/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/991022.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, October 22, 1999, Vol. 3, No. 205 Headlines ACME METALS: Alpha Tube Taps Connolly Bove Lodge & Hutz LLP AMRE INC: Motion To Require Payment of Dividend BROTHERS GOURMET: Hearing To Consider Disclosure Statement BRUNO'S: Examiner Objects To Debtors' Prosecution of Claims CRIIMI MAE: Agreement To Extend Time For Committee's Objection DEBBIE REYNOLDS: BAP Addresses Surcharge and Superpriority DEVLIEG-BULLARD: Seeks To Retain PricewaterhouseCoopers EQUALNET: Announces Improved Fourth Quarter Results FLORIDA COAST: Hearing To Consider Disclosure Statement FLORIDA COAST: Taps Deloitte & Touche For Tax Preparation FORMAN: Applies To Employ Special Litigation Counsel FOSTER WHEELER: Signs Definitive Agreement With Robbins GULF STATES: Noteholder Committee Supports Exclusivity Extension HECHINGER: Bondholders Object to Bidding Procedures HVIDE MARINE: Hearing On Approval of Disclosure Statement HVIDE MARINE: Meeting of Creditors IONICA PLC: Opposes Dismissal of Case LOEWEN: Asks Court To Set Bar Date LOEWEN: Held To Non-Compete Deals NEXTWAVE: Improved Chances of Retaining Licenses PLOOF TRUCK: Notice of Auction and Sale Hearing QUANALYZE OIL: Taps Plunkett & Gibson QUANALYZE OIL: Responds to US Trustee's Motion For Dismissal SOURCEONE WIRELESS: Seeks More Time To Assume/Reject Leases SUN HEALTHCARE: Obtains Court OK To Honor Prepetition Obligations SUN HEALTHCARE: Court OK's Medicare/Medicaid Reconciliation WSR CORP: Seeks To Extend Exclusive Periods BOND PRICING FOR WEEK OF OCTOBER 18, 1999 ********* ACME METALS: Alpha Tube Taps Connolly Bove Lodge & Hutz LLP ----------------------------------------------------------- Alpha Tube Corporation, one of the debtors in this case, seeks a court order authorizing the retention and employment of Connolly Bove Lodge & Hutz LLP as co-counsel and substitution of counsel. AMRE INC: Motion To Require Payment of Dividend ----------------------------------------------- A hearing on A. Eicoff & Company's motion to require payment of dividend has been set for hearing on November 10, 1999 at 9:30 AM before the Honorable Steven A. Felsenthal, US Bankruptcy Court, 1100 Commerce Street, courtroom 3, 14A7, Dallas, Texas. A. Eicoff & Company, a general unsecured creditor states that on information and belief, AMRE has previously distributed a 10% divdend to Class 6 general unsecured creditors holding allowed claims. AMRE has failed and refuses to make a distribution to Eicoff. Eicoff asserts that AMRE now will or has distributed a second 10% dividend to Class 6 unsecured creditors, and again refuses to distribute any payment to Eicoff. BROTHERS GOURMET: Hearing To Consider Disclosure Statement ---------------------------------------------------------- A hearing to consider the approval of the Disclosure statement of Brothers Gourmet Coffees, Inc., and its affiliates will be held before the Honorable Mary F. Walrath, US Bankruptcy Court, Wilmington Delaware at 2:00 PM on November 16, 1999. BRUNO'S: Examiner Objects To Debtors' Prosecution of Claims ----------------------------------------------------------- Harrison Goldin, fulfilling his duty as the Court-appointed Examiner in the Debtors' chapter 11 cases, presented his Final Report to Judge Robinson and the core parties-in-interest setting forth his findings of fact, financial analysis, legal conclusions and recommendations concerning potential claims arising from the Leveraged Recapitalization. The publicly-disclosed conclusions reached by Mr. Goldin in the Examiner's Report are generally consistent with the conclusions of the Debtors' Leveraged Recapitalization Report. "In light of the multiple legal and factual obstacles to any substantial fraudulent transfer or illegal distribution recovery by the Debtors, the Examiner believes the prosecution of such claims is extremely difficult to justify," Mr. Goldin tells the Court. Having exhaustively considered the various potential causes of action arising out of the Recapitalization from financial, factual and legal perspectives, the Examiner concludes that the prospects for successful prosecution of such claims are not promising. As a financial matter, the Examiner believes the Recapitalization did not leave the Debtor insolvent (if a proper measure of solvency is used) or with unreasonably small capital. As a factual matter, the Recapitalization differed fundamentally from prior highly-leveraged transactions that have been found to be unlawful: among other things, the risks of the transaction are borne by the acquiror (KKR) and the lenders (who were unsecured), rather than shifted onto pre-transaction creditors. Finally, as a legal matter, the laws of the governmental jurisdictions (Alabama and, if suit is filed in Delaware, the Third Circuit) present formidable obstacles to recovery from the principal defendants. The Examiner gave prime consideration to the Debtor's potential claims under Alabama's fraudulent transfer statute. The Report first considers the financial effect of the Recapitalization: whether it rendered Bruno's insolvent or left it with unreasonably, small capital. The Examiner considers it LIKELY that a court will permit use of a "business enterprise" valuation method to determine Bruno's solvency following the Recapitalization. Assuming such a valuation method is used, the Examiner believes a court will find Bruno's to have been solvent. It is possible, however, that a court might require use of a "piecemeal," or "asset-by-asset," valuation method to determine solvency. The Examiner believes use of such a method would be a mistake and would result in an improper valuation of Bruno's; it would, however, result in a determination that Bruno's was rendered insolvent by the Recapitalization. The Report also evaluates whether Bruno's was left with unreasonably small capital and concludes that a court is UNLIKELY to find this to have been the case. The Examiner closely scrutinizes the defenses available to the various potential fraudulent transfer defendants. Each of the principal defendants -- the former shareholders, the banks and KKR has substantial defenses: * The Examiner believes that, from an equitable standpoint, Bruno's former shareholders are the most compelling fraudulent transfer defendants. However, a recent decision by the Third Circuit eliminates fraudulent transfer claims against most shareholders and makes it unlikely that the Debtor will have such claims even against the insider shareholder (the Bruno family). These defenses would not apply, however, if the fraudulent transfer suit was brought in Alabama, rather than Delaware. * The potential fraudulent transfer claims against the banks are limited by Alabama's unique fraudulent transfer statute, which, by its terms, appears to apply only to transfers and no also to obligations. The Examiner believes it LIKELY that the Alabama statute will be read to apply only to transfers, in which case the Debtor's potential recoveries from the banks will be substantially limited (although still significant). * Were the Recapitalization found to have been a fraudulent transfer, the Examiner considers it LIKELY that the Debtor would be able to recover from KKR the almost $19 million in fees and expense reimbursements paid to KKR at the time of the Recapitalization. The Examiner considers the prospect REMOTE that the Debtors will be able to hold KKR liable for much larger amounts because it was the entity "for whose benefit" the Recapitalization was effectuated. The Examiner considers what remedies a court would likely apply in the event the Recapitalization were found to have been a fraudulent transfer for which one or more defendants were liable. Because these cases involves the unusual circumstance that the great majority of the Debtors' existing debt is held by parties that financed the transaction now under scrutiny; virtually all the remaining debt is held by trade vendors who extended credit to the Debtors and regularly turned over their receivables subsequent to that transaction. The Examiner believes there is a REASONABLE chance that the holders of the bank debt and subordinated notes issued in connection with the Recapitalization will be barred on common law estoppel and ratification grounds from sharing in the benefits of any fraudulent transfer recoveries. The Examiner believes there also is a REASONABLE (albeit somewhat lower) prospect that post-Recapitalization trade creditors will similarly be barred. An estoppel ruling of either or both of these sorts could dramatically limit the Debtors' fraudulent transfer recoveries, effectively imposing an aggregate cap @n those recoveries of either $1OO million (if Recapitalization participants were barred from participating) or close to zero (if subsequent trade creditors were also barred). While a result of this sort would have little case lack, precedent, it would rest upon the compelling equitable grounds present in this case. The Report also considers the Debtors' potential recoveries under Alabama's illegal distribution statute. As with respect to the fraudulent transfer statute, the Examiner believes it LIKELY that the court will apply an "enterprise value" approach to determine Bruno's solvency on a balance sheet basis. Use of this test would result in a finding of solvency, whereas application of an asset-by-asset valuation test would result in a determination of insolvency. To recover from directors under the illegal distribution statute, the Debtors would need to show that they breached their fiduciary duties of either care or loyalty, an outcome the Examiner considers UNLIKELY. The Examiner believes the prospect of obtaining a recovery from Bruno's shareholders under this statute is REMOTE. In light of the multiple legal and factual obstacles to any substantial fraudulent transfer or illegal distribution recovery by the Debtors, the Examiner believes the prosecution of such claims is extremely difficult to justify. This is particularly so with respect to claims against the banks. Given the practical difficulty, if not impossibility, of concluding this chapter 11 case prior to a resolution of the claims against the banks (which will be receiving most of the reorganized Debtors' equity). Prosecution of claims against other defendants, such as the former shareholders and KKR, would not impede the administration of this chapter 11 case, but the potential benefits from such suits would appear to be limited and speculative. (Bruno's Bankruptcy News Issue 26; Bankruptcy Creditor's Service Inc.) CRIIMI MAE: Agreement To Extend Time For Committee's Objection -------------------------------------------------------------- CRIIMI MAE Inc. and the Official Committee of Unsecured Creditors of CRIIMI MAE Inc. stipulate and agree that the period of time within which the Committee may file and serve an objection to the debtor's motion to approve bidding protection provisions of the Apollo Stock Purchase Agreement and Deposit Escrow Agreement shall be extended through and including October 26, 1999. DEBBIE REYNOLDS: BAP Addresses Surcharge and Superpriority ---------------------------------------------------------- Lender Liability News reports on October 15, 1999 that the bankruptcy court erred in ruling that the oversecured creditor was not subject to surcharge as a matter of law under Section 506(c) of the Bankruptcy Code because it was an oversecured creditor and only the most junior secured creditor could be surcharged. The court was required to conduct a benefit analysis to determine whether a Section 506(c) surcharge was appropriate rather than applying a per se rule. Further, the court erred in approving the distribution of the surcharge to the debtors' attorney at the expense of the appellant creditor's superpriority claim. (Calstar Corp. v. Debbie Reynolds Hotel & Casino, Inc., et al. (In re Debbie Reynolds Hotel & Casino, Inc., et al.), BAP No. NV-98-1862-RyKBu (Bankr. 9th Cir. Aug. 13, 1999).) After confirmation of the debtors' Chapter 11 liquidating plan, their attorney informed the oversecured creditor that he intended to seek a surcharge against its collateral pursuant to Section 506(c) for rendering services related to the maintenance and preservation of the casino property. The attorney and the oversecured creditor entered into a settlement agreement that gave the attorney a 50,000 surcharge against the oversecured creditor's claims and precluded any other creditor, including the appellant creditor, from surcharging any of the oversecured creditor's collateral. The appellant creditor was an administrative claimant that had loaned the debtor 150,000 postpetition on a superpriority basis pursuant to Section 364(c)(1). The bankruptcy court approved the settlement agreement over the appellant's objection. The court ruled that the oversecured creditor was not subject to surcharge because it was oversecured, but it was not precluded from voluntarily paying the attorney from its share of the sale proceeds. The 9th U.S. Circuit Bankruptcy Appellate Panel reversed pursuant to Section 364(c)(1) and Section 506(c). The bankruptcy court erred as a matter of law in determining that an oversecured creditor could not be surcharged under Section 506(c), thereby precluding the appellant creditor from surcharging the oversecured creditor. The general rule is that postpetition administrative expenses may not be charged against secured collateral. Rather, these expenses are chargeable against the estate's unencumbered assets. However, at common law the general rule was disregarded when a trustee expended funds to preserve the very property securing the debt. This equitable exception was codified in Section 506(c). A claimant must satisfy only three requirements to surcharge under Section 506(c): the expense must be necessary, reasonable and limited to the extent of the benefit to the secured party. The bankruptcy court approved the immunizing language in the settlement agreement, ruling that because the oversecured creditor was not subject to surcharge anyway (because it was oversecured), the agreement would be approved. This finding reflected a misunderstanding of Section 506(c). The statute neither distinguishes between undersecured and oversecured creditors nor states that oversecured creditors do not fall within the class of secured creditors subject to surcharge. Although a number of cases have held that Section 506(c) does not apply when the creditor is oversecured, these cases reached this conclusion on the basis of no benefit because the secured creditor would have been paid in full regardless of the claimant's performance. But these cases do not support a per se rule that Section 506(c) never permits oversecured creditors to be surcharged. Oversecured status is merely a factor to be considered in the benefit analysis. The Bankruptcy Appellate Panel noted with respect to the case at bar that, assuming the appellant's superpriority loan allowed the oversecured creditor to recover more with the debtors as a going concern than it would have recovered in a foreclosure sale, the oversecured creditor would have received a benefit. Finally, the bankruptcy court's approval of the surcharge in favor of the attorney was erroneous because the distribution impermissibly altered the appellant's superpriority claim. The distribution directly to the attorneyrather than to the estate enabled the attorney to get paid on a mere administrative claim ahead of the holder of a superpriority claim. Because the attorney bore the risk of nonpayment as a result of the debtors' superpriority borrowing, the use of Section 506(c) to pay the attorney at the expense of the appellant was improper. Appellant Calstar Corp. was represented by Jeffrey R. Sylvester of Sylvester & Polednak, Las Vegas. Debbie Reynolds Hotel & Casino, Inc. was represented by Lenard E. Schwartzer of Hale, Lane, Peek, Dennison & Howard, Las Vegas. Resort Funding, Inc. was represented by Bob L. Olson of Shea & Carlyon Las Vegas. DEVLIEG-BULLARD: Seeks To Retain PricewaterhouseCoopers ------------------------------------------------------- DeVlieg-Bullard Inc. seeks authority to retain and employ PricewaterhouseCoopers (PwC) LLP as accountants and financial advisors, and authorizing the Committee to utilize the financial advisors for specific purposes. PwC will prepare reports and provide general financial analysis for the Committee upon request. If either party asks for confidentiality, PwC will not share such report or analysis. In the event that either the Committee or the debtor believe that they require the services of PwC on an exclusive basis, it will so notify the other. The hourly rates that will be charged for this matter range from $150 for an associate to $350 for a partner/principal. EQUALNET: Announces Improved Fourth Quarter Results --------------------------------------------------- Equalnet Communications Corp. (Nasdaq: ENETC) announced improved fourth quarter earnings, the conversion of certain high- cost debt to equity by two note holders, and the appointment of a new Chief Financial Officer. Consolidated revenues for the three months ended June 30, 1999 were $7.1 million, a 65% increase over the $4.3 million for the corresponding period last year. Gross margin on long-distance sales for the three months ended June 30, 1999 was $1.8 million, in contrast with a $2.1 million loss for the corresponding period last year. Net loss applicable to common stock, which includes non-cash preferred stock dividends deemed distributed to preferred shareholders, for the three months ended June 30, 1999 was $2.4 million, or $.08 per common share, compared to a net loss of $9.7 million, or $.53 per common share for the same period last year. Mitchell H. Bodian, Equalnet's President and Chief Executive Officer, said "We are gratified with our results for the fourth quarter, which reflects improving performance from our core long- distance operations. Now that our wholly-owned subsidiary's consummation of a plan of reorganization is behind us, we can better focus on our primary goal to grow operating profits through cost efficiencies, revenue enhancements, accretive acquisitions, and entry into new related niche business areas." For the year ended June 30, 1999, consolidated net loss applicable to common stock was $22.2 million, or $1.11 per common share, compared to $18.0 million, or $1.64 per common share in 1998. Included in the 1999 results were approximately $4.2 million of non-cash preferred stock dividends deemed distributed to preferred shareholders. Excluding this non-cash deemed distribution, net loss for 1999 was $18.0 million, compared to 1998's net loss of $17.9 million. Included in the 1999 results was an extraordinary gain of $10.0 million on the forgiveness of debt related to the emergence of a wholly- owned subsidiary from bankruptcy protection. The Company also announced today two holders of debt, Genesee Portfolio-B Limited and Willis Group LLC have converted approximately $3.0 million of high-cost debt into preferred stock. Mr. Bodian stated "we appreciate the confidence displayed by both Genesee Investments and the Willis Group in their conversion of debt to equity. This represents an extremely positive step forward for Equalnet Communications." The Company added it had appointed Michael P. Gallagher as its Chief Financial Officer. "Michael's background and experience should enable him to make a meaningful contribution to our financial operations and executive management of the Company," said Mr. Bodian. Prior to joining Equalnet, Mr. Gallagher spent the past eight years at PricewaterhouseCoopers. Mr. Gallagher earned his MBA from Texas A&M University, his BBA from the University of Texas at Tyler, and is a Certified Public Accountant. In addition, Mr. Bodian confirmed both the previously announced merger with The Intelesis Group, Inc. and acquisition of Network Communications Solutions, LLC would not occur, but the Company was continuing to explore various alternatives in connection with advertiser-sponsored telecommunications services. Equalnet is a nationwide supplier of telecommunications services headquartered in Houston, Texas. The Company provides a comprehensive array of discounted long-distance and other telecommunications services. FLORIDA COAST: Hearing To Consider Disclosure Statement ------------------------------------------------------- The debtors, Florida Coast Paper Holding Company, LLC and its affiliates, and the Ad Hoc Committee of Holders of 12 3/4% First Mortgage Notes Due 2003 will file with the Bankruptcy Court a joint chapter 11 plan and a proposed disclosure statement. A hearing on the Disclosure statement will be held before The Honorable Peter J. Walsh, at 1:30 PM, November 17, 1999, US Bankruptcy Court, Wilmington, Delaware. FLORIDA COAST: Taps Deloitte & Touche For Tax Preparation --------------------------------------------------------- The debtors, Florida Coast Paper Holding Company, LLC and its affiliates, seek to employ and retain Deloitte & Touche LLP nunc pro tunc to May 27, 1999, for tax preparation services. Deloitte & Touche is owed approximately $7,000 for postpetition services rendered to the debtors, and will be owed between $12,000 and $15,000 by mid-October, 1999, at the completion of the debtors' mid-October tax returns. FORMAN: Applies To Employ Special Litigation Counsel ---------------------------------------------------- Forman Petroleum Corporation seeks to employ Mark C.Dart, NeilC. Abrmason, Ronald J. White and the law firm of Phelps Dunbar as special litigation counsel for the purpose of representing the debtor in certain personal injury actions arising out of individuals' respective work at one of the debtor's well sites. FOSTER WHEELER: Signs Definitive Agreement With Robbins ------------------------------------------------------- Foster Wheeler Corporation announced that it has signed a definitive Restructuring Agreement with holders of approximately 80% of the outstanding Bonds issued to finance the Robbins Resource Recovery Facility located in Robbins, Illinois. Agreements were signed following authorization by the governing body of the Village of Robbins. Under the definitive Restructuring Agreement signed on October 20, existing bonds will be exchanged for new bonds under a pre-packaged plan of reorganization for the special purpose subsidiaries involved in the project. Foster Wheeler has agreed, as its remaining financial obligation, to be responsible for $ 113 million of the new bonds. The facility is expected to be transferred to a new third party owner/operator. Foster Wheeler will operate the facility on a cost reimbursable basis for up to two years pending transfer to the new third party owner/operator. The agreement will be implemented following anticipated confirmation of the restructuring plan by the Bankruptcy Court. Filing is expected to be made in early December. The specific elements of the Restructuring Agreement were included in the company's July 27, 1999 announcement of its preliminary agreement with certain Bondholders. As a result of the transaction, the company will record a pre-tax charge of $ 214 million in the fourth quarter. In addition the company, in the third quarter, incurred a pre-tax loss of approximately $ 13 million, related to the project, which included transaction expenses and represented costs associated with continuing maintenance and technical enhancements made in preparation for the transfer of the facility to a third party. "While we fully recognize the impact of such a significant write down on the company's balance sheet, we believe this restructuring to be in the best interests of the company given the inordinate length of time it is taking to reach a conclusion in our Retail Rate Law litigation. The Restructuring Agreement allows us to limit our financial exposure and terminate our operational obligations to the project. It also allows us to continue with our plans to reduce debt, improve earnings and cash flow, as well as strengthen our balance sheet over the long term," said Thomas R. O'Brien, General Counsel and Senior Vice President Corporate Affairs. Richard J. Swift, chairman, president & CEO added, "The uncertainties and distractions of Robbins are now behind us. With business conditions in our industry showing signs of improvement, Foster Wheeler is well-positioned to move forward in 2000 and beyond." GULF STATES: Noteholder Committee Supports Exclusivity Extension ---------------------------------------------------------------- The official committee of holders of the 13 1/2% first Mortgage Notes due April 15, 2003 issued by Gulf States Steel, Inc. of Alabama supports the debtor's motion to extend through February 29, 2000 and April 30, 2000 respectively, the exclusive periods within which the debtor may file a plan of reorganization and solicit acceptances thereto. The Committee stated, "Of course, the participation of the Noteholder committee, as the primary economic party-in-interest is a key element at this critical stage of the reorganization process." And the Committee retains its right to seek a termination of exclusivity as well as its rights under the stipulation entered in this case respecting the use of the Noteholders' cash collateral. HECHINGER: Bondholders Object to Bidding Procedures --------------------------------------------------- Principal Life Insurance Company, Conning Asset Management, Sun Life of Canada, Oaktree Capital Management, LLC, Berkshire Life Insurance Co., Provident Mutual Life Insurance Company and Foothill Capital Corp. object to the motion of the debtors for orders establishing bidding procedures. The Bondholders hold bonds issued by McCormick Realty Limited Partnership (MRLP) in connection with a transaction entered into by McCormick and Hechinger Company and certain affiliates. Specifically, the Bondholders object to the debtors' attempt to deal with only a portion of the MRLP Master Lease. The Bondholders assert that piecemeal treatment of the MRLP Master Lease is not permitted under the bankruptcy code. Kimco's bid at the auction included only one MRLP property in Carnegie, Pennsylvania and no other party bid on any other MRLP property. HVIDE MARINE: Hearing On Approval of Disclosure Statement -------------------------------------------------------------- By notice published in The Wall Street Journal, October 21, 1999, Hvide Marine Incorporated et al. announces a haring on November 2,1999 before the Honorable Peter J. Walsh, US Bankruptcy Court, District of Delaware, Wilmington, Delaware. Objections must be received before October 28, 1999. HVIDE MARINE: Meeting of Creditors ---------------------------------- A meeting of creditors of Hvide Marine Incorporated, et al. will be held on October 29, 1999 at 10:00 AM at the J. Caleb Boggs Federal Building, Wilmington, Delaware. IONICA PLC: Opposes Dismissal of Case ------------------------------------- The debtor, Ionica Plc, states that dismissal of this Chapter 11 case, would benefit only the moving parties, Ionica Group plc and Nortel Networks plc, "the two parties whose actions casued the financial collapse of the debtor," according to the debtor. Ionica states that it still retains its technology and its network, and is in negotiations with interested parties which could potentially lead to a restructuring of the business. The debtor states that PwC administrators are currently in negotiation with a party that has expressed an interest in reinstating the operation of the Fixed Radio Access telecoms system operated by Ionica. Ionica also states that continuation of the proceeding will provide a forum for pursuit of Ionica's claims fore equitable subordination and substantive consolidation, which could enhance recoveries for Ionica's creditors. Such an action will benefit creditors by enhancing recoveries, and will prevent parties, such as the movants, that acted inequitably from obtaining an unfair advantage over other creditors. Dismissal of the case would eliminate the possibility of any recovery for such actions. The debtor also states that even if rehabilitation ultimately proves to be infeasible and Ionica proceeds with a liquidating plan, continuation of the proceedings will promote efficiency and lower administration costs. LOEWEN: Asks Court To Set Bar Date ---------------------------------- To flush-out all pre-petition claims against their estates and obtain reasonable estimates of the aggregate amount of creditors' claims, the Debtors ask Judge Walsh, pursuant to Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure, to establish a deadlines by which all creditors must file proofs of claim. The Debtors do not propose a specific date at this time for the General Bar Date. The Debtors propose that the General Bar Date apply to all creditors except: (1) creditors who have previously-filed their proofs of claim; (2) creditors who agree with the way the Debtors will schedule their claims; (3) claims previously allowed or paid pursuant to a Court order; (4) approximately 2,000,000 Preneed Customers who would assert claims based solely on Preneed Contract Obligations which the Debtors intent to assume and perform; and (5) Intercompany Claims; and that any creditor who fails to timely file a proof of claim be forever barred, estopped and enjoined from asserting a claim in excess of any scheduled claim. To the extent that a creditor's claim arises on account of the rejection of an executory contract, the Debtors ask that Bar Date be fixed as the later of (a) the General Bar Date and (b) 30 days after entry of a rejection order. The Debtors propose to serve copies of the Bar Date Order and customized proof of claim forms on every known creditor (except the Preneed Customers), allow a 45 day period for creditors to file their proofs of claim, and require that claim forms be returned to Logan & Company, Inc., for processing. Additionally, the Debtors propose to publish notice of the bar date in the national editions of The Wall Street Journal, The New York Times, USA Today, The Globe and Mail and The National Post. LOEWEN: Held To Non-Compete Deals --------------------------------- The Death Care Business Advisor reports on October 14, 1999 that U.S. Bankruptcy Court Judge Peter Walsh ruled The Loewen Group cannot cancel 200 non-compete agreements with former independent funeral home owners as part of its plan to reorganize its debts. Loewen had asked the court to void the agreements so the former owners could open new funeral homes to compete with the ones they sold and Loewen could stop paying them. It has been suggested by some of the attorneys representing former owners that Loewen picked the 200 least likely to re-enter the business, due to age, health or other reasons. Currently, 900 are paid by the company not to compete. Lawyers for the former independents argued the payments are less about competition and more about deferring a portion of the sale price being paid in installments. Loewen wanted the contracts declared executory, meaning they would only be in force as long as Loewen continued to abide by the payment terms. The company would then have the option of abandoning the contracts at any time without penalty, by not paying. That is where the argument concerning the selection of the 200 former owners is relevant. The court was told Loewen chose those who were in frail health or retired. Apparently, one of them died just before the hearing. Judge Walsh agreed with the former owners about Loewen's true motives. "The covenant not to compete is eyewash," Walsh said in his ruling. "It is a mechanism for deferring compensation." Walsh gave the company the option of having the non-compete agreements ruled on individually, but said he suspected the former owners would be treated as unsecured creditors, not as signatories to executory contracts. What have they won? The independent owners' victory over Loewen may not turn out to be a complete one. The company still isn't paying them, because of the ruling's implication that the sellers need to stand in line with other creditors. In addition, because the contracts are being treated as pre- petition claims, Loewen might have to stop paying on the 700 other agreements, pushing those former owners into the unsecured creditor line as well. Company attorney Paul Harner said Loewen is studying the ruling, but might find itself unable to continue payments because of bankruptcy laws that require creditors to be treated equally. Harner was quick to point out that Loewen doesn't want to cause hardship to the former owners, but he said that's almost always inevitable in Chapter 11 cases, and the company is obligated to protect all of its creditors. One lawyer representing a group of former owners was pleased with the court ruling, saying his clients can now join with the other unsecured creditors and gain upwards of 50 cents on the dollar. No doubt that figure won't be too pleasing to the 700 former owners who expected to continue receiving payments from Loewen. Despite debt, Loewen seeks executive raises. At the same time Loewen wants to cut payments to the former owners, the company has asked the court to approve salary increases for top executives and bonuses for the rank-and-file employees. Loewen argued the money is necessary to prevent competitors from raiding key employees during the reorganization. Loewen proposed raising Chairman John Lacey's salary from 75,000 to 500,000 annually, noting he was not originally hired to work full time. An executive compensation firm recommended the change. It also recommended the salary of CEO Robert Lundgren be increased to 425,000. Both executives would be eligible for additional incentives based on achieving certain sales goals and other goals for emerging from bankruptcy. Loewen asked the court to allow it to spend 17.4 million during the rest of 1999 and 14 million in 2000 to retain cemetery personnel. Rulings are pending on all of the salary matters. NEXTWAVE: Improved Chances of Retaining Licenses ------------------------------------------------ WIRELESS TODAY reports on October 20, 1999 that NextWave Telecom Inc.'s chances of retaining its wireless spectrum licenses are enhanced by a Congressional conference committee's decision to drop a proposal that would have allowed the FCC to reclaim licenses from bankrupt companies. The Senate added the proposal to an appropriations bill for the Departments of Commerce, Justice and State along with independent government agencies including the FCC. It could have stripped NextWave of spectrum licenses it won in 1996 in two government auctions. A conference committee of House and Senate members agreed to drop the plan on Monday. Hawthorne, N.Y. based-NextWave's inability to pay the FCC almost $5 billion it bid for rights to offer service in 95 areas around the country led to a Chapter 11 federal bankruptcy filing last year. On paper at least, the company asserts that the worse is over and that it's ready to rise from the ashes as a full-fledged operator of PCS services in the U.S. market. A bankruptcy court ruled that the FCC had fraudulently transferred the licenses to NextWave, so the carrier should be allowed to keep the rights after paying just $1 billion. An appeals court is reviewing the decision. Complicating matters is the offer by Nextel Communications Inc. [NXTL] to pay at least $2.1 billion for NextWave's spectrum. The FCC's staff agreed to recommend a waiver to let Nextel bid on the licenses, which it normally would be prohibited from doing because of its size. Reston, Va. -based Nextel also has Justice Department clearance to bid for the spectrum, but Rep. John Dingell (D-Mich.), ranking member of the House Commerce Committee, and the Cellular Telecommunications Industry Association have criticized the FCC's apparent support for Nextel's intention. Last month, NextWave announced more than $700 million in equity investment commitments to support its reorganization plan. Rather than act as a wholesaler of wireless airtime for the use of other operators (its original game plan), NextWave will seek to emerge from Chapter 11 as a provider of both affordably priced, high-speed wireless Internet access and an alternative to local telephone service. PLOOF TRUCK: Notice of Auction and Sale Hearing -------------------------------------------------------------- A hearing will be held before the Honorable Jerry A. Funk, US Courthouse, 311 Monroe St., Jacksonville, Fla. at 1:30 PM on November 4, 1999 to consider the motion of the debtor, Ploof Truck Lines, Inc., to sell substantially all of its assets free and clear of liens to PTL Acquisition Corporation for $11.45 million. The assets include terminals, rolling stock and personalty (other than its cash, accounts and insurance deposits). The sale of Ploof's assets will be subject to higher and better written offers delivered to Ploof's attorneys before November 1, 999. In the event of competing bids, the court will hold an auction at the sale hearing on November 4. QUANALYZE OIL: Taps Plunkett & Gibson ------------------------------------- The debtor, Quanalyze Oil & Gas Corporation, seeks court authorization to employ Plunkett & Gibson, Inc. as attorneys for the debtor. The hourly rate for the attorney chiefly responsible for the case is $235 per hour. QUANALYZE OIL: Responds to US Trustee's Motion For Dismissal ------------------------------------------------------------- The debtor, Quanalyze Oil & Gas Corporation, tells the Court that it will have its schedules and statement of financial affairs filed on or before October 15, 1999. The debtor has been concentrating on obtaining third party funding which will provide payment of its existing secured creditors and unsecured creditors in this case. The debtor has been pursuing sale s of real property and the gross proceeds together with the third party financing that the debtor has been pursuing will provide the funds necessary to pay all of the debtor's existing secured indebtedness and unsecured indebtedness. The debtor asserts that it has meaningful business operations, that being the development of its real estate assets and the sale of parcels from its real estate assets. The debtor also states that if it fails to accomplish its reorganization efforts through its sales of real property and its third party refinancing on or before December 14, 1999, or a short period thereafter, that this case should be dismissed. SOURCEONE WIRELESS: Seeks More Time To Assume/Reject Leases ----------------------------------------------------------- SourceOne Wireless, Inc., debtor, seeks an additional extension of time for assumption or rejection of unexpired leases of nonresidential real property and ESBI contract. Under the terms of an Asset Purchase Agreement between the debtor and Aquis Communications, Inc. and final order approving the sale motion, certain procedures were established governing Aquis' designation of the Tower Leases, real estate leases and the ESBI contract. Because of the number of leases involved, along with the amount of effort the parties have had to devote to the take- over of the Midwest Assets by Aquis, the parties have not yet been able to complete the identification process. The parties should be in a position to finalize the list of all contracts and leases to be assumed within the very near future according to the debtor. Therefore, the debtor requests a short additional extension of the deadline to assume or reject the Tower Leases, the other real estate leases, and the ESBI Contract to and including November 16, 1999. SUN HEALTHCARE: Obtains Court OK To Honor Prepetition Obligations ----------------------------------------------------------------- The Debtors have sought and obtained the Court's authority to honor all prepetition obligations to patients and residents under all of their Patient Service Programs in place at the Petition Date, including: (A) Medicaid Eligibility Refunds. At times, a resident is admitted to a nursing home pending an eligibility determination by Medicaid. The family pays the bills pending that determination. In the event Medicaid okays the admission, Medicaid pays Sun and Sun refunds payments to the family. The Debtors estimate $350,000 owed as of the Petition Date in Refund Obligations. (B) Prepayment Refunds. Nursing home bills are generally paid monthly in advance. When a resident dies, leaves, or is discharged, Sun usually owes a refund for a partial month's service. The Debtors estimate Prepayment Refunds owed as of the Petition Date total $1,000,000. (C) Overpayment Refunds. It is common for patients, their insurers and other Payors to overpay for services provided by Sun, entitling those entities to refunds. The Debtors estimate their liability on this front at $150,000 as of the Petition Date. (D) Patient Trust Accounts. The Debtors hold small banks of money for certain residents in Trust. These trust accounts, the Debtors stress, do not constitute property of their estate pursuant to 11 U.S.C. Sec. 541(d). Judge Walrath makes it clear that, although the Debtors are authorized to honor these obligations, they are not required to honor them and no part of his order confers any entitlement to any creditor. SUN HEALTHCARE: Court OK's Medicare/Medicaid Reconciliation ----------------------------------------------------------- The Debtors derive a substantial percentage of their revenues from Medicare and Medicaid. The Debtors receive payments from these Payors that are routinely subject to reconciliation at a later time. Sometimes the Debtors receive overpayments and sometimes they receive underpayments. By this Motion, the Debtors seek the Court's authority to continue the reconciliation process, including the normal refunding and collecting of Medicare and Medicaid overpayments and underpayments received and owed during the Debtors' current cost period. It is essential for this process to continue, the Debtors explain, in order to maintain stable cash flows and avoid issues related to recoupment, withholding, and setoff. Judge Walrath Granted this Motion at the First Day Hearing in all respects. WSR CORP: Seeks To Extend Exclusive Periods ------------------------------------------- The debtors, WSR Corporation, R&S Strauss, Inc., National Automotive Stores, Inc. and National Auto Stores Corp., seek an extension of 90 days to the debtors' exclusive periods within which to file a chapter 11 plan and solicit acceptances thereto. The debtor seek to extend its plan exclusivity period and solicitation exclusivity period to and including January 13,2000 and March 13, 2000, respectively. The debtors need sufficient time to finalize and implement their plans for a sale of their assets. The debtors currently find themselves an attractive target for a potential equity investor or acquirer. This is a large and complex case, and the debtors have worked closely with the Creditors' Committee through a "working group." The debtors and the creditors' Committee agreed to jointly seek business combinations or transactions with third parties. An extension of the debtors' exclusive periods will enable the debtors to build upon the progress that has been made so far in these cases, and develop a consensual plan. BOND PRICING FOR WEEK OF OCTOBER 18, 1999 ========================================= Followng are indicated prices for selected issues: Acme Metal 10 7/8 '07 18 - 20(f) Amer Pad & Paper 13 '05 16 - 20 Asia Pulp & Paper 11 3/4 '05 72 - 74 E & S Holdings 10 3/8 '06 38 - 42 Fruit of the Loom 8 7/8 '06 31 - 34 Geneva Steel 11 1/4 '01 19 - 20 (f) Globalstar 11 1/4 '04 61 - 63 Hechinger 9.45 '12 11 - 13(f) Integrated Health 9 1/2 '07 5 - 7(f) Iridium 14 '05 7 - 8(f) Just for Feet 11 '09 15 - 17 Loewen 7.20 '03 48 - 50(f) Planet Hollywood 12 '05 28 - 30(f) Purina Mills 9 '10 20 -24(f) Revlon 0 '01 20 - 21 Service Merchandise 9 '04 12 - 13(f) Sunbeam 0 '18 15 - 16 TWA 11 3/8 '06 45 - 47 United Artists 9 3/4 '08 20 -24 Vencor 9 7/8 '05 20 - 22(f) Zenith 6 1/4 '11 17 - 20(f) ********* The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. 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