hold Lusk in Civil Contempt INTERACTIVE NETWORK INC: AT&T Assumes Common Stock INTERNATIONAL META: Trustee Files Motion to Reopen Case IRIDIUM: Class Action Update KCS ENERGY: Reports First Quarter 1999 Results LAMONTS APPAREL, INC: Announces Annual Meeting LOEHMANN'S: Files Chapter 11 MANHATTAN BAGEL: Conway Appointed Trustee For Trust MESA AIR GROUP INC: Reports Improved Bottom Line MOSSIMO, INC.: Reports $1.5 Million First Quarter Loss NEXTWAVE: Scores Victory In License Suit Against FCC NU-KOTE HOLDING: Hearing on Disclosure Statement PARTY WORLD: Status Report PLANET HOLLYWOOD INTERNATIONAL INC: Facing Losses, Defaults PLUMA INC: Files Chapter 11 Bankruptcy POWER DESIGNS: Order Approves Agreement With AICCO PRANDIUM INC: Former Koo Koo Roo Enterprises, Sales Up, Profits Down SA TELECOMMUNICATIONS: Disclosure statement and Liquidating Plan SPECIALTY CARE: Announces First Quarter Results STRATOSPHERE CORP: Profits Up Slightly THE SCORE BOARD: Committee Seeks To Pursue Causes of Action THORN APPLE VALLEY: Responds To Ford Motor Credit's Motion to Compel UNITED COMPANIES FINANCIAL CORP: Decries Internet "Misinformation" USCI INC: Preferred Stock to Become Common Stock ********* AAMES FINANCIAL: Announces Third Quarter Results ------------------------------------------------ Aames Financial Corporation (NYSE:AAM), a leader in subprime home equity lending, reported a net loss of $(36.0) million, or $(1.16) per share diluted, for the three months ended March 31, 1999, compared to restated net income of $2.0 million, or $0.07 per share diluted, for the three months ended March 31, 1998. Contributing to the loss was $15.1 million in pre-tax operating losses and $37.0 million for a one-time charge related to the Company's servicing advances. The net loss for the nine month period ended March 31, 1999 was $(234) million, or $(7.55) per share diluted, compared to restated net income of $21.1 million, or $0.68 per share diluted, for the nine months ended March 31, 1998. Net income for the nine-month period ended March 31, 1999 included the impact of the $191.6 million valuation adjustment to the Company's interest-only strip recorded in the quarter ended December 31, 1998. Neil B. Kornswiet, Aames' president, stated, "Further contributing to the decrease in total revenue was a 29.6 percent decrease in total loan production during the quarter to $401.7 million from $570.9 million during the three month period ended March 31, 1998, reflecting a combination of the Company's limited warehouse capability in the first half of the quarter, and price and underwriting changes implemented in the second fiscal quarter to permit the Company to access the whole loan market and stay within its liquidity constraints." He added, "The Company's core operations, retail and broker, decreased 4.6 percent to $382.5 million for the quarter from $400.8 million for the same quarter in 1998. Retail originations for the quarter were $156.1 million, compared to $165 million for the same period in 1998. Origination volume for the broker network declined to $226.4 million for the quarter, compared to $235.8 million for the quarter ended March 31, 1998. Correspondent purchases were $19.3 million, compared to $170.1 million for the prior year's quarter, reflecting changes implemented by the Company in response to the liquidity constraints and an emphasis on core operation loan origination." Mr. Kornswiet said that total loan production for the nine months ended March 31, 1999 declined 1.9 percent to $1.68 billion from $1.7 billion for the nine months ended March 31, 1998. ACME METALS INC: Continuing Problems ------------------------------------ Acme Metals has filed financial statements indicating continuing losses for the company. Acme itself sustained a $17,809 loss, and its guarantor subsidiary a $16,813 loss for the first quarter 1999. Acme and its subsidiaries, on September 28, 1998 filed for chapter 11 bankruptcy protection. To date no reorganization plan has been submitted to the Court by Acme but the Bankruptcy Court has granted Acme's request to extend its exclusive right to file a plan through July 26, 1999. The Chapter 11 proceedings raise substantial doubt about the company's ability to continue as a going-concern. The company states that though the Board of Directors strives to maximize shareholder value, a plan of reorganization could, among other things, result in material dilution of the equity of existing shareholders of the Company as a result of the issuance of equity to creditors or new investors. AMERICAN RICE: Seeks Time To Assume/Reject Leases ------------------------------------------------- The debtor, American Rice Inc. seek to further extend the time wherein the debtor may assume or reject unexpired nonresidential real property leases until July 31, 1999. The debtor is currently a party under eight leases. The debtor recently obtained court approval of a disclosure statement in support of its plan of reorganization. The hearing on plan confirmation has been scheduled for June 16, 1999. The debtor requests that the court further extend the deadline for making its decision concerning assumption or rejection of the leases until after plan confirmation. This will avoid the estate's potentially incurring termination liability as an administrative expense befoe the debtor's restructuring with its lien holders under the plan has been approved. BORDEN CHEMICALS & PLASTICS LTD: Experiences Decline in Revenues ---------------------------------------------------------------- In accord with SEC financial statements filing requirements Borden Chemicals & Plastics has reported revenues during the first quarter of 1999 decreased $38.1 million or 25% to $115.4 million from $153.5 million in the first quarter of 1998. This decrease, the company states, was the result of a $23.0 million decrease in PVC polymers products revenues, a $16.1 million decrease in methanol and derivatives revenues and a $1.0 million increase in nitrogen products revenues. Net loss for the first quarter of 1999 was $5.7 million compared to an $8.3 million loss for the first quarter of 1998. The primary reasons cited for the $2.6 million improvement were raw material decreases and improved production efficiencies being able to offset an 18% decrease in selling prices. BROTHERS GOURMET: Committee Objects To Motion of BGC ---------------------------------------------------- The Official Committee of Unsecured Creditors objects to the motion of BGC Acquisition Corp. to enforce an order approving proposed bidding procedures with respect to the sale of the debtors' business and approving certain terms of stock purchase agreement. BGC seeks court approval of $550,000 in breakup and due diligence fees. The Committee states that "BGC's antics do not come as a surprise, rather they simply follow a long line of deceptive conduct by BGC in this case." The Committee states that the debtors were lured into selecting BGC as the stalking horse bidder despite a materially higher offer. BGC agreed that it would provide the debtors