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/raid1/www/Hosts/bankrupt/TCR_Public/990728.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, July 28, 1999, Vol. 3, No. 143 Headlines BIO RECYCLING: Seeks Relief In Bankruptcy Court BRADLEES: Extension Of Tender Offer For Option Agreement CENTENNIAL COAL: Seeks To Reject Certain Leases FACTORY CARD: SEC Replies to Objections re: Equity Committee FIX-CORP INT'L: Amends Bnakruptcy Filing FRONTIER AIRLINES: DDJ Reports July Sales Of Common Stock FORSTMANN & CO: Files Chapter 11 GANTOS INC: Less Than 5% Beneficial Ownership Reported GENEVA STEEL: Judge Rejects Bonus and Severance Plan GIBSON GREETINGS: Expects Loss In Second Quarter 1999 GLENAYRE: Reports Second Quarter Earnings HAYES ASIA PACIFIC: Zoom Telephonics Completes Acquisition HECHINGER: Committee Taps Pepper Hamilton as Co-Counsel HOME HEALTH: Last Date For Creditors To File Proof of Claim INTILE DESIGNS: Case Summary & 20 Largest Unsecured Creditors LIBERTY HOUSE: Order Authorizes Auction/Auctioneer LIGGETT GROUP: Rules Out Bankruptcy as an Option LOEHMANN'S INC: Creditors Committee Supports Extension for Leases LONG JOHN SILVER: A&W Chooses New CEO LONG JOHN SILVER: Seeks Approval of Settlement MEDPARTNERS: KPC GlobalCare To Quadruple With Acquisition MONTGOMERY WARD: Unsecured Creditors To Split $650 Million MONTGOMERY WARD: Signature Group Closes Two Call Centers NATIONAL RESTAURANTS: Files For Chapter 11 NATIONSWAY: Seeks Approval of Bonus Program NU-KOTE: HP Whites Out Nu-kote In Patent Suit OXFORD HEALTH: "Winding Down" Heritage Management Agreement SERVICE MERCHANDISE: Going Back To Basic Product Categories SOUTHERN PACIFIC FUNDING: Committee Seeks OK To Trade Claims SYSTEMSOFT CORP: Files For Authority to Waive Exclusive Period THORN APPLE: IBP Purchases Assets For $117.5 Million UNITED COMPANIES: Committee Taps Arthur Andersen UNITED COMPANIES: Moody's Downgrades Debt Ratings UNITED PETROLEUM: Objection to Disclosure Statement ********** BIO RECYCLING: Seeks Relief In Bankruptcy Court ----------------------------------------------- A Fontana-based company with dreams of recycling organic wastes into marketable byproducts is seeking relief from creditors in U.S. Bankruptcy Court after cost overruns on a fertilizer plant led to spiraling debt. Biorecycling Technologies Inc. - which currently employs about five people - has shut down its operations in Fontana and disconnected its phones. The firm plans to move into a small office in Upland while it reorganizes, said attorney Stephen R. Wade of Lewis, D'Amato, Brisbois & Bisgaard LLP in San Bernardino. Wade is representing the company in the bankruptcy filing. The company filed for Chapter 11 bankruptcy protection last month in U.S. Bankruptcy Court in Riverside. In preliminary filings, the company claimed assets of $ 831,322 and liabilities of nearly $ 3.7 million. Biorecycling Technologies ceased construction on its proposed Noble Fertilizer plant near Fresno last year due to anticipated cost overruns of $ 1.2 million, Wade said. "That's really what precipitated this (bankruptcy) filing," he said. Wade did not have a total construction figure for the plant, but said the company quit the project because it couldn't afford the overruns without a new influx of capital. The Fresno facility, which was never completed, was supposed to convert 92,000 tons of farmland manure and 100,000 tons of green waste each year into fertilizer, soil amendments and electricity, though most of the latter would have been used to run the plant, according to company press releases. Without revenue from the completed project, the company had difficulty paying its bills and defaulted on several real estate leases, Wade said. The bankruptcy filing represents the company's second shot at a fix: In May, Biorecycling Technologies proposed a settlement to its 200-plus creditors, and all but two of them accepted, Wade said. Because acceptance wasn't unanimous, the company could not carry out the plan and had to turn to bankruptcy court, he said. Wade said he believes the case will proceed quickly, since most of the creditors already accept the company's payment plan. The objecting creditors don't have enough votes to block the plan in bankruptcy court if it gets the same show of support it did in May, he explained. He would not name the dissenting creditors or discuss details of the payment plan. BRADLEES: Extension Of Tender Offer For Option Agreement -------------------------------------------------------- Bradlees, Inc. and its wholly-owned subsidiary, Bradlees Stores, Inc., announce they are extending the period of time for which their tender offer for an option agreement with respect to $13,993,956 principal amount of 9% Convertible Notes of Bradlees Stores, Inc. will remain open. The tender offer was initially scheduled to expire at 12:00 midnight, New York City time, on Wednesday, July 21, 1999. The tender offer will now expire at 12:00 midnight, New York City time, on Monday, July 26, 1999. The terms of the offer remain the same. Bradlees is a leading regional discount retailer with 102 stores in seven Northeastern states and 1998 sales of $1.4 billion. The company plans to open two additional stores in October, the first new stores to be opened in four years. Bradlees offers an assortment of merchandise, focusing on basic and casual apparel, basic and fashion items for the home, and commodity and convenience products. CENTENNIAL COAL: Seeks To Reject Certain Leases ----------------------------------------------- The debtors, Centennial Coal, Inc. seeks an order authorizing and approving the rejection of certain unexpired leases. The debtors seek authorization to reject the Office Lease relating to the debtors' administrative headquarters in Louisville Kentucky and the related Equipment Lease, effective as of July 31, 1999. The debtors have determined that it is in their best interests to consolidate their administrative and mining operations into one office, to be located at the Mining Headquarters. FACTORY CARD: SEC Replies to Objections re: Equity Committee ------------------------------------------------------------ The SEC replies to the objections of the debtors, Factory Card Outlet Corp., et al. the Official Committee of Unsecured Creditors, and the US Trustee to the motion for the appointment of an Official Committee of Equity Holders. The SEC represents that the appointment of an Equity Committee is necessary to ensure the adequate representation of the shareholders of record of Factory Card Outlet, Corp. The SEC argues that the appointment of an equity security holders committee will not unduly delay these proceedings, that the debtor's stock is widely held with relatively small holdings by officers and directors, that costs attributable to an official equity committee are not disproportionate to the benefits provided by such a committee. FIX-CORP INT'L: Amends Bnakruptcy Filing ---------------------------------------- Fix-Corp International (OTC:BB:FIXC ) announced the company has amended its Chapter 11 bankruptcy filing to include FIXCOR Industries, Inc., the company's major operating subsidiary. "This