/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/990723.MBX T R O U B L E D C O M P A N Y R E P O R T E R Friday, July 23, 1999, Vol. 3, No. 140 Headlines AQUAGENIX: Case Summary and 20 Largest Unsecured Creditors AQUAGENIX: Partnership Sells Most of Aquagenix Holdings BRUNO'S: HSBC'S Draft Solicitation Urging Rejection of Plan CELLEX BIOSCIENCES: Confirmation of Plan CHALK - INTERNATIONAL AIRLINES: Chapter 11 Plan Confirmed CORDEX PETROLEUMS: Order For Conversion To Chapter 7 DAEWOO: Creditors Agree To Delay Re-Payment of $8 Billion Debt ERNST HOME CENTER: Order Confirming Plan FEDCO: Consortium Begins Liquidation Sales FWT,INC: Order Approves Employ of Bondholder Counsel GENESIS MANUFACTURING: Hearing on Sale Of Assets GOLDEN BOOKS: Taps Willkie Farr as Special Environmental Counsel HECHINGER: Seeks Approval of Sale of Real Property LANXIDE: Hearing on Bidding Procedures and Break-Up Fee LEVITZ FURNITURE: Seeks To Amend DIP LEVITZ FURNITURE: Publishes Annual Report For Fiscal '99 LOEWEN: Committee Taps Bingham Dana LOEWEN: Duff & Phelps Withdraws Ratings MARVEL: Ellenbogen Fired; New CEO; Prepares For Sale NEWCARE HEALTH: Meeting of Creditors PINNACLE BRANDS: Committee Taps Akin, Gump as Counsel PITTSBURGH PENGUINS: Lemieux Seeks to Seal Deal by Friday ROOM PLUS: First Meeting Of Creditors SERVICE MERCHANDISE: Court Extends Time To Assume/Reject Leases SERVICE MERCHANDISE: Seeks To Sell Properties SGSM ACQUISITION: Meeting of Creditors Set For August 17 SIRENA APPAREL: Seeks Authority To Continue Factoring Agreement TELETRAC INC: Taps Arthur Anderson as Auditor TRANSTEXAS: Applies To Retain Consultant TRANSTEXAS: Applies To Retain Attorneys VOICE IT WORLDWIDE: Disclosure Statement Hearing Continued WESTERN FIDELITY FUNDING: Meeting of Creditors WIRELESS ONE: Replies to Objection of Black Warrior ********** AQUAGENIX: Case Summary and 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Aquagenix, Inc. 6500 NW 15th Avenue Suite 300 Ft. Lauderdale, Florida 33309 Type of business: Water Technology Court: Southern District of Florida, Ft. Lauderdale Case No.: 99-24534 Filed: 07/09/99 Chapter: 11 Debtor's Counsel: Chad P. Pugatch, PA Northmark Buildin, Suite 101 33 NE 2nd Street Ft. Lauderdale, FL 33301 Total Assets: $5,630,660 Total Liabilities: $2,046,379 No. of shares of preferred stock 1,000,000 No. of shares of common stock 10,000,000 - 1,300 holders 20 Largest Unsecured Creditors: Name Amount ---- ------ Terra Industries Inc. 204,894 Timberland Enterprises, Inc. 123,450 Church (ADI) 120,903 Soil Remediation of Phil.(Haas) 108,000 Atlas, Pearlman 84,136 Peerless Construction 63,138 American Cyanimide, Inc. 56,334 Wharton Capital 50,000 Case Credit Corp. 46,000 Briendel & Ferstendig, PC 44,953 TMT Enterprises, Inc. 43,266 Novartis Crop Protection 43,084 United Green Mark, Inc. 35,503 Pyxis Co. 30,850 US Rentals 28,672 Sierra Nevada Woodwaste 26,991 Directory Concepts Inc. 26,400 Devil Mountain Nursery 22,532 Cal Equipment 17,953 Wright Express 17,045 AQUAGENIX: Partnership Sells Most of Aquagenix Holdings ------------------------------------------------------- Steel Partners II, a New York-based partnership, almost liquidated all its investment in Aquagenix Inc., the Fort Lauderdale vegetation control company, before Aquagenix sought Chapter 11 bankruptcy court protection from its creditors. Aquagenix, citing losses in its California operation and the need to reorganize debt, announced last week that it filed its Chapter 11 case July 9. Steel Partners for months has been selling shares in Aquagenix. Steels most recent filing with the U.S. Securities and Exchange Commission reports it sold 584,150 shares from May to July at 14 cents to 92 cents per share. But all but 15,000 of those shares got sold July 12, after the Chapter 11 filing, at just under 14 cents per share. BRUNO'S: HSBC'S Draft Solicitation Urging Rejection of Plan ----------------------------------------------------------- HSBC BANK USA proposes to send a Counterstatement in the Debtors' Disclosure Statement soliciting votes to reject the Joint Plan of Reorganization: [Note: The following proposed counterstaternent has not yet been approved by the Court. Approval of the following will be sought at the continued hearing on the Debtors' Disclosure Statement presently scheduled for July 19, 1999. Until and unless it is approved, nothing contained herein should be deemed a solicitation of votes to accept or reject a plan]. COUNTERSTATEMENT OF HSBC BANK USA TO DEBTORS' DISCLOSURE STATEMENT TO: ALL HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTORS HSBC Bank USA ("HSBC") serves as Indenture Trustee for the Senior Subordinated Notes and as a member of the Official committee of Unsecured Creditors (the "Creditors Committee"). HSBC does not support the Debtors' Plan for the reasons set forth below amid urges all creditors and parties in interest (a) to consider the counter statements sent with this package in opposition to confirmation of the Plan before voting on the Plan, and(b) to vote against and oppose confirmation of the Plan. Preliminary Statement Stated simply, HSBC believes that Bruno's went into bankruptcy primarily as a result of a Leveraged Buyout. {1} in 1995 pursuant to which Kravis, Roberts & Co. L.P. and its affiliates ("KKR") acquired approximately 83% of the stock of Bruno's forjust over $880 million. To finance its acquisition of the stock, KKR purportedly put up $250 million of its own money, but then used over $630 million of the Debtors' funds which the Debtor had to borrow, thus incurring massive debt that HSBC believes left Bruno's insolvent, with inadequate working capital, and unable to pay its debts as the matured. HSBC believes that the Leveraged Buyout was a classic fraudulent transfer. HSBC believes that the Debtor has excellent claims against KKR which was a beneficiary of the transfer, as well as against inside former shareholders who received proceeds of the transaction. There are also claims against the LBO participants and their professionals for the tens of million of dollars paid in fees and expenses in connection with the Leveraged Buyout. For the privilege of getting 