with evidence of its wherewithal to consummate the transaction by January 12, 1999, which it did not do. The Committee objects to approval of Breakup Fees because, among other reasons, "neither BGC, Mr. Griffith, nor Mr. McBride have provided the debtors with financing commitments for the proposed transaction. Although the debtors received certain materials, they did not demonstrate the Buyers' ability to consummate the transaction. The Committee states that it is clear that BGC did not satisfy conditions for payment fo the Break-up Fee or the Due Diligence Fee, and the Committee requests that the court deny BGC's motion for same. CALCOMP TECHNOLOGY INC: Late Filing ----------------------------------- As a result of Calcomp Technology's adoption of a plan of orderly shutdown and liquidation of operations which was announced on January 15, 1999, Calcomp has converted its financial statements to the liquidation basis of accounting whereby assets and liabilities are stated at estimated fair values in liquidation. As a result timely filing of their financial statements has been delayed. Additional resources in the form of outside experts and consultants have been engaged by the company to assist it with the preparation of its consolidated financial statements to ensure their accuracy and completeness. The company expects to complete their consolidated financial statements for the quarterly period ended March 28, 1999 and file its Quarterly Report on or before May 17, 1999. CENTENNIAL COAL: Hearing to Approve Sale ---------------------------------------- Centennial Coal, Inc., Centennial Resources, Inc., CR Mining Company and B-Four, Inc. seek authority to sell substantially all of their assets to Western Mining & Investments LLC. The purchase price is $9.2 million plus a promissory note in the amount of $3 million. Among the assets being sold are numerous executory contracts and unexpired leases. The debtors submit that they do not have the resources to continue to operate their businesses on a stand-alone basis, as demonstrated by their current status of operations and the fact that the debtors' post-petition financing is nearly exhausted. The debtors believe that the prompt transfer of the assets to a third party is critical if the value of the assets is to be preserved. A hearing on the motion is presently scheduled for May 21, 1999 at 1:00 PM. CFI MORTGAGE: Seeks To Disband Committee ---------------------------------------- CFI Mortgage, Inc., seeks entry of a court order disbanding the Committee of Creditors holding unsecured claims that was appointed by the US Trustee's office. The debtor states that one of the Committee members, U.S. Property & Appraisal Services Corporation is not a bona fide creditor of the debtor and that the debtor is not indebted to US Property. CHASTAIN CAPITAL CORP: Selling Off Assets to Satisfy Debts ---------------------------------------------------------- Chastain Capital, a REIT, while showing a gain of $1,068,825 before consideration of losses sustained on sales of assets (CMBS, mortgage loans and real estate)shows a first quarter 1999 loss of $1,594,800. The Board of Directors of Chastain earlier made the decision to sell off assets in order to meet the company's debt obligations. In connection with the Chastain decision to discontinue its initial investment strategies, the company also decided to sell its real estate investments and accordingly, at March 31, 1999, the company's real estate investment is classified as held for sale. The company expects to dispose of the real estate in 1999. The real estate investment was written down to market value less estimated selling costs in 1998. On March 25, 1999, Chastain sold its Bryarwood 85 real estate investment for $3.8 million. Primarily due to the buyer's assumption of tenant improvement liabilities, net cash proceeds were $2,881,543, resulting in a realized loss of $262,392 of which $257,797 was reported in 1998. Revenue totaled $3,450,342 for the period ended March 31, 1999. For the three months ended March 31, 1999, rental income consisted of two real estate investments. The real estate investments include a retail property in Stockton, California and an office building in Atlanta, Georgia. The office building was sold on March 25, 1999. DISCOVERY ZONE: Seeks Authorization for Auction Agreement --------------------------------------------------------- The debtor, Discovery Zone, Inc. and its affiliates seek entry of an order authorizing the debtors to enter into an auction agreement with Hilco/Great American Trading Co. and Garcel, Inc. and authorization for the sale and liquidation of certain property. In consideration for its services, Hilco/Great American shall receive a commission of 10% of gross proceeds of sale of any assets subject to the agreement. Hilco/Great American will also collect a ten percent "buyer's premium" from any purchaser which shall be subject to rebate to the debtors depending upon the total level of sale proceeds. EDISON BROTHERS: Announces Agreement To Sell 485 Stores ------------------------------------------------------- Edison Brothers Stores, which filed for Chapter 11 bankruptcy protection on March 9, has signed agreements and will request bankruptcy court approval for two sales involving most of the stores in its JW/Jeans West, Coda and 5-7-9 apparel chains. The company has also pulled its Bakers footwear stores from a previously filed request for court approval to liquidate the chain, based on the expectation that it will soon reach an agreement to sell that chain. Under the terms of an agreement signed today, Edison would sell a total of 285 stores to Coda Acquisition Group, a private company, for $10.3 million. The sale would include 263 of the more than 350 JW/Jeans West and Coda stores, which target young, urban males, as well as 22 stores in Edison's Riggings menswear chain, which began liquidation sales on April 30. The sale also includes all of the merchandise inventory of JW/Jeans West and Coda stores. Edison also signed an agreement to sell approximately 200 of the 250 stores in its 5-7-9 junior apparel chain for $13.7 million to The New 5-7-9 and Beyond, Inc., a private company and subsidiary of A.I.J.J. Enterprises, Inc., commonly known as Rainbow Apparel, of Brooklyn, N.Y. All arrangements are subject to court approval at a later date. Edison also has amended a previous filing seeking approval to liquidate the JW/Jeans West, Coda and 5-7-9 chains so as to include only the approximately 40 stores now operating as 5-7-9 that are not part of the sales agreements. If a liquidation bid for those stores from Gordon Brothers Retail Partners LLC is approved by the bankruptcy court, clearance sales should start later this week. Edison had previously signed a definitive agreement to sell its Repp Ltd Big & Tall menswear stores and Repp By Mail catalog operations to J. Baker for approximately $31.7 million, and has announced plans to sell its Princeton, Ind. distribution center for $6.1 million. A second distribution center in Washington, Mo. will