action is part of our larger, overall plan for restructuring the entire company," said Mark P. Hershhorn, Fix-Corp chairman and chief executive officer. "Securing Chapter 11 protection for FIXCOR Industries will help us execute the plan properly." Fix-Corp International filed for Chapter 11 protection on Feb. 17, 1999 with the U.S. Bankruptcy Court. In late April the company received Court approval for a new management team. On June 28, the company announced 1998 losses totaling $ 17.6 million. Fix-Corp's new bankruptcy counsel, Benesch, Friedlander, Coplan & Arnoff, LLP, effected today's amendment to the company's bankruptcy proceedings. The firm will also represent Fix-Corp's subsidiaries in bankruptcy actions. Fix-Corp International, Inc. is a recycler of post-consumer high density polyethylene (HDPE) and a producer of recycled post-consumer plastic resin pellets. Fix-Corp International also reclaims and recycles both oil and plastic from post-consumer HDPE motor oil. The company is based in Heath, Ohio. FRONTIER AIRLINES: DDJ Reports July Sales Of Common Stock --------------------------------------------------------- DDJ Capital Management, LLC, B III Capital Partners, L.P.. and DDJ Capital III, LLC, in regard to Frontier Airlines Inc, reports that the Fund presently beneficially owns, and DDJ Capital III, LLC and DDJ presently beneficially own, as general partner and investment manager, respectively, of the Fund, 3,455,229 shares of common stock (including the warrants to purchase 716,929 shares of common stock), or approximately 20.9% of the outstanding shares of Frontier. On July 20, 1999, B III Capital Partners, L.P. wrote 540 February 2000 Call Options with a strike price of $20 in consideration for cash in the amount of $133,645.50. The Fund also wrote 100 February 2000 Call Options with a strike price of $17.50 in consideration for cash in the amount of 34,748.83. All such Call Options were traded on public markets and there are no written agreements. On July 22, 1999, the Fund wrote 450 February 2000 Call Options with a strike price of $20 in consideration for cash in the amount of $102,934.03. The Fund also wrote 50 February 2000 Call Options with a strike price of $17.50 in consideration for cash in the amount of $17,374.41. These h Call Options were also traded on public markets and there are no written agreements. Below is an itemization of all purchases and sales of shares of common stock since July 2, 1999. The transactions were made for cash in open market transactions. 07/02/99 SALE (13,700) $221,038.00 07/06/99 SALE (10,000) $161,569.60 07/07/99 SALE (5,000) $81,722.27 07/08/99 SALE (4,500) $74,112.52 07/12/99 SALE (298,000) $4,968,232.88 07/14/99 SALE (6,500) $110,715.04 07/15/99 SALE (22,000) $380,151.70 07/16/99 SALE (35,300) $621,121.58 07/19/99 SALE (60,000) $1,084,289.79 07/20/99 SALE (17,300) $317,357.90 07/21/99 SALE (23,000) $423,671.15 07/22/99 SALE (39,500) $722,759.09 FORSTMANN & CO: Files Chapter 11 -------------------------------- Fabric company Forstmann & Co. Inc., founded in 1904, said that it filed for chapter 11 protection Friday and that it has received $50 million in emergency funding, according to Reuters. The New York company cited falling demand, excess capacity and unfair foreign trade practices for the problems in its core business of wool fabric production. Bank of America leads the lending group providing the debtor-in-possession financing for the company, which supplies wool fabrics for consumer clothing. The company's executives expect to finder merger or acquisition partners and "emerge from this process a stronger, more competitive company," President Rod Peckham said. The company has brought in an interim COO from a turnaround consulting firm. (ABI 26-July-99) GANTOS INC: Less Than 5% Beneficial Ownership Reported ------------------------------------------------------ Elliott Associates, L.P., a Delaware limited partnership, Westgate International, L.P., a Cayman Islands limited partnership, and Martley International, Inc., a Delaware corporation, have ceased to be the beneficial owner of more than five percent of the outstanding common stock of Gantos Inc. Elliott currently beneficially owns a total of 318,595 shares of common stock, consisting of 273,100 shares of common stock held outright and warrants exercisable for an additional 45,495 shares of common stock. Westgate and Martley together beneficially own warrants exercisable for 45,495 shares of common stock. Elliott's beneficial ownership of 318,595 shares of common stock constitutes 4.05% of all of the outstanding shares of common stock, together with sole voting and dispostitive power over those shares. Westgate and Martley's aggregate beneficial ownership of 45,495 shares of common stock constitutes .58% of all of the outstanding shares of common stock of Gantos Inc. Westgate and Martley share voting and dispositive power over the aggregate number of shares held. GENEVA STEEL: Judge Rejects Bonus and Severance Plan ---------------------------------------------------- A federal bankruptcy judge has rejected Geneva Steel's proposed $1.2 million executive bonus and severance plan. Geneva lawyers said the money would have helped retain executives during the company's reorganization. The retention money would have boosted six top executives' salaries 50 percent to 75 percent, including Chief Executive Officer Joe Cannon, who made $ 487,708 last year. Another 31 managers would have received a 25 percent bonus. Executive Vice President Ken Johnsen said the decision this week by Judge Glen E. Clark wasn't a popular one among Geneva's elite. "We were disappointed," he said. "We think it was an important process in the reorganization." Clark ruled that under Chapter 11 bankruptcy regulations, Geneva Steel's 36 key employees are not entitled to severance pay or emergence bonuses. Johnsen said the judge did give Geneva some options, however. "We've been given some ideas on what might be acceptable," he said. "We will consider that, but frankly right now, we haven't decided what to do." The United Steelworkers of America was pleased with the decision. "It was an unreasonable request," said Kelly Hansen, financial secretary for the steelworkers local. "Management has the right to manage, but in this instance we were obligated to speak up." The union got 900 signatures on a petition opposing the retention program and submitted it to the court. Employees were also concerned bonuses would be paid even if executives found new jobs. "If there hadn't been any opposition I think it probably would have gone right through," Hansen said. "But we were able to help the court make the right decision." The court's ruling comes a few weeks after the company reported slowing losses. GIBSON GREETINGS: Expects Loss In Second Quarter 1999 ----------------------------------------------------- Gibson Greetings, Inc. says that based on preliminary analysis of its results for the second quarter ended June 30, 1999, the company expects to report a loss ranging from $1.54 to $1.64 per diluted share. Gibson also said that it expects to report a loss for the full year as compared to net income