26 cents on the dollar within the next few months, the Plan provides that general unsecured creditors must give up any claims that you or the Debtor itself have against KKR, the Bruno family and others. At the same time, the banks and management walk away with 100% ownership of the reorganized company, which the Debtor estimates is worth $300 million but which might be worth significantly more. HSBC believes that claims against KKR and others could be worth hundreds of millions of dollars to the estate, and quite possibly enough to enable the Debtor to pay all creditors in full. The Debtor should pursue these claims, not extinguish them. And ask yourself, why? Why does the Debtor insist on filing a plan giving releases to KKR and shareholders for no consideration? Why not, for example, file the very same plan but preserve the claims against KKR. HSBC believes there is only one reason, that you are being held hostage to the demands of a KKR controlled board of directors who presently have the exclusive right to file a plan and who have insisted on free releases as a condition to their filing a plan. The banks and the trade representatives on the Creditors' Committee, for whatever their reasons, have determined to cooperate with KKR and to give it a free release. HSBC believes this is wrong. HSBC believes that you have little to lose, and much to gain, by voting to reject the Plan. HSBC believes that there are better plans out there, and that there needs to be some competition in connection with the sale of the company contemplated in the Plan before this Plan is [crammed down] on creditors. Background Several weeks before the Debtors filed the Plan, HSBC filed a motion for appointment of an independent examiner under Section 1104(c) of the Bankruptcy Code to investigate and prepare a report on potential claims (including preferences, fraudulent transfers, and other causes of action that may lie under state law) available to the Debtors' estate against third parties, including the Debtors' current and former directors and controlling shareholders, arising from and related to the leveraged buyout of the common stock of Bruno's, Inc. in August 1995 (the "1995 LBO"). As noted above, HSBC believes that there are valid claims against third parties relating the 1995 LBO which are being extinguished and released under the Plan with no consideration to creditors. The Debtors acknowledge that if there are valid claims to pursue 1n connection with the LBO, the likely beneficiaries of any recovery are the general unsecured creditors, who currently will receive only a 26% dividend on account of their allowed claims under the proposed Plan. HSBC believes that if the claims relating to the LBO were pursued (a) the recovery by general unsecured creditors would be substantially greater; (b) there could be a recovery to the Subordinated Noteholders after giving effect to the subordination provisions in the Subordinated Notes Indenture, and/or (c) the subordination provisions might be unenforceable. HSBC sought an independent examiner because the Debtors' report on the 1995 LBO summarized in Section IV.H of the Disclosure Statement did not employ the appropriate analysis to determine whether the company was insolvent when the transaction occurred, whether the company was left with unreasonably small capital or even who the potential targets may be. In addition, insiders of the Debtors (who were active participants in and potential targets of any action to avoid the transactions and recover for the benefit of the estate) remain in control of the Debtors' Board of Directors, which HSBC believes makes it virtually impossible for the Debtors to pursue an unbiased investigation and reach an independent conclusion. The Bankruptcy Court approved the appointment of the Examiner. The Examiner concluded that [INSERT SUMMARY OF EXAMINER REPORT]. HSBC urges you to read the Examiner's report on the 1995 LBO, as well as the Disclosure Statement and other Counterstatements before you vote. THE 1995 LBO To pay for the billion-plus dollar LBO, Bruno's and its affiliated Debtors obtained cash and credit through the issuance of $400 million in Senior Subordinated Notes, a $475 million term loan facility, and a $125 million revolving credit facility from Chemical Bank (now Chase) of which approximately $10 million was drawn to fund the LBO and which was secured by the stock of Bruno's subsidiaries. KKR and its affiliates purportedly contributed $250 million in cash. Bruno's also applied $20 million of its existing cash to the transaction. The net cash proceeds were allocated to the following principal uses: (i) payment of $880.1 million of cash merger consideration to pre- closing shareholders, i.e., the purchase of Bruno's pre-transaction outstanding common stock at $12.00 per share (a substantial premium over the prevailing market price), with the Bruno's family receiving nearly one-fourth of those funds in redemption of their shares, (ii) repayment of $200 million plus accrued interest in pre-transaction indebtedness which bore a favorable, low interest rate, i.e., the retirement of 6.62% Series A Senior Notes due 2003 and 7.09% Series B Senior Notes due 2008; and (iii) payment of $75 {2} million in fees and expenses related to the merger, including, among other payments, $15 million in fees to KKR plus unreimbursed expenses, $39.9 million in debt issuance costs, including substantial fees to the Banks, and $5.6 million for termination of a pre-existing interest rate swap. HSBC believes that the obvious result of the LBO was that Bruno's assets were depleted to the prejudice of its creditors: KKR, public and insider shareholders, and other potential targets received the fruits and benefits of these transactions through the redemption of stock, retirement of low-interest debt, and payment of substantial fees, while Bruno's, as the surviving entity, received questionable benefit (if any), incurred hundreds of millions of dollars of higher-interest debt, faced increasing difficulties in servicing its obligations and maintaining its business position, and slid into financial ruin. At the same time, while