be closed by mid- July and is currently for sale. The company is also in the process of liquidating most of its Wild Pair footwear stores and Riggings menswear chain. Edison Brothers Stores Inc. operates Bakers and Wild Pair footwear stores; 5-7-9 junior apparel stores; Riggings, JW, Coda and Repp Ltd. Big & Tall menswear stores; and Repp By Mail men's catalog. The company has nearly 1,500 stores in the United States, Canada, Puerto Rico and the Virgin Islands. ELECTRO CATHETER: Files Chapter 11 Petition -------------------------------------------- Electro-Catheter Corporation announced today that it has sought protection pursuant to the provisions of Chapter 11 of the Federal Bankruptcy Code. The Chapter 11 proceeding was filed in the United States Bankruptcy Court for the District of New Jersey in Trenton, New Jersey on May 14, 1999. Ravin, Greenberg & Marks, P.A. of Roseland, New Jersey is representing the Company in its Chapter 11 proceeding. On May 13, 1999, Electro-Catheter Corporation suspended the production of catheters until further notice. The Company continues to ship catheters from its inventory. Electro-Catheter Corporation designs, develops, manufactures and markets a broad line of catheters and catheter-related products utilized in connection with the diagnosis and treatment of illnesses of the heart and circulatory systems. Electro-Catheter Corporation stock is traded on the OTC Bulletin Board under the symbol ECTH. ENERGY WEST INC: Reports New Minority Interest ---------------------------------------------- Energy West reports that Turkey Vulture Fund XIII, Ltd., an Ohio limited liability company, has acquired a minority interest in Energy West for the purpose of investment. Purchase of 122,700 shares, or 5.1% of the outstanding shares of the corporations common stock, was made for an aggregate price of approximately $1.1 million. The principal business of the Turkey Vulture Fund is to acquire, hold, sell or otherwise invest in all types of securities and other instruments. ESSEX CORP: Lagging Use of Expertise Invites Lower Revenues ----------------------------------------------------------- Essex Corp. recorded a first quarter 1999 loss of $149,327 on revenues of $965,762. The company has incurred losses over the last decade, primarily due to the development and marketing of its optoelectronics products and services. Essex has invested substantial sums in developing its line of patented optoelectronic processors. These exceedingly high-speed computational engines combine the power of laser optics and semiconductor chips. They develop images from radar signals, medical magnetic resonance (MRI) equipment, ultrasound equipment and the company's laser holographic Virtual Lens Microscope. Although the company has sold a few pre-production units to the U.S. Defense community, it has not yet succeeded in commercializing these products. Essex' revenues are heavily made up from contract work it is doing for Motorola. Over 70% of the first quarter '99 revenues came from this source. Essex is engaged in working on Motorolas cellular satellite communications system. In addition, Essex has recently begun work on two subcontracts under U.S. Government contractors. The company is optimistic that increased use of its technological expertise will bring it to profitability. FINE HOST: Interim Funding Agreement for Defense Expenses --------------------------------------------------------- Fine Host Corporation seeks entry of an order authorizing and approving an interim funding agreement for defense expenses relating to its D&O Liability Insurance. Fine Host purchased Directors and Officers Liability Insurance issued by Executive Risk Specialty Insurance Company ("ERSIC"). The policy provides certain coverage to the present and former officers and directors of Fine Host and provides for certain reimbursement to Fine Host for indemnification of such directors and officers. The policy will pay legal fees and expenses in defense of a claim up to $10 million. Certain of the defense expenses of Fine Host are not covered by the term of the policy. Fine Host requested that ERSIC provide interim payment of defense expenses in connection with certain lawsuits naming individual defendants and in response to an SEC investigation and in response to the de-listing action by Nasdaq. Fine Host and ERSIC negotiated an interim funding agreement, and Fine Host now seeks court approval of such agreement. The Interim Funding Agreement will allow Fine Host to obtain reimbursement from ERSIC promptly. FINE HOST: Reorganized Board of Directors ----------------------------------------- Pursuant to the terms of the second amended plan of reorganization for the debtor, Fine Host Corporation, the Ad Hoc Committee designates the following individuals to serve on the Reorganized Fine Host Board of Directors and the Litigation Trust Board: Reorganized Fine Host Board of Directors: Ross Margolies, Salomon & Smith Barney Jeffrey Aronson, Angelo Gordon & Co. Jed Hart, Angelo Gordon & Co. Jeffrey Altman, Franklin Mutual Advisors Norman Haberman, Fine Host Corporation (Current Director) Litigation Trust Board Timothy T. Brock, Esq. Satterlee Stephens Burke & Burke LLP FRACMASTER: Canadian Judge Rejects Bids for Fracmaster Assets ------------------------------------------------------------- Alberta Judge Marina Paperny rejected bids in a three-way race for Calgary-based Fracmaster Ltd., stating that none of the bids offered enough return to unsecured creditors and shareholders under the "terms and spirit" of the Canadian bankruptcy laws, according to Reuters. She also placed the company into receivership, and directed receiver Arthur Andersen to present a new process by Friday for auctioning off the North American energy service and Russian oil- producing company. UTI Energy Corp., former Fracmaster chair Alfred Balm's Janus Corp. group, and Calfrac, led by a former Fracmaster president, all had bid for the company and now will consider whether to resubmit bids or develop new offers. Fracmaster, which provides high-tech oil field services in North America, is best known for its oil production joint ventures in Russia. The company sought protection from creditors as the Russian economy and oil industry faced downturns last year. Arthur Andersen said Fracmaster will likely be sold as a company, not various assets. (ABI 18-May-99) HOMEPLACE STORES: Commitment Letter With BankBoston --------------------------------------------------- HomePlace Stores, Inc. and three corporate affiliates seek authority to enter into a Commitment Letter with BankBoson Retail Finance Inc. and pay fees thereunder. As of May 7, 1999, approximately $64 million in indebtedness (including outstanding but undrawn letters of credit) was due and owing by the HomePlace Group to BankBoston under the BankBoston DIP Facility. BankBoston has agreed to make loans and arrange for other financial institutions to make loans to the New HomePlace Group upon its emergence from Chapter 11 on the terms and conditions set forth in that