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/raid1/www/Hosts/bankrupt/TCR_Public/991202.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, December 2, 1999, Vol. 3, No. 233 Headlines ACCESSAIR: Shuts Down CARNATION MANAGEMENT: Case Summary CENTRAL VERMONT: Plans Bond Exchange Offer CODON PHARMACEUTICALS: Hearing To Consider Plan Confirmation DOW CORNING: Judge Approves $3.2 Billion Implant Accord EAGLE GEOPHYSICAL: Order Extends Time To Assume or Reject Lease EQUITEX: No Longer Operating As Business Development Company FLORIDA COAST: Committee Objects To Disclosure Statement FRANKEL'S HOME: Proposed Settlement with Scotty's GOSS GRAPHIC SYSTEMS: Despite Lower Net Sales Losses Decline INCOMNET: Seeks To Extend Exclusivity LLOYD'S SHOPPING CENTERS: Proposed Sale of Real Property MONDI OF AMERICA: Taps Keen Realty NMT MEDICAL: Revenues Improve, Net Losses Decrease ORBITAL SCIENCES: Questions Raised About Financial Data PHILIP SERVICES: Announces U.S. Plan Confirmation PLANET HOLLYWOOD: Disclosure Statement PLANET HOLLYWOOD: Loses Nearly $100 Million in Third Quarter RENAISSANCE COSMETICS: Applies For Bar DAte RUSSELL CAVE: Confirmation of Joint Liquidating Plan SUN HEALTHCARE: Motion For Approval of Omega Lease Rejection TALK AMERICA: Disclosure Statement With Respect to Plan TALK AMERICA: Seeks To Establish Bar Date TELEGEN: Receives Court Approval & Commitment for Debt Offering VANGUARD AIRLINES: Sees Net Gain As Revenues Increase ********* ACCESSAIR: Shuts Down --------------------- AccessAir, which promised low-cost alternative service from the Midwest to New York and Los Angeles, has shut down. The Des Moines-based airline, which raised nearly $15 million from Caterpillar Inc. and several Iowa companies, has filed for protection from creditors under Chapter 11 of the Bankruptcy Code and fired 80 percent of its 360 employees. In addition to Caterpillar, Principal Financial Group, Pioneer Hi-Bred International Inc., the Farm Bureau and MidAmerican Energy Co. had provided financial backing. The airline was designed to provide Iowans and people living in western Illinois cheaper access to New York and Los Angeles. Despite the corporate backing, however, business travelers didn't use the airline. More than 4,000 customers were left holding tickets. AccessAir and Iowa Atty. Gen. Tom Miller complained in February to the U.S. Department of Transportation that the major airlines were flooding the Iowa area with additional flights and cheaper tickets in a bid to drive the start-up out of business. CARNATION MANAGEMENT: Case Summary ---------------------------------- Debtor: Carnation Management Corporation (South Bronx Medical Complex) 427 East 138th Street Bronx, New York 10454 Court: Southern District of New York Case No: 99 46236 Debtor's Attorney: Gilbert A. Lazarus Lazarus & Lazarus, P.C. 240 Madison Avenue 8th Floor New York, NY 10016 (212) 889-7400 Fax : (212) 684-0314 Total Assets - $3-$3.25 million Total Liabilities $7.16 million (approx.) Filed liquidated secured debt - $5.2 million (approx.) Shares of common stock 20 Type of Business: Private Medical Facility 20 Largest Creditors: Creditor Amount -------- ------ Marciano Construction $230,000 Best Monitoring Ltd./Best Alarms $78,000 Bronx County Air Conditioning Corp. $40,000 Weinbaum William & Shirley $50,000 Adar Electric $45,500 Kasar $130,000 Business Wizard Inc. $75,000 Allstate Medical Supplies $24,501 Robert Borsody $23,325 Towne Partners $62,992 Universal Consulting $24,500 Nextlink $9,418 Xerox Corp. $9,440 Caligor $9,706 Richard B. Rafal MD $18,250 J. Grossman MD $10,500 The Guardian $22,725 Martinez Cleaning Company Inc. $12,004 Montgomery Stationery & Printing $10,216 CTI $14,306 CENTRAL VERMONT: Plans Bond Exchange Offer ------------------------------------------ Central Vermont Public Service Corporation, in a prospectus filed with the Securities and Exchange Commission, is proposing an offer to exchange up to $75,000,000 worth of new 8 1/8 % Second Mortgage Bonds due 2004 for any and all outstanding 8 1/8 % Second Mortgage Bonds due 2004. The prospectus and accompanying letter of transmittal relate to the company's proposal to make the exchange for new bonds which will be freely transferable, for any and all outstanding 8 1/8% Second Mortgage Bonds due 2004 issued on July 30, 1999, which have transfer restrictions. The terms of the new bonds are substantially identical to the old bonds, except for transfer restrictions, registration rights and liquidated damages. All old bonds that are validly tendered and not validly withdrawn will be exchanged. Tenders of old bonds may be withdrawn at any time prior to expiration of the exchange offer. Holders of old bonds do not have any appraisal or dissenters' rights in connection with the exchange offer. Old bonds not exchanged in the exchange offer will remain outstanding and be entitled to the benefits of the Indenture, but, except under limited circumstances, will have no further exchange or registration rights under the Registration Rights Agreement. The company does not intend to apply for listing of the new bonds on any securities exchange or to arrange for them to be quoted on any quotation system. The only conditions to completing the exchange offer are that the exchange offer not violate applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission and no injunction, order or decree has been issued which would prohibit, prevent or materially impair the company's ability to proceed with the exchange. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the new bonds. The information in the prospectus filed with the SEC is not complete and may be changed. In fact, Central Vermont Public Service may not exchange the securities until the registration statement filed with the Securities and Exchange Commission relating to the securities is effective. For further information on the exchange offer access http://www.sec.gov/cgi-bin/srch-edgar?0000950130-99-006519 on the Internet, free of charge. CODON PHARMACEUTICALS: Hearing To Consider Plan Confirmation ------------------------------------------------------------ By order dated November 15, 1999, the US Bankruptcy Court for the District of Delaware approved the amended joint Disclosure Statement regarding the second amended liquidating Chapter 11 plans of Codon Pharmaceuticals, Inc. and Oncor, Inc. On January 12, 2000, at 12:30 PM a hearing will commence before the Honorable Joseph J. Farnan, Jr. to consider confirmation of the second amended liquidating plans. Treatment of classes and claims pursuant to the Oncor plan: Class 1 - NTFC Capital Corp. Secured Claim. Unimpaired. Total Claims $18,435 Estimated Recovery:100% Class 2 - Other priority Claims. Unimpaired. Total Claims:$12,600. Estimated Recovery:100% Class 3 - General Unsecured Claims - $10.25 Million Total holders: approximately 400. Impaired. Estimated Recovery 46-93% Class 4 - Subordinated Promethean Unsecured Claims. Impaired. Total Claims: $8.97 Million - Holders: 3 Estimated Recovery: 0 Class 5 - Equity Interests - Impaired and deemed to reject the plan. Total holders: Approximately 471. Each holder of an equity interest shall not receive any distribution under this plan on account of such equity interest and such equity interest shall be canceled on the Effective Date. Codon Classes of Claims and Equity Interests: Class C1: General Unsecured Claims - Total Claims: $22,736. Impaired. Approximately 150 holders. Estimated Recovery: 0-1% Class C2: Equity Interests - Impaired and deemed to reject the plan. Total holders: 1 - Canceled on the Effective Date. DOW CORNING: Judge Approves $3.2 Billion Implant Accord ------------------------------------------------------- The Washington Post reports on December 1, 1999, A federal bankruptcy judge yesterday paved the way for Dow Corning Corp. to pay out $ 3.2 billion to settle claims by some 170,000 women who say they were injured by the company's silicone breast implants. Judge Arthur Spector, who announced the ruling yesterday in Michigan, said he will give full details in an opinion to be handed down next week. But Dow Corning's lawyers said the judge essentially approved a July 1998 proposal that was submitted jointly by Dow Corning, implant recipients and other creditors to end one of the most protracted and acrimonious disputes in American jurisprudence. For those who choose to accept a settlement, the plan offers specific monetary damages for the various problems linked to the devices. Women whose implants ruptured or leaked can get up to $ 25,000, and women who want to remove their implants can get $ 5,000 for the procedure. Those claiming that the devices caused systemic illness such as ailments of the immune system will be able to get as much as $ 300,000. Dow Corning says that 94 percent of women with claims against the company have said they will settle. "We've got a great step forward in both concluding the Dow Corning bankruptcy case and concluding the breast implant controversy for Dow Corning," said Barbara Houser, the lead bankruptcy lawyer for the company. The battle over the implants has been held up as a textbook example of the inherent conflicts between science and law. Cases were filed on behalf of sick women long before sound scientific studies had been performed to show whether or not silicone causes disease, and no study since then has found a strong link between implants and diseases like lupus and scleroderma. The companies that made implants--Dow Corning was the biggest--have long contended that the women's illnesses were caused by something other than silicone. The women and their attorneys have countered that the studies, many of which were funded by the industry, don't tell the whole story. The $ 3.2 billion for implant recipients is part of a larger $ 4.5 billion settlement with all of Dow Corning's creditors, including financial institutions and health-care companies. Of the $ 3.2 billion, women who decide not to accept the settlement can use $ 400 million to pursue litigation. Those opting to litigate will not be allowed to sue Dow Corning's corporate parents, Dow Chemical Co. and Corning Corp., nor will they be able to receive punitive damages if they win their cases. "Obviously, we are pleased with the judge's decision," said Edward Blizzard, a Houston attorney who represented implant recipients on the committee of creditors. Blizzard said that he and his clients look forward to the next step in the process--a ruling from a judge in a higher court that will actually put into place the procedures for settlement, and for opting out of the settlement. After that step, which could come within two months, "the women can begin receiving the benefits of the plan that they've waited for so long," Blizzard said. In a court-ordered vote among the Dow Corning implant recipients, 94 percent favored the bankruptcy plan--an unusually favorable percentage in bankruptcy proceedings, Houser said. Relatively few women are expected to pursue the individual lawsuits allowed under the plan, Blizzard said, though he added that he would review the settlement offer with each of his clients and expected that some would sue. Not everyone is pleased with the bankruptcy plan. Among them are attorneys representing implant recipients who live outside of the United States and who will receive less money under the settlement than their U.S.-based counterparts. An appeal based on these concerns could further delay final action on the plan. Another critic is attorney Geoffrey White of Reno, Nev., who represents 49 women in cases against Dow Chemical. White called Judge Spector's ruling a "shocking decision," because it wipes out legal rights granted to his 50 clients by the Nevada courts to sue Dow Chemical. During the long controversy over implants--which have been used in America since 1963--the science underlying the cases has shifted considerably. In 1988, the Food and Drug Administration called for research into implant safety. Unsatisfied with the evidence the companies provided, FDA Commissioner David A. Kessler in 1992 ordered the devices off the market, except for use in reconstructive surgery and replacement of prior silicone implants. With the moratorium, litigation boomed. Yet scientific evidence showing that the implants were or were not safe had yet to emerge. No one disputes that so-called "local complications" such as infection following surgery occur in as many as 24 percent of cases, and many implants break or cause painful tissue contraction and scarring. Many of the lawsuits, however, have focused on much broader patterns of illness that the recipients blamed on implants: debilitating diseases of the immune system that resembled lupus, fibromyalgia and scleroderma and included symptoms like joint pain, inflammation and profound fatigue. A series of studies which began to appear in the mid-1990s found no strong link between these diseases and implants. But none of the