Troubled Company Reporter - Case Summary and 2 Largest Unsecured Creditors
Headlines
1-75 ASSOCIATES: Case Summary and 2 Largest Unsecured Creditors
ACCESSAIR: Promotional Event At Marriott Hotel At Aug. 24 To Fly
ARM FINANCIAL: Taps Swidler Berlin as Special Litigation Counsel
ASSET SECURITIZATION: Fitch Downgrades Mortgage Pass-through Certificates
AUREAL INC: Applies To Employ Remarketing Associates as Auctioneer
CITY BREWERY: Brewing Firm Potential Buyer Can't Cut It
CONSECO, INC: Fitch Downgrades Senior Debt Rating To 'BB-'
CORAM, INC.: Healthcare Concern Seeks Authority To Use Cash Collateral
DIAL CORPORATION: Earnings Decline Prompts Fitch to Place Ratings on Watch
DOW CORNING: Says Solvency Was Obvious from Day One, but Government Disagrees
EERIE WORLD: Case Summary and 20 Largest Unsecured Creditors
ELDER-BEERMAN: New Merchandising Strategy and Organizational Streamlining
FLEETPRIDE, INC.: Moody's Confirms Bank Debt at B1 & Senior Sub. Notes at B3
FRUIT OF THE LOOM: Court OK's 2004 Exams for Charities re Farley Contributions
GST TELECOMMUNICATIONS: Reports about Auction of Assets and 2Q Results
GREATE BAY: Discloses Talks with Hollywood Casino to Restructure Obligations
HARNISCHFEGER INDUSTRIES: Beloit's Motion To Reject Six Executory Contracts
HEDSTROM HOLDINGS: To Shut Down Or Auction Off Subsidiary By Year End
JOAN AND DAVID: Debtor Asks Court to Fix October 2, 2000, Bar Date
LAROCHE INDUSTRIES: Creditors' Committee Applies to Retain Arthur Andersen
LOEWEN GROUP: Mullin's Motion To Compel Decision About Non-Compete Agreement
LONDON FOG: Business Plan Complete, Looks to Extend Exclusive Period to 11/20
MAURICE CORP.: Ravelson Family Offers $15,000 for Tradename & Worcester Lease
MONARCH DENTAL: CEO Upbeat about Revenue and Cost Control Initiatives
PATHMARK STORES: EBL&S Development Offers $3,200,000 for Camden County Store
PEP BOYS: Moody's Lowers Debt Ratings and Places Them Under Review
PINNACLE ONE: $810MM Issue of Senior Secured Notes Rated 'BBB-' by Fitch
RELIANCE GROUP: Stull, Stull & Brody Files Noteholders' Class Action Complaint
ROBERDS, INC: Liquidation Nearly Complete, Needs More Time to File a Plan
SAFETY-KLEEN: Agrees to Excise 4 Law Firms Ordinary Course Professionals List
SCAFFOLD CONNECTION: Improved Earnings Likely to Bolster Support for CCAA Plan
SIERRA HEALTH: Fitch Downgrades Financial Strength Ratings To 'BB+'
SILVER WEST: Case Summary
SOUTH CAMERON: Former CEO Faces More Indictments on Theft of Hospital Funds
SUN HEALTHCARE: Government Agencies Agree to Facility Disposal Protocol
SUNSHINE MINING: Noteholders Agree to Extend Maturity Date to Aug. 18, 2000
TEXAS HEALTH: State Asks Kern To Lower Stake To Emerge From Bankruptcy
TREND-LINES: Reorganizes Under Chapter 11 Bankruptcy Protection
UNITED COMPANIES: CSFB Objects To Whole Loan/REO Portfolio Sale to EMC
UNITED COMPANIES: SBC and ESH Agrees over Modified Plan of Reorganization
VALUE AMERICA: Halts E-tailing, to Restructure as Electronic Services Business
VENCOR, INC: Healthcare Service Provider Reports $5 Million 2Q Loss
WSR CORP: Asks Court to Approve Environmental Settlement Agreement
ZENITH NATIONAL: Moody's Changes Insurer's Outlook From Stable To Negative
* Meetings, Conferences and Seminars
*********
1-75 ASSOCIATES: Case Summary and 2 Largest Unsecured Creditors
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Debtor: 1-75 Associates, L.P.
527 Split Rock Rd
Oyster Bay Cove, NY 11791
Chapter 11 Petition Date: August 11, 2000
Court: Southern District of New York
Bankruptcy Case No: 00-41957
Judge: Cornelius Blackshear
Debtor's Counsel: Mark A. Frankel, Esq.
Backenroth Frankel & Krinsky, LLP
885 Second Avenue
New York, NY 10017
(212) 593-110
Total Assets: $ 6,890,182
Total Debts : $ 2,755,500
2 Largest Unsecured Creditors:
Green & Green $ 4,000
Shanhalt Glassman et al $ 3,500
ACCESSAIR: Promotional Event At Marriott Hotel To Fly on Aug. 24
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Spokeswoman Julie Evans tells the Associated Press that Des Moines-based
AccessAir will hold a "community rollout" on Aug. 24 at the Marriott Hotel.
AccessAir is seeking government approval for allow it to start operations
again. The purpose of the event is to promote the airline -- using postcards
as, "Top 10 Reasons to Fly AccessAir."
AccessAir filed for bankruptcy protection under Chapter 11 last November. It
had 400 employees and had daily flights from Des Moines to New York; Colorado
Springs, Colo.; Moline, Ill.; and Los Angeles. The airline's goal was to
provide cheap flights together with airlines charging high fares.
ARM FINANCIAL: Taps Swidler Berlin as Special Litigation Counsel
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ARM Financial Group, Inc., and Integrity Holdings, Inc., seek court authority
to employ and retain the law firm of Swidler Berlin Shereff Friedman, LLP, as
special litigation counsel to investigate possible causes of action against:
(A) any of the debtor's former officers and directors who resigned or who
were terminated prior to the Petition Date;
(B) professionals or advisors who provided services to the debtors in any
capacity prior to the Petition Date; and
(C) any persons or entities, including insiders who may have exercised
control over the debtors prior to the Petition Date.
SBSF will also advise the debtors with respect to the preservation of any
causes of action in connection with any chapter 11 plan.
These Swidler attorneys will have primary responsibility for representing the
debtors:
Shalom Jacob, Esq. - $400 per hour
Elise Scherr Frejka, Esq. - $275 per hour
Mathew Bergman, Esq. - $170 per hour
ASSET SECURITIZATION: Fitch Downgrades Mortgage Pass-through Certificates
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Fitch downgrades Asset Securitization Corp.'s (ASC) commercial mortgage pass-
through certificates series 1997-D5's $13.2 million class B-4 to 'B-' from
'B+', $13.2 million class B-5 to 'CCC' from 'B', and $21.9 million class B-6
to 'CCC' from 'B-'.
In addition, Fitch affirms the following certificates:
a) $105.0 million class A-1A,
b) $172.6 million class A-1B,
c) $713.0 million class A-1C,
d) $229.8 million class A-1D,
e) $52.6 million class A-1E,
f) interest-only classes A-CS1 and PS-1 at 'AAA';
g) $87.7 million class A-2 at 'AA';
h) $52.6 million class A-3 at 'A+';
i) $26.3 million class A-4 at 'A';
j) $39.5 million class A-5 at 'BBB+';
k) $43.9 million class A-6 at 'BBB-';
l) $21.9 million class A-7 at 'BBB-';
m) $39.5 million class B-1 at 'BB+';
n) $39.5 million class B-2 at 'BB';
o) $8.8 million class B-3 at 'BB-'.
Fitch does not rate the class B-7, B-7H, and A-8Z certificates, while class B-
3SC is privately rated. Classes A-8Z and B-3SC represent the interests in the
Trust Fund corresponding to the junior portions of the Comsat and Saul Centers
loans, respectively, and are not part of the pool balance. The rating actions
follow Fitch's annual review of the transaction, which closed in October of
1997.
The rating actions are the result of the deteriorating performance of several
loans in the pool. Four loans are currently in special servicing (4.0% of the
pool), including one loan (2.8% of the pool) secured by a Chicago hospital
whose operator filed for Chapter 11 in April and subsequently terminated
operations at the facility. The special servicer Lend Lease Asset Management,
L.P. is also contesting that the loan is in breach of the representations and
warranties, and that the depositor must repurchase the loan by the end of Aug.
or risk having the trust fail to qualify as a REMIC.
The certificates are collateralized by 155 fixed-rate mortgage loans
consisting of office (28%), anchored retail (28%), multifamily (20%), and
hotel (14%) properties. There are large geographic concentrations in Maryland,
New Jersey, Ohio, and Texas (10% each). As of the July 2000 distribution date,
the pool's collateral balance has been reduced by approximately 3.4%, to $1.69
billion from $1.75 billion at closing. CapMark Services, L.P., the master
servicer, collected year-end 1999 or trailing-twelve-month (TTM) 2000
financials for 153 loans, which represent 99% of the pool balance. According
to the information provided, the current weighted average debt service
coverage ratio (DSCR) is 1.67 times (x), compared to the underwritten DSCR for
the same loans of 1.60x.
Fitch reviewed the performance of the deal's six shadow-rated loans and their
underlying collateral. The DSCR for five of the six loans was calculated using
borrower reported NOI adjusted for Fitch underwriting guidelines, required
reserves, and a stressed debt service except where noted.
The Saul Centers Retail Portfolio (7.0% of the pool) is the largest loan in
the pool. It is secured by nine neighborhood and community retail shopping
centers with a total of 2.3 million square feet in three states. Fitch's
stressed DSCR for the trailing twelve months ending March 2000 (TTM 3/00) was
1.83x, compared to 1.50x at closing. The portfolio's weighted average
occupancy increased from 91% at closing to 96% as of March 2000, including
three properties reporting occupancies of 100%.
The 3 Penn Plaza loan (6.1% of the pool) is secured by a 16-story office
building in Newark, NJ, of which all of the office space is net leased to
Horizon Blue Cross Blue Shield of New Jersey through March 2012. The year-end
1999 DSCR is 1.32x versus 1.29x at closing.
The Fath Multifamily Pool (5.0% of the pool) is secured by 17 low- to middle-
income properties consisting of 4,029 units in three states, with 14 of the
properties located in Cincinnati, OH. The DSCR has increased from 1.24x at
closing to 1.52x as of TTM 3/00. The pool's weighted average occupancy has
also increased from 89% at closing to 95% as of March 2000.
The Westin Casuarina Resort loan participation (2.8% of the pool) is secured
by a leasehold interest in a 341-room beachfront resort hotel located on Grand
Cayman Island in the British West Indies. TTM 3/00 DSCR is 2.42x versus 2.15x
at closing. The hotel's occupancy and average daily rate have increased since
closing (from 70% and $220 to 73% and $253, respectively).
The Swiss Bank Tower loan (2.7% of the pool) is secured by the borrower's
condominium interests comprising the air rights above the Saks Fifth Avenue
department store at 50th Street and 5th Avenue in New York City. The
borrower's revenues consist of an annual base payment by lessee Swiss Bank
Corp. and a percentage of the net cash flow of all the tenants in the tower.
Using actual annual debt service, the year-end 1999 DSCR has decreased
slightly to 1.01x versus 1.05x at closing.
The Comsat loan (2.1% of the pool), which is secured by an office and R&D
complex in Clarksburg, MD, is a credit tenant lease loan, as the facilities
are 100% leased to Comsat Corp. On Aug. 3rd, Lockheed Martin Corp. (NYSE: LMT)
purchased the remaining 51% of Comsat shares to finalize its acquisition of
the company.
In addition, Fitch applied a hypothetical loss scenario for the overall
transaction whereby all loans identified as potential problems (4.9% of the
pool) would default at various stress scenarios. Under this analysis, the
credit enhancement provided to classes B-4 through B-6 would be extinguished.
Subordination for the remaining classes, however, would be sufficient to
maintain their current ratings.
AUREAL INC: Applies To Employ Remarketing Associates as Auctioneer
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Aureal, Inc., asks the U.S. Bankruptcy Court for the Northern District of
California to approve its application to employ Remarketing Associates, Inc.,
to enable it to dispose of the remaining tangible assets of the estate, such
as equipment and office furniture that are not subject to the proposed sale of
assets to Guillemot. After a minimum of $400,000 in gross proceeds is
received, RAI will receive a graduated commission of 2.5% based on gross
proceeds of $400,001 to $500,000, 5% commission based on gross proceeds of
$500,001 to $700,000 and a 7.5% commission on gross proceeds of $700,001 or
more. RAI agrees to cap its expense reimbursement request at $31,500.
CITY BREWERY: Brewing Firm Potential Buyer Can't Cut It
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The Associated Press reports that the latest buyer looking to acquire
financially distressed City Brewing Co. walked. City Brewing President, Randy
Smith said the potential buyer called-off its buyout because it can't commit
to some contract work at the brewery from another business. "We are
disappointed that this one didn't go forward because it looked like one to
fill the employees' desire to have an ownership stake, it provided solid
financial backing and it would have gotten people paid," Smith added,
declining the name the potential buyer. To Mr. Smith's knowledge, no other
potential buyers are interested at this time.
CONSECO, INC: Fitch Downgrades Senior Debt Rating To 'BB-'
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Fitch, the international rating agency formed by the merger of Fitch IBCA and
Duff & Phelps Credit Rating Co., has taken several rating actions related to
Conseco, Inc. (Conseco) and its insurance and finance subsidiaries.
Fitch has downgraded Conseco's senior debt rating to 'BB-' from 'BB' and its
preferred stock to 'B' from 'B+'. These actions reflect higher debt levels
incurred during the second quarter of 2000, reduced financial flexibility as a
result of not selling Conseco Finance and some uncertainty related to upcoming
bank maturities. Fitch expects the bank maturities to be resolved in the near
term.
In addition, Fitch has downgraded the insurer financial strength ratings of
Conseco's insurance subsidiaries (see list below) to 'BBB' from 'A-'. Although
Fitch believes that the subsidiaries remain well capitalized, operating
results declined during the first half of 2000. This action also reflects the
reduced financial flexibility of the holding company.
Also, Fitch has downgraded Conseco Finance's senior debt rating two notches to
'B' from 'BB-'. The rating differential between Conseco and Conseco Finance
reflects Conseco's weakened ability to provide financial support, Conseco
Finance's increased financial leverage and asset quality deterioration in
recent periods.
All ratings remain on Rating Watch Negative. Fitch expects to meet with
Conseco's management after the bank issue is resolved to discuss short-term
and long-term strategic plans.
Fitch has taken the following rating actions and all ratings remain on Rating
Watch Negative:
*Insurer Financial Strength
-- Bankers Life & Casualty Insurance Company, from 'A-' to 'BBB',
-- Conseco Annuity Assurance Company, from 'A-' to 'BBB',
-- Conseco Direct Life Insurance Company, from 'A-' to 'BBB',
-- Conseco Health Company, from 'A-' to 'BBB',
-- Conseco Life Insurance Company, from 'A-' to 'BBB',
-- Conseco Life Ins. Company of New York, from 'A-' to 'BBB',
-- Conseco Medical Insurance Company, from 'A-' to 'BBB',
-- Conseco Senior Health Insurance Company, from 'A-' to 'BBB',
-- Conseco Variable Insurance Company, from 'A-' to 'BBB',
-- Manhattan National Life Insurance Company, from 'A-' to 'BBB',
-- Pioneer Life Insurance Company, from 'A-' to 'BBB'.
* Conseco, Inc.
-- Senior Debt, from 'BB' to 'BB-',
-- Preferred Stock, from 'B+' to 'B'.
* Conseco Financing Trust I through VII
-- Preferred Securities, from 'B+' to 'B'.
Conseco Finance Corp.
-- Senior Debt, from 'BB-' to 'B'.
CORAM, INC.: Healthcare Concern Seeks Authority To Use Cash Collateral
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Foothill Capital Corporation, Goldman Sachs Credit Partners LP, and Cerberus
Partners LP are Lenders under a Credit Agreement extending up to $60
million to Coram, Inc., to be used for general corporate and operating
purposes. Coram's debtor-affiliates guarantee Coram's obligations under the
Credit Agreement.
The debtors seek entry of an order extending, through and including October
31, 2000, the debtors' authority to use "cash collateral" as that term is
defined in Section 363(a) of the Bankruptcy Code in which the lenders have a
purported interest.
Without the ability to use Cash Collateral, the debtors will suffer immediate
irreparable harm and will be unable to satisfy necessary and ongoing expenses
including, but not limited to, current wages, benefits to employees,
insurance and other necessary expenses relating to the wind-down of the
debtors' operations, including the reconciliation of provider claims and
payor receivables. At the Petition Date there was approximately $37
million dollars due and owing to the Lenders pursuant to the Credit Agreement
plus $2.5 million contingently owed in respect of issued but undrawn letters
of credit.
The debtors believe that the assets of the debtors, together with the assets
of the Borrowers and other Guarantors under the Credit Agreement are more
than sufficient to satisfy the obligations due the Lenders under the Credit
Agreement.
DIAL CORPORATION: Earnings Decline Prompts Fitch to Place Ratings on Watch
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Fitch has placed its ratings of The Dial Corporation's (Dial) senior unsecured
notes, bank credit facility, at 'BBB+', shelf registration/senior notes at
'BBB+', and shelf registration/subordinated notes at 'BBB' on Rating Watch
Negative. The company's commercial paper rating is affirmed at 'F2'.
Approximately $330 million of long-term debt is affected by this rating
action.
The Rating Watch reflects a significant decline in operating earning and
Fitch's concern as to when a turnaround will occur, higher debt levels, which
have resulted from share repurchases and a strategic review that has been
undertaken by Herbert M. Baum, Dial's new president, chairman and chief
executive officer. The company's decline in operating earnings is due to
numerous factors, such as, trade de-stocking following the retail industry
consolidation, heightened competitive activities, which impacted profitability
and slower revenue growth due to a core product re-staging.
Although the company has been successful in broadening its product portfolio
through acquisitions over the past two years, its specialty personal care
product line requires greater inventory management and a higher investment in
working capital than originally anticipated. Fitch will meet with Dial's new
senior management team within the next 30-60 days to determine its strategic
and operational response to the current challenges and to review its financial
goals and policies going forward. The Rating Watch Negative status is expected
to be resolved shortly thereafter.
Dial's credit statistics are likely to continue to decline in 2000, as a
result of a negative operating earnings trend. For the 12-month period ending
year June 30, 2000, Dial's credit statistics were as follows: fixed-charge
coverage ratio 5.2 times, total debt-to-EBITDA was 2.9 times and cash flow to
total debt was 21%.
The company's four core franchises are Dial soaps, Purex laundry detergents,
Renuzit air fresheners and Armour Star canned meats. Dial is primarily a niche
player in large and mature markets. Through acquisitions the company entered
into the specialty personal care category in 1998. Dial continues to maintain
its market leadership position in antibacterial soaps. Its other consumer
products remain strong seconds in their respective product categories.
DOW CORNING: Says Solvency Was Obvious from Day One, but Government Disagrees
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Dow Corning Corporation "has at all times been solvent," John M. Newman, Jr.,
Esq., of Jones, Day, Reavis & Pogue, tells Judge Arthur J. Spector, in a pitch
to have the Bankruptcy Court rule that Dow Corning is entitled to deduct more
than $90,000,000 of accrued but unpaid postpetition interest on creditors'
claims in its five-year-old chapter 11 proceeding after the Internal Revenue
Service told the Company it can't for the 1995 and 1996 tax years. "The
uncontroverted evidence shows that [Dow Corning] was at all times legally
obligated and financially able to pay . . . postpetition interest," Mr. Newman
asserts. "The IRS' position is wrong . . . because [Dow Corning] has always
been, and remains, solvent."
How does Dow Corning assert with a straight face that it was and is solvent
notwithstanding billions of dollars of silicone implant-related personal
injury claims? These are the facts Gifford E. Brown, Vice President for
Planning and Finance and Chief Financial Officer for Dow Corning, puts before
Judge Spector:
(A) Dow Corning's GAAP-based financial statements "reflect its firm
financial foundation and continuing operating strengths. They reveal
positive net worth, even after taking into account the large reserve
for breast implant claims";
(B) Dow Corning's pleadings and filings in the Bankruptcy Court "from the
very beginning of the Chapter 11 process present a picture of
solvency entirely consistent with both the audited financials and the
Company's stated intention and expectation of emerging from court
protection with a plan that would pay its creditors in full and leave
equity ownership intact";
(C) Dow Corning said in its First Day Motion for permission to pay
prepetition employee obligations that it would "pay all unsecured
claims in full";
(D) Dow Corning told the Bankruptcy Court that the anticipated
reorganization plan "provides for the full payment of all of DCC's
creditors" when it sought and obtained authority to pay prepetition
claims owed to foreign creditors;
(E) But for the legally-mandated delay in payment required by 11 U.S.C.
Sec. 502(b)(2), Dow Corning could and would have made timely interest
payments to creditors;
(F) "At no time during the plan negotiations, protracted and contentious
as they were, ever encompass the prospect that prepetition debt, or
its associated postpetition interest, would not be paid";
(G) Each of the five plans of reorganization but before the Court were
predicated on Dow Corning's solvency; and
(H) Neither the Commercial Committee nor the Tort Claimants' Committee
ever disagreed with Dow Corning's view of the Company's interest
paying capacity.
The interest issue, Mr. Newman suggests, given Dow Corning's facts, is easily
framed:
(1) Did Dow Corning have a contractual obligation to pay the interest it
deducted on its tax returns with prepetition claims?
(2) If so, was Dow Corning solvent?
(3) If Dow Corning was solvent, was it also obligated, as a matter of
bankruptcy law, to pay interest on its trade and other indebtedness?
The answer to each of these questions in an incontrovertible "yes," Mr. Newman
concludes. The disagreement over deductibility of interest arises from the
IRS' inability to come to grips with the admittedly unusual facts -- none of
which can be disputed -- that compel the conclusion that DCC's postpetition
interest is deductible from income on Dow Corning's tax returns.
"The IRS can provide no evidence raising a genuine dispute over solvency," Mr.
Newman continues. Insolvency is not a prerequisite to a chapter 11 filing.
See 11 U.S.C. Sec. 109. Likewise, no inference of insolvency arises from the
filing of the chapter 11 petition.
Dow Corning shows Judge Spector a copy of a final report prepared by an IRS
Revenue Agent setting forth the Government's position that the interest
accruals are not deductible pursuant to 26 U.S.C. Sec. 163(a). "The report,"
Mr. Newman and his Jones Day colleagues, Carl M. Jenks, Esq., Edward A.
Purnell, Esq., and Todd S. Swatsler, Esq., opine, "grasps at a number of
straws in an effort to cast doubt on DCC's financial ability to pay the
interest in issue. All evince a basic misunderstanding of the bankruptcy
process, and none goes to the issue of DCC's solvency. Whether the IRS will
cling to any of these straws at this stage, and if so which ones, we do not
know."
"When a solvent accrual-based taxpayer has a fixed obligation to pay interest,
it is entitled to a deduction under the Internal Revenue Code," the Jones Day
team tells Judge Spector. "Because there is no genuine issue of material fact
as to (i) DCC's solvency, (ii) the requirement under the DCC loan agreements
and indenture that DCC pay interest, or (iii) DCC's obligation to pay interest
on its trade and other debt once it had filed for bankruptcy protection, DCC
is entitled to summary judgment in its favor. Interest on both its contract
debt (as claims on its tax returns) and trade and other debt is deductible in
determining the Company's federal tax liability for the tax years 1995 and
1996."
Provided that the Government doesn't whine that it needs more time to prepare
to litigate the questions Dow Corning puts before the U.S. Bankruptcy Court
for the Eastern District of Michigan, Northern Division, Dow Corning is
prepared to go forward with a hearing on this matter in Bay City on October
26, 2000, George H. Tarpley, Esq., and Craig J. Litherland, Esq., of
Sheinfeld, Maley & Kay, P.C., advise Judge Spector.
Similar claims for disallowance of interest deductions, Dow Corning notes,
grounded on similarly erroneous IRS positions, are expected for the 1997,
1998, and later tax years.
EERIE WORLD: Case Summary and 20 Largest Unsecured Creditors
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Debtor: Eerie World Entertainment, L.L.C.
1212 Avenue of the Americas, 14th Flr.
New York, NY 10036
Chapter 11 Petition Date: August 11, 2000
Court: Southern District of New York
Bankruptcy Case No: 00-13708
Judge: Cornelius Blackshear
Debtor's Counsel: Scott S. Markowitz, Esq.
Todtman, Nachamie, Spizz & Johns, P.C.
425 Park Avenue
New York, New York 10022
(212) 754-9400
Total Assets: $ 28,648,360
Total Debts : $ 5,484,255
20 Largest Unsecured Creditors:
RN Land Co.
c/o The John Buck co.
Sears Tower
Suite 550 Chicago Lease
Chicago, IL 60606 Guaranty $ 490,737
Sogem USA, Inc. 3 months rent on
NY office lease $ 73,699
Kaufman Sign Company Trade $ 73,096
American Phoenix Insurance $ 62,208
United Van Lines Trade $ 45,204
First Insurance Monthly payment
Funding Corp. on insurance $ 24,375
Kirkland & Ellis Legal Fees $ 18,049
Frank B. Gates Rent $ 12,136
Collegiate Graphics Collegiate Graphics $ 12,039
Rosenberg, Kolb $ 10,954
Reboul, MacMurray,
Hewit Legal Fees $ 10,693
Grapevine Mills, L.P. $ 6,000
Prestige Printing Trade $ 2,697
Sharlen Sign & Design Trade $ 2,490
Transwestern Commercial
Services Trade $ 2,061
Frank W. Palillo Trade $ 1,650
Paul, Hastings,
Janofsky & Walker Legal Fees $ 1,612
Denitech Corporation Trade $ 1,240
StaffMark, Inc. Trade $ 600
ADP Trade $ 448
ELDER-BEERMAN: New Merchandising Strategy and Organizational Streamlining
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The Elder-Beerman Stores Corp. (Nasdaq:EBSC) announced completion of its
evaluation of strategic alternatives and unveiled a three-part strategic plan
to reinforce its position as the department store of choice in secondary
markets in the Midwest. The new plan calls for:
(A) A shift in the company's merchandising strategy
The company plans to aggressively grow its opening price point and
moderate priced value driven assortments, with an intense focus on
ladies' and men's apparel, ladies' shoes and the home store. The
company also intends to grow its already strong cosmetics business.
Frederick J. Mershad, chairman and chief executive officer, stated
that, "This new merchandising direction is the product of an intense
effort over the past several months by a team of our executives and
outside retail consultants, and has been tested through an extensive
study of thousands of our customers conducted this summer by our
consultants. We believe we can deliver exceptional moderate and
opening price point assortments in ladies' and men's apparel,
ladies' shoes and the home store that represent quality, fashion and
value to our customers. We intend to make these businesses, along
with our strong cosmetics business, the major differentiators to
bring customers to Elder-Beerman."
(B) An acceleration of new concept store development
The company will capitalize on its successful, newly developed
concept stores that were introduced in the third and fourth quarter
of 1999. The company has previously announced the fall season
openings of three new concept stores in Howell, Michigan, West Bend,
Wisconsin and Jasper, Indiana. New concept store openings will be
accelerated beginning in the spring of 2001. The company will also
incorporate some of the most successful operational elements of the
concept stores into existing company stores over the next eighteen
months. About one-half of the existing stores will be modified prior
to the Christmas 2000 shopping season, with the balance to be
converted in 2001. The new concept stores, smaller than the typical
department store, maximize the flexibility and use of selling space
in a customer-friendly setting through a floor plan that features
movable interior walls, a neutral color palate, high capacity floor
fixturing and extensive wallscaping. These stores are located in
smaller, secondary markets where there is less competition, allowing
Elder-Beerman to position itself as the retail destination of first
choice. Features of these stores include:
a) Highly visible centralized customer service centers conveniently
located in main aisles throughout the store, which are staffed
during all store hours, providing efficient, convenient
transactions and quality customer service.
b) Assisted service cosmetics and shoes available on open sell
fixtures for ease of selection.
c) And The Zone, a combined juniors and young men's shop that creates
an exciting specialty store within a store to capture sales from
the next generation of customers.
(C) Streamlining of the company's organizational structure
An aggressive streamlining initiative is planned to improve profits
in the near term through significant, permanent expense reductions
of $10 to $12 million pretax in fiscal 2001 and an additional $5 to
$7 million pretax in fiscal 2002. The company's expense cutting
initiatives touch all aspects of the company's operations, with
particular emphasis on reductions in corporate office expense, work
simplification and/or elimination and systems enhancement. The
expense cutting steps include an immediate job reduction affecting
approximately 130 people. These reductions affect all departments
and all levels. Employees at the company have been notified of the
plan, and those affected will receive severance packages consistent
with company policy and industry standards.
The company's decision to reposition its merchandising direction was driven in
part by a thorough market analysis conducted by ROI Retail Strategies, a
consumer research firm, and a complete reevaluation of the company's strategic
plan with the assistance of Renaissance Partners, LP, a retail consulting
firm. Mershad noted that "the ROI research validates the opportunities Elder-
Beerman has in repositioning its merchandising strategy."
The company estimates that, including the severance costs for job reductions,
the company will incur up to $16 million in charges to complete this
restructuring. These charges will include:
i) approximately $2 million in severance pay and other expenses in
connection with job reductions, including severance costs in
connection with the termination of John A. Muskovich, former
president and chief operating officer;
ii) approximately $750,000 in outside professional fees and expenses
incurred in connection with the development of the restructuring
plan and the Year 2000 proxy; and
iii) up to $13 million in merchandise non-cash charges to be incurred
during the balance of fiscal 2000 to bring the company's merchandise
inventories into a position consistent with the new merchandising
strategy.
Mershad continued, "We have targeted key areas that we need to strengthen and
strengths we need to exploit, based on our experience and on customer
research. Demographic trends and customer research affirm that our
repositioning will provide the best mix of merchandise for our customers. And
our new concept store format is a customer-friendly vehicle to deliver that
merchandise and promote customer loyalty. The streamlining of our
organizational structure will allow us to execute our new retail strategy
while minimizing the risk of any short-term adverse effect on our bottom
line."
Mershad concluded, "We're confident that in the current environment our best
opportunities to strengthen our franchise rest with implementing this
strategic plan rather than selling the company."
The nation's ninth largest independent department store chain, The Elder-
Beerman Stores Corp. is headquartered in Dayton, Ohio and operates 60
department stores in Ohio, West Virginia, Indiana, Michigan, Illinois,
Kentucky, Wisconsin and Pennsylvania. Elder-Beerman also operates two
furniture superstores. The company has announced it will open three new
concept stores in 2000.
FLEETPRIDE, INC.: Moody's Confirms Bank Debt at B1 & Senior Sub. Notes at B3
----------------------------------------------------------------------------
Moody's Investors Service confirmed all ratings of FleetPride, Inc. (name
changed from HDA Parts System, Inc. on 12/1/99) but changed the rating outlook
to negative from stable. The ratings confirmed include the $200 million bank
facility rated B1 and the $100 million 12% senior subordinated notes, due
2005, rated B3. The senior implied rating was also confirmed at B1 and the
issuer rating at B2.
The negative rating outlook considers a performance decline that caused an
operating margin decrease to 5.5% in the first three months of 2000 versus
6.7% in the same period of 1999 and higher than anticipated leverage (debt to
EBITDA) of about 5.3 times. Aftermarket parts sales have been adversely
affected by several years of strong Class 8 heavy duty new truck sales and the
subsequent decrease in average fleet age as well as by economic pressure on
fleet operators related to higher fuel and driver costs. In addition, computer
system conversion and integration difficulties, and slower than anticipated
realization of merger synergies also negatively impacted operating results.
With recent same location sales decline of over 8% and the expected slow
return to a more traditional truck fleet average age, Moody's believes that
operating performance could remain weak in coming periods.
The ratings continue to reflect the company's leveraged financial condition,
the relative lack of operating history, and the intense competition within the
vehicle aftermarket parts industry. In addition, the ratings reflect the
nature of the company's aggressive growth-through- acquisition strategy.
However, the ratings also recognize the strong equity sponsorship and market
leading position of the company with major geographical coverage in the
northeast, southeast and western portions of the US, and its large,
diversified customer base. The company's market position and size provides the
capacity to better negotiate with vendors and parts manufacturers and to
leverage its investments in information technology and other back-office
functions.
The B1 rating on FleetPride's bank facility (comprised of a $125 million
revolver and $75 million term loan) reflects its senior position in the
company's capital structure as well as the benefits of security in
substantially all of the company's assets. The recent reduction of the
revolver commitment to $125 million from $150 million also benefits the
secured bank facility. (The bank agreement's leverage and interest coverage
covenants were also loosened for the period through 2001.) The B3 rating on
the senior subordinated notes reflects their contractual and effective
subordination to the senior secured credit facilities.
FleetPride, Inc. of Deerfield, Illinois, the nation's largest aftermarket
distributor of heavy-duty truck parts with annual sales of almost $550
million, has rolled up 28 parts distributors since June 1998 and currently
operates a network of more than 170 distribution and/or service center
locations in 33 states.
FRUIT OF THE LOOM: Court OK's 2004 Exams for Charities re Farley Contributions
------------------------------------------------------------------------------
Judge Walsh ordered 13 charitable organizations to submit to examinations
pursuant to Rule 2004, despite repeated and diverse objections by William
Farley. The organizations are thought to have received donations from Mr.
Farley or Fruit of the Loom when Mr. Farley was CEO. The charities must
produce documents and "knowledgeable" people within 20 days of the date on
which a Subpoena is properly served. Fruit of the Loom must give notice to
the Informal Committee, the Official Committee and Mr. Farley of any
subpoenas. All of the core parties-in-interest will have the right to review
requested documents and participate in oral examinations. On July 31, 2000,
at the Debtors' behest, the Clerk issued Subpoenas to each of the 13
charitable organizations. (Fruit of the Loom Bankruptcy News, Issue No. 9;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
GST TELECOMMUNICATIONS: Reports about Auction of Assets and 2Q Results
----------------------------------------------------------------------
GST Telecommunications, Inc., an Integrated Communications Provider in
California and the western United States, reported revenues of $56.8 million
for the quarter ending June 30, 2000, compared to $63.7 million reported for
the first quarter of 2000 and $86.9 million in the corresponding quarter last
year. Included in these revenues were construction and facility sale revenues
of $3.6, $9.0 and $34.5 million for the second and first quarters of 2000 and
second quarter of 1999, respectively. Construction revenues can vary
significantly from quarter to quarter based on transaction activity.
Telecommunications service revenues decreased two percent to $53.2 million in
the second quarter from $54.5 million in the first quarter. This reflects an
increase of four percent over the $51.2 million reported in the second quarter
of 1999.
Selling, general and administrative expenses for the three months ending June
30, 2000 were $31.2 million, a decrease of $4.4 million from the $35.6 million
reported in the first quarter of 2000. Capital expenditures for the quarter
totaled $17.5 million.
The Company reported second quarter adjusted Earnings Before Interest, Taxes,
Depreciation, and Amortization (EBITDA) of $(15.1) million, compared to
$(17.0) million reported in the first quarter and $2.4 million in the
corresponding quarter in 1999.
On May 17, 2000, the Company announced that it had filed in the U.S.
Bankruptcy Court for the District of Delaware for protection under Chapter 11
of the U.S. Bankruptcy Code. In addition, a Letter of Intent was executed with
Time Warner Telecom Inc. (Nasdaq: TWTC) for the sale of substantially all the
assets of GST for $450 million in cash, and a commitment was secured from
Heller Financial, Inc. to provide (Debtor In Possession) DIP financing for up
to $50 million (and the potential for up to an additional $75 million) to
continue day-to-day operations. Subsequently, the Letter of Intent with Time
Warner Telecom Inc. expired and the Company sought and received Bankruptcy
Court approval to proceed with an open bidding procedure for the auction of
substantially all of its assets.
"GST continues to operate 'business as usual' during the bidding process,"
stated Tom Malone, acting chief executive officer. "We have been focused
primarily on maintaining operational stability and conserving cash. With
assistance from our construction partners, we have modified the terms of many
of our construction agreements to accelerate cash receipts. These construction
agreement revisions, combined with new fiscal conservation measures instituted
over the last three months and operational efficiencies gained from continued
process improvements, have resulted in a cash position whereby the Company has
not yet needed to draw on the DIP financing secured from Heller Financial." As
of August 8, 2000, the Company had unrestricted cash and cash equivalents of
$27.7 million.
The bidding procedure stipulates that qualified buyers submit bids no later
than August 11, with the final auction to be conducted on August 22. On August
25, 2000, the Company will appear before the U.S. Bankruptcy Court for the
District of Delaware to seek approval of the sale of its assets to the highest
and best bidder(s). If some or all of the Company's assets are not sold
through the auction process, the Company will explore other options, including
reorganization and restructuring.
GREATE BAY: Discloses Talks with Hollywood Casino to Restructure Obligations
----------------------------------------------------------------------------
Greate Bay Casino Corporation (OTC Bulletin Board: GEAAQ) reported income from
operations of $144,000 for the second quarter of 2000 compared to a loss from
operations of $459,000 for the second quarter of 1999. Net revenues for the
second quarter of 2000 amounted to $4.1 million compared to net revenues of
$1.9 million for the second quarter of 1999.
The increases in net revenues and income from operations were attributable to
an increase in software installation revenues at Advanced Casino Systems
Corporation, the Company's sole remaining operating subsidiary.
For the six months ended June 30, 2000, the Company reported a loss from
operations of $861,000 on net revenues of $4.9 million compared to a loss from
operations of $634,000 on net revenues of $4.1 million for the comparable six
months of 1999.
The net loss from all sources amounted to $1.5 million for the second quarter
of 2000, and $4.1 million for the six months ended June 30, 2000 compared to
net income of $83.2 million and net income of $81.1 million for the comparable
three and six months ended June 30, 1999, respectively. The 1999 results were
due to a one time non-cash credit of $86 million resulting from elimination of
the Company's negative equity in Pratt Casino Corporation and its subsidiaries
when Pratt Casino Corporation and its subsidiaries filed for protection under
Chapter 11 of the United States Bankruptcy Code on May 25, 1999 as part of a
prenegotiated plan of reorganization. The reorganization, which was
consummated in October 1999, eliminated ownership and operating control of
these entities by Greate Bay.
Greate Bay had outstanding indebtedness to Hollywood Casino Corporation of
$53.4 million on June 30, 2000 including $9.9 million in demand notes and
accrued interest. ACSC's operations do not generate sufficient cash flow to
provide debt service on the Hollywood obligations and, consequently, Greate
Bay is insolvent. Accordingly, Greate Bay has commenced discussions with
Hollywood to restructure its obligations and, in that connection, has entered
into a standstill agreement with Hollywood. Under the standstill agreement,
monthly payments of principal and interest for the six months ended August 1,
2000 with respect to a note due from Hollywood, have been deferred until
September 1, 2000 in consideration of Hollywood's agreement not to demand
payment of principal or interest on the demand notes outstanding to Greate
Bay. There can be no assurance at this time that the discussions with
Hollywood will result in a restructuring of Greate Bay's obligations to
Hollywood. Any restructuring of Greate Bay's obligations, consensual or
otherwise, will require Greate Bay to file for protection under federal
bankruptcy laws.
HARNISCHFEGER INDUSTRIES: Beloit's Motion To Reject Six Executory Contracts
---------------------------------------------------------------------------
Because substantially all of the assets of Beloit have been sold and the
operations of Beloit have substantially terminated, Beloit no longer needs
equipment leased or services provided under various of the Agreements.
Accordingly, Beloit seeks authority to reject:
(1) the PKS Agreement for AS/400 computer services;
(2) Master Lease Agreement with Sun Financial Group relating to computer
equipment;
(3) Lease Order No. 1 relating to computer equipment leased from Sun
Financial commencing on April 25, 1997;
(4) Lease Order No. 1 relating to computer equipment leased from Sun
Financial commencing on June 24, 1997;
(5) Lease Order No. 2 relating to computer equipment leased from Sun
Financial;
(6) Agreement relating to Fagerland's license to Beloit of RDH patents and
other intellectual property;
Judge Walsh authorized the rejection of these six contracts. (Harnischfeger
Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
HEDSTROM HOLDINGS: To Shut Down Or Auction Off Subsidiary By Year End
---------------------------------------------------------------------
Before the year ends, toy manufacturer Amay Industries, Inc., will cease
operations and look for a buyer, Plastic News reports. What caused the
present situation is due to the financial predicament of its parent company
Hedstrom Holdings, Inc., in Illinois. The Mount Prospect-based parent filed
for bankruptcy protection under Chapter 11 in U.S. Bankruptcy Court in
Delaware last April. After the failed effort of reorganization of Amay, VP
Jim Brauenig of Hedstrom's Plastics in Ashland, Ohio, decided to shut down the
plant and auction off or transfer some of its machinery.
JOAN AND DAVID: Debtor Asks Court to Fix October 2, 2000, Bar Date
------------------------------------------------------------------
Joan and David Halpern Incorporated seeks entry of an order fixing a bar date
for the filing of proofs of claim against the debtor on October 2, 2000 at
4:00 PM. Each proof of claim must be received on or before the Bar Date if
sent by mail to: The US Bankruptcy Court, Southern District of New York, RE:
joan and david halpern incorporated, PO Box 37, Bowling Green Station, New
York, NY 10274.
LAROCHE INDUSTRIES: Creditors' Committee Applies to Retain Arthur Andersen
--------------------------------------------------------------------------
The Official Committee of Unsecured Creditors of Laroche Industries, Inc., and
Laroche Fortier, Inc., applies for an order authorizing the retention of
Arthur Andersen, LLP, as accountants and financial advisors for the Official
Unsecured Creditor's Committee.
The firm will perform the following services according to the affidavit of
Stephen J. Gawrylewski, partner at Arthur Andersen:
* The review of all financial information prepared by the debtors or
their accountants or other financial advisors as requested by the Committee,
including the debtors' financial statement showing all assets and liabilities
and priority and secured creditors;
* Monitoring of debtors' activities regarding cash expenditures, loan
draw downs and projected cash and inventory requirements;
* Attendance at meetings of the Committee, the debtors, creditors, their
respective attorneys and financial advisors, and federal, state and local tax
authorities, if required;
* Assistance to the Committee as requested;
* Review of plan of reorganization;
* Determination of whether debtors' financial condition is such that a
plan of reorganization is likely or feasible;
* Review of debtors' periodic operating and cash flow statements;
* Review of the debtors' books and records for related party
transactions, potential preferences and fraudulent conveyances;
* Preparation of a going concern sale and liquidation value analysis of
the estate's assets;
* Any investigation that may be undertaken with respect to the pre-
petition acts, conduct, property, liabilities and financial condition of the
debtors, including the operation of their businesses;
* Review of any business plans prepared by the debtors;
* Review and analysis of proposed transactions for which the debtors seek
court approval;
* Assistance with the auction or a sale of the debtors.
Andersen will charge for its services at its customary hourly billing rates.
Partners/principals $350-$495
Directors/managers $240-$425
Senior Consultants $150-$250
Consultants and Assistants $90-$150
LOEWEN GROUP: Mullin's Motion To Compel Decision About Non-Compete Agreement
----------------------------------------------------------------------------
The Mullins Family tells the Court that in 1994, like many other funeral
home operators, they sold their funeral home businesses and related
cemeteries to the Debtors. As part of the sale, the Mullins family agreed
not to compete with the Debtors. The Debtors in turn promised to pay
substantial non-compete payments in exchange for detailed non-compete
covenants, but has not paid any of the non-compete payments post-petition,
the Mullin Family alleges.
According to the Mullins Family, following the Court's ruling in August
1999 concerning the Debtors' request to reject hundreds of covenants not
to compete, the Debtors gave former owners of funeral homes express permission
to compete. However, the Debtors neither gave the Mullin Family
such permission nor made non-compete payments despite repeated requests.
The Mullins Family asserts that LGII's pecuniary obligations under a
Memorandum of Understanding and Agreement, include:
(A) $555,100 to John T. Mullins at $79,300 per year on May 10, 1998
and on May 10 of each following year until payment in full;
(B) $555,100 to be paid to Barbara A. Mullins at $79,300 per year on May
10, 1998 and on May 10 of each following year until payment in full;
(C) $350,000 to be paid to Jeanne M. Anderson at $50,000 per year on May
10, 1998 and on May 10 of each following year until payment in full;
(D) $350,000 to be paid to Beth A. Mullins at $50,000 per year on May 10,
1998 and on May 10 of each following year until payment in full;
(E) $639,800 the remainder of the $914,000 to be paid to David Mullins
payable $91,400 per year for 10 years on each anniversary of the
funeral home closing as his portion of the May 10, 1994 Mullins
Family Non-Compete.
Under the Agreement, the Mullins Family is obliged not to compete. The
Mullins Family asserts that the Debtors' default on payment would
constitute a material breach that would excuse the Mullins Family from
performance under the Agreement. Accordingly, the Mullins Family requests
the Court to order the Debtors to assume or reject the Agreement. (Loewen
Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
LONDON FOG: Business Plan Complete, Looks to Extend Exclusive Period to 11/20
-----------------------------------------------------------------------------
London Fog Industries, Inc. seeks an extension of its exclusive periods
during which the debtors may file a plan of reorganization and solicit
acceptances to such plan. A hearing on the motion will be held on August 21,
2000 at 4:00 PM.
The debtors request entry of an order extending the Exclusive Periods by
ninety days, to and including November 20, 2000 and January 19, 2001,
respectively. The debtors developed a business plan that contemplated three
basic steps to address the financial difficulties facing the debtors and to
reorganize the debtors' businesses: to dramatically reduce the debtors'
retail operations which have not been profitable, to consolidate the
administrative functions of LFI and Pacific Trail and to restructure the
debtors' long-term indebtedness. The debtor concluded inventory liquidation
sales at 108 of their former retail store locations. The debtors have 34
remaining store locations. The debtors have also made significant progress
toward formulation of a plan of reorganization.
The debtors and their professionals are nearing completion of the complex and
detailed financial and operational analysis necessary to enable them to
formulate a plan. The Claims Resolution process has taken a substantial
amount of time, and the debtors state that the extension of the exclusive
periods will afford the debtors the additional time necessary to complete
their financial and operational analyses to approach their creditor
constituencies and concretely to propose the terms of a plan with the
objective of achieving a consensual emergence form Chapter 11.
MAURICE CORP.: Ravelson Family Offers $15,000 for Tradename & Worcester Lease
-----------------------------------------------------------------------------
The Telegram & Gazette in Worcester, Massachusetts, reports that the Ravelson
family intends to buy back Maurice The Pants Man name by leasing the original
Worcester store, and to reopen in October. Parent company, Maurice Corp.,
filed for Chapter 11 and sold the business cause it failed to restructure its
debt. Even with the Chapter 11 filing, Arnold Ravelson and his family got
calls from Maurice The Pants Man customers which motivated to make the offer,
according to son Larry. Callers told Mr. Ravelson, "What are we going to do
without the store? We have been shopping there for 25 or 30 years." Mr.
Ravelson added, "Despite the bankruptcy of Maurice Corp., the Worcester store
has been a very good store, and the company's woes are not directly connected
to that location or to that store."
Maurice Corp. attorney, Kevin J. Walsh, Esq., said the Ravelsons' offered
$15,000 for Maurice Corp.'s trade names, including Maurice The Pants Man,"
customer list and assumption of the Worcester store lease. Ravelsons'
Attorney, Kevin C. McGee, Esq., said, they already own the real estate, which
includes 30-44 Millbury St., 13 Lamartine St. and 7-1/2 Lamartine St. "If the
offer is approved by the court," Mr. Ravelson said, "the family hopes to get
into the store after the liquidation sale is over at the end of August, clean
it up and spruce it up with fresh merchandise."
MONARCH DENTAL: CEO Upbeat about Revenue and Cost Control Initiatives
---------------------------------------------------------------------
Monarch Dental Corporation (Nasdaq: MDDS) reported results for the second
quarter and six months ended June 30, 2000.
Patient revenue, net grew 5.2% to $54.2 million for the second quarter
compared to the $51.5 million reported for the same period last year. Net
income for the quarter was $1.2 million. Net income includes pretax costs of
$473,000 related to the company's previously announced evaluation of strategic
alternatives. Excluding these costs, net income was $1.5 million compared to
net income of $1.1 million for the second quarter in 1999.
Gary W. Cage, Chief Executive Officer, stated, "We are pleased to show
continued solid financial performance in the second quarter. Our revenue
growth is attributable to a same-store growth rate of 5.8% for the second
quarter of 2000 resulting primarily from continued success in revenue
enhancement initiatives such as our patient focused marketing programs. Our
EBITDA margin improved to 14.9%, excluding strategic alternative costs, in the
second quarter compared to 12.7% for the same period last year due primarily
to revenue growth and cost-control initiatives implemented in 1999. The EBITDA
margin results of the second quarter mark the sixth consecutive quarter of
EBITDA margin expansion. Additionally, our cash flow from operations for the
second quarter was $3.9 million compared to $1.4 million for the second
quarter of 1999."
For the six-month period ended June 30, 2000, patient revenue, net was $109.2
million, as compared with $100.9 million in 1999. Net income for the six-month
period ended June 30, 2000, excluding strategic alternative costs, was $2.9
million compared to the $1.7 million for the six-month period ended June 30,
1999. Cash flow from operations, for the six months ended June 30, 2000 was
$8.5 million compared to $2.8 million for the six month period ended June 30,
1999. Mr. Cage concluded, "Based on second quarter financial results, we
expect that we will continue to realize the benefits of our revenue and cost
control initiatives throughout the remainder of 2000."
Monarch Dental currently manages 190 dental offices serving 20 markets in 14
states. The Company seeks to build geographically dense networks of dental
providers primarily by expanding within its existing markets, but also by
selectively entering new markets through acquisitions.
In Monarch's latest quarterly report filed with the SEC, the Company stated
that it "believes that cash generated from operations and borrowings under the
Credit Facility will be sufficient to fund its cash requirements in the second
quarter of 2000. However, the Company does not expect to generate sufficient
cash from operations to repay its obligations under its short-term note, due
June 30, 2000 under the Credit Facility, which the Company expects will
approximate $10.0 million at that time. Failure to make the required principal
payment would constitute a default under the Credit Facility. The Company is
currently discussing with its lenders an extension of this short-term note,
however, the Company can provide no assurance that its lenders will extend the
maturity of this short-term note. The Company believes that cash from
operations will be sufficient in the third and fourth quarters of 2000 to meet
its obligations." In announcing second quarter results, Monarch provides no
additional details about this projected shortfall.
PATHMARK STORES: EBL&S Development Offers $3,200,000 for Camden County Store
----------------------------------------------------------------------------
Pathmark Stores, Inc., and its debtor-affiliate, Plainbridge, Inc., present a
Motion to the Delaware Bankruptcy Court seeking authority to certain real
property, the assumption and assignment of certain unexpired leases and
limited indemnity of purchaser.
Plainbridge is the owner of property located at 130 White Horse Pike,
Gloucester Pike and East Atlantic Avenue in Lawnside, Camden County, New
Jersey, and of certain adjacent property. Pursuant to a sale agreement,
Plainbridge agrees to sell the property to EBL&S Development LLC for a
purchase price of $3,200,000, subject to certain adjustments. Pathmark will
indemnify the EBL&S for any expenses related to pre-Closing Date environmental
liabilities at the property in excess of $265,000 already set aside in an
Environmental Escrow Account.
PEP BOYS: Moody's Lowers Debt Ratings and Places Them Under Review
------------------------------------------------------------------
Moody's Investors Service lowered the ratings of The Pep Boys -- Manny, Moe &
Jack, based on the company's weak debt protection measures and continuing low
operating profitability, the intense competition in the automotive
aftermarket, and the slow growth in the important Do-It-Yourself segment of
the industry. The new ratings also incorporate the company's solid franchise,
geographic diversity and service capabilities. The ratings are also placed on
review for further possible downgrade. Moody's review will focus on Pep Boys'
efforts to develop new business to compensate for the slow-growing DIY market,
its strategies to boost operating efficiency, and the company's spending plans
and funding sources.
Ratings lowered and placed on review for further possible downgrade:
* Senior unsecured bank credit agreement guaranteed by material
subsidiaries to Ba2 from Ba1.
* Senior unsecured notes and medium term notes to Ba3 from Ba2.
* Convertible subordinated notes and debentures to B1 from Ba3.
* Senior implied to Ba2 from Ba1.
* Senior unsecured issuer rating to Ba3 from Ba2.
Pep Boys sells retail automotive parts and accessories, and also services and
installs parts. Service, excluding the sale of any installed parts or
materials, accounted for about 18.8% of fiscal 2000's total revenues. Pep Boys
is the largest retailer serving all three segments of the automotive
aftermarket: "do-it-yourself", "do-it-for-me" and "buy-for-resale". Overall,
about 47% of the company's revenues are generated by the DIY segment, which
has experienced softness in demand, as time-pressed consumers choose DIFM
service for their increasingly complex cars.
Pep Boys' margins lag those of some competitors that are entirely dependent on
DIY. In the second quarter ended July 29, 2000, the company earned a net
profit of only $4.38 million, of which $967 thousand was generated by a net
gain on the early retirement of debt. Operating profit margin of 3.1% for the
first six months is well below the 5.9% of the same period in the prior year.
Pep Boys has launched some initiatives to bolster performance. Recent
alliances with The Hertz Corporation and Safelite AutoGlass could help to grow
the customer base and improve returns. Operating efficiency and store service
levels may improve following the implementation of a decentralized divisional
store structure and new inventory and distribution systems.
Headquartered in Philadelphia, The Pep Boys - Manny, Moe & Jack currently
operates about 665 stores and 6,928 service bays in 37 states and Puerto Rico.
PINNACLE ONE: $810MM Issue of Senior Secured Notes Rated 'BBB-' by Fitch
------------------------------------------------------------------------
Fitch assigned a 'BBB-' credit rating to Pinnacle One Partners, LP/Pinnacle I,
Inc.'s (Pinnacle One) $810 million issuance of 8.83% senior secured notes
(notes) due 2004, issued and sold under Rule 144A. Proceeds will be used to
distribute cash to TXU Corp. (TXU) and fund an overfund account. The support
for the rating comes from an overfund account (pre-funded interest) and equity
commitment from TXU. The overfund account will be invested in TXU debt
securities (rated 'BBB'), with payments used to service interest to
noteholders. Fitch considers the cash flow stream to repay interest
representative of a 'BBB' credit profile. Payment of principal relies on the
remarketing of TXU's mandatorily convertible preference securities. Fitch
currently rates TXU's preference securities 'BBB-'.
TXU Corp., through its wholly owned subsidiary TXU Communications (TXUC), is
entering into a joint venture with a third-party investor to monetize its
telecommunications investments. The new joint venture (Pinnacle One) will be a
special-purpose Delaware-limited partnership, formed exclusively for the
purpose of this transaction and restricted to activities of only holding its
interests in TXU Communications Ventures (AssetCo) and an Overfund Trust.
The monetization of telecom assets will be funded through an $810 million
issuance of senior secured notes backed by an equity commitment in the form of
mandatorily convertible preference stock from TXU Corp. and a $150 million
contribution from a third-party investor in exchange for a 50 percent
ownership interest (Class A Common Equity Interest) in Pinnacle One.
Meanwhile, TXU (through TXUC) will contribute telecommunication assets with a
current market value of approximately $760 million to Pinnacle One in exchange
for a cash distribution of approximately $600 million and a 50 percent equity
interest (Class B). The remaining capital raised will be earmarked to pre-
funded interest ($337 million) and pay transaction costs. These proceeds will
be invested in TXU debt securities or higher-rated government securities, with
semi-annual amortizing payments used to service interest to noteholders and
the preferred yield to Class A interest holders (investor).
While multiple principal repayment sources are available, such as an Initial
Public Offering (IPO), the sale of AssetCo or the sale of Pinnacle One's
equity, noteholders should view TXU's support and equity commitment as the
fundamental components of this transaction.
Upon a Note Trigger Event and subject to certain standstill periods, the Share
Trustee will cause the remarketing of TXU Mandatorily Convertible Preference
Stock on terms that are designed to generate an amount sufficient to redeem
the notes in full. In the event that the issuance of the preference securities
yields less than $810 million, under the Share Settlement Agreement, TXU is
required to deliver additional shares until at least $810 million has been
raised. If TXU cannot or does not deliver on this obligation, then the
difference between $810 million and the amount raised becomes a payment
obligation to TXU. This obligation would represent a general unsecured claim
of TXU. The issuance of additional shares to make noteholders whole in a
downside scenario includes the following trigger events: an event of default
on the Pinnacle One notes occurs and notes are accelerated; 120 days prior to
maturity on Pinnacle One notes if amounts sufficient for 100 percent principal
repayment have not been received by the trustee as a result of the sale of TXU
equity or other equity (which may include the mandatorily convertible
preference stock); downgrade of TXU's senior unsecured debt below 'BB+/ Ba1'
by Fitch, S&P or Moody's; and a decline in TXU's stock price by 30 percent
over three consecutive days prior to the date of pricing of the notes (based
on the average ten day closing price).
Additional security for the notes is in the form of TXU's telecom portfolio
(equity interest in AssetCo). If an event of default occurs and notes are
accelerated and a 120-day standstill period has passed, at the direction of at
least 25% of the then outstanding principal amount of the notes, Pinnacle One
noteholders may force the sale of the telecommunications assets.
Importantly, the ultimate net proceeds from the sale will vary depending on
the price received less any debt obligations held at the operating companies
(under AssetCo, including the revolver). Initially, TXU will act as a lender
to assist with the telecom growth strategy, establishing a $200 million
revolver (between TXU and AssetCo) to fund working capital needs, capital
expenditures and any modest acquisitions.
This transaction provides TXU with an efficient vehicle to monetize its
telecom portfolio, effectively accelerate the process for capital redeployment
and de-consolidate TXUC, while maintaining flexibility for future telecom
growth. Besides supporting TXU's telecommunications growth strategy, the joint
venture financing structure provides a modest enhancement to the credit
quality of TXU. Proceeds from this issuance (Pinnacle One) will be used to
reduce TXU's outstandings under its commercial paper program, thus improving
short-term financial flexibility and lowering debt levels (reducing
debt/capital ratio by 1 percent to approximately 61 percent). Fitch does not
expect the success/failure of TXU's telecommunication activities to materially
impact TXU's consolidated credit quality. Currently, the telecommunication
business represents a small portion of TXU's asset portfolio and provides
minimal contribution to consolidated cash flows.
TXU is a holding company whose credit support is primarily derived from the
strong cash flow and healthy credit profile of its subsidiaries TXU Electric
(rated 'A-' on a senior secured basis) and TXU Europe (rated 'BBB+' on a
senior unsecured basis). Other strengths include a geographically diverse mix
of utilities businesses, more than $40 billion in assets globally, and
substantial customer franchises in Texas, UK and Australia. While TXU's
capital structure has been stable over the last two years, parent company
leverage and consolidated financial ratios are weaker than other 'BBB' rated
peers.
TXU currently provides telecommunications services, which include telephone,
telecom and transport businesses, through its wholly owned subsidiary, TXUC.
Services being offered by TXUC include local, long distance, cellular, paging,
Internet access, web hosting and development, and network and data services.
Additionally, TXUC leases out capacity on its fiber-optic network to other
communications carriers as well as TXU. Management believes the company is
well positioned to capitalize on telecommunication growth opportunities
specifically in Texas. One of the strategies the company is pursuing is to
leverage the significant customer base and name recognition associated with
the energy business (sister companies). This relationship should provide TXUC
with many cross-selling opportunities including the bundling of energy and
telecom services. TXUC expects its growth in Texas to be diversified, with a
focus on building the transport and telecom businesses. TXUC plans to build
customer share in the top 20 Texas markets, with heavy emphasis on small-to-
medium business customers.
Based on current industry multiples, the business (whose primary operations
consist of two incumbent local exchange carriers and a CLEC) has an implied
equity market valuation of approximately $760 million. TXU anticipates that
this business will experience a significant increase of market value over the
next few years as its competitive communications business grows.
RELIANCE GROUP: Stull, Stull & Brody Files Noteholders' Class Action Complaint
------------------------------------------------------------------------------
A class action lawsuit was filed on Aug. 10, 2000, in the United States
District Court for the Southern District of New York on behalf all persons who
purchased the 9% Senior Notes, due November 2000 or the 9 3/4% Senior
Subordinated Debentures due November 15, 2003 of Reliance Group Holdings,
Inc., (NYSE:REL) between February 8, 1999, and May 10, 2000.
The Complaint charges that defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by
issuing a series of material misrepresentations to the market between February
8, 1999, and May 10, 2000.
For example, as alleged in the Complaint, on March 31, 1999, defendants, in
their financial statement filed with the SEC for its fiscal 1998 operations,
stated that the Company's reinsurance contracts were valid, and that it
expects to recover the full amount of such coverage. This statement was false
and misleading, and defendants knew, or recklessly disregarded its falsity,
because the Company was notified, prior to making the statement, that several
reinsurance companies terminated their obligations to the Company. Because the
Company's obligations to its insureds remained intact, the Company's expected
losses exceeded $150 million. Furthermore, this $150 million loss should have
been reflected as a charge to income, under Generally Accepted Accounting
Principles, and was not, thereby masking the Company's true, and impaired,
financial condition and prospects.
On May 10, 2000, the Company reported that its first fiscal 2000 quarter would
see an operating loss of $.31 per diluted share, which represented a greater
loss than the comparable 1999 quarter. That day the price of Reliance Group
stock closed at $2.625- a decline of over 400% from the class period high of
$11 per share.
Contact Tzivia Brody, Esq. at Stull, Stull and Brody at 1-800-337-4983 or
SSBNY@aol.com for further details.
ROBERDS, INC: Liquidation Nearly Complete, Needs More Time to File a Plan
-------------------------------------------------------------------------
Roberds, Inc., asks the U.S. Bankruptcy Court for the Southern District of
Ohio for an order further extending the periods during which it has the
exclusive right to file a plan of reorganization and the exclusive right to
solicit acceptances of that plan. The debtor requests that its exclusive
filing period be extended through and including December 16, 2000, and that
the Exclusive Solicitation Period be extended to February 14, 2001.
The debtor has been actively liquidating its remaining stores, which
liquidation sales are to be completed on or about September 15, 2000. On
July 7, 2000 the debtor filed a motion to sell at auction the remaining real
estate leases and real property sites it owns. The debtor believes that
within the next 120 days the debtor may be able to file a plan of
reorganization and disclosure statement.
SAFETY-KLEEN: Agrees to Excise 4 Law Firms Ordinary Course Professionals List
-----------------------------------------------------------------------------
To placate the United States Trustee's concerns about how much money the
Debtors could pay to professionals employed in the ordinary course of
their businesses -- up to $25,000,000 a year without Bankruptcy Court
oversight, Frank J. Perch, III, Esq., an Attorney-Advisor for the Office of
the United States Trustee complained to Judge Walsh -- Safety-Kleen Corp.
agreed to excise from their Application to employ and pay ordinary course
professionals the four law firms they believe will bill the most each month.
The Debtors will present formal applications to retain:
* Overlayer, Rebmann, Maxwell & Hippel;
* Karaganis & White;
* Zevnick, Horton, Guibord, McGovern, Palmer Fognarii; and
* Arter & Hadden
as special counsel and these four law firms will be required to present
formal Fee Applications to the Bankruptcy Court in Wilmington, Delaware.
With this modification, Judge Walsh Approved the Debtors' Application,
authorizing the Debtors to pay their Ordinary Course Professionals up to
$30,000 per month and $250,000 during the entire case, without further
oversight by the Court. (Safety-Kleen Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SCAFFOLD CONNECTION: Improved Earnings Likely to Bolster Support for CCAA Plan
------------------------------------------------------------------------------
According to The Edmonton Sun, troubled Scaffold Connection Corproation
announced $4 million in net earnings for the quarter ending June 30, compared
to a net loss of $3.4 million last year. The Edmonton-based company has
operated under Companies Creditors Arrangement Act protection since Dec. 23
and is presenting its plan to creditors this week. "Highlights of the plan,"
the Company says, "include secured creditors providing ongoing financing and
deferring interest and principal payments and the debt of unsecured creditors
being converted into common shares primarily at a rate of 60 cents per share."
An estimated amount of $20 million of unsecured debt will be converted to 35.4
million common shares.
In the July 14 edition of the TCR, we reported that Scaffold Connection
Corporation filed its Second Amended and Restated Plan of Arrangement and
Compromise with the Court of Queen's Bench of Alberta. Shareholders will be
asked to ratify the Plan at a Special Meeting set for August 18, 2000.
SIERRA HEALTH: Fitch Downgrades Financial Strength Ratings To 'BB+'
-------------------------------------------------------------------
Fitch, the international rating agency formed through the merger of Duff &
Phelps Credit Rating Co. and Fitch IBCA, has downgraded to 'BB+' the insurer
financial strength ratings on the following three subsidiaries of Sierra
Health Services (SIE): Health Plan of Nevada (HPN), Sierra Health and Life
Insurance Company (SHL) and Sierra Insurance Group (SIG). The Rating Outlook
is Negative.
Today's rating action follows Fitch's discussions with SIE's management
regarding second quarter 2000 operating results, which showed a net loss of
$207 million. The rating action reflects our concerns regarding SIE's
financial flexibility and much lower-than-expected operating results driven by
underperformance in Texas-based health plan operations and associated charges.
SIE did announce the sale of the company's Houston operations, which should
improve the Texas operating results. While Fitch was anticipating charges in
the quarter, the level of charges was higher than expected. Furthermore, the
rating action reflects our view that SIE will be challenged to reduce
financial leverage in line with our expectations within a reasonable time
frame. At June 30, 2000, SIE's ratio of debt-to-total capital was an estimated
76% on a consolidated basis.
SIE is pursuing the sale of certain real estate properties and other assets to
free up additional capital. Fitch expects that these sales will be completed
around yearend 2000 and that proceeds will be used to reduce outstanding debt
and improve the capital position of its operating subsidiaries.
The ratings on HPN and SHL continue to reflect SIE's dominant market share in
the southern Nevada health care market, with strong and profitable competitive
positions in the Medicare risk and commercial segments, and modest capital
adequacy. Operating performance at HPN and SHL has generally met Fitch's
expectations in 2000. The ratings on SIG continue to reflect adequate balance
sheet fundamentals with strong asset quality and good capitalization.
Operating performance at SIG has been somewhat below expectations due to
negative reserve development primarily related to claims incurred prior to
company's implementation of a low-level reinsurance program in July 1998.
SIE is a publicly held, diversified managed care holding company based in Las
Vegas, NV, with operations primarily in managed care, health insurance and
workers' compensation insurance. HPN is a for-profit, federally qualified HMO.
HPN operates as a mixed group/network model HMO and was organized in 1981 in
the state of Nevada. SHL is a stock life insurance company. Members of the SIG
Intercompany Pool are: California Indemnity Insurance Co., Commercial Casualty
Insurance Co. and Sierra Insurance Company of Texas.
SILVER WEST: Case Summary
--------------------------
Debtor: Silver West Homes Inc.
733 E. Glendale
Parks NV 89434
Chapter 11 Petition Date: August 11, 2000
Court: District Of Nevada
Bankruptcy Case No: 00-32289
Judge: Gregg W. Zive
Debtor's Counsel: Cliff Young, Esq.
600 S Virginia St Ste B
Reno NV 89501
(775) 786-7771
Total Assets: $ 3,531,000
Total Debts : $ 1,031,428
SOUTH CAMERON: Former CEO Faces More Indictments on Theft of Hospital Funds
---------------------------------------------------------------------------
The Associated Press reports that a Cameron Parish, Louisiana, grand jury will
meet for the second time on the case of the state's first bankrupt hospital.
Former CFO, Joe Soileau, who was not present before the panel, was indicted
last year on four counts of theft. He is accused of stealing a total of
$425,000 from South Cameron Memorial Hospital which he handled for 10 years.
District Attorney Glenn W. Alexander said, "When the grand jury meets again,
we'll call more witnesses and have more testimony, and after that it could be
possible there will be more indictments of Mr. Soileau and possible others."
Mr. Alexander will recall again the panel in late September.
The South Cameron Memorial Hospital owes the Health Care Finance
Administration between $7 million and $12 million as a result of Medicare
overpayments in 1997 and 1998. The hospital based in Cameron, Louisiana, also
owes the state more than $100,000 and more than $240,000 to other creditors.
The debt pushed the hospital to be the first in the state to be in bankruptcy.
SUN HEALTHCARE: Government Agencies Agree to Facility Disposal Protocol
-----------------------------------------------------------------------
Sun Healthcare Group, Inc., tells the Bankruptcy Court in Wilmington,
Delaware, that the disposition of underperforming assets is crucial to the
Company's reorganization. Sun says that it is best to dispose of facilities
without affecting the health and safety of their patients. However, disposing
of facilities on a going concern basis is complicated by the interaction of
the Bankruptcy Code with the Medicare and Medicaid programs, the Debtors tell
Judge Walrath.
HHS's Perspective
In response to one of the initial motions made by the Debtors, the U.S.
Department of Health and Human Services objected to a new operator's use of a
Debtor's Medicare Provider Agreement pending the new operator's certification.
Under the position espoused by HHS, the Debtors must assume and assign
Medicare Provider Agreements in order to transfer such Provider Agreements to
new operators.
Although HHS directly administers the Medicare program and not the Medicaid
programs, it has considerable influence over the states' administration of
the Medicaid programs. Under federal law, the federal government pays a
portion of the Medicaid payments made by the states to providers such as the
Debtors. If the states were to permit a new operator to use a Debtor's
Medicaid Provider Agreement, in certain circumstances the state would be at
risk of non-reimbursement from the federal government for such Medicaid
payments. The risk of federal non-reimbursement effectively prevents the
states from adopting a position on the transferability of Provider Agreements
inconsistent with HHS's position.
Moreover, absent an agreement to the contrary, assumption of the Provider
Agreement results in the elevation of HHS' prepetition claims to
administrative expense priority status, which is onerous and unacceptable to
the Debtors' estates and creditors.
Absent an agreement, the Debtors also have difficulty in closing or entering
into any transfer transactions because HHS argued that any transferee of a
Facility would assume liability for any overpayment and other claims arising
under the existing Provider Agreement. The risk of assuming an unknown and
potential liability understandably is a cause of concern among potential new
operators.
Settlement and Authority Sought
Settlement discussions with HHS and the Department of Justice, Sun relates,
have become global in nature, but for the Debtors to begin the process of
disposing of the Divested Facilities in the meantime, the parties have agreed
to negotiate a more limited stipulation.
Pursuant to that, the Debtors seek the Court's approval, under Rule 9019 and
section 365 of the bankruptcy code, of a stipulation of settlement with the
United States of America on behalf of the Health Care Financing
Administration and Office of Inspector General of the United States
Department of Health and Human Services and the Department of Justice, and of
procedures for the disposition of certain healthcare facilities and the
leases and provider agreements.
The Stipulation is not signed and remains subject to final comment and
approval by both parties. The Debtors believe there will not be many changes
but promise that they will make available the final form of the Stipulation
at or before the hearing which has been set for August 10, 2000.
Salient Terms of the Stipulation
(1) Effective Date of Stipulation is the date of the Court's final order
approving the Stipulation.
(2) Assumption and Assignment of Medicare Provider Agreements to new
operators can be made by the Debtors for the Divested Facilities.
(3) Transfer Date will be the date of transfer of operational and
financial control.
(4) Compliance with Law and obtaining HCFA Approval by a new operator for
a change of ownership are precedent conditions for the effectiveness
of transfer. Sun will give notice to HCFA of each proposed transfer
at least 10 business days before the Transfer Date, unless HCFA
agrees to lesser notice.
(5) Termination and Rejection of Provider Agreements can be made by the
Debtors provided that the Debtors obtain approval of a transition
plan for residents according to applicable law and forward a copy of
the plan to HCFA not later than the date due to the state under
applicable law.
(6) Closure Date is the date that a closed Divested Facility ceases
operations according to applicable law and the Debtors must notify
HCFA of such a Date at least ten business days in advance.
(7) Cure Payment of $1,235,000 for defaults arising under a Medicare
Provider Agreement through the Transfer or Closure Date must be made
by the Debtors to the United States within three days of the
Effective Date, pursuant to section 365(b)(1)(A) of the Bankruptcy
Code.
(8) No Successor Liability to the United States for claims will be imposed
on new operators, including claims under the False Claims Act and
common law fraud, arising from Debtors participation in the Medicare
program prior to the Transfer or Closure Date of each Divested
Facility, but each new operator succeeds to the quality history.
(9) Continued Interim Medicare Reimbursement Payments or similar payments
will be made by HCFA to the Debtors as reimbursement for services
provided by the Divested Facilities to Medicare beneficiaries on a
continuing basis, including any Interim Payments due for all cost
reporting periods up to the Transfer or Closure Date.
(10) Mutual Release is provided for. The United States will release the
Debtors from all Medicare-related amounts they may owe to HCFA,
except for claims under the False Claims Act and common law fraud.
The Debtors will waive all claims for reimbursement HCFA may owe,
except for Interim Payments, and will withdraw with prejudice
pending administrative or judicial appeals within ten business days.
(11) Terminating Cost Reports will be filed by the Debtors for respective
Divested Facilities for the period commencing with the first day of
the fiscal year in which the transfer or closure is effective, and
ending on the applicable Transfer Date or Closure Date. The new
operator may elect to begin a new cost reporting year starting on
the Transfer Date or file a partial cost report from the Transfer
Date through the end of the fiscal year in which the transfer is
effective. This election will not render the new operator or the
Debtors responsible for each other's overpayments or other
associated liabilities under such cost reports.
(12) Right to Audit is reserved by HCFA for any cost reporting period up
to the Transfer or Closure Date. The Debtors reserve the right to
challenge any determinations of overpayment. Unaudited amounts
relating to the Divested Facilities, held in administrative freeze
pending audit, will be released to HCFA without further review.
(13) Time Limitation for Transfer or Closure by the Debtors will be 180
days, from the date of a final order approving the Stipulation, to
effectuate the closure or transfer of the Divested Facilities. Any
claims the Federal Agencies may have against the Debtors will be
governed by the Stipulation only to the extent that the Transfer
Date or Closure Date of each Divested Facility takes place within
such 180 day period. The 180 day period may be extended by mutual
agreement.
(14) The Federal Agencies' claims against the Debtors not released in the
Stipulation will be treated as if the Medicare had been rejected
pursuant to section 365 of the Bankruptcy Code and will not be
elevated to the status of an administrative expense claim by virtue
of Debtors' assumption and assignment of the Medicare provider
agreements.
Transfer Procedures
Given the number of Facilities to be transferred, the Debtors propose Transfer
Procedures for saving time and resources for Sun and the Court:
(1) Each transfer transaction will include a lease termination agreement
(the LTA) and an operations transfer agreement (the OTA);
(2) The applicable Lease of the Divested Facility will be rejected
pursuant to the LTA, the transfer of operational and financial
control will be governed by the OTA, and the Debtors will seek Court
approval of the requested treatment of the Medicaid Provider
Agreement.
(3) The Debtors will seek approval of a particular transfer transaction
upon ten days advance written Notice of Transfer to
(i) the respective counterparty or counterparties to such Lease,
(ii) the Creditors Committee,
(iii) the Office of the United States Trustee for the District of
Delaware,
(iv) attorneys for the Debtors' postpetition lenders,
(v) attorneys for the Debtors prepetition lenders,
(vi) HHS/DOJ, and
(vii) all parties on the Debtors' master service list.
(4) The Notice of Transfer will be accompanied by a synopsis of details
including the treatment of any state Medicaid Provider Agreement, and
an LTA and OTA blacklined copy to reflect any changes made to the
form LTA and OTA.
(5) If an objection to a Notice of Transfer is filed and served upon the
Debtors' counsel within the ten day notice period, the Notice of
Transfer will be heard at the Court's next omnibus hearing date, but
the Debtors may seek an earlier hearing.
(6) If no objection is received to a Notice of Transfer within such ten
day period, the Court may enter an order approving the transfer
transaction without a hearing.
The Debtors contend that the motion should be approved because:
(1) The Divested Facilities continue to be a huge burden to the estate;
(2) The Stipulation settles all related claims (other than fraud claims)
between HHS/DOJ and the Debtors for one lump sum payment;
(3) The Stipulation provides for full satisfaction of any cure obligation;
(4) Release of new operators from successor liability for any alleged
claims is a key element for attracting new operators for the Divested
Facilities;
(5) The Stipulation provides a favorable basis for the Debtors to approach
the relevant state Medicaid agencies for an arrangement for the
transfer of Medicaid Provider Agreements;
(6) The Stipulation is only the first step in the continuing negotiations
of a global settlement between the Federal Agencies and the Debtors.
Americorp Seeks Clarification
Americorp Financial, Inc. as party to a Master Lease with the Debtors,
reminds that Court to address the interest of Americorp because the Debtors'
motion does not say whether, as part of the sale, the Debtors plan to transfer
equipment leased from Americorp, and it is also unclear whether the
Debtors intend to assume and assign the Lease with Americorp.
Precision Data Claims Royalty Fees
Precision Data Systems, Inc. tells the Court that ACP and PDS are parties to
an Agreement under which ACP agreed to pay PDS a royalty fee of $50 for each
OminSound 3000 unit sold or transferred by ACP or its affiliates in partial
consideration for work PDS performed in the development of the OmniSound
3000. The Debtors seek to transfer 459 OmniSound 3000 units from ACP to
SunDance Rehabilitation Corporation and then ultimately to the Castels and
the Beaches but the relief sought does not address any of PDS's entitlement
to royalty fees. PDS claims that it is entitled to $22,950 royalty fees
pursuant to the motion and reminds the court that this issue needs to be
addressed. (Sun Healthcare Bankruptcy News, Issue No. 13; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
SUNSHINE MINING: Noteholders Agree to Extend Maturity Date to Aug. 18, 2000
---------------------------------------------------------------------------
Sunshine Mining and Refining Company (OTCBB:SSCF) announced that a meeting of
the Noteholders of the 8% Senior Exchangeable Notes of Sunshine Precious
Metals Inc. (the Eurobonds) was convened. At the meeting, a motion was made
and passed to further extend the maturity date and interest payment date of
the Eurobonds from Aug. 11 to Aug. 18, 2000. The meeting has been adjourned
until Aug. 18, 2000. As previously announced, Sunshine is continuing
negotiations with the Noteholders and holders of its other debt securities
regarding a comprehensive restructuring of the Company's balance sheet.
Sunshine Mining news releases and information can be accessed on the Internet
at http://www.sunshinemining.com.
TEXAS HEALTH: State Asks Kern To Lower Stake To Emerge From Bankruptcy
----------------------------------------------------------------------
The Wall Street Journal reports that Texas Health Enterprises' owner faces a
tough decision if his chain is to emerge from bankruptcy. Texas Health owner
Peter "Woody" Kern is required by the Department of Human Services to lower
his stake in the company. HHS' approval is vital, as the chain needs a state
license to serve Medicaid patients. And Medicaid patients constitute nearly
75% of the chain's business.
The Department of Human Services suggests that Woody Kern should hold no more
than a 5% equity stake in Reorganized Texas Health. Kern's pushing for a 15%
interest. Department spokeswoman Rosemary Patterson says, "If Mr. Kern
pursues such request, they will be forced to check his records on his
industry." Ms. Patterson adds that Mr. Kern, "doesn't have a very good
history of operating nursing homes."
An attorney monitoring the case, Debra Green, Esq., says state officials
haven't come to a decision yet. She adds, "We have told [the creditors] to
look at the history of how [the company] is operated and state regulations.
They can make their own decision."
The reorganization fight began in May, when Texas Health Enterprises filed its
reorganization plan. Under the plan, the company was to be divided up among
its creditors -- but Mr. Kern was himself a creditor. Mr. Kern had lent Texas
Health Enterprises $5.5 million before the company filed for bankruptcy, and
under the plan he retains as much as a 15% stake in the new company.
TREND-LINES: Reorganizes Under Chapter 11 Bankruptcy Protection
---------------------------------------------------------------
Revere, Massachusetts-based Trend-Lines, Inc. (Nasdaq: TRND), announced that
the Company and its wholly-owned subsidiary, Post Tool, Inc. have filed
voluntary petitions to reorganize the business under Chapter 11 of the U.S.
Bankruptcy Code.
Stanley Black, CEO of Trend-lines Inc., stated, "While we are disappointed
in having to take this step, it will allow us to reorganize our business and
create an opportunity to return to profitability. We are confident that the
vendor community will work with the Company to effectuate a successful
turnaround and that our management team and our associates are committed to
this task."
The Company announced in June that it was planning to divest itself of its
golf businesses in order to concentrate on its larger and more profitable tool
business. The Company is currently negotiating with one or more parties to
sell its Golf Day businesses and expects to conclude a transaction by early
September.
Wherever you prefer to putter, be it around the workbench or on the green,
Hoovers says, Trend-Lines has the gear for you. The specialty retailer sells
woodworking tools and accessories through a catalog and some 120 Woodworkers
Warehouse stores in the Northeast and Mid-Atlantic and nearly 30 Post Tool
stores in California and Nevada. Trend-Lines offers brand-name tools such as
Black & Decker, as well as private-label tools under under its Carb-Tech,
Reliant, and Vulcan names. It also sells golf equipment and clothing through a
catalog and at about 80 Golf Day stores, but plans to sell these operations.
Chairman and CEO Stanley Black and his wife, Emilia, own about 40% of Trend-
Lines and control 77% of the voting power.
UNITED COMPANIES: CSFB Objects To Whole Loan/REO Portfolio Sale to EMC
----------------------------------------------------------------------
Credit Suisse First Boston Management Corporation objects to the terms and
conditions of the Mortgage Loan and REO Property Purchase Agreement
with EMC Mortgage Corporation and The Bear Stearns Companies, Inc.
CSFB holds $73,360,000 in outstanding principal amount of Subordinated Notes,
$7 million in outstanding principal amount of 9.35% Senior Notes and $1
million in outstanding principal amount of 7.70% Senior Notes. CSFB holds an
unsecured claim in the aggregate principal amount of $81.36 million, plus
interest and fees. CSFB is the single largest holder of the Subordinated
Notes, holding nearly 50% of the outstanding principal amount thereof.
According to CSFB, the proposed sales constitute " an ill-conceived and
impermissible vehicle of senior creditors to realize a short-term return at
the expense of Subordinated Claimants, who are frozen out of the sale
proceeds under the debtors' plan. CSFB claims that the debtors capitulated
to pressure from the Creditors' Committee and signed the Letter of Intent
with EMC. CSFB also refers to the statement of two previous CEO's who both a
third-party subservicing arrangement would maximize the value of the assets.
CSFB complains that the debtors neither sought the input of nor negotiated
their plan with CSFB. In abandoning their pursuit of a subservicing
arrangement for what CSFB terms a "distressed" sale, CSFB states that the
debtors caved into pressure from the Creditors' Committee, which insisted
upon an auction without a floor, rather than an auction with a "stalking
horse" bidder.
CSFB proclaims that the debtors have renounced their fiduciary duties to
creditors who, in their view, are out of the money. CSFB also pints out that
by virtue of the Incentive Fees the debtor has promised to pay Jay Alix in
the event of, first, a sale of substantially all of the debtors' assets to a
third party, and, again, consummation of a Chapter 11 plan proposed by the
debtors, Jay Alix stands to benefit considerably from consummation of the
sale and concomitant confirmation of the debtors' plan. And finally CSFB
states that the debtors have not and can not show that the purchase price is
fair and equitable.
Bingham Dana LLP serves as lead counsel to Credit Suisse First Boston
Management Corporation, assisted by The Bayard Firm as local counsel in
Wilmington, Delaware.
UNITED COMPANIES: SBC and ESH Agrees over Modified Plan of Reorganization
-------------------------------------------------------------------------
United Companies Financial Corporation (OTC:UCFNQ) announced that it reached
an agreement with a representative of the holders of Subordinated Debenture
Claims and the Official Committee of Equity Security Holders to support a
modified plan of reorganization to be filed shortly by United Companies in
connection with the chapter 11 cases of United Companies and certain of its
subsidiaries, which cases are pending in the U.S. Bankruptcy Court for the
District of Delaware in Wilmington. The Equity Committee has agreed to
withdraw its competing plan of reorganization and both the Equity Committee
and such representative of the holders of Subordinated Debenture Claims have
agreed to withdraw objections filed with the Bankruptcy Court to the
previously announced sale of United Companies' whole loan portfolio and
residual and other interests and servicing rights to EMC Mortgage Corp.
For voting purposes and mailing of notices related to the modified plan of
reorganization, June 30, 2000 is the Record Holder Date for the holders of
claims and interests. The voting deadline is 4:00 PM Eastern time on September
11, 2000. A hearing to consider confirmation of the modified plan of
reorganization is scheduled to commence on September 13, 2000.
United Companies Financial Corporation is a specialty finance company that
historically provided consumer loan products nationwide and currently provides
loan services through its lending subsidiary, UC Lending(R). The Company filed
for chapter 11 on March 1, 1999.
VALUE AMERICA: Halts E-tailing, to Restructure as Electronic Services Business
------------------------------------------------------------------------------
Value America, Inc. (NASDAQ:VUSA, http://www.VA.com)announced that it filed
for chapter 11 protection and will reorganize its business. The filing was
made in the federal bankruptcy court for the Western District of Virginia. The
Company also announced that it has discontinued its e-retailing operations and
undertaken a reduction in force to concentrate on the development of its
electronic services business.
The electronic services business involves operating an infrastructure system
for third party manufacturers, vendors and distributors to enable them to
fulfill online orders from consumers, arrange for payment, and deliver goods
and products to the consumer, through the use of the Internet.
Glenda Dorchak, Chairman and CEO said, "The decision to shut down our Internet
retailing business was difficult. Despite tremendous efforts on the part of
our employees and the loyalty of our vendors and customers, it has become
apparent that the prospect for near term profitability of a company engaged
exclusively in the retail side of the electronic commerce industry is not
assured." As part of the shutdown today, the Company terminated 185 employees
involved in its retailing operations.
According to Dorchak, "The Chapter 11 filing will protect the interest of our
many stakeholders and should ensure that our electronic services business has
an opportunity to develop and move forward. After careful consideration, and
despite our good faith efforts, we were unable to establish to our
satisfaction that our Internet retailing operation would become profitable
within a reasonable time frame. However, we believe the Company has one of the
most sophisticated and commercially viable technology infrastructure backbones
in e-commerce today. We also believe that it will prove valuable to other
companies who want to launch an e-commerce solution of their own on the
Internet."
With the help of outside consultants, the Company said it has conducted
extensive market research to understand how other companies, embarking on
their own e-commerce solutions, could deploy Value America's experience,
processes and technology. The Company also said it subjected its e-services
business plan to due diligence reviews by potential commercial partners and
received favorable feedback. The Company intends to continue with its e-
services development efforts during the Chapter 11 proceeding. Unlike other
dot.com companies that have recently filed for bankruptcy protection, Value
America said it expected its electronic services business would emerge, on a
stand-alone basis, from the reorganization filing and restructuring efforts.
Potential investors and acquirers already have expressed interest in the
electronic services business proposition, the Company announced. Dorchak said,
"We are hopeful that this filing will give Value America the breathing room it
needs to further enhance the value of our technology and infrastructure assets
and further explore opportunities for our electronic services business."
VENCOR, INC: Healthcare Service Provider Reports $5 Million 2Q Loss
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Vencor, Inc., announced its operating results for the second quarter ended
June 30, 2000.
Revenues for the quarter totaled $713 million compared to $689 million in the
year-earlier period. The Company reported a net loss of $5 million in the
second quarter of 2000 compared to a net loss of $41 million in the second
quarter of 1999.
The net loss for both quarterly periods included certain unusual items. In the
second quarter of 2000, the Company recorded a gain of $5 million on the sale
of a closed hospital and incurred costs of approximately $3 million in
connection with its restructuring activities. Second quarter results for 1999
included a charge of $21 million associated with the write-down of an
investment and the cancellation of a software development project and $5
million of costs related to restructuring activities.
For the six months ended June 30, revenues aggregated approximately $1.4
billion for both periods. The Company reported a net loss of $21 million for
the first half of this year compared to a net loss of $64 million for the same
period a year ago. Operating results for the first half of 1999 included a
charge of $9 million for a change in accounting for start-up costs adopted on
January 1, 1999. The net loss for both six-month periods included additional
restructuring costs of $3 million and $2 million incurred in the first
quarters of 2000 and 1999, respectively.
Vencor and its subsidiaries filed voluntary petitions for reorganization under
Chapter 11 with the United States Bankruptcy Court for the District of
Delaware on September 13, 1999.
Vencor, Inc. is a national provider of long-term healthcare services primarily
operating nursing centers and hospitals.
WSR CORP: Asks Court to Approve Environmental Settlement Agreement
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WSR Corporation and its affiliates seek Bankruptcy Court approval of an
Environmental Settlement Agreement by and between R&S Strauss Associates,
Roth-Schlenger, Inc., Schottenstein Stores Corporation, Donald Schlenger, R&S
Strauss, Inc., and R&S Parts and Service LLC.
R&S Parts & Service, purchaser of the assets of Strauss, alleges that during
the years that Strauss and the other parties controlled and operated the
Properties, there were accidental releases, leaks and/or spills of petroleum
products and other hazardous substances into the environment.
R&S Parts & Service agrees to undertake all necessary Required Remedial
Actions with respect to the alleged Environmental Conditions at its cost and
expense, not to exceed $1 million. The Prior Operator shall pay to Parts the
sum of $300,000. Parts shall have the right to seek indemnification from
Strauss for claims and environmental conditions exceeding $1.3 million.
ZENITH NATIONAL: Moody's Changes Insurer's Outlook From Stable To Negative
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Moody's Investors Service has changed the outlook for the ratings of Zenith
National Insurance Corp. and its operating subsidiaries to negative from
stable. The company's ratings (senior debt at Baa3, insurance financial
strength Baa1) were lowered to their current level in January, 2000. At the
time, the rating action was based on the declining operating performance of
its core workers' compensation business and subsequent weakening interest
coverage.
Moody's noted that the company's declining operating performance continued
through the first six months of 2000. Zenith's combined ratio on its workers
compensation book of business was 134% for the first six months, and adverse
loss development suffered on its small reinsurance book of business led to a
183% combined ratio on $16.8 million of earned premium for that same time
period. While the reinsurance results will fluctuate from period to period,
Moody's noted that the company's workers' compensation business has been
steadily deteriorating for several years. Through six months, Zenith's inforce
premiums in its California workers compensation book of business increased 30%
on rate and exposure increases.
There are positive signs that the workers compensation market (particularly in
California) has begun to turn. Zenith and other insurance carries have begun
to raise rates and reported combined ratios may begin to decline in late 2000
or early next year. However, Moody's believes that the dynamic loss
environment, which follows on the heels of a prolonged rate war, still holds
risks for insurers choosing to grow their business at this juncture.
Moreover, rates are still not believed to be sufficiently adequate to allow
for meaningful earnings improvement for at least the balance of this year.
Tempering these concerns, Moody's noted that the holding company presently
maintains ample cash from the sale of CalFarm Insurance Company to Nationwide
in 1999 to service its fixed charges. Moreover, the operating leverage being
maintained by its operating companies is reasonable. Moody's believes that
management has demonstrated good underwriting discipline in recent years
during which the workers' compensation market has encountered significant
turmoil. Going forward, the rating will be influenced by company's ability to
maintain that same degree of underwriting and pricing discipline.
The following companies were affected by the rating action:
* Zenith National Insurance Corp. - senior debt rated Baa3;
* Zenith National Insurance Corp. - subordinated debt rated Ba1;
* Zenith National Insurance Capital Trust 1-capital securities rated ba1;
* Zenith Insurance Company - insurance financial strength rated Baa1;
* ZNAT Insurance Company - insurance financial strength rated Baa1;
* Zenith Star Insurance Company - insurance financial strength rated Baa1.
Zenith National Insurance Corp., based in Woodland Hills, California,
specializes in providing workers' compensation insurance and related services
in 39 states, primarily California and Florida. For six months ending June 30,
2000 the company reported a net loss of $24 million and shareholders equity of
$314.8 million.
Meetings, Conferences and Seminars
----------------------------------
August 14-15, 2000
TURNAROUND MANAGEMENT ASSOCIATION
Advanced Education Workshop
Loews Vanderbilt Plaza, Nashville, Tennessee
Contact: 1-312-822-9700 or info@turnaround.org
August 17-19, 2000
ALI-ABA
Banking and Commercial Lending Law -- 2000
Renaissance Stanford Court
San Francisco, California
Contact: 1-800-CLE-NEWS
September 7-8, 2000
ALI-ABA and The American Law Institute
Conference on Revised Article 9 of the
Uniform Commercial Code
Hilton New York Hotel, New York, New York
Contact: 1-800-CLE-NEWS
September 12-17, 2000
NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES
Convention
Doubletree Resort, Montery, California
Contact: 1-803-252-5646 or info@nabt.com
September 15-16, 2000
AMERICAN BANKRUPTCY INSTITUTE
Views From the Bench 2000
Georgetown University Law Center, Washington, D.C.
Contact: 1-703-739-0800
September 20-22, 2000
RENAISSANCE AMERICAN MANAGEMENT & BEARD GROUP, INC.
3rd Annual Conference on Corporate Reorganizations
The Regal Knickerbocker Hotel, Chicago, Illinois
Contact: 1-903-592-5169 or ram@ballistic.com
September 21-23, 2000
AMERICAN BANKRUPTCY INSTITUTE
Litigation Skills Symposium
Emory University School of Law, Atlanta, Georgia
Contact: 1-703-739-0800
September 21-24, 2000
AMERICAN BANKRUPTCY INSTITUTE
8th Annual Southwest Bankruptcy Conference
The Four Seasons, Las Vegas, Nevada
Contact: 1-703-739-0800
October 17-18, 2000
INTERNATIONAL WOMEN'S INSOLVENCY AND RESTRUCTURING CONFEDERATION
Annual Fall Conference
Somewhere in Boston, Massachusetts
Contact: Janet Bostwick, Esq., at 617-832-0284
November 2-6, 2000
TURNAROUND MANAGEMENT ASSOCIATION
Annual Conference
Hyatt Regency, Baltimore, Maryland
Contact: 312-822-9700 or info@turnaround.org
November 27-28, 2000
RENAISSANCE AMERICAN MANAGEMENT & BEARD GROUP, INC.
Third Annual Conference on Distressed Investing
The Plaza Hotel, New York, New York
Contact: 1-903-592-5169 or ram@ballistic.com
November 30-December 2, 2000
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
Camelback Inn, Scottsdale, Arizona
Contact: 1-703-739-0800
February 22-24, 2001
ALI-ABA
Real Estate Defaults, Workouts, and Reorganizations
Wyndham Palace Resort, Orlando (Walt Disney
World), Florida
Contact: 1-800-CLE-NEWS
March 28-30, 2001
RENAISSANCE AMERICAN MANAGEMENT & BEARD GROUP, INC.
Healthcare Restructurings 2001
The Regal Knickerbocker Hotel, Chicago, Illinois
Contact: 1-903-592-5169 or ram@ballistic.com
July 26-28, 2001
ALI-ABA
Chapter 11 Business Reorganizations
Hotel Loretto, Santa Fe, New Mexico
Contact: 1-800-CLE-NEWS
The Meetings, Conferences and Seminars column appears
in the TCR each Tuesday. Submissions via e-mail to
conferences@bankrupt.com are encouraged.
*********
A list of Meetings, Conferences and seminars appears in each Tuesday's edition
of the TCR. Submissions about insolvency-related conferences are encouraged.
Bond pricing, appearing in each Friday's edition of the TCR, is provided by
DLS Capital Partners in Dallas, Texas.
For copies of court documents filed in the District of Delaware, please
contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents
filed in cases pending outside the District of Delaware, contact Ken Troubh at
Nationwide Research & Consulting at 207/791-2852.
*********
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., Trenton, NJ, and Beard Group, Inc., Washington, DC.
Debra Brennan, Yvonne L. Metzler, Ronald Ladia, Zenar Andal, and Grace Samson,
Editors.
Copyright 2000. All rights reserved. ISSN 1520-9474.
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