certain Commitment Letter among the HomePlace Group, Waccamaw and BankBankBoston dated May 6, 1999(the "Commitment Letter") The material terms of the proposed Exit facility are as follows: The senior secured credit facility will be provided in two separate tranches: A senior revolving credit facility in an amount not to exceed $200 million with a $25 million sub-limit for the issuance of standby and documentary letters of credit. And a subfacility in an amount not to exedd $15 million subject to reductions. HomePlace Group and Waccamaw must pay an upfront fee in the amount of $500,000 and $100,000 to cover fees (Legal Deposit). HomePlace seeks court authority to enter into the Commitment Letter and pay the upfront fees, which are a condition precedent to receiving the exit facility. HOSPITAL STAFFING: Trustee's Motion To Hold Lusk in Civil Contempt ------------------------------------------------------------------ Kenneth A. Welt, Trustee, seeks an order holding Ron Lusk in civil contempt of court for failure to comply with the court's agreed order to return records and personal property removed from the estate. A hearing will be held on June 15, 1999 at U.S. Courthouse Room 308, 299 East Broward Boulevard, Fort Lauderdale, Florida. INTERACTIVE NETWORK INC: AT&T Assumes Common Stock -------------------------------------------------- All beneficial ownership of the Common Stock, no par value, of Interactive Network Inc. was recently announced by Tele- Comunications, Inc., ("TCI") as being owned by them. On March 9, 1999, TCI became a wholly-owned subsidiary of AT&T Corp., due to merger of an AT&T subsidiary with and into TCI. In connection with the AT&T merger, AT&T assumed beneficial ownership of the Common Stock. AT&T has assumed the reporting duties of the Common Stock. INTERNATIONAL META: Trustee Files Motion to Reopen Case ------------------------------------------------------- Randolph N. Osherow, the Chapter 7 trustee of the bankruptcy estate of International Meta Systems, Inc. files his motion to reopen the Chapter 7 case. IPIQ Corporation objected to a notice of abandonment of personal property. The court then ordered that the pre-petition transfer claim against Tech Search may not be abandoned and therefore, said claim remains an asset fo this bankruptcy estate. The trustee believes it would be in the best interest of the estate if the no asset report be withdrawn and that the case be reopened to administer said cause of action. IRIDIUM: Class Action Update ----------------------------- On April 22, 1999, Finkelstein, Thompson & Loughran filed a securities fraud class action lawsuit against Iridium World Communications, Ltd. in the United States District Court for the District of Columbia, on behalf of shareholders who purchased Iridium stock between September 9, 1998 and March 29, 1999 (the "Class Period"). On April 27, 1999, Finkelstein, Thompson & Loughran filed a second class action Complaint against Iridium, on behalf of purchasers of any Iridium securities (including bonds, notes and warrants issued by Iridium or Iridium's subsidiaries, Iridium LLC and Iridium Operating LLC) during the Class Period. Both Complaints charge Iridium, Motorola, Inc. ("Motorola") and certain officers and directors of Iridium with violations of the federal securities laws and regulations of the United States. Each alleges that, during the Class Period, defendants issued false and misleading statements and failed to disclose material facts concerning the Iridium System, including misrepresentations and omissions concerning the capabilities of the System, the timing of "commercial availability", certain revenue targets, and the Company's ability to meet certain covenants with its lenders. The suits further charge that Iridium insiders sold over $1.5 million in stock during February 1999, and that certain defendants sold over $250 million of Iridium stock during a January 1999 public offering. The Company's fraudulent practices were disclosed on March 29, 1999 when, for the first time, the Company disclosed that it would not meet its necessary subscriber numbers and that, as a direct consequence, the Company would not be able to satisfy certain Secured Credit Facility covenants. Continuing news developments have underscored the problems Iridium faced throughout the Class Period, but failed to disclose accurately. These developments include the resignation of Edward Staiano as the Company's CEO, and the publication of news articles in The Wall Street Journal and TheStreet.com which provide strong anecdotal evidence that the Iridium System fails to perform in a commercially acceptable manner. Most recently, on May 13, 1999, Iridium announced that it does not expect to meet Secured Credit Facility covenants which require the Company to have at least 27,000 subscribers by May 31, 1999, and that the Company is exploring means to restructure its indebtedness. KCS ENERGY: Reports First Quarter 1999 Results ---------------------------------------------- KCS Energy, Inc. (NYSE: KCS) today announced financial and operating results for the first quarter ended March 31, 1999. Financial Highlights ($ thousands except per share) 3 mos. 1999 3 mos. 1998 Revenue $33,005 $31,309 Net Loss $(1,918) $(140) Loss Per Share $(0.07) $(0.00) KCS Energy reported operating income of $7.9 million for the first quarter of 1999, compared to $7.6 million for the comparable 1998 period. The net loss for the quarter was $1.9 million, or $0.07 per share, compared to a net loss of $0.1 million, or $0.00 per share, for the same period in 1998. EBITDA was $22.1 million for the first quarter of 1999, compared to $20.5 million in the same period last year, while cash flow before changes in working capital was $12.8 million, or $0.44 per share. Total revenue for the quarter was $33.0 million, a 5% increase compared to $31.3 million for the 1998 quarter, as increased production and hedging gains more than offset the dramatic decrease in commodity prices. Commenting on the Company's first quarter 1999 performance, KCS President and Chief Executive Officer James W. Christmas said, "Production increased 25% to 17.1 billion cubic feet equivalent (Bcfe), compared to 13.7 Bcfe in the 1998 first quarter. Approximately 2.0 Bcf of the increase is due to makeup volumes under the Company's Volumetric Production Payment (VPP) Program, which were not delivered as scheduled in August-October 1998 on account of weather conditions." Without the makeup of VPP volumes, production would have been approximately 170 MMcfe per day. All significant VPP makeup volumes have now been received and KCS expects volumes for the remainder of 1999 to decline gradually (from levels without makeup volumes) as the Company reduces capital investments and divests noncore properties to allow additional debt paydown. Oil and gas prices continued the precipitous decline that began in late 1997. Average gas sales prices for the quarter declined 19% to $1.71 per Mcf from $2.11 in last year's quarter and average oil prices declined 25% to $9.94 per barrel of