studies has been able to definitively rule out that implants may increase the risk for rare tissue diseases, or new, atypical disease. By the 1990s, hundreds of thousands of cases clogged the courts. Implant makers in 1993 offered to settle all claims for $ 4.25 billion--an agreement that collapsed as the number of claims grew beyond the ability of the fund to pay. (The other major implant makers subsequently proposed another settlement, and have paid out hundreds of millions of dollars in claims.) Then, in May 1995, Dow Corning sought Chapter 11 bankruptcy protection. Prior proposals by the company to emerge from bankruptcy protection have been rejected by the judge. EAGLE GEOPHYSICAL: Order Extends Time To Assume or Reject Lease --------------------------------------------------------------- By order of the US Bankruptcy Court for the District of Delaware, entered on November 19, 1999, the debtors, Eagle Geophysical, Inc., et al. are granted a further extension of the period within which the debtors must assume or reject an unexpired lease covering real property located at 209 Eighth Avenue SW, Suite 600, Calgary, Alberta, Canada. EQUITEX: No Longer Operating As Business Development Company ------------------------------------------------------------ On January 4, 1999, Equitex, Inc., filed with the Securities and Exchange Commission to withdraw its election to be treated as a business development company and elected to be treated for a maximum period of one year as a "transient investment company" as that term is defined in the Investment Company Act of 1940. A business development company is a form of closed-end, non-diversified investment company under the Investment Company Act. As a result of the company's acquisition during the third quarter of First Bankers Mortgage Services, Inc., Equitex is no longer operating as a transient investment company but as a fully operating company. Revenues for the quarter ended September 30, 1999 were $679,728 as compared to pro-forma revenues of $204,272 at September 30, 1998 and actual revenues of $16,248 for the company's business development company operations for the same period. For the nine months ended September 30, 1999, revenues were $1,676,582 compared to pro-forma revenues of $209,182 and actual revenues of $417,649 at September 30, 1998. For the three months ended September 30, 1999, Equitex recorded a net loss of $1,001,275 as compared to pro-forma net loss of $446,092 for the quarter ended September 30, 1998. For the nine months ended September 30, 1999, the company recorded a net loss of $2,197,908 as compared to pro-forma net loss of $1,633,700 for the nine months ended September 30, 1998. FLORIDA COAST: Committee Objects To Disclosure Statement -------------------------------------------------------- The Official Committee of Unsecured Creditors of Florida Coast Paper Holding Company, LLC et al. objects to the proposed Disclosure Statement in respect of Florida Coast Paper Company, LLC and its affiliated debtors. The Committee asserts that the Disclosure Statement fails to set forth sufficient information which would allow unsecured creditors to make an informed investment decision on whether to accept or reject the proposed plan. In particular, the Company points out that unsecured creditors would receive in cash, the pro rata share of the lesser of 10% Of the aggregate allowed unsecured claims or $1.6 million, yet the Disclosure Statement fails to set forth the value or even an estimate of the allowed unsecured claims. The Committee states that "the proposed plan is nothing more than a private deal cobbled together between Stone and the Noteholders under which Stone would obtain ownership of the paper mill -- the debtors' most significant asset --- by paying off the Notheolders at the expense of the unsecured creditors." In substance, the Committee states that Stone is purchasing the Noteholders' claims in exchange for the paper mill and a general release from the world. The proposed plan is a result of an undisclosed "deal" among Stone and Four M which they have "dressed up" to effectuate a discharge in direct violation of the Code. The Committee also asserts that plan is based on the assumption that the noteholders have a valid, perfected and enforceable lien on all assets of the debtors' estates including a lien on the proceeds of the litigation between the debtors and Stone concerning the Output Purchase Agreement. The Committee states that the noteholders do not have such a lien. FRANKEL'S HOME: Proposed Settlement with Scotty's ------------------------------------------------- AS of the Petition Date, the debtor, Frankel's Home Furnishings, inc. and Scotty's Inc. were parties to a certain Licensing Agreement pursuant to which the debtor operated flooring and linen departments in the Scotty's stores. The court approved an asset purchase agreement with Scotty's pursuant to which substantially all of the debtor's assets located within its Scotty's licensed departments were sold to Scotty's. Pursuant to the asset purchase agreement, the License Agreement will terminate. Following the closing of the agreement, the debtor received approximately $5.4 million from Scotty's toward the purchase price of the assets. The parties then became involved in certain controversies with regard to the remainder of money owed to the debtor. The settlement agreement provides that Scotty's will pay to Frankel's the sum of $240,000 in full settlement of all amounts owed under the Asset Purchase agreement. GOSS GRAPHIC SYSTEMS: Despite Lower Net Sales Losses Decline ----------------------------------------------------------- Goss Graphic Systems, Inc. produces newspaper, insert, and commercial printing press systems. The company's net sales for the fiscal quarter ended September 30, 1999 decreased by 64.0% or $199.7 million to $112.2 million compared to the quarter ended September 30, 1998 when net sales were $311.9. Net sales for the first nine months of 1999 were $422.1 million, a decrease of $236.0 million or 35.9 % from the $658.1 million in the first nine months of 1998. Net losses experienced by the company in the quarter ended September 30, 1999 were $37.9 million as compared to net losses in the same quarter of 1998 of $68.3 million. The net losses in the first nine months of 1999 were $93.5 million compared to net losses in the first nine months of 1998 of $104.0 million. The company has been operating under the protection of the Bankruptcy Court and during the Chapter 11 proceedings the company plans to continue to pay employee wages, salaries and benefits as usual. The company will pay for the post-petition delivery of goods and services in the ordinary course of business. According to the company, under the restructuring plan, the claims of all creditors, including trade creditors, will either not be impaired by the plan or will be paid in full over time. INCOMNET: Seeks To Extend Exclusivity ------------------------------------- The debtors, Incomnet Inc. and its affiliate ask that the court extend exclusivity for 90 days. The debtors detail that there is good cause to extend the exclusivity periods. The cases are large, and the debtors' operations are "unusually complex." Incomnet states that it is seeking an investor to recapitalize the company and to finance the company's reorganization. Incomnet has already begun discussions with potential investors, some of who are pre-petition creditors. These discussions have revealed that Incomnet has an appreciable going-concern value. Incomnet believes that it will successfully locate an investor. The debtors ask that the court enter an order extending the time during which only Prime Matrix may file a plan of reorganization and solicit acceptances to the plan until at least March 31, 2000 and May 31, 2000 respectively. LLOYD'S SHOPPING CENTERS: Proposed Sale of Real Property -------------------------------------------------------- The US Bankruptcy Court for the Southern District of New York approves of the proposed sale by the debtor, Lloyd's Shopping Centers, Inc. of the debtor's real property together with buildings and improvements thereon in Middletown, NY. The purchaser is DPSW Holdings I LLC. The purchase price is $5.2 million, and any initial competing bid must be at least $5.65 million. A break up fee of $350,000 will be paid to the purchaser in the event of a closing of a sale to a third party. MONDI OF AMERICA: Taps Keen Realty ---------------------------------- The debtors, Mondi of America, Inc. and its affiliates seek authority to retain and employ Keen Realty Consultants Inc. as real estate consultant for the purpose of marketing and auctioning the debtors' properties. Keen's fees will be the greater of 5% of the gross proceeds of a transaction or $2,000, provided that such transaction results in the payment of at least $2,000 in gross proceeds to the debtors. NMT MEDICAL: Revenues Improve, Net Losses Decrease -------------------------------------------------- NMT Medical, Inc. (formerly Nitinol Medical Technologies, Inc.) designs, develops and markets innovative medical devices that utilize advanced technologies and are delivered by minimally invasive procedures. The company's products are designed to offer alternative approaches to existing complex treatments, thereby reducing patient trauma, shortening procedure, hospitalization and recovery times and lowering overall treatment costs. The company's patented medical devices include self-expanding stents, vena cava filters and septal repair devices (the CardioSeal Septal Occluder). The company's stents have been commercially launched in Europe and in the United States for certain indications, its vena cava filters are marketed in the U.S. and abroad and the CardioSEAL Septal Occluder is in the clinical trials stage in the U.S. and is sold commercially in the U.S. for certain humanitarian uses only, and in Europe and other international markets. As a result of the company's acquisition on July 8, 1998 of Elekta Neurosurgical Instruments, the neurosurgical instruments business of Elekta AB, a Swedish corporation (Elekta AB), which the Company operates through its NMT Neurosciences division, the company develops, manufactures, markets, and sells specialty implants and instruments for neurosurgery including cerebral spinal fluid shunts, the Selector Ultrasonic Aspirator, Ruggles Surgical Instruments, the Spetzler Titanium Aneurysm Clip and endoscopes and instrumentation for minimally invasive surgery. NMT's revenues for the three months ended September 30, 1999 increased to $12.7 million from $12.2 million for the three months ended September 30, 1998. The company's net loss on the $12.7 million revenue was $0.9 million as compared with the 1998 same quarter net loss of $4.3 million. Revenues for the nine months ended September 30, 1999 increased to $36.0 million from $19.0 million for the nine months ended September 30, 1998. Again, net loss was down in the 1999 nine month period to $0.5 million, whereas in the same 1998 nine month period net loss was $3.4 million. ORBITAL SCIENCES: Questions Raised About Financial Data ------------------------------------------------------- Orbital Sciences Corporation is working to resolve certain pending questions relating to previously published financial data, which may also affect current financial data. Accordingly, the financial information supplied by the company is preliminary. The company's current auditors have raised questions arising out of prior year valuations of the company's subsidiary, Magellan Corporation, reflected in the company's audited 1997 and 1998 financial statements. These questions are still under review, and the effect of a change in previously audited and unaudited financial statements as well as current financial statements, if any, relating to Magellan has not yet been determined. In addition, the company's current auditors have questions pertaining to the company's accounting for certain transactions related to its investments in Orbital Imaging Corporation and CCI International, N.V. There can be no assurance that the company's current auditors or its previous auditors will not raise additional questions. Final resolution of these matters, including the determination of the impact of any resultant changes, has not been completed. Accordingly, the financial information given here may change as a result of resolution of the issues that remain under discussion. The company is seeking to resolve these matters as expeditiously as possible. Once the outstanding issues are resolved, the company plans to publish revised financial data. Preliminary financial information shows the company had net revenues, in the quarter ended September 30, 1999 of $248,914 with net losses of $32,649. In the same quarter of 1998 net revenues were reported as $197,688 with net losses of $1,490. The latter figures have been restated by the company. The first nine month period of 1999 shows preliminary reports of $685,538 in net revenues with $71,507 in net losses. In the first nine months of 1998 the company showed restated net revenues of $558,363 and net losses, restated, of $12,191. Orbital's operations are organized into three business sectors, which correspond to different product and service types, the different markets served by such products and services, and the manner in which these products and services are managed. Orbital's three business sectors are: space and ground infrastructure systems, satellite access products and satellite services. Space and ground infrastructure systems include launch vehicles, satellites and related space systems, electronics and sensor systems and transportation management systems, and satellite ground systems, software, mapping and land information services. Satellite access products include satellite-based navigation, positioning and communications products. Satellite services include satellite-based mobile data communications services, satellite-based remote imaging services, satellite-based automotive information services and satellite-based voice communications services. PHILIP SERVICES: Announces U.S. Plan Confirmation ------------------------------------------------- Philip Services Corp. (TSE/ME:PHV) announced that its U.S. Plan of Reorganization has been confirmed under Chapter 11 of the U.S. Bankruptcy Code. The Company has already received approval under the Companies Creditors' Arrangement Act ("CCAA") for its Canadian Amended and Restated Plan of Compromise and Arrangement. With confirmation in both the Canadian and U.S. Courts, Philip will undertake the legal and administrative steps necessary over the next month to implement its Plan of Reorganization. The Company has received a commitment from Foothill Capital Corporation to provide a US $175 million exit working capital facility. The commitment is subject to customary closing conditions and completion of documentation. The facility will support Philip's ongoing working capital requirements over the next thirty months. Obtaining the exit working capital commitment was the last step necessary for Philip to seek final confirmation under Chapter 11. "This final U.S. Court approval is a milestone event for Philip Services," said Anthony Fernandes, President and Chief Executive Officer. "We have conquered many challenges and we are a stronger, more unified company because of it. Now we are going to tap this collective talent so that we can realize our potential. With the approval of both Courts our management team and all our employees can now focus their energy on building a profitable company." As part of final Plan implementation, Philip will convert existing secured debt of US $1 billion into US $250 million in secured debt and US $100 million in convertible payment-in-kind notes. Over US $140 million in existing unsecured debt will be converted into US $48 million in payment-in-kind notes and US $18 million in convertible payment-in-kind notes. Upon final Plan implementation, 24 million shares will be issued by Philip Services (Delaware), Inc. on a pro rata basis to its secured lenders (91%), unsecured creditors (5%), class action claimants (1.5%), other equity claimants (0.5%) and existing shareholders (2%). Shareholders of record on the date of Plan implementation will receive their pro rata share of 480,000 common shares of the restructured Company, or one share for every 273 shares held. Philip Services is an integrated metals recovery and industrial services company with operations throughout the United States, Canada and Europe. Philip provides diversified metals services, together with by-products management and industrial outsourcing services, to all major industry sectors. PLANET HOLLYWOOD: Disclosure Statement -------------------------------------- The debtors expect the consummation of their plan of reorganization in conjunction with the continued implementation of their new business strategy to result in a reduction of more than $180 million in principal and accrued interest on their pre- petition debt; and adequate cash flow to fund such obligations and the company's operations. The operations restructuring plan is the premise for a capital restructuring that has been agreed to between Planet Hollywood International ("PHI") and Holders of over $200 million of the $250 million principal amount of PHI's 12% Senior Subordinated Notes due 2005 and forms the basis for the plan. The plan of reorganization contemplates a $30 million infusion of new equity by a group of investors organized by Robert Earl, PHI's current Chairman and CEO in exchange for approximately 70% of the equity of the reorganized Planet Hollywood International; a debt facility in the form of New Senior Secured Notes totaling up to $25 million, and up to a $15 million post-Effective Date secured Working Capital Facility. The plan provides for the payment of $47.5 million of cash, the issuance of $60 million of new secured PIK Notes and equity totaling approximately 26.5% of reorganized Planet Hollywood International to the holders of Old Senior Subordinated Notes. An alternative distribution would substitute up to $25 million of New Senior Secured Notes and other consideration for a portion of the cash distribution. Classification and treatment of Claims and Interests: Class 1 Priority Claims - Unimpaired - $0 Class 2 The SunTrust Claims - Unimpaired - Commitments under the SunTrust Agreements in the aggregate amount of $2.5M Class 3 Miscellaneous Secured Claims - Unimpaired - Estimated Amount $2M Class 4 Convenience Claims - Unimpaired - Allowed Unsecured claims of $2,000 or less. Estimated number of claims, 1,900 holders. The payment is expected to total approximately $1.5 million. Class 5 Old Senior Subordinated Notes Claims - Impaired. The distribution is estimated to be approximately 40%. Class 6 General Unsecured Claims - Impaired. Claims aggregate approximately $22.5 million. The distribution is estimated to be approximately 40% of the allowed claim of each holder of a general unsecured claim. Class 7 Landlord Settlement Agreement Claims - Unimpaired. Post- petition date cash payment is approximately $896,000. Class 8 Old Common Stock - Impaired. Shares of Class A and Class B Common Stock, par value $.01 per share, of PHI - pro rata share of New Warrants provided that not less than ten New Warrants will be distributed to any holder. Holders of less than 5,450 shares of Old Common Stock will receive no consideration. If Class 5 or 6 reject the plan, Class 8 interests will be cancelled as of the Effective Date. Class 9 Claims for Issuance of Old Common Stock - Impaired. No consideration or property under the plan, cancelled as of the Effective Date. Class 10 Intercompany claims - Unimpaired. Class 11 Intercompany Interests - Unimpaired PLANET HOLLYWOOD: Loses Nearly $100 Million in Third Quarter ------------------------------------------------------------ THE ORLANDO SENTINEL reports on December 1, 1999 Planet Hollywood International Inc. lost nearly $100 million in the third quarter and doesn't expect an annual profit again until fiscal 2004. The Orlando-based company, which filed for bankruptcy court protection in October, said in a recent federal filing that it has completed a reorganization plan in which founder Robert Earl would retain his chief executive officer title during the company's ambitious recovery effort. But the plan submitted to U.S. Bankruptcy Court in Delaware calls for creditors to have a say in the appointment of other top executives as well as control of two seats on a new, seven-member board of directors. The filing with bankruptcy court and the Securities and Exchange Commission notes that the restructuring plan has been agreed to by a committee for unsecured creditors as well as the largest group of creditors - holders of more than 80 percent of $250 million in bonds. A new, $25 million debt issue, secured by substantially all of the restructured company's assets, would replace the old bonds. Company officials said they are confident the plan, which also calls for a $30 million investment of new capital by Earl and other key insiders, will get the business back on sound financial ground. "Planet Hollywood International projects having ample liquidity, post-bankruptcy, to fund capital improvements, marketing and advertising needs, in addition to the debt-service requirements under the plan," the company said in its filing. Earl said Tuesday he hopes the company can get the Chapter 11 petition completed and confirmed by the court sometime in January, to make what he previously pledged would be a "speedy exit" from bankruptcy court. A Chapter 11 bankruptcy allows a company to operate with court protection while it restructures and sheds debt that it cannot repay, without totally liquidating the business. "We have our heads down preparing for the future. Everything is moving forward," Earl said. But in an attachment to the reorganization plan, the company projects that it will lose more than $17 million annually in both fiscal 2000 and 2001, another $11.8 million in 2002 and $4.7 million in 2003. It expects to return to full-year profitability in 2004 with projected earnings of $3.4 million. Before the bankruptcy filing, the company's top executives had said they expected to return to profitability sometime in 2000, though they did not say that it would be enough to ensure a profitable full year. In the third quarter that ended in September, the company lost $96 million, or 88 cents a diluted share, on revenue of $80.4 million. In the same period a year ago, the company lost $10 million, or 9 cents a share, on revenue of $110.3 million. An analyst who has followed the company in recent years, New York-based bond expert Stephen Schoene, with Miller Tabak Hirsch & Co., said he was still reviewing the voluminous reorganization document but saw no surprises in his initial reading. "My gut feeling is that it's pretty much what they've been talking about all along," Schoene said Tuesday. He added that he could draw no immediate conclusions about the prospects for the company's future health based on the company's projections. Planet Hollywood stock closed Tuesday at 10 cents a share. RENAISSANCE COSMETICS: Applies For Bar Date ------------------------------------------- The debtors, Renaissance Cosmetics, Inc., et al. seek an order establishing a final bar date in these cases by extending until January 31, 2000 the final date for filing proofs of claim. SUN HEALTHCARE: Motion For Approval of Omega Lease Rejection ------------------------------------------------------------ As of the Petition Date, the Debtors were parties to more than 376 unexpired leases of real property in connection with the Debtors' long-term care facilities in the United States. Those leases are held by approximately 100 landlords. Most of the long-term care facilities house elderly and infirm persons who require full-time nursing care. Providing health care services to those patients is the paramount business of the Debtors' estates. During the six-month period prior to the Commencement Date, the Debtors, their financial advisors, Ernst & Young LLP, and their legal counsel, Weil, Gotshal & Manges, performed an extensive analysis of the profitability of the Debtors' facilities and the legal status of the facility leases. This analysis included, among other things, reviewing (i) revenue and expense items, (ii) the locations of the Debtors' facilities and geographic mix of the Debtors' overall facility portfolio, and (iii) the terms of the facility leases and master leases. The Debtors, with the assistance of E&Y, identified profitable and unprofitable or otherwise undesirable facilities. As a result of such analysis, the Debtors determined that it was in their best interest to dispose of certain facilities held in their portfolio in a manner that is consistent with the goal of ensuring at all times the health and safety of their patients. While the Debtors' have over 100 landlords in connection with their facility leases, a large number of their facilities are leased from approximately ten landlords. A number of the Debtors' landlords approached the Debtors regarding their leases during the prepetition period. The Debtors made the determination to engage in negotiations with certain of those landlords. As a result of these discussions, the Debtors developed certain guidelines to ensure that the return of any of the Debtors' facilities to the Debtors' landlords was effected in the most orderly manner possible. In that regard, the Debtors and their professionals prepared form transfer of operations agreements and management agreements to govern such transfers. As part of this general process for analyzing their facility portfolio, the Debtors engaged in negotiations, under the circumstances described below, with their largest landlord, Omega, in respect of the fifty-four facilities the Debtors leased from Omega. Those fifty-four facilities are located in the states of Iowa, Texas, Kentucky, California, Ohio, West Virginia, North Carolina, Washington, Idaho, Massachusetts, Florida, Illinois, Louisiana, Alabama, Tennessee, and Indiana and leased pursuant to seven master leases. On or about May 28, 1999, Omega delivered notices of default with respect to each of the Leases, pursuant to which the Debtors were advised that they had failed to pay certain Minimum Rent and Additional Charges (as defined in the Leases), and that the failure to cure these defaults within two business days after the notice would constitute Events of Default (as defined in the Leases) under the respective Leases. On or about September 3, 1999, Omega delivered notices of termination with respect to each of the Leases, pursuant to which the Debtors were advised that they had not cured all the defaults described in the notices of default, and pursuant to the applicable Leases, (a) Events of Default had occurred, and (b) as a result of the Events of Default, the Leases would terminate on September 13, 1999. It is the position of the Lessors that the Debtors failed to cure the Events of Default on or before the Commencement Date, and that the Leases terminated prepetition. The Debtors have contested this assertion and expressly reserve their rights with respect to the issue of termination of the Leases. The Debtors were approached by the Lessors to explore negotiations concerning the continued use of existing facilities and the return of those facilities deemed unprofitable. In that regard, after negotiations with the Lessors, the Debtors determined to assume the leases for 50 facilities and reject the leases for 4 facilities and return these 4 facilities to the Lessors in an orderly manner that ensured the health and safety of the resultant patients. In view of the potential protracted litigation with the Lessors concerning the status of their Leases, the Debtors determined it was appropriate to achieve a global resolution of all issues surrounding the Leases. Prior to the Commencement Date, the Debtors reached an agreement with the Lessors, the terms of which are embodied in the Forbearance Agreement and Operations Transfer Agreement. Pursuant to the settlement with the Lessors, the Debtors will be rejecting and returning to the Lessors four facilities (the "Rejected Lease Facilities") that the Debtors previously had determined to return to the Lessors. The Debtors expect to save approximately $3.2 million annually through this disposition and, in addition, the Lessors have waived substantial rejection damage claims relating to the Rejected Leases. In addition, the Debtors will be assuming and keeping fifty facilities subject to the Assumed Leases (the "Assumed Lease Facilities") that the Debtors determined to hold as an integral part of their facility portfolio going forward. Accordingly, the Debtors have concluded that assumption of the Assumed Leases is appropriate and in the best interests of their estates. The Forbearance Agreement sets forth the terms of the agreed transaction and the periods during which the Debtors and the Lessors agree to forbear as both parties attempt to implement and effectuate the details of the general transaction. The Forbearance Agreement also describes the terms of the rejection of the Rejected Leases. Generally, it provides that (i) certain assets relating to the Rejected Leases will be transferred to the Lessors; (ii) there will be a pro-ration of liabilities between the Lessors and the Debtors as of the effective date of the transfer of operations; and (iii) the Lessors and Debtors have respective obligations to fund working capital for operations for certain periods. The Debtors recognize that their most important priority is the health and safety of their patients and, accordingly, the transactions with Omega are designed to ensure efficient and safe continuity in the operations of the Rejected Lease Facilities. The Operations Transfer Agreement provides for the specifics governing the transfer of operations from the Debtors to the Lessors. The Forbearance Agreement also describes the terms of assumption of the Assumed Leases. Generally, the Forbearance Agreement provides that (i) the Debtors have an obligation to cure the designated monetary defaults prior to assumption; (ii) the Debtors and the Lessors have certain agreements as to the enforceability of certain non-monetary defaults; (iii) certain of the Assumed Leases have been amended; (iv) the Lessors have certain rights in respect of certain security deposits on the Assumed Leases; (v) the Debtors and Lessors have agreed to certain releases and waivers; and (vi) the master leases and cross-default provisions of the Assumed Leases are enforceable. The Debtors are mindful of the fact that the request for assumption and rejection of the Leases comes at an early point in these chapter 11 cases. However, it was for this reason that the negotiations between the Debtors and Lessors were protracted and intense. The result of these negotiations is a series of agreements between the Debtors and the Lessors which effectuates a fair and reasonable settlement of all issues relating to the Leases. The Debtors believe that this settlement will clear the way for consensual agreements with other major landlords with respect to facilities which the Debtors wish to dispose of, thereby assuring the Debtors that their most vital asset -- the nursing home facilities -- will continue to operate without interruption. (Sun Healthcare Bankruptcy News Issue 6; Bankruptcy Creditor's Service, Inc.) TALK AMERICA: Disclosure Statement With Respect to Plan -------------------------------------------------------- Pursuant to the Disclosure statement of Talk America, Inc., the debtor proposes to pay general unsecured creditors in full by the close of 2003, by virtue of future revenues. Classification and Treatment of Claims and Interests: Class 1 - All allowed secured claims, if any, held by KeyCorp. in connection with the Beacon Sale, KeyCorp. was allowed a secured claim of $1 million of which $360,000 has been paid from Beacon sale closing proceeds. Impaired. Claims to be satisfied in accordance with the terms of the Beacon Sale Order. Class 2 - All allowed secured claims, if any, held by NTFC Capital Corp. Unimpaired. Class 3 - All allowed secured claims, if any, held by Greenpages of $27,733. Unimpaired. Class 4 - Allowed secured claims held by Paymentech. Allowed secured claim of $1.4 million. Impaired. The holder of the class 4 claims shall retain all liens provided by the Paymentech Order, the Paymentech Term Sheet and the Beacon Sale Order. Class 4 claims shall be satisfied in accordance with the terms of the Paymentech Plan Memorandum. Without limitation, as Refund Claims are satisfied, the class 4 claim shall be reduced dollar for dollar. Class 5 - Allowed secured claims and all priority claims, if any, held by the City of Portland for personal property taxes. The city asserts claims aggregating over $130,000, contested by the debtor. Unimpaired. Class 6 - All allowed priority claims, if any held by employees. The debtor estimates an aggregate amount of $8,997. Impaired. To be satisfied by payment in cash in the full amount on or before the Effective Date. Class 7 - Allowed unsecured claims of holders of refund claims - total $2,064. Impaired. Claimants shall be paid in full by aping on account of such holders the Excess Reserve Funds and 65% of the Net Beacon Note Proceeds and of proceeds from the Adjusted Gross Revenue Percentage, in accordance with and subject tot he terms of the Paymentech Plan Memorandum until such class seven claims are fully satisfied. Such payments shall commence on June 30, 2000 and shall thereafter be made on a quarterly basis in arrears. Class 8 - Allowed unsecured claims other than class 7 claims, including without limitation, the class claim, if any and any claims held by the MacRoberts plaintiffs. Excluding the class claim and the MacRoberts plaintiffs' claims which are disputed - the claims total $5,413,831. Impaired. Allowed Class Eight claims shall receive 100% of the TAI Settlement proceeds and any proceeds of post-confirmation cases of action, if any, until such time as such claims are paid in full. In addition, the reorganized debtor shall pay on account of the class eight claims 35% of the Net Beacon Note Proceeds and the adjusted gross revenue percentage until Class 7 claims are paid in full, and thereafter, 100% of the Net Beacon Note Proceeds and of the adjusted gross revenue percentage for a period ending December 31, 2003. Class 9 - Shall consist of the holders of equity interests in the debtor. Class Nine consists of the debtor's shareholders, Rob Graham and Michael Shane. Impaired. Interests shall be retained, but no distribution made other than salary and bonuses in the ordinary course of business. TALK AMERICA: Seeks To Establish Bar Date ----------------------------------------- The debtor, Talk America, Inc. seeks to establish a Bar Date for filing proofs of claim. The debtor requests that March 1, 2000 be established as the Bar Date. TELEGEN: Receives Court Approval & Commitment for Debt Offering --------------------------------------------------------------- Telegen Corporation (OTC BB:TLGNQ) announced today that it has received approval from the U.S. Bankruptcy Court authorizing its $500,000 debt offering. The Court also authorized Telegen to enter into an investment banking agreement with WMS Financial Planners, Inc. and Pacific West Securities, Inc. to conduct the debt offering and a $13.8 million stock offering. Telegen also announced that it has received firm commitments for the entire $ 500,000 debt offering and expects to close it shortly. Telegen plans to begin the $13.8 million stock offering later this month. Proceeds from that offering will be used to fund Telegen's Plan of Reorganization as well as continue development of its HGED flat panel display and MP3 Internet technologies. Telegen expects to complete reorganization in the first half of next year. "We are very pleased to receive these Court authorizations and the financing commitment today. These represent important steps toward Telegen's successful reorganization," said Telegen Corporation President and CEO Jessica L. Stevens. Telegen Corporation is located in San Mateo, California, and is developing a proprietary flat panel display technology known as HGED through its subsidiary Telegen Display Laboratories, Inc., as well as hardware and software solutions for Internet delivered MP3 digital music through its subsidiary Telegen Communications Corporation. The Company's stock is traded on the electronic bulletin board under the symbol TLGNQ. VANGUARD AIRLINES: Sees Net Gain As Revenues Increase ----------------------------------------------------- Vanguard Airlines Inc. was incorporated on April 25, 1994 and operates as a low-fare, short- to medium-haul passenger airline that provides convenient scheduled jet service to attractive destinations in established markets in the United States. The company currently operates thirteen leased Boeing 737-200 jet aircraft and its current schedule provides an average of 81 daily weekday flights serving Kansas City, Atlanta, Buffalo/Niagara Falls, Chicago-Midway, Cincinnati, Dallas/Fort Worth, Denver, Minneapolis/St. Paul, Pittsburgh and Myrtle Beach. The company operates a concentration of its daily flights in Chicago-Midway with 23 daily weekday flights and Kansas City with 21 daily weekday flights. It also provides limited charter services. Total operating revenues increased 10% from $32.2 million for the quarter ended September 30, 1998 to $35.4 million for the quarter ended September 30, 1999. The company indicates that this increase was attributable to the additional capacity put into service during the quarter and the resultant increase in the number of passengers offset by a decrease in passenger yield. The reduction in yield in the third quarter of 1999 as compared to the third quarter of 1998 mainly resulted from a major competitor's pilot strike during the third quarter of 1998. Other revenues include fees generated as a result of service charges from passengers who change flight reservations, and mail and liquor revenues. The company saw a net gain in the third quarter of 1999 of $0.2 million which compared unfavorably with the third quarter 1998 gain of $3.4 million, however, total operating revenues increased 19% from $78.9 million for the nine months ended September 30, 1998 to $93.9 million for the nine months ended September 30, 1999 and the nine months ended September 30, 1999 saw favorable net gain of $2.2 million as compared to the net loss in the first nine months of 1998 of $0.9 million. ********* 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, 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 * * *