shareholders received a premium over prevailing public market prices for the redemption of their shares through the LBO, the creditors of the Debtors were left with companies whose overall financial health was far more precarious, and who, unlike the cashed-out interest holders, ran increasingly serious risks that their obligations would not be fully satisfied. HSBC believes that the LBO left Bruno's overburdened with debt and no other clear benefit. Reasons To Reject The Debtors' Plan HSBC believes that the Plan can not and should not be confirmed for the following reasons: The Plan, if accepted and confirmed, will release and extinguish causes of action against the Debtors' insiders, current and former shareholders, and other third parties for no consideration, based solely on the Debtors' and their attorneys' own conclusions that there are no viable causes of action against third parties. If the causes of action are preserved to be pursued by an independent party, the Debtors could emerge from Chapter 11 and provide a greater recovery to creditors including the Senior Subordinated Noteholders. In addition, the Debtors' Plan cannot be confirmed because the Debtors' majority shareholder and other shareholders, will receive value under the Plan in the form of releases and other protections from lawsuits and claims, including the elimination of causes of action and the continuation of rights of indemnification while unsecured creditors are not paid in full and certain creditors receive nothing under the Plan. The Plan also requires any creditor who holds a claim against both the Debtors and an insider to seek satisfaction first from the Debtors and the balance, if any, from the non-debtor insider. The Plan also preserves the indemnification claims of such insiders so that the recovery of unsecured creditors will be reduced by the amount of any allowed indemnification claim. The Plan also includes a settlement with the Banks on account of preference action which requires the Debtors to pay over $2.5 million to the Banks on account of post petition fees incurred by the Banks. This settlement was negotiated by the Debtors' counsel which has acknowledged that it also represents members of the Bank group in other cases and matters. The Debtors fail to disclose that the Plan is not in the best interest of creditors because in a liquidation of the company under Chapter 7 (which could involve the sale of the company as a going concern) creditors likely would receive more than they do under the current Plan. In a "liquidation" of the company under this scenario, the causes of action against KKR and others would be preserved. The Plan forgives millions of dollars in loans and compensates officers for their losses on account of their stock holdings while general unsecured creditors receive only a small recovery on account of their claims. Finally, the Plan protects the Debtors, their officers and directors and their professionals and the Committee members and its professionals for the actions in pursing confirmation of a plan which does not fairly treat creditors. (Bruno's Bankruptcy News - Issue 22; Bankruptcy Creditors' Services Inc.) CELLEX BIOSCIENCES: Confirmation of Plan ---------------------------------------- The plan filed by Cellex Biosciences, Incorporated on June 28, 1999, and dated June 28, 1999 was confirmed by the US Bankruptcy Court for the District of Minnesota, Third Division on July 7, 1999. CHALK - INTERNATIONAL AIRLINES: Chapter 11 Plan Confirmed ----------------------------------------------------------- Bankruptcy Judge Robert C. McGuire (N.D. Texas)confirmed Chalk's International Airlines' chapter 11 plan, according to The Sun- Sentinel. Six creditors filed an involuntary bankruptcy petition against the Fort Lauderdale, Fla.-based company in January. Former pilot and Miami businessman Jim Confalone will pay $925,000 in cash for the airline; the transaction is expected to close August 2. Confalone plans to retain the airline's 35 employees and expand operations. Chalk's parent company is based in Forth Worth, Texas. Attorney John D. Penn of Haynes and Boone LLP, Fort Worth, represented chapter 11 trustee and plan proponent Michael A. McConnell. (ABI 21-July-99) CORDEX PETROLEUMS: Order For Conversion To Chapter 7 ---------------------------------------------------- By order of the US Bankruptcy Court for the District of Colorado entered on July 16, 1999, the Chapter 11 case of Cordex Petroleums, Inc. was converted to a case under Chapter 7. DAEWOO: Creditors Agree To Delay Re-Payment of $8 Billion Debt ----------------------------------------------------------- For three decades, Kim Woo-choong was South Korea's rising star. A self-proclaimed workaholic who liked to boast he had never taken a day off, Kim loved doing business. In a span of 32 years, Kim built Daewoo from a one-room textile exporter to the nation's second largest conglomerate, a company with $65 billion in assets that produces goods as diverse as ships, cars, electronics, clothes and pesticides. This week, however, Kim's star fell, his Daewoo narrowly averting the biggest bankruptcy in South Korean history -- a failure that government officials feared would send the country's economy plunging into recession. The near collapse laid bare the truth of what Koreans liked to call the "Kim Woo-choong myth," the belief that his success was built on hard work, entrepreneurship and globe-spanning vision. Kim, 63, built his empire on billions of dollars in short-term loans that melted away in the heat of a crippling business downturn. On Monday, Daewoo's creditors agreed to delay repayment of $8.3 billion in debt for six months and extend $3.3 billion in new loans to keep the teetering conglomerate afloat. By year's end, Daewoo hopes to sell enough of its 40 subsidiaries to overcome its liquidity problem -- a task many analysts say it is not likely to accomplish. "It's cosmetic, no solution at all," said Suh Sung-won, head of research at SG Securities in Seoul. "Creditors were desperate but found no solution, so they decided to give themselves six more months." In the hurriedly put-together rescue plan, experts