oil from $13.23 last year. Hedging gains on gas production for the quarter added $3.3 million, or $0.22 per Mcf. Forbearance Agreements KCS is currently negotiating forbearance agreements with respect to each of its bank credit facilities. Under the proposed forbearance agreements, which would expire on June 30, 1999, the lenders would defer redetermination of the borrowing base until July 1, 1999 and would refrain from exercising their rights and remedies as a result of the existing defaults until June 30, 1999. The proposed forbearance agreements would require minimum monthly principal payments and require additional payments of principal based on operating cash flow and upon the sale of any of the Company's oil and gas properties between the time the agreements are entered into and June 30, 1999. There can be no assurance that these proposed forbearance arrangements will be entered into and even if they are, upon termination of the forbearance agreements, the defaults under the credit agreements shall automatically become events of default. The lenders will be able to exercise their rights under the credit agreements, including declaring the principal balances immediately due and payable. If this should occur, the Company would be unable to pay the amount due in cash, although the Company believes the lenders are fully secured; and the holders of the Company's senior notes and senior subordinated notes would have the right to declare the principal amount of the notes ($275 million) immediately due and payable. The lenders have also indicated their intention at some time in the near future to reduce the borrowing base under the revolving bank credit facilities. Any reduction in the borrowing base would necessitate additional repayment of principal, and these payments would have a negative impact on cash availability. As a result of these factors, there is substantial doubt about the Company's ability to continue as a going concern. Cost-Reduction Initiatives in Place "Our focus on cost-reduction initiatives is beginning to be seen in the financials," Mr. Christmas said. "Lease operating costs declined $460,000 from the fourth quarter, or approximately 6%. General and administrative costs declined 12% from the fourth quarter prior to nonrecurring charges of approximately $700,000 primarily related to office closing charges. Absent these one-time expenses, general and administrative expenses were modestly lower compared to last year," he said. To improve its financial situation through 1999, the Company has reduced planned capital expenditures; planned property sales which are expected to raise cash proceeds of $25 million; significantly reduced its Rocky Mountains workforce; closed its New Jersey corporate office and transferred all functions to its Houston, Texas, facility; suspended the dividend; and frozen senior management salaries for 1999. Additionally, the Company has engaged a financial advisor to explore strategic alternatives for financing its future activities. Also, the Company intends to form partnerships with third-party investors to fund a large portion of the VPP program. Update on Operations Total crude oil and natural gas production in the first quarter, including the VPP makeup volumes, increased approximately 7% over fourth quarter production to 17.1 Bcfe, or 190 MMcfe per day. Gas production accounted for 86% of equivalent volumes. For the first quarter in 1998, the Company produced 13.7 Bcfe, or 151 MMcfe per day. "As part of its cost-reduction initiatives, the Company significantly reduced its capital program in the first quarter to $9.2 million, with eight wells drilled during the quarter. We have a clear vision of our future operational strategy," stated William N. Hahne, Senior Vice President and Chief Operating Officer. "Even though we are operating under a reduced capital budget, we are continuing to search out and find exciting opportunities to expand our investments in the core areas of the Mid-Continent and Onshore Gulf Coast regions. We expect to see an increased level of drilling as well as meaningful divestiture activity during the next two quarters." The most significant new discovery was the Edwards 2-19 well drilled in an overturned Springer Play in Kiowa County, Okla. This well, in which KCS has a 25% working interest, tested two individual zones, each at rates in excess of 4 MMcf per day and will be commingled and placed on production within the next few weeks. An offset location is drilling and additional locations have been identified. KCS is an independent energy company engaged in the acquisition, exploration, development and production of natural gas and crude oil with operations in the Mid-Continent, Onshore Gulf Coast, Gulf of Mexico and Rocky Mountains regions. LAMONTS APPAREL, INC: Announces Annual Meeting ---------------------------------------------- The Annual Meeting of Stockholders of Lamonts Apparel, Inc. will be held on July 9, 1999 at 10:00 a.m. The meeting will convene to elect five directors to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified; to approve an Amendment to the Company's Certificate of Incorporation eliminating the prohibition against the issuance of nonvoting equity securities, and to approve certain amendments to Lamonts Apparel, Inc. 1998 Stock Option. LOEHMANN'S: Files Chapter 11 ---------------------------- Loehmann's Inc., the speciality retailer, says it has filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code. Under Chapter 11, the retailer will continue to operate its business under court protection from creditors, while seeking to work out a plan of reorganization. The petition was filed in the U.S. Bankruptcy Court for the District of Delaware. Loehmann's, which operates 69 stores, says it has secured $75 million of debtor-in-possession financing from Congress Financial, subject to Bankruptcy Court approval. The Company believes that such financing should provide it with adequate funding throughout the reorganization period. The company determined that in light of its sales, gross margin and earnings levels in April, especially results for the latter part of the month which were significantly below plan, there was substantial risk that the company would be unable to secure sufficient trade credit for the second half of the fiscal year. Loehmann's said it determined that seeking a Chapter 11 filing at this time was in its best interests. Robert N. Friedman, chairman and CEO, said, ``The decision to file for Chapter 11, while difficult, represents the most viable option for restructuring our Company. Over the past 18 months, we have implemented several strategic initiatives including a more diversified merchandise mix, an aggressive marketing campaign and improved operating efficiencies. "While we believe these strategies were the appropriate course of action, they have yet to mature and generate the expected financial returns. The Chapter 11 filing will provide additional time to build on these efforts and to take the steps necessary to ensure a strong future for