of $0.13 per diluted share reported in 1998. The loss in the second quarter of 1999 is attributable to several factors, according to the company, including the impact of accounts that were lost in the second half of 1998, continuing costs associated with the setting up of new accounts that were signed in the fourth quarter of 1998 and the first quarter of 1999 which are treated as period costs, higher product returns, increased business acquisition costs, and higher operational costs. The quarter also included pretax charges of approximately $1.1 million of severance and other costs related to staff reductions and a $21.2 million write down of Silly Slammer inventory. In April 1999, Gibson Greetings stated that it had become clear that certain components of its strategy were not working and that it had embarked on a thorough review of its entire organization, including each of its core businesses and product lines, to identify opportunities to create a leaner business. Although the company says this review is ongoing, it has made the decision to seek a buyer for its Silly Slammer business. With the company's focus on its core card line, alternative card business and its expanding role as a provider of creative content to the Internet, it believes the Silly Slammer brand can best be marketed outside of Gibson. Until a transaction is completed, the company will continue its commitment to its retailers and to the Silly Slammer brand. However, certain Silly Slammer product lines introduced in 1997 and 1998 will not be supported and the write down noted above is recorded in the second quarter. The primary focus going forward will be on licensed products, including NASCAR, other sports and entertainment products. For the second quarter of 1998, Gibson reported net income of $5.6 million on revenues on $105.0 million. Gibson expects to release its actual financial results for the second quarter the second week of August. "Despite extensive reductions in our fixed costs over the last year, our costs remain too high for existing sales levels. We are aggressively attacking this problem on a number of fronts including our $35.0 million investment in new, more efficient information technology systems," said Frank O'Connell, Gibson chairman, president and chief executive officer. "We are in a continuing process of delineating a new strategy for the company which focuses on the core card business and we are shedding unprofitable product lines. Our intent is to restructure the business so that it is more responsive to the market-place and able to adapt to changing consumer tastes quickly," O'Connell added. Gibson Greetings, Inc., is an industry innovator in the greeting card business, and is pursuing a strategy of marketing relationship-fostering products that provide strong entertainment value. Gibson distributes more than 24,000 individual relationship communication products (over 5,000 new products last year), including greeting cards, gift wrap, party goods, licensed products and Silly Slammers(R), America's favorite "beanbags with an attitude." GLENAYRE: Reports Second Quarter Earnings ----------------------------------------- Glenayre Technologies Inc. (Nasdaq: GEMS) reports results for the second quarter ended June 30, 1999. On July 14, 1999, the company announced that results would fall short of expectations. Net sales for the second quarter of 1999 decreased 24% to $62.1 million from $81.9 million for the second quarter of 1998. Net sales decreased primarily as a result of lower net sales to paging customers. Loss from operations for the second quarter of 1999 was ($91.1) million compared to a loss of ($4.5) million for the second quarter of 1998. The second quarter 1999 loss included non-recurring charges of approximately $78 million primarily to increase reserves for i) doubtful notes, receivables and inventories associated with Conxus, which filed bankruptcy in May 1999, and ii) receivables from other carriers. Resulting net loss per share increased to ($0.99) per share for the second quarter of 1999 from ($0.05) per share loss for the second quarter of 1998. Net sales for the six months ended June 30, 1999, decreased 25% to $132.1 million from $176.4 million for the same period of 1998. Loss from operations for the six months increased to ($101.0) million from ($4.6) million. Net loss per share increased to ($1.01) per share for the six months from ($0.05) per share loss for the same period of 1998. In its July 14, 1999, earnings pre-announcement, the company stated that it would conduct further restructurings during third quarter 1999. The first initiative will relate to the company restructuring its overall global activities, which will be announced by the end of the third quarter. The company expects to record third quarter charges between $10 million and $15 million associated with these changes. Secondly, Glenayre expects to record a $50 million to $60 million writedown of goodwill and other intangibles in the third quarter 1999 related to its Wireless Access pager business. The writedown will result primarily from lower than expected financial results attributed to a slowdown in worldwide paging and the buildout of two-way paging systems. "As we previously reported, paging orders and sales were significantly less than expected during the quarter, offsetting improved results, including operating income, from the company's Integrated Networks and microwave product groups," stated Eric L. Doggett, appointed as Glenayre's president and chief executive officer last month. "Additional information on the strategic actions we are implementing to return Glenayre to growth and profitability will be communicated within the next 60 days." Glenayre's second quarter 1999 earnings teleconference will be held Tuesday, July 27, 1999, at 8:00 a.m. EST. To listen to the call, dial (913) 981-5510. Replay of the teleconference will be available from noon, Tuesday, July 27 through Friday, July 30, by calling (719) 4570820. Reference access code 740589. For over 30 years, Glenayre has been developing and providing leading edge personal telecommunication systems, including products for paging and cellular networks. The company has approximately 2,000 employees, and products installed in over 100 countries. Additional information about Glenayre is available on the company's Web site at: http://www.glenayre.com. HAYES ASIA PACIFIC: Zoom Telephonics Completes Acquisition ---------------------------------------------------------- Zoom Telephonics, Inc. [NASDAQ:ZOOM] has completed its acquisition of Hayes Asia Pacific, the last piece of the bankrupt modem manufacturer to become part of Zoom. Meanwhile Zoom itself reported a quarterly loss of $719,000. In a series of purchases totaling about $6.4 million, Zoom took over the European and Asia/Pacific arms of Hayes as well as trademarks, product rights, firmware, and tooling for all of the Norcross, Ga., company's modem brands except its EZ-Jack line, which went to California modem maker Xircom, Inc. Zoom will also continue manufacturing modems under its own Zoom name. Some Hayes Accura products will be sold through retail channels in