smelled a deep-seated government fear that if Daewoo failed, it would drag down the entire nation's economy. The government controls many of Daewoo's creditor banks, either directly or indirectly. Daewoo and four other family-owned conglomerates, known as chaebol, generate a combined $298 billion in sales annually, compared to South Korea's gross domestic product of $375 billion. Thousands of suppliers, retailers and wholesalers depend on business with Daewoo. "If Daewoo goes down, the whole economy will shake," said Lee Pil-sang, an economist at Seoul's Korea University. "The government is putting off the pain for six months. But will the pain disappear in six months? I seriously doubt it." For years, Daewoo has been a crisis waiting to happen. As it pushed its overseas expansion drive, its debt soared from $19 billion in 1995 to $50 billion last year, more than five times its equity. That excludes an estimated $10 billion its foreign joint-ventures have borrowed. In the past, Kim always managed to find loans, with government backing, to finance his new ventures. Indeed, debt-driven expansion was a common strategy for South Korean conglomerates that spearheaded the country's dramatic rise from the ashes of the 1950-53 Korean War. But few have practiced it more aggressively than Daewoo. Starting out as a textile salesman in 1967, Kim built his empire largely through taking over troubled companies at home, using his well-oiled connections with past authoritarian governments. In the 1990s, Kim's ambition became even loftier. Under his slogan of "global management," Daewoo went on a worldwide shopping spree, buying dilapidated auto and home appliance plants in former communist countries and Third World nations. At the height of Kim's overseas drive, Daewoo took over one company every three days. Daewoo now runs 600 overseas companies and is a household name in much of Eastern and Central Europe. Daewoo's trouble began when Asia's financial crisis engulfed South Korea in late 1997 and banks began tightening their purses. It was also then that Kim made a fatal policy mistake and angered the government of President Kim Dae-jung, who is urging the bloated conglomerates to slim down. While other conglomerates were selling assets and focusing on profitability, Daewoo continued to expand. Meantime, the developing world's demand for cheap cars, TV sets and other goods Daewoo produces did not grow as rapidly as Kim had expected. Smelling trouble, creditors began calling in short-term loans that accounted for more than half of its total borrowing. In August alone, $6.4 billion in loans came due. If Daewoo fails to keep its promise of reform within six months, the government says, creditors will start breaking up the conglomerate by disposing of $8.42 billion of stock and real estate Daewoo put up as collateral, including Kim's personal stock worth $1.04 billion. Desperate to persuade creditors to give him more time, Kim vowed to either restructure the conglomerate by the end of this year or resign. Daewoo's ability to raise enough new financing in the short term is doubtful because most of its subsidiaries on the chopping block are only marginally profitable at best, he added. ERNST HOME CENTER: Order Confirming Plan ---------------------------------------- On July 9, 1999, the US Bankruptcy Court for the Western District of Washington entered an order confirming the plan of reorganization of Ernst Home Center Inc. FEDCO: Consortium Begins Liquidation Sales ------------------------------------------ A consortium of four companies (Schottenstein Bernstein Capital Group LLC, The Ozer Group LLC, Hilco/Great American and the Nassi Group LLC) announced that "going-out-of-business" sales will begin at FedCo locations in Los Angeles and San Diego today, according to a newswire report. The 10 FedCo warehouse department stores, which had previously been open only to members, are now open to the public. Last week the Bankruptcy Court for the Southern District of California approved the consortium's $55 million bid for the right to liquidate the inventory, valued at about $90 million at retail. (ABI 21-July-99) FWT,INC: Order Approves Employ of Bondholder Counsel ---------------------------------------------------- The US Bankruptcy Court for the Northern District of Texas, Fort Worth Division entered an order approving the employment of McConnell & Goodrich as local counsel for the official Bondholder Committee. GENESIS MANUFACTURING: Hearing on Sale Of Assets ------------------------------------------------ Genesis Manufacturing Limited LC seeks authority to sell substantially all of the debtor's business as a going concern to Reliant Manufacturing, Inc, a corporation formed by Cortran Group, Inc. The asset purchase agreement provides for the sale of the sale assets to the purchaser for $5.75 million. An auction sale will commence on July 27, 1999 at 10:00 AM at the offices of Honigman, Miller, Schwartz & Cohn, 2290 First National Building 660 Woodward Avenue, Detroit, Michigan 48226. The hearing to consider approval of the sale motion and the sale of the sale assets shall be held on July 27, 1999 at 2:00 PM. Competitive bidding shall start in the amount of the purchase price plus $100,000, and shall continue thereafter in increments of at least $50,000. GOLDEN BOOKS: Taps Willkie Farr as Special Environmental Counsel ---------------------------------------------------------------- The debtors, Golden Books Family Entertainment, Inc., et al., seek court approval to retain and employ Willkie Farr & Gallagher as special environmental counsel. The firm will perform necessary legal services in connection with pending judicial and administrative actions arising under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 respecting a certain Superfund site located in Plattekill, NY. The firm's attorneys who are primarily responsible for this representation are Steven M. Oster, whose billing rate is $455 per hour, and Bonni Fine Kaufman, whose billing rate is $385 per hour. HECHINGER: Seeks Approval of Sale of Real Property -------------------------------------------------- The debtors, Hechinger