Loehmann's," he added. The company noted the Chapter 11 filing should not have an impact on its day-to-day operations. MANHATTAN BAGEL: Conway Appointed Trustee For Trust --------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey entered an order appointing Donald F. Conway as Trustee to Manhattan Bagel Unsecured Creditor Trust. MESA AIR GROUP INC: Reports Improved Bottom Line ------------------------------------------------- Mesa Air reports a net profit in the first quarter of 1999 of $2,906 (reported in thousands). During the past twelve months, significant changes have occurred at Mesa. In May 1998, Mesa and its WestAir subsidiary ceased all operations as United Express, which reportedly resulted in a loss of approximately 45% of Mesa's consolidated revenue and 89 excess aircraft. Mesa successfully redeployed and disposed of almost all of the excess aircraft. In addition, Mesa acquired an additional 9 Canadair Regional Jets since March 1998. All of the 24 regional jets which Mesa currently operates fly under fee per departure contracts with US Airways and America WMesa and CCAIR, Inc., a regional airline based in Charlotte, North Carolina. The airlines executed a definitive purchase agreement dated as of January 28, 1999, whereby CCAIR will become a wholly- owned subsidiary of Mesa. The transaction is valued at approximately $54 million and is intended to be accounted for as a pooling of interests. Notwithstanding the above, operating revenues decreased by $41.7 million to $77.9 million in the quarter ended March 31, 1999, from $119.6 million in the quarter ended March 31, 1998. The revenue decrease was primarily due to a 46.5% decrease in passengers carried. The decrease in ASM's and passengers carried is said to be attributable to the discontinuation of the Company's United Airlines Express operations. MOSSIMO, INC.: Reports $1.5 Million First Quarter Loss ------------------------------------------------------ Mossimo, Inc., reports a $1.55 million net loss for the first quarter 1999. Net sales decreased to $8.3 million during the first quarter of 1999 from $14.4 million in the corresponding quarter in 1998. The decrease in net sales was said to be primarily due to a 25% decline in men's sales and a 34% decline in women's sales. Gross profit decreased to $2.0 million during the first quarter of 1999 from $3.7 million in the corresponding quarter in 1998.The decrease resulted primarily from an increase in sales of prior season inventory to discount channels. NEXTWAVE: Scores Victory In License Suit Against FCC ---------------------------------------------------- The court in NextWave Personal Communications Inc.'s lawsuit against the Federal Communications Commission concluded that reasonably equivalent value was not exchanged when the FCC granted the company 63 C-Block wireless communications licenses in early 1997. As a result, the court ruled that over $3.7 billion in transfers to the FCC rendered NextWave insolvent and were therefore subject to avoidance. However, the court stopped short of deciding upon a final solution in the case concluding that the court would conduct a further hearing to consider the question of remedy. As reported, shortly after filing for chapter 11 bankruptcy protection, NextWave sued the FCC for breach of contract and fraudulent conveyance. (The Daily Bankruptcy Review and ABI Copyright c May 18, 1999) NU-KOTE HOLDING: Hearing on Disclosure Statement ------------------------------------------------ A hearing to consider approval of the Disclosure Statement is set for June 15, 1999 at 9:00 AM in Courtroom 2, Customs House, 701 Broadway, Nashville, Tennessee. PARTY WORLD: Status Report -------------------------- The debtors Party World, Inc. and Party America Inc. report in their Status Report that as of May 5, 1999, the debtors were holding approximately $50,000 (Not including approximately $8,500 which the debtors expect to receive from preference actions). The debtors estimate that remaining unpaid administrative claims will total approximately $300,000, including claims for additional professional fees which the debtors expect will be requested in connection with final fee applications. A.S.K. Financial filed fifty one preference actions seeking recovery of an aggregate of more than $650,000 in net avoidable transfers. As of May 10, 1999 four of the preference actions remain unresolved. With respect to two of these actions, the debtors are enforcing a default judgment. With respect to one action the debtors have entered into a stipulated judgment. A pre- trial conference with respect to the last remaining preference action is scheduled for May 25, 1999. This action seeks recovery of approximately $47,000. PLANET HOLLYWOOD INTERNATIONAL INC: Facing Losses, Defaults ----------------------------------------------------------- Planet Hollywood has reported almost identical first quarter 1999 losses to that of first quarter 1998. In '98 the company sustained loss of $109,881,while this past quarter the loss stood at $109,090. The company's revolving credit facility was terminated in December 1998. The company expects to continue to incur negative cash flows from the operation of the OFFICIAL ALL STAR CAFE, SOUND REPUBLIC and COOL PLANET units. Additionally, Planet Hollywood currently expects continued under-performance from its PLANET HOLLYWOOD operations. Consequently, the cmpany has been discussing with bank representatives an extension of the $12.5 million payment which was due March 31, 1999 under the its bank credit facility. Planet Hollywood has also delayed the $15 million interest payment required under their Senior Subordinated Notes agreement, which was due April 1, 1999. As a result, subsequent to first quarter 1999, the company was and is presently in default under the terms of both of those agreements for its failure to make principal and interest payments when due. PLUMA INC: Files Chapter 11 Bankruptcy -------------------------------------- Unable to resolve its debt problems, fleece-wear manufacturer Pluma Inc. of Eden filed for Chapter 11 bankruptcy protection in Greensboro on Friday. The company appeared headed toward a date with the bankruptcy judge after a period of financial losses culminated in the resignation of top management earlier this year. Duke Ferrell Jr. stepped down as chief executive in February and was replaced by turn-around specialist Ronald Norelli of Norelli and Co. of Charlotte. Norelli was replaced earlier this week by John Wigodsky, a former executive with Delta Woodside and Fruit of the Loom. The filing in U.S. Bankruptcy Court lists Pluma as having $136.6 million in assets and $119 million in debts. The company has not recorded a quarterly profit since the third quarter of 1997. In 1998 alone the company lost $36 million, which included some charges for restructuring. Wigodsky said Pluma's lenders had been "very good about" extending money and working with company during its recent troubles. "There comes a point to where they have to say 'we can't do this anymore,' " Wigodsky said of