Europe, Zoom said, but in the US, Hayes products will be sold only through value-added resellers. In the quarter ended June 30, Zoom lost $719,000 on revenues of$ 15.8 million, somewhat narrowing its loss from $1.6 million on revenues of $12.2 million in the corresponding quarter last year. About 10 percent of sales in the 1999 quarter was Hayes products, company officials said. Hayes filed for protection under Chapter 11 of the US Bankruptcy Act in the state of Delaware last October, and closed its doors in January. Its assets were auctioned this spring. Company spokespeople told Newsbytes last fall that Hayes ran into trouble because its sales failed to keep up with its research and development spending. Hayes dominated the modem market in the 1980s, when compatibility with standards set by Hayes defined modems in much the same way that compatibility with IBM personal computers defined PCs. The company began to falter in the 1990s, though, and in 1996 was forced to file for Chapter 11 protection for the first time. Zoom Telephonics also hired several senior members of Hayes' former engineering, sales, and marketing teams. Zoom Telephonics is at http://www.zoom.comon the Web. HECHINGER: Committee Taps Pepper Hamilton as Co-Counsel ------------------------------------------------------- The Official Committee of Unsecured Creditors of Hechinger Investment Company of Delaware, Inc. et al., seek a court order authorizing the employment and retention of Pepper Hamilton LLP, nunc pro tunc to June 24, 1999 as co-counsel for the Creditors' Committee. The firm will perform professional services including but not limited to: Attending hearings pertaining to the case as necessary; Reviewing applications and motions filed in connection with the case; Communicating with Otterbourg, Steindler, the Committee's lead counsel, as necessary; Communicating with and advising the Committee and attending meetings of the Committee; Providing expertise with respect to the proceedings and procedural rules and regulations; and Performing all other services for the Committee that are necessary for its co-counsel to perform in the cases. The Committee intends to work closely with Otterbourg, Steindler to insure that there is no duplication of services. Pepper has advised the Committee that the rates applicable to the principal attorneys and paralegals proposed to represent the Committee are: David B. Stratton - $325 David M. Fournier - $240 Tara L. Lattomus - $160 Monica Loftin - $160 Andrea B. Unterberger - $115 Jaymi H. Cook - $105 Jason A. Thompson - $75 HOME HEALTH: Last Date For Creditors To File Proof of Claim ----------------------------------------------------------- The debtors, Home Health Corporation, and its affiliated debtors, filed a notice of last date for creditor and interest holders to file proofs of claim or interest. On July 14, 1999, the Bankruptcy court signed an order establishing August 23, 1999 at 4:00 PM as the last date and time for filing proofs of claims or proofs of interest against any one or more of the debtors. INTILE DESIGNS: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Intile Designs, Inc. 9716 Old Katy Road, Suite 110 Houston, TX 77055 Type of business: Intile Designs, Inc. is a direct importer and distributor of domestic and foreign ceramic tile, marble swimming pool tile and related home design products. Court: Southern District of Texas Case No.: 99-34760-H1-11 Filed: 05/14/99 Chapter: 11 Debtor's Counsel: Thomas S. Henderson Sheinfeld Maley & Kay PC 3700 First City Tower 1001 Fannin St. Houston Tx. 77002 (713) 658-8881 Total Assets: $3,395,100 Total Liabilities: $7,229,776 No. of shares of preferred stock 0 0 No. of shares of common stock 4,791,509 140 20 Largest Unsecured Creditors: Name Amount ---- ------ Vallelunga 172,754 Ceramiche Saime 137,933 Ceravisuib Jati Ci, M KTD 133,190 Italgraniti 125,049 ABK Campeginese 88,617 Commercial Finance Group 87,679 Customs Import Services 74,098 Marketing & Trading Agency 67,588 Tuscania 66,106 Balgres/Port Galileo Corp 60,686 Cuoghitalia/Atlantic 53,497 Powerline Imports, NC 53,205 Leonardi & C. SRL 48,470 Ceramiche Sole 48,185 Halcon 43,686 Forlivesi 43,533 Ceramica Monica SRL 42,641 Diago Cermicas 40,343 Alcorense, SA 40,219 Mulia 39,064 LIBERTY HOUSE: Order Authorizes Auction/Auctioneer -------------------------------------------------- The US Bankruptcy Court, District of Hawaii, entered an order authorizing the debtor to employ Marty McClain and McClain Auctions as auctioneer on such terms as are acceptable to the Office of the US Trustee. The debtor is authroized to conduct a private sale/and or public auction of certain assets which consist of store furniture, fixtures, equipment, furnishings and display items from the stores formerly operated by the debtor at the following locations: Tumon Bay Plaza, Maui Marketplace, Ward Avenue, Kauai Marriott, Sheraton Waikiki, Lahaina Center, Liz Pearlridge, Aloha Tower, Azeka Place Penthouse and Waikele Penthouse. The assets shall be sold free and clear of all liens, claims and encumbrances. The auctioneer may deduct his fees and expenses from the proceeds of the sale. LIGGETT GROUP: Rules Out Bankruptcy as an Option ------------------------------------------------ Liggett Group Inc., Durham, N.C., said that it is not considering bankruptcy as one of its options, following an Alabama court's rejection last week of its proposed class action settlement involving bankruptcy, according to a newswire report. A spokesperson for the company said "The company is absolutely not considering bankruptcy as an option." Liggett is the tobacco unit of Brooke Group Ltd. and was one of the companies that testified in the national tobacco settlement. (ABI 26-July-99) LOEHMANN'S INC: Creditors Committee Supports Extension for Leases ----------------------------------------------------------------- The Official Unsecured Creditors of Loehmann's Inc. supports the debtor's motion to extend the time to assume or reject 71 unexpired non-residential real property leases for 90 days, until October 15,1999. The Committee asserts that due to the very large number of leases and the complexity of the proceeding, the debtor should be afforded a reasonable opportunity to meaningfully assess the value of the leases. Substantial additional data must be accumulated on the profitability of each of the various stores to allow for an informed determination of which stores should be retained as part of the reorganized debtor. LONG JOHN SILVER: A&W Chooses Bazner as President and COO --------------------------------------------------------- Nation's Restaurant News (Copyright 1999 Lebhar-Friedman, Inc.) reports on July 19, 1999 that A&W has tapped foodservice vet Kevin Bazner to President and COO. The role of president previously was held by Sidney J. Feltenstein, who remains A&W's chairman and chief executive. The company's former chief operating officer, Ron Powell, now holds the title of executive vice president. The merger -- which is expected to be completed on or about Sept. 1 -- recently was approved by a Chapter 11 bankruptcy court judge and now awaits creditor approval with a hearing scheduled