Investment Company of Delaware, Inc., et al. seek court approval of a sale of certain vacant adjacent parcels of real property located in Landover, Maryland. Acquest Holdings, Inc. has agreed to purchase the property from the debtors for a purchase price of $1.8 million. The debtors represent that the property is excess, undeveloped land at a location where the debtors no longer maintain offices and have no plans to operate or open a store or offices. The debtors have determined that a sale of the property at this time is in the best interests of their estates because the debtors have not utilized such property, and the property is not necessary for a successful reorganization. The debtors believe that the purchase price is fair, and after marketing the property for several years, this has been the only offer. LANXIDE: Hearing on Bidding Procedures and Break-Up Fee ------------------------------------------------------- A hearing on the motion of the Trustee to sell substantially all of the debtor's assets to METEK Metallverarbeitungsgesellschaft mbH and/or one or more of its subsidiaries, affiliates or assignees or to the highest bidders for the debtor's assets will be convened at the court on July 29, 1999 at 4:30 PM. LEVITZ FURNITURE: Seeks To Amend DIP ------------------------------------ The Debtors tell Judge Walrath that the asked the DIP Lenders to adjust the EBITDA covenants set forth in the Tenth Amendment downward because it is now obvious that those targets -- while still positive -- will not be achieved. The DIP Lenders consented to the amendment, in consideration of a $100,000 Amendment Fee. By this Motion, the Debtors ask Judge Walrath for authority to amend the DIP Financing Facility and pay the Amendment Fee. If this Eleventh Amendment is not approved, the Debtors caution, the DIP Facility will be in default. EBITDA targets are modified under the Eleventh Amendment to: For the Period EBITDA Shall Be No Less Than -------------- ---------------------------- April 1, 1999 through June 30, 1999 $1,400,000 April 1, 1999 through September 30, 1999 $4,400,000 The current consortium of Revolving Lenders under the DIP Facility are: Lender Revolving Commitment ------ -------------------- BT Commercial Corporation $19,000,000 LaSalle National Bank $19,000,000 Heller Financial, Inc. $18,000,000 TransAmerican Business Credit Corporation $13,000,000 Finova Capital Corporation $19,000,000 GMAC Business Credit L.L.C. $19,000,000 (Levitz Bankruptcy News; Issue 33; Bankruptcy Creditors' Services, Inc.) LEVITZ FURNITURE: Publishes Annual Report For Fiscal '99 -------------------------------------------------------- For the Fiscal Year ending March 31, 1999, Levitz generated revenues of $653.1 million and posted a $94.4 million net loss. Adding back interest, taxes, depreciation, amortization and restructuring costs for the year results in EBITDAR approximating $4 million. But for the chapter 11 filing, another $23.1 million would have been payable on pre-petition debts during Fiscal 1999. Fiscal 1999 SG&A expenses aggregating $280.8 million exceeded Levitz' $276.7 million Fiscal 1999 gross profit. Increases in SG&A as a percentage of sales over prior years are attributed to (i) increased advertising efforts, (ii) increases in salary expenses and (iii) decreased service fee income from the private label credit card program. Comparable store sales declined 0.1% in Fiscal 1999 from Fiscal 1998. In April 1999, comparable store sales increased 1.9%, but decreased 2.2% and 0.9% in May and June 1999, respectively. Levitz reminds investors that seasonal variation has a significant impact on its business. Arthur Andersen continued to express doubt about Levitz' ability to continue as a going concern in light of the Chapter 11 filing, recurring losses, and cash flow deficiencies. Andersen's opinion does not account for the restructuring of Levitz' balance sheet as outlined in the Debtors' Joint Plan of Reorganization. The continuation of Levitz' business as a going concern is, Andersen notes, contingent upon, among other things, the ability to formulate a plan of reorganization which will gain approval of the creditors and confirmation by the bankruptcy court, success of future operations, the ability to obtain financing and the ability to recover the carrying amount of assets and/or the amount and classification of liabilities. On June 8, 1999, Levitz operated 64 retail stores, and 21 Sales Support Centers located in major metropolitan areas in 13 states, with a concentration in California. As of June 8, 1999 Levitz had available for disposition nine owned and nineteen leased properties formerly operated as retail stores. As part of its "warehouse rationalization program", the Company has completed the closing of its warehouses in Dedham, MA, Danvers, MA, Paramus, NJ, GardenCity, NY, Northridge, CA, Minneapolis, MN, San Bernardino, CA, Cherry Hill, NJ, South San Francisco, CA, Hartford, CT, Redondo Beach CA, Lynwood, WA, Allentown, PA, Concord, CA and Modesto CA. (Levitz Bankruptcy News; Issue 33; Bankruptcy Creditors' Services, Inc.) LOEWEN: Committee Taps Bingham Dana ----------------------------------- Teachers Insurance and Annuity Association of America and UBS AG, Co-Chairing the Official Committee of Unsecured Creditors appointed in the Debtors' chapter 11 cases, sought and obtained the Court's authority to retain Bingham Dana LLP (and, prior to the July 1, 1999, law firm merger, Hebb & Gitlin) as lead counsel to represent the Committee. Evan Flaschen, Esq., leads the engagement, from the Firm's Hartford, Connecticut, office, assisted by Litigation partner Greg Nye, Esq., Finance partner Bill Kelly, Esq., Insolvency partner Ron Silverman, Esq., and Insolvency associates Anthony Smits, Esq., and Anna Gustafson, Esq. Prior to the Firm's engagement by the Committee, the Firm represented Teachers and the Ad Hoc Committee in pre-petition negotiations with Loewen. Specifically, Bingham Dana will: (a) provide legal advice with respect to the Committee's powers and duties in these cases; (b) prepare, on behalf of the Committee, all necessary applications, answers, orders, reports and other legal papers; (c) represent the Committee in any and all matters involving contests with the Debtors, alleged secured creditors and other third parties; (d) negotiate a plan of reorganization; (e) represent the Committee, in coordination with Canadian counsel, with respect to all of the foregoing matters in connection with the Canadian Debtors and the Canadian Proceedings; and (f) perform all other legal services for the Committee which may be necessary and proper in these Chapter 11 proceedings and the Canadian Proceedings. Bingham Dana will charge for its services at its customary hourly rates: Members/Partners $200 - $457 per hour Counsel & Associates $140 - $350 per hour Paralegals $90 - $125 per hour Prior to the Petition Date, the Firm received $321,000 from Loewen in connection with its representation of Teachers and the Ad Hoc Committee. At the Petition Date, the all retainers paid to the Firm were exhausted. (Loewen Bankruptcy News Issue 6; Bankruptcy Creditors Services Inc.) LOEWEN: Duff & Phelps Withdraws Ratings --------------------------------------- July 8, 1999 -- Duff & Phelps Credit Rating Co. (DCR) has withdrawn the ratings of The Loewen Group, Inc. (NYSE: LWN) and related entities. LWN filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on June 1, 1999. DCR rated the following securities: -- The Loewen Group, Inc.'s senior guaranteed notes, 'DD' (Double-D); -- The Loewen Group, Inc.'s convertible first preferred shares series C, 'DP' (preferred stock with dividend arrearages); -- Loewen Group International Inc.'s (LGII) senior guaranteed notes, 'DD' (Double-D); -- Loewen Group Capital, L.P.'s monthly income preferred securities (MIPS), 'DP' (preferred stock with dividend arrearages); and -- Loewen Pass-Through Asset Trust 1997-1's pass-through asset trust certificates (PATS), 'DD' (Double-D). MARVEL: Ellenbogen Fired; New CEO; Prepares For Sale ---------------------------------------------------- After failing to find a buyer, Marvel comics is installing a buyout artist as CEO to make "Spider-Man" and the "Hulk" more attractive to investors. Eric Ellenbogen was fired after less than nine months on the job and is being replaced by Peter Cuneo, a Harvard MBA who has run disparate consumer-products businesses. Most recently, Cuneo was a principal at a buyout firm called Cortec Group that has managed to capture a 50 percent return on investments. He has worked for Isaac Perlmutter, one of Marvel's biggest investors. Marvel and its investment bankers at Morgan Stanley held talks with toy giants Hasbro and Mattel, said a source close to the company, who added that Marvel was hoping to get as much as $600 million. But the asking price was too high, and a power struggle leading to Ellenbogen's ouster emerged. On one side were investors Perlmutter and Avi Arad, who exercised their 40- percent ownership to force Ellenbogen out, the source close to Marvel said. On the other side was a group of investors - including Chase Manhattan, Morgan Stanley, and Dickstein Partners - who bought Marvel bonds at a deep discount when the company emerged from bankruptcy. Arad, Marvel's creative chief, yesterday denied there was a power struggle, and declined to comment on hiring investment bankers and talking with the toy companies. He referred questions to Marvel's general counsel. Marvel has a history of bloody infighting, notably the long battle for control between Carl Icahn and Ron Perelman. Icahn eventually won. But vulture investors shoved him aside after Marvel entered bankruptcy court in 1996. The company, once worth some $3 billion, has a market capitalization of $250 million today, based on its stock price and basic, common shares outstanding. Cuneo, the new CEO, denied Ellenbogen was ousted because Marvel didn't find a suitor and insisted he didn't take the job to scope out a deal. "I am not here to find a buyer for the company," he told The Post. "I'm here to build the value for shareholders." But Cuneo acknowledged that should Marvel become attractive to potential buyers over time, "then it happens." The shakeup comes as Marvel is still recovering from its painful tour of Chapter 11 bankruptcy court, from which it emerged in October when it combined with Toy Biz Inc. Ellenbogen, backed by Marvel's creditors, took the helm the following month and lined up $250 million in long-term financing, as well as a $60 million working-capital facility. In a written statement yesterday, Marvel Chairman Morton Handel credited Ellenbogen with helping to get the "Spider-Man" movie off the ground by clearing away litigation. Right now, the "Spider Man" script is being rewritten from James Cameron's original version, with Sony Pictures Entertainment making the film, a Marvel spokeswoman said. Cuneo, an ex-CEO of Remington Products Co., known for personal-care gadgets like electric razors, is filling the CEO post immediately. Cuneo also worked for Black & Decker Corp. as head of its security hardware group, and was president of beauty company Clairol's personal-care division. In addition, he's been a senior exec at drug maker Bristol-Myers Squibb Co. and has Internet exposure from being a board member of FactoryMall.com, a durable consumer-products marketer. NEWCARE HEALTH: Meeting of Creditors ------------------------------------ A meeting of creditors is set in the Chapter 11 case of Newcare Health Corporation for August 10, 1999 at 2:00 PM at the Office of the US Trustee, Franklin Square Tower, 600 Main Street, Suite 202, Worcester, MA. Attorney for the debtor is Alan S. Dambrov, Cooley, Shrair, PC, 1380 Main Street, Springfield, MA. PINNACLE BRANDS: Committee Taps Akin, Gump as Counsel ----------------------------------------------------- The Official Committee of Unsecured Creditors of the debtors, Pinnacle Brands, Inc., and its affiliates seek authorization to retain and employ Akin, Gump, Strauss, Hauer & Feld LLP as counsel for the Committee and to substitute Akin, Gump for Stroock & Stroock & Lavan LLP. The reason for the change is due to the association of Fred S. Hodara with Akin, Gump. Hodara, formerly a partner with Stroock & Stroock, has now become a member of Akin, Gump; and due to his knowledge of the case and his expertise in handling the ongoing representation of the Commitee, the Committee seeks to employ Akin, Gump. Akin, Gump will bill at its normal hourly rates which range from $375-540 for partners. PITTSBURGH PENGUINS: Lemieux Seeks to Seal Deal by Friday --------------------------------------------------------- Although Mario Lemieux was granted a 20-day extension last week on his purchase of the bankrupt Pittsburgh Penguins, he and his team of investors hope to complete the deal by Friday, The Pittsburgh Post-Gazette reported. His attorney said that although Lemieux set Friday as a goal, next Wednesday is more realistic and that the support from the Public Auditorium Authority and the mayor would help solidify the deal. The Penguins filed chapter 11 in October with more than $120 million in liabilities. Former Penguin Lemieux won the right from the court to buy the team, over several other bids. (ABI 21-July-99) ROOM PLUS: First Meeting Of Creditors ------------------------------------- The first meeting of creditors in the case Room Plus, Inc. has been adjourned to August 3, 1999 at 10:00 AM at the Office of the US Trustee, One Newark Center, Room 2106, Newark, New Jersey. SERVICE MERCHANDISE: Court Extends Time To Assume/Reject Leases --------------------------------------------------------------- "There is considerable value in the Unexpired Leases for both the Go-Forward Stores . . . and the Closing Stores . . . that needs to be maximized for the benefit of the Debtors in order to reorganize"; Judge Paine found. "The Debtors have diligently hired experts," Judge Paine observed, "to value and market the Unexpired Leases and the proof is unrebutted that the Debtors are expeditiously and aggressively marketing such leases at this time. Notwithstanding the inconvenience and uncertainty in the near future to the landlords as the Debtors market the Unexpired leases, [the] landlords will be protected by the payment of rent. . . ." Accordingly, Judge Paine ordered that the Debtors' time within which to decide whether to assume or reject non-residential real property leases is extended: * through confirmation of a plan of reorganization with respect to Go-Forward Stores leased from Non-Objecting Landlords; * through March 31, 2000, with respect to Go-Forward Stores leased from Objecting Landlords; * through March 31, 2000 with respect to Closing Stores leased from Non-Objecting Landlords; and * through September 28, 1999 with respect to Closing Stores leased from Objecting Landlords. These extensions, Judge Paine made clear, are without prejudice to the right of any Landlord to move the court to reduce the extension. (Service Merchandise Bankruptcy News Issue 8; Bankruptcy Creditors' Services, Inc.) SERVICE MERCHANDISE: Seeks To Sell Properties --------------------------------------------- As previously reported, the Debtors determined to close approximately 1/3 of their Stores prior to the Petition Date. DJM Asset Management delivered its appraisal of those 102 Properties to the Debtors. Keen Realty and Trammel Crow, in turn, launched an aggressive marketing campaign to help the Debtors realize value for those fee-owned and leased properties. Bids for the Properties came from every direction and in every form. Commercial Net leasing and Whitehall Street Real Estate Limited Partnership submitted a $66.1 million bid for 58 properties. That complex bid provided for (i) a 115% reduction of the allocated purchase price for each property on which the Debtors obtained a higher and better offer and (ii) payment of a 2% Break-Up Fee in the event the pool of assets fell on which CNL was bidding fell below $22 million. The Debtors conducted an out-of-court auction, attended by 66 qualified bidders (assisted by more than 200 advisors), the DIP Lenders, the Committee, the U.S. Trustee, and the Indenture Trustees. Spirited bidding went on for hours, with numerous breaks for caucusing purposes. That auction process generated bids valued at $80.2 million for 77 Properties. Off to court the Debtors and the Successful Bidders raced, seeking Judge Paine's ratification of the auction process and authority for the Debtors to accept those bids as the highest and best. Without reservation, Judge Paine ratified the auction process and granted the Debtors the authority necessary to accept and be bound to the Successful Bids. Judge Paine made it clear that the Debtors will still have to make their case, deal-by- deal, for authority to assume and assign their Leasehold Interests to the Successful Bidders. No ruling by the Court this stage constitutes a finding that any Successful Bidder is a qualified assignee of a Leasehold Interest. Separate Motions, on appropriate notice the the affected Landlord, will be required to be filed. Each Landlord will have the opportunity to debate (i) the eligibility of a prospective assignee and (ii) the appropriate cure amount to be paid in connection with the assumption of a Lease. With respect to the Fee-Owned Properties, Judge Paine found that the Debtors have obtained the highest and best prices for those properties and, accordingly, the sale of those properties is approved pursuant to 11 U.S.C. Sec. 363(b) and the Debtors are granted broad authority to proceed to closing. The $80.2 million raised from these asset sales will be used, first, to discharge all pre-petition liens encumbering the applicable Properties and, second, to reduce the Debtors' obligations for post-petition borrowings under the DIP Financing Facility. (Service Merchandise Bankruptcy News Issue 8; Bankruptcy Creditors' Services, Inc.) SGSM ACQUISITION: Meeting of Creditors Set For August 17 -------------------------------------------------------- A meeting of creditors in the case of SGSM Acquisition Company LLC and its affiliates is set for August 17, 1999 at 2:00 PM at the Office of the US Trustee, Texaco Center, #2112, 400 Poydras, New Orleans, LA 70130. Attorney for the debtor is James L. Patton, Jr., PO Box 391, Rodney Square North, Wilmington, DE. SIRENA APPAREL: Seeks Authority To Continue Factoring Agreement --------------------------------------------------------------- The Sirena Apparel Group, Inc., seeks an order authorizing its continued operation under the prepetition factoring agreement with Heller Financial Inc. The debtor sold its accounts receivable to Heller on the terms and conditions set forth in the Factoring Agreement. In exchange for certain commission charges provided in the Factoring Agreement, Heller provided the debtor with credit insurance and collection services. Pursuant to an assignment of monies due under the Factoring Agreement, Heller would remit all amounts otherwise due the debtor to Foothill Capital Corporation. TELETRAC INC: Taps Arthur Anderson as Auditor --------------------------------------------- The debtor, Teletrac, Inc. seeks court authorization to retain Arthur Anderson LLP as auditor for the debtor. The firm will conduct an audit of the debtor's annual financial statements; review quarterly financial information included in the debtor's form 10-Q and opine on the calculation of certain escrow account funding balance requirements. Accordingly, the debtor believes that Andersen is well qualified for these services. Compensation will be paid on an hourly basis. Those professionals now designated to work on this case bill at hourly rates ranging from $350 per hour to $190 per hour. TRANSTEXAS: Applies To Retain Consultant ---------------------------------------- TransTexas Gas Corporation applies to retain consultant, Meca, Inc. d/b/a Matrix Energy Capital Associates. The debtor needs the professional services of the company to source and negotiate arrangements for funding drilling programs, to source and negotiate arrangements for the sale financing or other monetization of the Winnie Treating Facility and for additional services as needed and as may be provided upon request. The debtor has agreed to pay a monthly retainer of $5,000, and a daily rate of $600 for each day actually worked, out of pocket expenses and approved travel costs; and an incentive fee fof.5% of all capital raised on behalf of TransTexas from certain sourcs as agreed to by the debtor. TRANSTEXAS: Applies To Retain Attorneys --------------------------------------- Transamerican Energy Corp. and Transamerican Refining Corp., debtors, seek court authority to hire the law firm of Jordan, Hyden, Womble & Culbreth PC, replacing the law firm of Young, Conaway, Stargatt & Taylor LLP. The law firm has been approved as bankruptcy counsel for the debtor, TransTexas. The firm will assist the debtors and the debtors' special counsel in the counseling and professional advice regarding cont6inued operation of their businesses and management of their property and duties and responsibilities as debtors; Assist the debtors and the debtors' special counsel in preparing all schedules and statements required; Assist the debtors and the debtors' special counsel in preparing on behalf of the debtors all necessary applications, notices, answers, adversaries, orders, reports and other legal papers regarding the debtors' obligations and operations under Chapter 11; Assist the debtors and the debtors' special counsel in performing all other legal services for the debtors as may be necessary and appropriate to advise, instruct assist or otherwise perform the duties of debtor. The firm charges hourly rates ranging from $275 to $55 for paralegals. VOICE IT WORLDWIDE: Disclosure Statement Hearing Continued ---------------------------------------------------------- The US Bankruptcy Court for the District of Colorado entered an order on July 16, 1999, vacating the hearing date for considering the adequacy of the Disclosure Statement which was to be held on July 20, 1999. The debtor is required to file a status report with the court on the progress of the debtor and Renaissance in formulating a consensual plan of reorganization on or before September 20, 1999. WESTERN FIDELITY FUNDING: Meeting of Creditors ---------------------------------------------- A meeting of creditors is set in the Chapter 7 case of Western Fidelity Funding, Inc. for August 16, 1999 at 3:30 PM at the US Custom House, 721 19th Street Rm. 125, Denver, CO. Attorney for the debtor is Harry Sterling 1600 Broadway, Ste. 2600, Denver, CO. WIRELESS ONE: Replies to Objection of Black Warrior --------------------------------------------------- Wireless One, Inc., debtor, replies to the objection of Black Warrior Telecommunications, Inc. (BWT) with respect to the debtor's motion for postpetition financing. The debtor states that BWT has no standing to assert the objection since it is based on the contractual obligations of an indirect, non-debtor subsidiary. The debtor asserts that even if BWT or its members had a claim against the debtor, BWT's alleged administrative priority claim is not entitled to superpriority status which would be equal to or greater than the superpriority status to be accorded to the proposed lender and which ahas already been accorded to the current lender; and the postpetition financing objected to does not, and is not intended to alter the contractual rights of BWT. DLS CAPITAL PARTNERS: Bond Pricing For Week of July 19, 1999 ------------------------------------------------------------ Following are indicated prices for selected issues: Acme Metal 10 7/8 '07 15 - 18 (f) Amer Pad & Paper 13 '05 56 - 59 Asia Pulp & Paper 11 3/4 '05 75 - 76 Boston Chicken 7 3/4 '05 5 - 6 (f) E & S Holdings 10 3/8 '06 52 - 54 Geneva Steel 11 1/2 '01 21 - 22 (f) Globalstar 11 1/4 '04 72 - 73 Hechinger 9.45 '12 11 - 13 (f) Iridium 14 '05 18 1/2 - 20 (f) Jitney Jungle 10 3/8 '07 36 - 39 Loewen 7.20 '03 65 - 66 Planet Hollywood 12 '05 19 - 21 (f) Samsonite 10 3/4 '08 84 - 86 Service Merchandise 9 '04 22 - 23 (f) Sterling Chemical 11 3/4 '06 79 - 81 Sun Healthcare 9 1/2 ''07 12 - 15(f) Sunbeam 0 '18 17 - 18 TWA 11 3/8 '06 63 - 65 Vencor 9 7/8 '05 30 - 33 (f) Zenith 6 1/4 '11 22 - 25 (f) ********** The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. Bond pricing, appearing 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. All rights reserved. ISSN 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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