Pluma's banks, which are led by NationsBank. The company had a new credit agreement that was announced March 31, according to Pluma's public bankruptcy announcement on Friday, but cash flow problems caused in part by the bankruptcy of customer Starter Galt created more difficulties. Wigodsky said Pluma expects to emerge from Chapter 11 as soon as possible. Foreign competition and declining demand for fleece-wear have hurt Pluma's sales. Also, the acquisition of California- based wholesaler Frank L. Robinson Co., purchased in December of 1997, and Wisconsin wholesaler Stardust Corp., bought in January of 1998, did not go as planned. "It took the company out of its core competency, which is making garments, not distributing garments," Wigodsky said. The company has since closed all its Robinson operations. In response to its financial troubles, Pluma has been trimming its work force. About 500 jobs have been eliminated in the past six months, bringing total employment to about 1,400 employees, Wigodsky said. The company closed its Rocky Mount sewing plant earlier this year and said last month it was closing two Virginia sewing factories. The company still has a fabric plant in Eden and two sewing plants in Virginia. Pluma makes fleece-wear and other active-wear garments that are sold under its own brands and some owned by other companies, such as Sam's Club, adidas, Starter and Walt Disney. Trading of Pluma shares on the New York Stock Exchange were halted Friday morning prior to the company's announcement that it was filing for bankruptcy. Pluma shares closed the day before at 50 cents per share. In June of 1997 the stock had closed as high as $15.75 per share. The stock is being "de-listed" by the New York Stock Exchange, Wigodsky said, and will be trading instead on the so-called "pink sheets," which is an informal market for stock trading. (Greensboro News Record -05/15/99) POWER DESIGNS: Order Approves Agreement With AICCO -------------------------------------------------- The U.S. Bankruptcy Court for the District of Connecticut, Bridgeport Division, entered an order permitting the debtors, Power Designs, Inc. and PDIXF Acquisition Corp. to enter into a certain premium finance agreement between the debtors, and A.I. Credit Corp., or their subsidiary AICCO, Inc. PRANDIUM INC: Former Koo Koo Roo Enterprises, Sales Up, Profits Down ---------------------------------------------------------------- On April 16, 1999 the corporation known as Koo Koo Roo Enterprises, Inc. underwent a name change. The company is now operating under the name of Prandium Inc. which reflects a change in name only. The company operates family restaurants and fast-food outlets, two of which are the El Torrito and Chi Chi's chains. During the first quarter of 1999 the company's total sales of $134,258,000 increased by $20,952,000 or 18.5% as compared to the same period in 1998. The increase was due to the addition of sales from the Koo Koo Roo and Hamburger Hamlet restaurants which were acquired on October 30, 1998, sales increases in the comparable El Torito and Chi-Chi's restaurants and sales from new restaurants, partially offset by sales decreases for restaurants sold or closed. While sales were up over the same period in 1998 expenses were also higher, principally in costs of food, wages and rental on facilities. SA TELECOMMUNICATIONS: Disclosure statement and Liquidating Plan ---------------------------------------------------------------- The debtors' Chapter 11 cases are being jointly administered and the plan is being presented as a joint plan of liquidation of the debtors. The plan provides for the substantive consolidation of the assets and liabilities of all of the debtor affiliates. The debtors sold substantially all of their assets to EqualNet Parties in a transaction that closed on July 22, 1998. The $1.5 million in cash proceeds is dedicated to General Unsecured Claims. The percentages agreed to in the Inter-Debtor Settlement Agreement are Class 3A: 42%, Class 3B: 42% and Class 3C: 16%. The following provides a brief summary of the treatment of claims under the plan: Class 1A Miscellaneous Secured Claims against STEL - Unimpaired Class 1B Miscellaneous Secured Claims against Addtel - Unimpaired Class 1C Miscellaneous Secured Claims against Consolidated USC- Unimpaired Class 2A Classified Priority Claims- Unimpaired Class 3A General Unsecured Claims against STEL - Impaired Class 3B General Unsecured Claims against Addtel- Impaired Class 3C General Unsecured Claims against Consolidated USC- Impaired Class 4A Intercompany claims- Impaired, No distribution. Class 5A STEL Preferred stock Interests- Impaired, No distribution. Class 6A STEL Common Stock Interests- Impaired, No distribution. Class 7A Subsidiary Common Stock Interests- Impaired, No distribution. SPECIALTY CARE: Announces First Quarter Results ----------------------------------------------- Specialty Care Network, Inc. (Nasdaq/NM:SCNI) announced financial results for the first quarter ended March 31, 1999. Revenue for the first quarter of 1999 was $14.5 million, a 19% decrease over first quarter 1998 revenues of $18.0 million. Net loss for the quarter was approximately $290,000 compared with net income for the first quarter of 1998 of $2.3 million. Basic loss per share for the first quarter was $0.02 on 16,494,704 shares compared with first quarter 1998 basic earnings per share of $0.13 on 17,731,273 shares. Exclusive of the effect of approximately $1.1 million in charges for litigation and other costs relating to lawsuits with three of its affiliated practices and legal and consulting fees associated with the negotiation of a restructuring transaction with ten of the Company's affiliated practices, net income for the quarter ended March 31, 1999, would have been approximately $370,000. Basic earnings per share for the quarter would have been approximately $0.02. The Company continues to expand its HealthcareReportCards.com business. The Company added four additional hospitals to its list of licensees during the first quarter bringing its total to nine for the first five months of operation. Additionally, HealthcareReportCards.com has entered into banner advertisement agreements with two companies in selected markets. As previously announced, the Company has entered into agreements relating to the proposed restructuring of arrangements with ten of its affiliated practices. The Company's shareholders will vote on approval of the restructuring transaction at a special meeting to be held on June 11, 1999. The Company's lending banks have consented to the proposed restructuring transaction, although the Company remains in default under its current facility. However, the banks have indicated a willingness to revise the terms of the Company's loan agreement if the proposed restructuring transaction is completed. In addition, completion of the restructuring transaction is subject to several conditions, including shareholder approval. In response to inquiries regarding the Company's Internet business, Kerry R. Hicks, president