for Aug. 18. Combined sales of the two chains would exceed $1 billion and set the stage for an extensive co-branding partnership. "The reason we have done this is that we are getting ready for the acquisition of Long John Silver's," Feltenstein said. "As we bring them on, I will be spending more of my time on that, so I won't be able to perform my day-to-day responsibilities with A&W. Kevin's appointment will ensure that A&W sustains its stability and momentum going forward." Bazner, who joined the Farmington Hills-based company in 1984, served most recently as the managing director of A&W Restaurants International Division, expanding the chain's overseas presence from 40 stores in Pacific Asia to some 200 franchised restaurants in more than 17 foreign countries. During Bazner's work abroad he was held hostage by Iraq in the 1991 Persian Gulf War and holds the distinction of having successfully challenged Iraqi dictator Saddam Hussein in a face- to-face confrontation to release detained women and children before U.S. air attacks. Before joining A&W, Bazner was director of Canadian operations for Magic Pan Restaurants of San Francisco. Bazner in his new role will supervise domestic franchise development, franchise and company operations, domestic marketing, purchasing and distribution, franchise contract administration, real estate and construction. In addition, he will continue to oversee the international operation until a replacement is named. Bazner said he plans to continue the same growth and reimaging strategies that have been in place for more than four years now - - since Feltenstein spearheaded an investment group that bought A&W from Detroit real-estate magnate Alfred Taubman in 1995. Bazner added that about 75 percent of the chain has been remodeled as part of the extensive reimaging and to date more than $75 million has been invested in remodelings and new restaurant development. Co-branding also will remain a key strategy for the chain's future growth. Through a strategic alliance with Atlanta-based Freshens Smoothie Co., A&W has 10 to 12 co-branded company-owned stores in shopping malls around the country and plans to increase that number to 20 to 25 by the end of the year, according to Bazner. A&W also has some 15 co-branded franchised units with KFC operators in Utah and Montana as well as 40 co-branded stores with Amigos, which is a quick-serve Mexican chain based in Lincoln, Neb. The pending deal with Long John Silver's -- the quick-serve- seafood operator and franchisor in Lexington, Ky., with more than 1,200 units -- will provide a new opportunity for A&W in terms of co-branded stores, and Feltenstein said he hopes to have the first co-branded restaurants open by mid-to late fall. He did not disclose possible sites. Feltenstein added that he sees an untapped opportunity to expand LJS' presence overseas, which now is limited to about 20 restaurants in Singapore. As previously reported, Feltenstein said the two chains would be operated separately, but LJS is in need of an extensive reimaging program. At the time of its Chapter 11 filing more than one year ago, LJS listed liabilities of $457.3 million and assets of $329.1 million. According to Nation's Restaurant News' annual Top 200 report, LJS' systemwide sales have plunged from $848 million in fiscal 1997, to an estimated $751.7 million for fiscal 1999, which ended in June. At the same time, corporate revenues fell from $582 million in 1997 to an estimated $497.3 million for fiscal 1999. LONG JOHN SILVER: Seeks Approval of Settlement ---------------------------------------------- Long John Silver's Restaurants, Inc., and its affiliates seek entry of a court order approving a Settlement Agreement Release and Indemnification Agreement among the debtors, Aon Risk Services, Inc. of the Carolinas and its affiliates and Lloyd's London dated January 14, 1999. The Settlement Agreement relates to pre-petition litigation commenced by the debtors against ARS and Lloyd's in the US District Court for the Eastern District of Kentucky, Lexington Division. The Settlement Agreement provides for payments ot the debtors totaling $195,000. MEDPARTNERS: KPC GlobalCare To Quadruple With Acquisition --------------------------------------------------------- The U.S. Bankruptcy Court in Los Angeles recently cleared the way for Riverside-based KPC GlobalCare to nearly quadruple its size by acquiring MedPartners Inc. clinics throughout Southern California. Counting a previous acquisition of 18 clinics, KPC GlobalCare will acquire a total of 83 clinics in Orange and Los Angeles counties from MedPartners of Birmingham, Ala. The clinics have been operating under the U.S. FamilyCare, Mullikin and Friendly Hills names. The acquisition will raise KPC GlobalCare's enrolled patient roster to 800,000 from about 200,000. MedPartners, once the industry's largest player, is quitting the business of managing physicians and clinics. A state-appointed conservator for MedPartners' California operations filed the Chapter 11 reorganization in March, forcing the company to seek court approval for the sale of any operations. Only one MedPartners asset sale in California still awaits a judge's nod: Riverside Medical Clinic. The local clinic's physicians have proposed buying its assets back from MedPartners, an option which the court will review Aug. 10. MONTGOMERY WARD: Unsecured Creditors To Split $650 Million ---------------------------------------------------------- As Ward exits Ch. 11, creditors eye cash pot. With its plan of reorganization approved by the U.S. Bankruptcy Court of Delaware less than two weeks ago, Montgomery Ward is preparing to emerge from Chapter 11 soon and expects to pay its creditors next month. Unsecured creditors other than GE Capital will split $650 million and should receive about 29 cents on the dollar. Secured creditors will be paid in full. Although chairman and ceo Roger Goddu is eligible to receive a $1 million early emergence bonus, the payment will not be made until the company returns to profitability. The company is in the process of converting about 40 of its 252 stores to its new Wards prototype, which reportedly boost per- store sales by 40%. It expects to complete the Wards conversions within two years. MONTGOMERY WARD: Signature Group Closes Two Call Centers -------------------------------------------------------- The Signature Group has closed two call centers in the Tampa Bay area and fired 220 people. The loss of jobs is highly unusual in an area known for its rapidly expanding call center work force. The company, a buying club that offers discounts on 40 different services to its members, last week abruptly shuttered its telemarketing facility at 4951 Adamo Drive East in Tampa and another in Bradenton. The Tampa center employed 105 people. A second call center near Tampa International Airport and facilities in St. Petersburg and Dunedin will remain open, spokeswoman Fanette Singer said Monday. Including the two in the bay area, Signature Group closed five call centers across the country last week, cutting about 700 jobs. The other centers are in Kansas City, Kan., Independence, Mo., and