and chief executive officer of Specialty Care Network, Inc., stated, "We intend to develop a comprehensive web-based healthcare rating service that will be viewed as a credible source of healthcare performance information for consumers and the medical community. To that end, our goal is to expand the site to include rating information on a broad array of healthcare providers and to re-launch our web site under a new name in the third quarter of this year. If the proposed restructuring is successfully completed, the Company is planning to seek outside capital to finance its expansion plans. In anticipation of receiving such financing and introducing our expanded web site, we have entered into discussions with several Internet portal and healthcare content providers that would involve links and placements within healthcare related web sites. Our ability to carry out our plans is subject to a number of contingencies including the successful completion of the restructuring transaction, cooperation of our bank lenders, and procurement of financing for our expansion plans. Nevertheless, we hope to report several positive announcements regarding our Internet business in the forthcoming months." STRATOSPHERE CORP: Profits Up Slightly -------------------------------------- Having recently emerged from Chapter 11 bankruptcy reorganization Stratosphere Corp. is reporting a first quarter 1999 net profit of $2,119 over $1,305 for the same period in 1998. Stratosphere operates an integrated casino, hotel and entertainment facility and a 1,149 foot, free-standing observation tower in Las Vegas, Nevada. As of March 28, 1999, the operations included 1,873 slot machines, 34 table games, a sports book, keno lounge, 1,444 hotel rooms and five themed restaurants. Casino revenues of $13.7 million for the 1999 first quarter were reported to be $1.3 million (9%)less than the same period in 1998. Management attributes the decline to increased competition with the opening of two new mega resorts on the Las Vegas Strip. THE SCORE BOARD: Committee Seeks To Pursue Causes of Action ----------------------------------------------------------- The Official Committee of Unsecured Creditors in the case of The Score Board, Inc., et al. seeks entry of an order authorizing the Committee to pursue certain causes of action on behalf of the debtor's estates, and the retention of Bragar Wexler Eagel & Morgenstern, LLP as special counsel on a contingency fee basis. The firm will receive a one-time retainer fee of $50,000. The Committee seeks to pursue two potential causes of action on behalf of the debtors' estates: (i)potential claims and causes of action against present and former officers and directors arising out of acts or omissions in the discharge of their fiduciary duties prior to the petition date and (ii) potential claims and causes of action arising in connection with Score Board's retirement, in October 1997, of its 9% subordinated debentures due 2002 for $2.3 million. THORN APPLE VALLEY: Responds To Ford Motor Credit's Motion to Compel -------------------------------------------------------------------- Debtors, Thorn Apple Valley, Inc., et al. respond to the motion of Ford Motor Credit seeking to compel assumption or rejection of unexpired personal property leases. Ford asserts that it leased various automobiles and small trucks to debtor, for terms of between 30 to 48 months, and requests that the debtor be compelled to immediately "assume or reject the lease agreements." According to the debtor, the value of the lease payments, with the residual value, is calculated for payment of the full economic value of the vehicle plus a certain interest rate or rate of return. Upon the debtor's further initial review of the leases it is apparent that the leases are not true leases but are finance leases. The current value of the vehicles subject to the Ford "leases" is substantially less than the total amount owed under such leases. Prior to the Commencement Date, the debtor paid the residual amounts owed on a number of vehicles. The debtor has demanded that Ford transfer title to the purchased vehicle to the debtor, but Ford has failed to do so. The debtor states that the failure to turnover the titles in an effort to gain leverage for payment should be considered a violation of the automatic stay. The debtor is willing to negotiate with Ford over appropriate interim adequate protection. In the event the court determines that the Ford agreements are true leases, the debtor requests additional time to assume or reject such leases. UNITED COMPANIES FINANCIAL CORP: Decries Internet "Misinformation" ----------------------------------------------------------------- United Companies Financial Corporation has expressed concern about what it believes to be material misstatements and omissions in many of the anonymous and signed communications concerning the company, its business and affairs, and its management that have appeared in various Internet "Message Boards," including Yahoo! Finance. The company says its policy is not to respond to the specifics of any such communications, but they believe that it is appropriate under the circumstances to caution its stockholders and others in the investment community regarding any reliance that may be placed on such communications. United Companies is a specialty finance company in reorganization that provides consumer loan products nationwide through its lending subsidiary, UC Lending. USCI INC: Preferred Stock to Become Common Stock ------------------------------------------------ USCI, Inc. has announced it has concluded an agreement with the holders of all of the outstanding shares of Preferred Stock of the Company. The agreement calls for USCI to convert an aggregate of $1.5 million stated value of its Preferred Stock into 75 million shares of the Company's Common Stock at $0.02 per share. USCI, Inc., through its wholly-owned subsidiary, is a non-facilities based carrier of wireless services. Its Ameritel subsidiary provides wireless coverage and billing to consumers for analog and digital cellular service, debit cellular service and paging service. USCI says it is now focusing on the introduction of prepaid cellular services that will target direct response marketing, specialized channels of distribution and the previously announced e-commerce. The agreement with the holders of the Preferred Stock also provides that the current Board of Directors of the Company will be replaced and a new Chief Executive Officer not as yet named will replace Bruce A. Hahn as CEO, at his request. Mr. Hahn has agreed to remain an executive officer of the company to devote his energies to the continued development and execution of the company's new prepaid cellular and e-commerce business strategies. ********* 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 in each Friday edition of the TCR, is provided 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, Yvonne L. Metzler and Lexy Mueller, Editors. Copyright 1999. 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