Grandview, Mo. The Schaumburg, Ill., company now has about 25 call centers. "We are simply consolidating for greater efficiencies," Singer said. The cutbacks are rare in the Tampa Bay area, which led the nation last year in new call center jobs, according to a recent study. Call centers added 3,630 jobs, led by Oxford Health Plans, adding 1,200 jobs, and Citigroup, adding 1,000. Companies are attracted by the region's growing work force, available land and low costs. Signature Group sells products such as credit cards, mortgages, financial services and auto club memberships by telephone. The unit was the direct marketing arm of Montgomery Ward & Co., which has been operating under Chapter 11 bankruptcy protection since July 1997. In May, GE Capital Inc. agreed to acquire the Signature unit as part of the retailer's bankruptcy reorganization plan. NATIONAL RESTAURANTS: Files Chapter 11 -------------------------------------- Nation's Restaurant News (Copyright 1999 Lebhar-Friedman, Inc.) Reports on July 19, 1999, that National Restaurants Management Inc., New York City's largest operator of fast-food brands and chain dinner houses, filed for Chapter 11 bankruptcy protection in an effort to erase the massive debts that have hobbled the company for more than a decade. The prepackaged federal court filing by NRMI, an arm of the Riese Organization, includes a proposed restructuring plan that seeks to repay a $117.8 million loan. In addition to retiring most of its debt load, the proposed restructuring would consolidate the ownership of the company, allow for the expansion of several concepts NRMI franchises from others and potentially permit the operator to become a franchisor in its own right. The Manhattan-based company operates about 100 restaurants in the city, including such quick-service chains as Nathan's Famous, Roy Rogers, Pizza Hut, Dunkin' Donuts and KFC. National also operates Lindy's, Houlihan's and Martini's. Together with the parent Riese Organization -- whose local operations include T.G.I. Friday's and Tad's Steaks -- the company has about 130 locations in New York's five boroughs and generated sales of about $150 million in sales for the fiscal year ended April 1999. National contributed about $100 million to that total. According to the bankruptcy filing, the company has about $8.7 million in assets and about $140.7 million in liabilities -- which includes the $117.8 million loan to Natrest Funding Inc. Dennis Riese, chairman and chief executive of the Riese Organization, said that, once concluded, the proposed restructuring would leave his company "virtually debt free." Furthermore, Riese continued, "we will not have given up any equity; no restaurants are being closed; there will be no transfers of properties or layoffs." The Riese Organization employs about 2,000 people. As part of the restructuring, Riese said he intends to explore the possibility of expanding and franchising the Tad's Steak concept. Now with four units in the New York area, Tad's is a counter-service concept that sells steak-and-potato meals for a per-person check of about $6.99. The company has hired restaurant designer Charles Morris Mount to design a new prototype and plans to convert some of its Roy Rogers properties into Tad's, Riese said. "We will use them as a laboratory to see where we should go with the concept," he continued, adding that Tad's would be "our first foray into franchising." While shielding National from lawsuits as it seeks approval from a committee of creditors and the court for its restructuring plan, the Chapter 11 action also would enable funding for Riese's buyout of his cousins' stake in NRMI, leaving Riese with "100 percent of the company's equity." According to spokesman Peter Rosenthal, National Restaurants and five of the company's properties will be operating under bankruptcy protection, while the balance of the properties will be unaffected. The reorganization plan also provides for the sale and leaseback of two key pieces of Manhattan real estate -- 1552 Broadway and 729 Seventh Avenue -- to National Restaurants' chief lender, Natrest Funding. Natrest is said to have agreed to a payment of $1 million to wipe out the debt. Riese, who owns the rights to open T.G.I. Friday's units anywhere within a seven-mile radius of Columbus Circle, said he plans to build a flagship Friday's at the Broadway location. In 1995 Riese won a court battle with Friday's franchisor Carlson Cos., which had claimed that Riese was in violation of his contract and sought to expel him from the system. Riese said that he does not want the company to remain in bankruptcy "any longer than it has to, which is why we attached the plan of reorganization to the filing." He added that he hopes the process will be resolved within three to six months. However, Riese said he expects that two or three of his creditors may attempt to fight the plan. "There are some people who are only interested in being vindictive," he said. "But I'm secure in the knowledge that we have the votes necessary to emerge from Chapter 11 in the manner I've envisioned." NATIONSWAY: Seeks Approval of Bonus Program ------------------------------------------- NationsWay Transport has asked a bankruptcy court to approve a bonus program that would pay the failed trucking company's 40 remaining employees at least $200,000. NationsWay Senior Vice President Harold R. Roth told the Phoenix court Thursday the bonuses are needed to keep a skeleton crew working at the company owned by Colorado Rockies co-owner Jerry McMorris. The program would give workers an additional 50 percent over the wages they earn between May 20 and the day they leave the company, as well as additional bonuses between $ 750 and $ 3,000. "I'm opposed to the bonus program," said Frederick Perillo, an attorney representing the International Federation of Teamsters. "Every one of these incentives reduces the chance that there is going to be funds remaining for the unsecured creditors," he said. The unsecured creditors include about 3,500 workers, most of whom did not receive their final paychecks after the Denver-based trucking company abruptly filed for Chapter 11 bankruptcy on May 20. NationsWay also asked the court to approve its choice of agents to sell its remaining real estate assets and equipment. If the agents are approved, auction of the assets could begin by late August. NationsWay plans to sell five of its trucking terminals, including locations in Denver and Phoenix, for $ 7 million each. The sale of the locations could net the company as much as $ 17 million, Roth said. The company also wants to sell some of its below-market-rate leases at terminals owned by McMorris' family. Among those terminals are locations in Pueblo, Colorado Springs and Durango. NU-KOTE: HP Whites Out Nu-kote In Patent Suit --------------------------------------------- Hewlett-Packard Co. won a $2 million patent and trademark infringement lawsuit against Nu-kote International Inc., a provider of inkjet printer refiller cartridges on Friday. A federal jury in San Jose, California, ruled that the cartridges manufactured by Nu-kote infringed upon three HP patents and three HP trademarks, and that certain Nu-kote packaging contained false and misleading statements. OXFORD HEALTH: "Winding Down" Heritage Management Agreement ----------------------------------------------------------- In September 1998, Oxford Health Plans' New Jersey HMO subsidiary, Oxford Health Plans (NJ), Inc., entered into an agreement with Heritage New Jersey Medical Group, P.C. to provide network management services for individual Oxford Medicare Advantage members who reside in New Jersey. In view of uncertainties in the regulatory environment and other considerations, Oxford Health Plans has decided to wind down the network management agreement with Heritage. The company says it is committed to a smooth transition of network management responsibilities back to the company's operations and the agreement with Heritage provides that Heritage will cooperate with the transition. Over the next several weeks, Oxford Health Plans will finalize the details of plans to transition the previously delegated services associated with its 13,000 Medicare members in New Jersey. Through this transition, the company will work directly with New Jersey health care providers so that valid claims are paid according to applicable contractual agreements. The Heritage agreement is not applicable to the company's 287,000 commercial members in New Jersey. The wind-down of the Heritage agreement will result in an increase in the company's health care and administrative costs for this business for the second quarter of 1999 and is expected to result in increases for the remainder of the year. The company has not completed preparation of its second quarter results; however, given the relatively small membership in the Heritage arrangement, the company expects that the wind-down will not prevent the company from achieving its financial goals for the quarter or the year. The company also expects that there will be a significant decrease in New Jersey Medicare membership going into next year. SERVICE MERCHANDISE: Going Back To Basic Product Categories ----------------------------------------------------------- Discount Store News (Copyright 1999 Lebhar-Friedman, Inc.) reports on July 26, 1999 that a year ago, former ceo Gary Witkin forecast a vibrant new Service Merchandise that would emphasize trendy home furnishings and jewelry as the last of the dying breed of catalog showroom retailers sought to reinvent itself. Today, Witkin is gone, and the chain continues to battle ever- decreasing sales and profits that drove it to file for bankruptcy protection in March. So now the game plan is "out with the new, in with the old." The retailer's new chief, Sam Cusano, wants to go back to the chain's basic product categories, ditching the emphasis on home decorbasically undoing much of what Witkin had envisioned. Other Witkin initiatives will remain, however, such as the transformation away from a pull-tag system to self-service and elimination of the catalog. "Returning to our core customers and core values makes a lot of sense. We think that's the success formula for us," Cusano told DSN following the retailer's annual meeting this month. He explained that the strategies of the past two years to reposition Service Merchandise as a fine jewelry, gifts and home store failed to attract the anticipated customer base for higher- margin products. "We had moved away from entry-level price points," Cusano said. "The whole issue of having low prices is one we de-emphasized." Whether that approach alienated some of the chain's core customers or simply did not draw in a new group of trend- conscious consumers, it bombed nevertheless. Service Merchandise reported a 13.5% decrease in net sales of $ 83.7 million to $3.17 billion in 1998and only $6.6 million of that decline was due to store closures. Comps were down 8.9% for the year, contributing to the chain's $110.3 million loss. As part of the new strategy targeting core customersparents age 45 to 64 whose median household income is $53,000Cusano said home products will now be de-emphasized and more opening-price point merchandise will be available. Original core product categories such as electronics, furniture, tabletop, cookware and luggage will get more attention, he said. Jewelry, the chain's strongest category in sales, will continue to be emphasized. The new focus has resulted in converting the chain's single superstore in Bradenton, Fla., which showcased jewelry and home decor products, into a store with more typical chain assortments. Cusano said that conversion was completed in June. Also, the chain's smaller-format Service Select stores were remerchandised as well to include what Cusano called the "best" of Service's traditional categories. Although none of those prototype store locations has been shut down, Service Merchandise has closed 122 underperforming stores this year as part of its effort to regain financial stability. Inventory liquidation sales generated $100 million in net proceeds, while $80 million was raised through an auction of 77 store properties on July 12, most of which were leased sites. The chain had solicited bids for 102 sites. Cusano said he does not expect further store shutdowns this year. As of mid-July, the chain's store count stood at 223 in 32 states, compared to a peak of slightly more than 400 at the retailer's height in 1996. No store openings are planned for the year, except possibly relocating a store in Gulfport, La. Other cost-cutting measures included reducing expenses by $32 million in 1999, closing some distribution facilitiesincluding a full-service center in Texasand reducing personnel at headquarters. While the chain has suspended its credit card program as a result of the bankruptcy filing, Cusano said the retailer's bridal and gift registry program remains a strong, core part of the business. Support from vendors has also rebounded somewhat; Cusano met with an estimated 400 vendor and retailer representatives July 14 and outlined the chain's strategy to return to financial health. Cusano said the chain is currently operating under a court- approved $750 million debtor-in-possession financing agreement. At the annual meeting, the former executive vp and cfo told shareholders he expects Service Merchandise to emerge from bankruptcy in early 2001. Craig Weichmann, an analyst with Morgan Keegan of Memphis, said it's a toss-up as to whether the chain can pull it off. "Obviously they're trying to go back to their roots to salvage the pieces. That's a sensible step to make. The question still is, How much flexibility do they have?," Weichmann said. Keeping the ship from sinking is Cusano's biggest challenge. Following last year's record loss of $110.3 million, first quarter results haven't improved. Net sales for the quarter ended April 4 were $510 million, down 14%, and the chain reported a $168 million net loss in earnings vs. a $24 million loss the previous year. Comps were down 12.7%, which the company attributed to trouble staying in stock on products prior to the Chapter 11 filing. Hard lines sales dropped 21.7% for the quarter, while jewelry remained strong, up 10.9% in sales. Of the 37 shareholders who attended the 15-minute annual meeting, questions about the chain's future were surprisingly few. One asked about the danger of Service Merchandise being taken over, while another wanted an explanation as to how things got so bad financially. Cusano remained upbeat, giving an abbreviated version of last year's failed strategic plan, although even he didn't dare to forecast the impact on next year's earnings. SOUTHERN PACIFIC FUNDING: Committee Seeks OK To Trade Claims ------------------------------------------------------------ The Official Creditors' Committee of Southern Pacific Funding Corporation ahs filed an amended motion to allow Committee members to trade claims. The motion would allow the members of the Committee to trade claims against the debtor and trade securities of the debtor for a 45 day period commencing the Effective Date of the Plan, currently anticipated to be July 30, 1999. A hearing on the motion will convene at 1:30 PM on July 30, 1999 in Courtroom 1 of the US Bankruptcy Court, 1001 S.W. Fifth Avenue, Suite 700 Portland, Oregon. SYSTEMSOFT CORP: Files For Authority to Waive Exclusive Period -------------------------------------------------------------- The debtor, Systemsoft Corporation seeks entry of an order authorizing the debtor to waive is exclusive right to propose and confirm a plan of reorganization. The debtor has filed a Chapter 11 plan of reorganization. Under the plan, the reorganized debtor will become closely held software developer, owned primarily by new investors and certain key executives and employees. The debtor's plan is being filed within 120 days after the Petition Date in the case. No third party may propose a competing Chapter 11 until September 19, 1999. THORN APPLE: IBP Purchases Assets For $117.5 Million ---------------------------------------------------- IBP Inc. (IBP) purchased substantially all of the assets of Thorn Apple Valley Inc. After four rounds of bidding, IBP was the successful bidder with an offer of $115 million cash plus the assumption of $2.5 million in industrial revenue bonds, according to Judy Calton of Honigman Miller Schwartz & Cohn, counsel to Thorn Apple Valley. The auction was held Honigman Miller's law offices yesterday morning. The sale to IBP was subsequently confirmed at a hearing before Judge Ray Reynolds Graves of the U.S. Bankruptcy Court in Detroit. The only two bidders were Excel Corp., a unit of Cargill Inc. (X.CRG), and IBP. Judge Graves ordered that the proceeds would be paid to Thorn Apple Valley's bank group, agented by Heller Financial and Harris Bank. David Heller of Latham & Watkins in Chicago represents the bank group. (The Daily Bankruptcy Review and ABI July 26, 1999) UNITED COMPANIES: Committee Taps Arthur Andersen ------------------------------------------------ The Official Committee of Equity Security Holders filed an application to approve employment of Arthur Andersen LLP as accountants and business and financial advisors to the Equity Committee nunc pro tunc to July 12, 1999. The firm will advise and assist the Equity Committee in analyzing the debtors' financial statement, schedules and other reports; value the debtors' assets and liabilities; analyze and advise the Equity Committee with respect to any plan of liquidation or reorganization, assist the Equity Committee in connection with evaluating and analyzing alternative scenarios and/or plans, assist the Equity Committee in evaluating the debtors' business plan and financial projections; serve as consultant to the Equity Committee with respect to financial, accounting or operation issues; review the debtors' records with respect to potential causes of action; provide expert testimony; attend meeting; inquire of debtors' management regarding operational, financial and other business matters relating to the ongoing activities of the debtors. Arthur Andersen will charge for its services on an hourly basis in accordance with its ordinary and customary rates. UNITED COMPANIES: Moody's Downgrades Debt Ratings ------------------------------------------------- Moody's Investors Service last week downgraded United Companies Financial Corp.'s debt ratings (senior unsecured to Ca from CAA2), according to a newswire report. The action concludes the rating agency's review that began when the company filed chapter 11 in March and reflects the assessment of the potential severity of loss to UC bondholders. Moody's also has withdrawn its debt and preferred stock ratings of UC. Based in Baton Rouge, La., UC is a specialty finance company that services non-traditional consumer loan products. (ABI 26-July-99) UNITED PETROLEUM: Objection to Disclosure Statement --------------------------------------------------- Two investors in United Petroleum debt securities, Dan Dotan and Mantel Investments object to the debtor's first amended Disclosure statement with respect tot he first amended plan of reorganization of United Petroleum Corporation. Among their many objections, the investors assert that their claims against the debtor, and even more significant against the Infinity Parties would be improperly extinguished by the plan, while the Infinity Parties would be paid in full on their secured claims, made holders of 36% of the shares of New UPC Common Stock, in a post- merger enterprise projected to have over $53 million in shareholders' equity and released from any and all claims brought by third parties and protected by a channeling injunction. The investors say that the Disclosure Statement misleadingly suggests that the Infinity Parties' willing participation in respect of the plan justifies divesting the Objectors and all other holders of valuable claims against the Infinity Parties. In reality, they say, Infinity is contributing nothing, and should not get releases and injunctive protection. Its secured claim will be paid in full with preferred stock having a liquidation preference equal to the full principal of its $7 million secured debt. Its contribution of 200,000 shares of common stock to the UPC Trust, to "settle" the numerous Securities Claims, is not supported by a fair and adequate disclosure concerning the merits of third parties' claims against the Infinity Parties to be permanently enjoined. The investors also state that the Disclosure Statement misleadingly de-emphasizes what the case of this relatively small debtor is really about: "extracting the value of the debtor's massive tax loss carry-forward, or "NOL," now disclosed as $30 million. The also claim that the Disclosure Statement further conceals the scheme perpetrated by the Infinity Parties and UPC respecting the April 1997 restructuring. And the investors suggest that the Debtor has omitted reference to the unequivocal opposition of the SEC to the releases and a permanent injunction the debtor sought to give to the Infinity Parties in the first version of its disclosure statement. The releases which the SEC opposed in the original plan are identical to those sought in the amended plan and Disclosure Statement, for even less justification. ********** 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. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *