/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/000106.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, January 6, 2000, Vol. 4, No. 4 Headlines ATC GROUP SERVICES: Seeks To Extend Exclusive Solicitation Period BRADLEES: Registers Over 7 Million Shares For Securityholders BRUNO'S: Files Plan Eliminating Pre-petition Debt CHERRYDALE FARMS: Committee Supports Exclusivity Extension CHS ELECTRONICS, INC.: Moody's Downgrades Senior Notes to Ca COMPLETE MANAGEMENT: Hearing To Consider Purchase Agreement DEVLIEG-BULLARD: Seeks Order Authorizing Extension of Financing EAGLE GEOPHYSICAL: Taps Arthur Andersen As Auditors EL PASO ELECTRIC: Fitch IBCA Upgrades 1st Mtge Bonds FELCOR LODGING TRUST, INC.: S&P Lowers Ratings To Double `B' FRUIT OF THE LOOM: Taps Milbank Tweed As Farley Counsel GRAND UNION: UBS Tries To Dump Directors HARNISCHFEGER: Taps Swidler Berlin; Details Confidential HARVARD INDUSTRIES: Supplies Components For Auto Manufacturers JUST FOR FEET: Order Extends Time To Assume/Reject Leases JUST FOR FEET: Order Schedules Auction LAMONTS APPAREL: Files Chapter 11 to Restructure Debt LOEWEN: Motion For Approval of Bid and Bid Protection Procedures MICHAEL PETROLEUM: Plan Provides For Sale of Company NEWCARE HEALTH: Seeks To Retain Receivable Strategies NU-KOTE: Objections To Disclosure Statement and Plan RARE SPECIES CONSERVATORY: Nearly Bankrupt Creating National Park SUN HEALTHCARE: Committee To Retain Saul Ewing as Local Counsel TELEHUB: LINC Capital Forces Assumption or Rejection of Equipment TULTEX: Hearing Continued To Relocate Equipment TULTEX: Reports Sales To SEC UNITED HEALTHCARE: Ordered To Pay Claims Of Contractors VENCOR: First Motion To Extend Exclusive Periods WESTSTAR CINEMAS: Bar Date Extended For WF Holdings WSR CORP: Charon Investments Objects To Exclusivity Extension ******** ATC GROUP SERVICES: Seeks To Extend Exclusive Solicitation Period ----------------------------------------------------------------- If approved, the exclusive period during which the debtors may solicit acceptances of a plan of reorganization shall be extended from January 24, 2000 through and including April 24, 2000. The granting of the requested extension will permit the debtors to finalize a firm commitment for $40 million in exit financing and complete the terms of the plan without the threat of a competing plan of reorganization. BRADLEES: Registers Over 7 Million Shares For Securityholders ------------------------------------------------------------- Bradlees, Inc., on behalf of selling securityholders, is registering 7,267,424 shares of common stock of the company. The securities being registered were issued by Bradlees under the terms of its bankruptcy reorganization. The selling securityholders received these securities, directly or indirectly, under Bradlees Plan of Reorganization in exchange for the cancellation of various indebtedness owed them. The company is not selling any of the securities and will not receive any proceeds from the sale of the securities. The selling securityholders may offer the securities through public or private transactions, on the Nasdaq National Market, at prevailing prices or at privately negotiated prices. The registration of the securities does not necessarily mean that any selling securityholder will actually sell their securities. BRUNO'S: Files Plan Eliminating Pre-petition Debt ------------------------------------------------- On October 15, 1999, Bruno's Inc. and its subsidiaries filed their Second Amended Joint Plan of Reorganization with the Bankruptcy Court. Among other things, the Proposed Plan of Reorganization provides that (i) all prepetition debt, other than capitalized lease obligations, would be eliminated, (ii) general unsecured creditors would receive cash payments in an amount equal to 30% of the agreed value of their claims, (iii) holders of the company's prepetition bank debt would receive substantially all of the shares of common stock of the reorganized company, and (iv) no payments would be made to holders of the company's Senior Subordinated Notes or to holders of shares of the company's existing common stock. On October 15, 1999, the Bankruptcy Court, after notice and a hearing, authorized the company to solicit acceptances of the Proposed Plan of Reorganization from its creditors. The Proposed Plan of Reorganization has been approved by the requisite vote of the creditors of the company entitled to vote. The Bankruptcy Court scheduled a hearing commencing on December 20, 1999 to consider confirmation of the Proposed Plan of Reorganization. Net sales decreased $41.8 million, to $398,708, and $221.1 million, to $1,213,520, in the quarter and year-to-date periods ended October 30, 1999, as compared to the comparable periods of the prior year. The decrease in net sales for both periods was primarily attributable, according to the company, to the reduction in the number of stores operated as a result of the divestitures that occurred during the fiscal year ended January 30, 1999. Net losses for the quarter and year-to-date 1999 periods were $27.4 and $8.0 million respectively. In the same periods of 1998 the company had quarterly losses of $39.2 million, and a net gain year-to-date '98 of $6.9 million. CHERRYDALE FARMS: Committee Supports Exclusivity Extension ---------------------------------------------------------- The Official Committee of Unsecured Creditors of Cherrydale Farms, Inc. supports the motion of the debtors for an order granting further extension of the exclusive period in which to solicit acceptances to the debtors' plan of orderly liquidation. CHS ELECTRONICS, INC.: Moody's Downgrades Senior Notes to Ca ------------------------------------------------------------ Moody's Investors Service lowered the rating on CHS Electronics, Inc.'s $200 million senior notes, due 2005, to Ca from Caa3, reflecting the increasing likelihood that recovery of principal on the company's debt obligations will be substantially impaired. The senior implied rating on the company was lowered to Caa2 from B3, and the senior unsecured issuer rating was lowered to Caa3 from Caa2. The ratings outlook remains negative. The ratings downgrade is based on CHS Electronics' announcement of an agreement to sell substantially all of its European operations to a group of senior managers for $11 million in cash, or relief of an equivalent amount of liabilities, and a 10% equity interest in the new company, subject to a successful exchange of CHS' outstanding debt between the prospective purchasers of the operations and the existing debt holders. Although the transaction value for the CHS shareholders has been estimated to be approximately $300 million, in Moody's opinion the senior note holders would be offered considerably less than full principal in the exchange. Under a previous proposal, CHS had considered selling only 51% of its operations in Europe and the Middle East, retaining a 49% interest in the ongoing operations and continued liability for repayment of the debt. The terms under the original proposal, first disclosed in late October, were essentially the same as those concerning the company's Latin American operations, which were sold in early December. Under the Latin American transaction, CHS will receive a consideration of $23.5, million consisting substantially of the assumption of certain Latin American liabilities and a 49% interest in the newly formed DistributionTech.com. Additionally under the Latin American transaction, CHS will own 51% of e- LatinCo.com, an electronic commerce joint venture for facilitating sales under which DistributionTech.com will own the remaining 49%. Most vexing is the uncertainty cast over the status of the company's outstanding debt. According to the terms of the proposed European transaction, CHS would be relieved of all obligations to the holders of the $200 million senior notes as well as $40.5 million convertible debentures held by Computer Associates and up to $47 million of its guarantees for obligations assumed by certain of the European subsidiaries. There exists a limitations on asset sales clause under the Indenture under which the disposition of assets envisioned in the proposed transaction, and the consideration received by the company, would have to conform, or otherwise a waiver from the note holders would have to be obtained. As of September 30, 1999, the company recorded a cash position of $163 million, nearly $80 million of which was restricted. Based on the transfer of the company's interests in eight subsidiaries to their original owners in non-cash transactions consummated in 1999Q4, CHS has significantly reduced its liabilities and virtually eliminated the previous negative consolidated tangible net worth reflected. The company's pro forma September 30, 1999 balance sheet listed notes payable of $542 million and long term debt of $275 million. The recent resignation of the company's chief financial officer and elevation to CFO of a senior executive formerly responsible for special projects within the company could presage a change in debt repayment philosophy. CHS Electronics' sales have continued to deteriorate as creditors have refused to extend credit to the company's European and Latin American subsidiaries and OEM vendors have tightened the payment terms for merchandise that is still being shipped. Although the company was able to generate $163 million cash from operations through FY1999Q3, liquidity has been adversely affected by $213 million of repayments required under the company's bank borrowings. For the three months ended September 30, 1999, revenues of $2.07 billion represented a 4.7% year-over-year decline from revenues in FY1998Q3. The FY1999Q3 operating loss was $44 million, even after adding back restructuring charges of $170 million. Operating losses have mounted to $82 million for the year to date through FY1999Q3. CHS Electronics, Inc., a leading international distributor of microcomputer products, including personal computers, peripherals, networking products and software, is headquartered in Miami, Florida. COMPLETE MANAGEMENT: Hearing To Consider Purchase Agreement ----------------------------------------------------------- A hearing will be held on January 25, 2000 to consider the motion of Complete Management, Inc., debtor, for an order approving the settlement and purchase agreement between the debtor and Emergimed, PC, and its affiliated parties. All litigation is terminated, the purchaser shall buy the assets associated with the medical practice operated by the purchaser parties at 663 Palisade Avenue, Cliffside Park, NJ. The purchaser delivered $2,025,000 to the escrow agent as provided in the escrow agreement. The agreements are subject to higher and better offers. DEVLIEG-BULLARD: Seeks Order Authorizing Extension of Financing --------------------------------------------------------------- The debtor, Devlieg-Bullard, Inc. seek entry of interim and final orders authorizing debtor to enter into an amendment of its postpetition financing facility with CIT Group/Business Credit, extending the maturity date of the DIP Financing Facility to February 15, 2000. The loan commitment under the DIP Financing Facility shall be reduced from $30 million to $20.3 million. CIT is entitled to a fee in the amount of $50,000. EAGLE GEOPHYSICAL: Taps Arthur Andersen As Auditors --------------------------------------------------- The debtors, Eagle Geophysical, Inc., et al. seek to employ Arthur Andersen LLP as auditors, tax consultants, advisors and preparers. The firm will provide inter alia the following services: Audit the debtors' annual financial statements; Consult with the debtors on tax issues, including tax planning; Provide general, non-bankruptcy business and general consulting, if necessary; Provide valuation services; Assist in the preparation of tax returns; EL PASO ELECTRIC: Fitch IBCA Upgrades 1st Mtge Bonds ---------------------------------------------------- Fitch IBCA upgrades the rating on El Paso Electric Company's (EPE) $595 million in first mortgage bonds to "BBB-" from "BB+". The rating upgrade reflects the approval of a rate settlement agreement and passage of constructive electric restructuring legislation in 1999 that together produce predictable and relatively healthy cash flow through 2005, and an ongoing debt reduction program that continues to reduce leverage and interest expense. The rating upgrade also considers the unresolved franchise issues with the city of Las Cruces, EPE's high debt level, and the company's significant concentration of nuclear generating assets. The June 1999 rate settlement with the Public Utility Commission of Texas allowed for continuation of a rate freeze through 2005 and a modest 5.0% rate reduction that should provide a predictable revenue stream from Texas jurisdictional customers, who account for 80% of retail revenue and 65% of total revenue, and the continuation of EPE's aggressive debt reduction program. In addition, electric industry restructuring legislation specifically excludes the company from competition in Texas until August 2005, which should permit EPE to amortize its stranded costs to projected market levels by the time competition is allowed in 2005. Because of low capital requirements and the absence of common stock dividend payments the company's internal cash generation has been sufficient to reduce debt in excess of projections. The debt ratio declined to 66% at Sept. 30, 1999 from 71% at yearend 1996, while the equity ratio increased to 34% from 22% over the same period. The debt ratio had been as low as 63% at year- end 1998, but increased following the 1999 repurchase of $136 million of preferred stock with cash reserves. Importantly, the preferred stock repurchase eliminated the cash dividend of nearly $15 million per annum which will be available for future debt repurchases. Given the 1999 rate reduction in Texas, the loss of revenues from sales to Comision Federal de Electricidad, the national electric utility for Mexico, and the potential loss of revenues from sales to Las Cruces, EPE's credit measures may decline in 2000, but should improve thereafter. Fitch IBCA expects EPE will still have sufficient free cash flow to reduce debt in an accelerated manner and that continued growth in the company's service territory, new wholesale sales and lower interest costs will improve credit measures after 2000. While the recent mandated review by the New Mexico Public Regulation Commission reopens EPE's 1998 rate stipulation, which lowered rates and provided for stranded cost recovery, causes some uncertainty, there appears to be little downside credit risk for EPE. The New Mexico Utility Industry Restructuring Act of 1999 provides for no less stranded cost recovery and potentially greater recovery than EPE was permitted under the 1998 rate stipulation. Moreover, EPE's stranded cost exposure in New Mexico is low due to the small percent of operations in New Mexico (20% of retail revenue) and the revaluation of EPE's assets to market value upon emergence from bankruptcy in 1996. FELCOR LODGING TRUST, INC.: S&P Lowers Ratings To Double `B' ------------------------------------------------------------ NEW YORK, Jan 4 - Standard & Poor's today lowered its corporate credit and bank loan ratings for FelCor Lodging Trust Inc. to double-'B' from double-'B'-plus. The preferred stock rating for the company was lowered to single-'B' from single-'B'-plus. In addition, the rating on FelCor Suite L.P.'s senior unsecured debt (guaranteed by FelCor Lodging) also was lowered to double-'B' from double-'B'-plus. The downgrades follow FelCor's announcement that its board of directors has authorized a $200 million share repurchase. The outlook remains negative. The share repurchase authorization follows an initial $100 million repurchase that was authorized in September 1999. The cumulative debt-financed repurchase program represents a significant shift in FelCor's financial policy, and will cause total debt to EBITDA to increase in the high 4 times (x) area on a pro forma basis. Historically, FelCor has been among the least levered hotel REITs, and has maintained a relatively conservative capital structure. However, credit measures have weakened continually over the past three years due to acquisitions, slower revenue per available room (REVPAR) growth, significant capital expenditures, and now, debt financed share repurchases. On the operating side, performance has been adequate, but slightly below expectations. The company has been impacted by new supply growth in Texas and certain other markets where it is concentrated. About 20% of FelCor's portfolio is in Texas. Also, REVPAR at the Embassy Suite hotels has been down slightly, in part due to distractions at Promus Hotel Corp., which is the franchisor. Hilton Hotel Corp.'s acquisition of Promus should help refocus operating management and improve the performance of the Embassy chain longer term. The Holiday Inn portfolio should benefit from the significant renovation and repositioning efforts that have been occurring since the Bristol acquisition closed in mid 1998. Importantly, the overall economic environment in the U.S. remains good. Standard & Poor's expects that cash flow will improve next year as the benefits from the Bristol hotel renovations are realized. Also, capital expenditures are winding down, and FelCor should generate modest amounts of free cash flow after dividends, maintenance capital expenditures, and interest payments. However, share repurchases will result in debt levels rising to about $2 billion. The company announced that it would fund the share repurchases with additional long-term debt. While this will help maintain undrawn capacity under FelCor's line of credit and extend maturities, long-term rates have been increasing, and coverage levels will be negatively impacted. EBITDA coverage of interest expense is expected to be in the 2.5x range going forward, compared with about 3.5x in 1998 pro forma for the Bristol acquisition. The company continues to pursue certain asset sales, which could modestly improve the leverage profile. OUTLOOK: NEGATIVE FRUIT OF THE LOOM: Taps Milbank Tweed As Farley Counsel ------------------------------------------------------- Fruit of the Loom Bankruptcy News Issue 2 reports that prior to the Petition Date, Katten Muchin Zavis represented William F. Farley, the Debtors' current chairman of the Board of Directors and former CEO, on various matters, including the $65,000,000 loan from the Prepetition Lenders to Mr. Farley that is guaranteed by the Debtors. Accordingly, prior to the Petition Date, the Debtors retained the New York-based law firm of Milbank, Tweed, Hadley & McCloy LLP, to provide advice on matters relating to Mr. Farley. By this Application, the Debtors ask Judge Walsh for authority to employ Milbank as Special Counsel pursuant to 11 U.S.C. Sec. 327(e). Dennis F. Dunne, Esq., a Milbank Partner, discloses that his firm received a $100,000 retainer from the Debtors prior to the Petition Date. As of the Petition Date, approximately $51,300 of that retainer was consumed. Milbank will bill the Debtors for services rendered by its attorneys and professionals at its customary hourly rates: Partners $380 to $605 Of Counsel $380 to $495 Senior/Special Attorneys $145 to $400 Associates $155 to $380 Legal Assistants $75 to $200 GRAND UNION: UBS Tries To Dump Directors ---------------------------------------- UBS AG, a corporation incorporated under the laws of Switzerland, holds 2,436,564 shares of common stock of Grand Union Company representing 8.12% of the outstanding shares of common stock of the company. UBS exercises sole voting and dispositive power over the shares. UBS originally acquired the shares in August 1998 as part of a plan of reorganization of Grand Union under Chapter 11 of the Bankruptcy Code. UBS is syndication agent and a lender under Grand Union's Credit Agreement dated August 17, 1998. Warburg Dillon Read LLC, a subsidiary of UBS, acted as a co-advisor and co-arranger with respect to the credit facility. UBS has a revolving loan commitment of $25.0 million under the Credit Agreement and has an outstanding term loan to the company under the Credit Agreement of approximately $9.5 million as of December 10, 1999. On December 3, 1999, UBS decided to solicit from a limited number of holders of the common stock consents, without a meeting of stockholders, to remove five of the company's directors (Jack W. Patridge, Gary M. Philbin, Joseph Colonetta, David M. Green and Thomas R. Cochill), to elect three persons to fill three vacancies created by such removal (Herbert E. Seif, a Managing Director of UBS; Michael J. Embler, a Vice President of Long Drive Management Trust; and Robert H. Barnes, General Partner of Broad Street Trading, L.P.) and to make certain related amendments to the company's By-laws, including the repeal of any By-laws adopted by the board of directors of the company on or after December 2, 1999. UBS is undertaking the consent solicitation because it is displeased with the performance of Grand Union and its common stock. According to UBS its purpose in the consent solicitation is to reconstitute the board of directors of the company to facilitate the immediate consideration and pursuit of alternatives to enhance shareholder value, including a merger or sale of the company. UBS says it does not have any plan or proposal regarding any specific transaction or the identity of any other party to any such transaction UBS has made and no proposals for any other changes in the management of the company, however, UBS reserves the right to formulate other purposes, plans or proposals regarding the company or any of its securities based on developments in the company's business, discussions with the company, actions by management or a change in market or other conditions. UBS does not intend to dispose of, or cause to be disposed of, any of the shares of common stock cited here during the pendency of its consent solicitation. HARNISCHFEGER: Taps Swidler Berlin; Details Confidential -------------------------------------------------------- The Debtors want to retain Swidler Berlin Shereff Friedman, LLP as their Special Securities Law counsel. They also want to file the required retention application "under seal" in the Bankruptcy Court. In other words, they do not want public disclosure of the details in the retention application. According to the Debtors' Motion to keep the Employment Application under wraps, the Retention Application "contains non-public information regarding the Debtors which is highly confidential and which the debtors would not be required to disclose were it not for the fact that they require Bankruptcy court approval to retain Swidler Berlin. . . ." (Harnischfeger Bankruptcy News Issue 18; Bankruptcy Creditors' Service Inc.) HARVARD INDUSTRIES: Supplies Components For Auto Manufacturers -------------------------------------------------------------- Harvard Industries, Inc. is a direct supplier of components for Original Equipment Manufacturers ("OEMs") producing cars and light trucks in North America, principally General Motors Corporation, Ford Motor Company and Daimler-Chrysler. During the past year the company conducted its operations primarily through three wholly owned subsidiaries, Hayes-Albion Corporation; Pottstown Precision Casting, Inc., formerly known as Doehler-Jarvis Pottstown, Inc.; and The Kingston-Warren Corporation. The company's subsidiaries produce a wide range of products including: rubber glass-run channels; rubber seals for doors and trunk lids; complex, high volume aluminum castings and other cast, fabricated, machined and decorated metal products; and metal stamped and roll form products. On September 30, 1999 substantially all the assets of Kingston-Warren were sold to a subsidiary of Hutchinson S.A. Management's business strategy focuses on leveraging Harvard's core competencies in the design and production of OEM automotive components in order to target new business opportunities with existing automotive OEM customers, as well as in the automotive aftermarket and non-automotive industrial market. Management indicates it intends to focus on accessing the non- automotive industrial market and the automotive aftermarket to leverage its existing product portfolio and manufacturing expertise. Harvard believes that a number of its existing automotive processes such as spin forming, tube rolling, and high-strength steel forming will be marketable in the industrial and aftermarket arenas because these processes are commonly used for products offered in those markets. Operating as debtor-in-possession since the 1997 filing of chapter 11 bankruptcy protection the company reports net income of $67,350 on sales of $495,131 for the fiscal year ended September 30, 1999. For comparison, the fiscal year ended September 30, 1998 yielded a sales figure of $690,076 and net losses of $55,804. JUST FOR FEET: Order Extends Time To Assume/Reject Leases --------------------------------------------------------- The US Bankruptcy Court, District of Delaware entered an order on December 28, 1999 extending the period within which the debtors may assume or reject their unexpired leases of nonresidential eal property to and including the earlier of April 30,2000 and the date on which an order is entered confirming a Chapter 11 plan for the debtors. With respect to the closing store leases that are subject to the auction the debtors shall have until February 7, 2000 to provide notice to the landlord for such leases of their intent to assume and assign such Closing Store Leases, and if the debtors do not send such notice, the leases are deemed rejected. JUST FOR FEET: Order Schedules Auction -------------------------------------- A hearing was held on December 22, 1999, and the court has entered an order authorizing and scheduling an auction for the sale of the debtor's leasehold interests in certain non- residential properties, approving the terms and conditions of the auction and establishing cure amounts. The auction of all or substantially all of the debtors' leases will be held on January 24, 2000 at 11:00 AM at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Ave., 25th Floor, New York, NY. LAMONTS APPAREL: Files Chapter 11 to Restructure Debt ----------------------------------------------------- Lamonts Apparel Inc. (OTCBB:LMNTE), which operates 38 family apparel stores in five Northwestern states, has taken steps to address its capital and liquidity constraints by filing a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The filing took place today in the U.S. Bankruptcy Court for the Western District of Washington in Seattle. Lamonts confirmed that it has received commitments for$45 million in debtor-in-possession (DIP) financing from Fleet Retail Finance Inc. and Back Bay Capital Funding LLC. Upon Court approval, the first draw under the new DIP agreement will replace the company's current working capital-term debt facility with Fleet Retail Finance. Lamonts expects daily operations at its stores to continue as usual, with as good or better a selection of goods and services available as existed before the filing. The company will ask the Court immediately to honor all customer commitments including return and exchange policies, special orders, gift certificates and other customer-related aspects of the business. Lamonts will continue to accept its private-label credit cards, as well as other major credit cards. Last week, Lamonts issued a statement that it has been experiencing liquidity constraints which prompted the company to open discussions with its lenders and with an informal committee of its largest trade creditors and counsel. Lamonts' capital constraints were exacerbated in 1999 due to several specific factors: higher than anticipated costs to achieve Y2K compliance and to complete installation of new store point-of-sale registers, and weak spring and summer sales resulting from unusually cool weather. Liquidity constraints adversely affected the company's ability to purchase inventory, obtain credit and receive timely deliveries from key vendors. "The Chapter 11 proceeding gives Lamonts the time necessary to restructure its debt and create an capital base appropriate to serve the best interests of all of our constituents," stated Alan Schlesinger, chairman, president and chief executive officer. "Capital constraints remain an issue for Lamonts, although we have consistently exerted very tight controls over operating expenses and store operations to improve earnings and the balance sheet. During fiscal years 1996, 1997, and 1998, we succeeded in growing topline sales by approximately 15 percent and doubling EBITDA (earnings before interest, taxes, depreciation and amortization). "In the past five years, Lamonts has generated more than$1 billion in sales and paid its merchandise vendors more than$700 million. "Despite the improvements in our business, the series of events in 1999 put severe pressure on the company's liquidity. As a result, when the critical holiday sales season arrived, our inventories were out-of-balance to the extent that we were overstocked in slow-moving items and understocked in fast-moving items, particularly in our popular Home Decor and Accessories departments." Schlesinger went on to state that, "Chapter 11 reorganization offers the best opportunity to bring new cash into the company and resolve outstanding debt. We have already obtained commitments for sufficient DIP financing and obtained support from important vendors. "Under the DIP financing, we will have significantly more cash available to purchase goods. While we recognize that the debt arising from goods and services received before the filing cannot be resolved except under the company's plan of reorganization, we hope that any hardship will be mitigated by purchases of new goods which receive priority payment status under the law." Lamonts intends to undertake specific key initiatives to achieve a successful reorganization. These actions include certain corporate organizational changes to strengthen merchandising and other key departments. Details of the new corporate organization are expected to be announced very soon. In addition, Lamonts intends to expand offerings under its Northwest Outfitter proprietary brand, focus on achieving gross profit margin targets, utilize new store point-of-sale systems to develop useful customer data, increase private-label credit card sales and facilitate electronic customer orders through the company's Internet site. Lamonts undertook a Chapter 11 reorganization which began on Jan. 6, 1995 and ended Jan. 31, 1998. During that time, the company achieved significant sales growth on a comparable-store basis, eliminated $90 million of debt and redirected resources from underperforming stores to 38 core stores that all operated profitably as of Jan. 30, 1999. For the fiscal year ended Jan. 30, 1999, Lamonts reported EBITDA of approximately $10.6 million and a net loss of $4.5 million, or$0.50 per share, on sales of $209.6 million, the company's highest sales in the past four years. The company's stock has traded on the over-the-counter bulletin board under the symbol LMNT, which the OTC market recently changed to LMNTE. Lamonts' revenues for the fiscal year ending Jan. 31, 2000 are anticipated to be approximately $209 million. As of Oct. 30, 1999, the company showed assets and liabilities of $110.7 million and$104.4 million, respectively. Approximately $40 million in trade payables are subject to the reorganization proceeding. Lamonts Apparel operates family apparel stores in the following regions: 7 stores in Alaska, 5 stores in Idaho, 2 stores in Oregon, 1 store in Utah and 23 stores in Washington. The company is well-known in the Northwest as a retailer of brand-name apparel, accessories and home decor from such manufacturers as Adidas, Alfred Dunner, Byer of California, Jockey, Lee, Levi, Liz Claiborne, Mikasa, Ocean Pacific, OshKosh, Pacific Trail, Rafaella, Sag Harbor, Vanity Fair and Woolrich. Lamonts has headquarters in Kirkland, Wash. in the greater Seattle area and employs approximately 1,500 people. Additional corporate information is available at the company's Web site at www.lamonts.com. LOEWEN: Motion For Approval of Bid and Bid Protection Procedures ----------------------------------------------------------------- The Debtors' long-term business plan includes the marketing and disposal of 201 funeral homes and 170 cemeteries. For various reasons, including geographic location, these funeral homes and cemeteries are not part of the ongoing business plan being developed by the Debtors and the Creditors' Committee. On December 30, 1999, the Debtors asked the Court to approve a complex process for selling these properties. The Debtors want to sell these funeral homes and cemeteries in geographical groups. Each group will be broken down into a subpackage of funeral home locations and a subpackage of cemetery locations. In January, the Debtors will begin distributing informational packages for each geographic group containing (i) basic financial and operational information; (ii) contact information for inquiries regarding potential transactions; and (iii) a letter of intent. Potential Purchasers will have to execute confidentiality agreements before receiving the informational packages. Potential purchasers will also be asked to submit non-binding expressions of interest on or before a date selected by the Debtors, probably in mid-February. These initial expressions of interest must include (a) an executed copy of a nonbinding letter of intent that includes a proposed purchase price; and (b) a letter detailing the prospective purchaser's financing sources. The debtors hope to identify qualifying bids, after consulting with the Creditors' Committee, on or before March 1, 2000. "Qualifying bids" are those that the Debtors and Creditors' Committee deem to be "reasonable offers." As soon as practicable after the Court approves these proposed bidding procedures, the Debtors will contact bidders who submitted qualified bids to begin negotiations with them. Qualified bidders will have access to a "Data Room" established at The Loewen Group Inc.'s headquarters in Burnaby, British Columbia. The Data Room will contain additional information regarding the funeral homes and cemeteries, including books and records, material contracts, and other financial and operational information. The Debtors will ask qualified bidders to submit "their final initial bids" for a particular Group Package or funeral home or cemetery subpackage by a specified date. After consulting with the Creditors' Committee, the Debtors will select a successful initial bid for each package. They will then negotiate and enter into a purchase agreement with the successful bidder as soon as possible. The Debtors may ask for a deposit of up to 5% of the purchase price at the time they execute a purchase agreement. This deposit is refundable only under certain specified conditions. Each purchase agreement will contain default provisions protecting the Debtors and a statement of intent and other provisions relating to executory contracts and leases. The Debtors also propose several procedures designed to protect bidders. These protections will be provided at the Debtors' discretion, and include reimbursement of the bidder's expenses and Breakup Fees. Breakup Fees would reimburse a successful initial bidder if the deal is not consummated for specified reasons after a purchase agreement is executed. A Breakup Fee could be awarded if, for example, the Debtors ultimately sell the package or subpackage to someone else. Breakup Fees could be substantial, ranging up to $15,000,000 for a successful initial bid for all of the location packages. The Debtors will ask the Bankruptcy court to approve each executed purchase agreement. The Debtors will ask the Court to hold a hearing on each proposed sale within twenty days of their filing a motion proposing the sale. At the same time, the Debtors will ask the Court to approve their proposed treatment of any related executory contracts or leases: .e., assumption, assignment or rejection of them. Parties receiving notice of the proposed sale will include everyone who requested and received an initial informational package for the packages that is the subject of the sale motion. With one exception noted below, anyone who wants to submit a competing bid for a package that is the subject of a sales motion will have a chance to do so at an auction before the Court rules on the sales motion. In order to trigger an auction under the Debtors' proposed plan, the competing bid must be received by the Debtors on or before 5:00 p.m., Eastern Time, five business days before the relevant sales hearing in the Bankruptcy court. The competing bid must also meet a long laundry list of conditions. These include exceeding the proposed sales price by a percentage designated by the Debtors in the sales motion to be between 3% and 5%, plus any applicable Breakup Fees and expenses. A competing bid must also be irrevocable, accompanied by proof of the competing bidder's financial ability to consummate the deal, and meet several other requirements. If someone submits a competing bid meeting all of the conditions, then an auction will be held for the affected package on the last business day before the sales hearing in the Bankruptcy Court. The auction will be held at the offices of Morris, Nichols, Arsht & Tunnel, the Debtors' local counsel in Delaware. Competing bidders may submit bids for the package at the auction in percentage increments of the sales motion purchase price. These increments will be designated by the Debtors in the sales motion, and will be between 3% and 5%. At the auction, the Debtors will select the winning bid after consultation with the Creditors' Committee. No competing bids will be solicited, and no auction will occur, if the Debtors conclude that the initial successful bid (i) represents the highest and best price for the package; (ii) only a limited number of locations are involved in the deal; (iii) the proposed purchase price for the package does not exceed $5,000,000, or $1,000,000 if an individual location; and (iv) the Creditors' Committee does not oppose the deal. If the Debtors decide to proceed without an auction, then potential competing bidders will not receive notice of a proposed sale motion unless they are otherwise on the bankruptcy service list, or unless they are parties to a related executory contract or lease other than a Preneed Customer contract. Finally, if the Court approves a sales motion and the successful bidder fails to consummate the deal, then the Debtors after consultation with the Creditors' Committee may accept the next highest and successful bid and consummate the deal with that bidder without prior Court approval. (Loewen Bankruptcy News Issue 17; Bankruptcy Creditors' Service Inc.) MICHAEL PETROLEUM: Plan Provides For Sale of Company ---------------------------------------------------- On December 10, 1999, Michael Petroleum Corporation, its parent corporation and certain of its subsidiaries entered into an agreement with certain holders of the company's 11 1/2% Senior Notes for a consensual joint plan of reorganization of the company. The terms of the Voting Agreement contemplate that the joint plan of reorganization will provide for a sale of the company or its assets in court-supervised proceedings under the Bankruptcy Code. On December 10, 1999, Michael Petroleum and certain of its subsidiaries filed petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Laredo Division. The company expects to file the Plan and related disclosure statement with the Bankruptcy Court in January 2000. The Voting Agreement has been signed by holders of more than $90,000,000, or two- thirds, of the outstanding principal amount of the company's Senior Notes. In addition to the approval of the Bankruptcy Court, the consummation of the plan of reorganization will be subject to the consent of the requisite number and amount of certain of the company's creditors. The Voting Agreement contemplates that the company and its subsidiaries will continue to operate as debtors- in-possession subject to the supervision of the Bankruptcy Court, and that the Plan will provide for the payment of all trade creditors' claims as and when they come due in the ordinary course or in full on the effective date of the Plan. Under the Voting Agreement, the consenting holders agreed to vote in favor of the Plan so long as the Plan is consistent in all material respects with the term sheet for the Plan attached to the Voting Agreement. The term sheet sets forth, among other things, a process for the marketing and sale of the company or its assets for a "Net Consideration" (as defined in the term sheet) of at least $120 million, as adjusted for certain costs and working capital items, the proceeds of which will be applied first to the repayment of the company's bank debt (approximately $24.3 million principal amount outstanding at December 10, 1999). Specifically, the Voting Agreement provides that, so long as no termination event occurs, the consenting holders will: - vote to accept the Plan; - neither commence nor assist or encourage any other person to commence any other legal or enforcement actions concerning the company's debts; - not take any position in the bankruptcy proceedings that conflicts with their obligation to support the Plan; and - vote their Senior Note claims to reject any bankruptcy plan for the company other than the Plan. The Voting Agreement further provides that the obligations of the consenting holders may terminate upon a "termination event," which includes the occurrence of any of the following: - the marketing process relating to the sale of the company or its assets shall have failed to timely achieve certain milestones, including a definitive agreement relating thereto having not been executed on or before April 14, 2000; - an injunction, judgment, order, decree, ruling or charge shall have been entered which prevents completion of the sale of the company's assets or the consummation of the financial restructuring contemplated by the proposed Plan; - the company shall file or support confirmation or fail to actively oppose confirmation of any plan of reorganization embodying terms materially different from those contemplated by the proposed Plan; - the company's assets shall not have been sold, and the Plan shall not have been substantially consummated by June 1, 2000; - the Bankruptcy Court shall have entered an order appointing a trustee or an examiner with expanded powers with respect to the company or its subsidiaries; - the Bankruptcy Court shall have entered an order dismissing any of the bankruptcy proceedings or converting such proceedings to cases under Chapter 7 of the Bankruptcy Code; or - there shall have occurred certain variances from certain company budgeted items during the first six months of 2000. NEWCARE HEALTH: Seeks To Retain Receivable Strategies ----------------------------------------------------- William A. Brandt, Jr., the appointed Chapter 11 Examiner is seeking an order authorizing him to employ Receivable Strategies as collection agent for the remaining accounts receivable of the debtors. NU-KOTE: Objections To Disclosure Statement and Plan ---------------------------------------------------- Canon Computer Systems, Inc. and its affiliates filed an objection to the Disclosure Statement and Joint Reorganization Plan of Nu-Kote Holding, Inc. and its affiliates. In addition, by separate filing, Seiko Epson Corporation and its affiliate filed an objection to the Disclosure Statement and Plan. The Canon affiliates object to the Disclosure Statement saying that they were not included in any of the settlement discussions or negotiations. Canon has consistently sought assurances from the plan proponents that the plan recognizes Canon's rights to set off/recoup claims established by Canon against the debtors in certain litigation. Canon also states that the plan will not protect the reorganized debtors from post-confirmation infringement. The plan fails to provide adequate disclosure with respect to the treatment of administrative expense claims and the liquidation analysis is conclusory and fails to address issues related to payment of administrative expense claims. Canon also states that the joint disclosure statement fails to describe the treatment of administrative expense claimants in the event of a Trust Triggering Event. Epson states that the defects in the Disclosure statement are so pervasive that it appears that it was not proposed with the expectation that it could or would be approved. According to Epson, the Disclosure Statement does not identify the trustees of the Trusts or post-petition management if Richmont is not the successful bidder. The plan proponents fail to explain the effect of the proposed further substantive consolidation. Epson also argues that the plan proponents fail to adequately provide for administrative claims. Epson claims that the absolute priority rule is violated in that the Lenders receive their claims and their liens and 100% payout if there is a cramdown. Epson objects that the Disclosure Statement fails to reveal the low likelihood of the Administrative Claims falling below the $3 million artifical cap and the consequences if the Allowed Administrative Claims exceed the artificial cap. There is no discussion of how the estimated $6.4 million termination liability to PBGC would be handled if the joint plan is not confirmed and the assets were sold under the proposed Section 363 sale. The failure to deal with this issue alone should be sufficient to reject the motion to approve the sale outside a plan without a conversion to Chapter 7. Epson states that there is inadequate disclosure of Nu-kote's significant defeats on its antitrust claims, inadequate disclosure of how the OEM Litigation will proceed post- confirmation, inadequate disclosure regarding reorganized debtors' future operations and inadequate disclosure of substantial potential claims against the debtors' management. RARE SPECIES CONSERVATORY: Nearly Bankrupt Creating National Park ----------------------------------------------------------------- Despite facing near bankruptcy, the Rare Species Conservatory Foundation in Florida has helped the island government of Dominica create the new Morne Diablotin National Park, located on the slopes of the highest volcanic peak in the Caribbean. Regarded by many international conservation groups as one of the most significant bioreserves in the Caribbean, Morne Diablotin National Park will protect the last habitat for the world's rarest Amazon parrot, the Imperial Amazon, or Sisserou, Dominica's national bird. In mid-December, 1999, the Cabinet of Dominica approved the final boundaries of the Park to occupy nearly 5% of the tiny nation's land area, and announced that formal, public declaration of the world's newest National Park would occur on January 21, 2000, in Roseau, Dominica. The conservation milestone, roughly 20 years in the making, came at a hefty price for the Rare Species Conservatory Foundation in Loxahatchee, Florida. To help acquire a 1300-acre parcel held by the Dominican Fruit Syndicate within the boundaries of the new Park, the foundation's small group of volunteer biologists raised $750,000 from private donors and gave nearly all of the foundation's financial resources to the project. In addition, the group assumed a $300,000 debt, including director Paul Reillo's life's savings. Now Reillo and the Board are campaigning to recoup funds to keep the Foundation alive and to continue field-based research and conservation programs. Reillo asserts there was no choice. "We are a tiny scientific organization that is not prone to land deals," says Reillo. "But the Sisserou is a flagship species representing one of the last great island ecosystems in the Caribbean, and this parcel was the last stumbling block to overcome. We had to go beyond science and education and actually do something permanent." In October 1999, the Dominican Cabinet approved acceptance of the Rare Species Conservatory grant in the amount of $750,000 toward the total land purchase price of $1.086 million. During this time, Cabinet also approved a concurrent Government promissory note in the amount of $336,000, satisfying the total land purchase price, and dedicated roughly 7,000 additional acres of Northern Forest Reserve lands to the Park. To the 74,000 people living on Dominica, the Sisserou is more than just an endangered species. Considered a political and cultural icon, the Sisserou is the national bird of Dominica, and native folklore contends the Dominican Carib people are reincarnated as parrots. Dominica is known to the international conservation community as a staunch conservation leader despite its fragile economy. Dominated by four mountains rising to over 4,000 feet, 75% of Dominica consists of mountainous terrain and elfin rain forests cut by deep, narrow river valleys, of which nearly 52,000 acres are State-owned (28% of the total land area). Dominica's mountainous rain forests boast some of the most impressive trees within the Caribbean basin, with Gommier (Dacryodes excelsa) exceeding eight feet in diameter. Animal biodiversity is similarly impressive, represented by 162 bird species, a myriad of small mammals, amphibians, and reptiles (including the Dominican iguana), and a suite of spectacular invertebrates, highlighted by 55 species of butterflies and the goliath beetle. Morne Diablotin National Park is likely to become Dominica's next Natural World Heritage Site, and the second Natural World Heritage Site in the Caribbean including the Bahamas. In 1997, the United Nations Education Scientific and Cultural Organization (UNESCO) awarded Natural World Heritage Site status to Morne Trois Pitons National Park, Dominica's most famous park and one of the Caribbean's first national parks, established in 1975. SUN HEALTHCARE: Committee To Retain Saul Ewing as Local Counsel ----------------------------------------------------------------- The Creditors Committee asks Judge Walrath to approve the Committee's retention of Saul, Ewing, Remick & Saul LLP as their local counsel, effective as of October 27, 1999. TELEHUB: LINC Capital Forces Assumption or Rejection of Equipment ----------------------------------------------------------------- LINC Capital, Inc. is applying for an order requiring the debtor, Telehub Network Services Corporation to assume or reject a master equipment lease agreement and directing the debtor to make post- petition lease payments and to pay administrative expenses or modifying the automatic stay or providing adequate protection. LINC leased certain computer equipment to the debtor and asserts that the debtor is in default of its obligations under the lease. According to LINC, the debtor is obligated to LINC in the aggregate sum of $1,236,728. Monthly lease payments due from the debtor are $66,642, and the debtor is in arrears for two payments pre-petition. TULTEX: Hearing Continued To Relocate Equipment ----------------------------------------------- The debtors, Tultex Corporation seek a continued hearing from January 5, 2000 on the debtors' motion to relocate certain production equipment from certain facilities to non-debtor production facilities in Mexico. The debtors have received inquiries from parties in interest with respect to the Equipment Relocation Motion requesting additional information as well as additional time to respond. The debtors believe that a continuance of the hearing on the Equipment Relocation Motion until January 19, 2000 will provide the debtors and interested parties ample time to address the inquiries received to date and may eliminate the need for certain objections to be filed. TULTEX: Reports Sales To SEC ---------------------------- On December 3, 1999, Tultex Corporation filed voluntary petitions to reorganize under Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Virginia, Lynchburg Division. The company has obtained $150 million of DIP financing from Bank of America and is currently operating its business as a debtor-in-possession, subject to the supervision of the Bankruptcy Court. Net sales for the three months ended October 2, 1999 were $120.5 million as compared to $136.4 million in the comparable period of 1998. Net losses were $35.4 million in the 1999 period as compared to the $2.4 million loss in the 1998 period. In the nine months ended October 2, 1999 the company had net sales of $278.2 million and net losses of $23.3 million. In the same period of 1998 net sales were $369.0 million with net losses of $23.1 million. UNITED HEALTHCARE: Ordered To Pay Claims Of Contractors ------------------------------------------------------- Maryland Insurance Commissioner Steven B. Larsen yesterday ordered United Healthcare of the Mid-Atlantic to pay medical claims, estimated to be millions of dollars, that were left unpaid when three organizations United used to manage HMO members' care filed for bankruptcy or went out of business, The Washington Post reported today. The order highlights the accountability gap that these types of arrangements can create and the resulting problems nationwide from the collapse of many organizations that claimed they could manage medical costs better than HMOs. United had contracts with Doctors Health Inc., Maryland Personal Physicians Inc. (MPPI) and Dimensions Health Network whereby those organizations received fixed payments from United to provide a range of medical services to United HMO members. These companies would profit if they could deliver the care for less than United was paying them, but Doctors Health filed for bankruptcy protection in November 1998, followed by MPPI in September. Dimensions folded in November. Millions of dollars of unpaid claims for United HMO members are an issue, and Larsen said in a news release yesterday that the HMO is legally responsible for monitoring its intermediaries' ability to pay. United issued a brief statement that it is reviewing the order and a response to it. Joel I. Sher, an attorney representing creditors in the Doctors Health and MPPI bankruptcies, said that although the total amount of claims covered by the order is not clear, an "educated guess" is that it's more than $10 million. Sher said that without the commissioner's order, health care providers would have had to seek payment from Doctors Health and MPPI in bankruptcy court, where they were likely to recover less than 10 cents on the dollar. Larsen plans to submit a report to the Maryland General Assembly next week recommending greater oversight of companies like United's defunct intermediaries. Some argue that this is a moot point since many consider this way of doing business to be a failure. (ABI 05-Jan-00) VENCOR: First Motion To Extend Exclusive Periods ------------------------------------------------ The Debtors ask Judge Walrath for 62 more days to file a Reorganization Plan, and 62 more days to solicit acceptances of that Plan. Specifically, the Debtors request that their exclusive period during which to file a plan of reorganization be extended through March 13, 2000. The Debtors request a concomitant extension of their exclusive period during which to solicit acceptances of their plan through May 12, 2000. The Debtors base their Motion on Section 1121(d) of the Bankruptcy Code, which grants the Bankruptcy Court authority to extend the Debtors' Exclusive Periods for cause after notice and a hearing. The Debtors explain in their Motion that they are negotiating a Plan "with certain holders of the debtors' pre-petition subordinated notes and the advisors of the official committee of unsecured creditors. . . ." The Debtors "had negotiated a broad framework for a joint plan of reorganization with their major constituencies before" they filed these chapter 11 cases. However, "Events arising post-petition have caused the debtors to enter into additional negotiations with these constituencies regarding the proposed reorganization structure." The Debtors' Motion does not identify these "events." At the Debtors' behest, Judge Walrath entered a "Bridge Order" extending the Debtors' exclusive period during which to file a Reorganization Plan, and to solicit acceptances of the Plan, until the time she rules on this Motion. (Vencor Bankruptcy News Issue 9; Bankruptcy Creditor's Service Inc.) WESTSTAR CINEMAS: Bar Date Extended For WF Holdings --------------------------------------------------- It is agreed by stipulation, subject to court approval, that the last date for WF Holdings and its affiliates, including Paramount Pictures Corporation, Viacom Inc., Time Warner, Inc., and Warner Bros, to file timely proofs of claim in the debtors' cases shall be January 31, 2000. WSR CORP: Charon Investments Objects To Exclusivity Extension ------------------------------------------------------------- Charon Investments LLC, the largest unsecured creditor of WSR Corporation, R&S Strauss, Inc., National Automotive Stores, Inc., and National Auto Stores Corp., objects to the extension of exclusivity requested by the debtors. Charon states that more than eighteen months have passed, and the debtors have yet to file a plan or motion authorizing the sale of the debtors' assets, or take any other steps to establish minimum levels for unsecured creditor recoveries. Charon believes that the debtors have yet to object to a single proof of claim. But the debtors have paid millions of dollars in professional fees. Charon desires a process that encourages competitive bidding for the debtors' assets, so as to maximize recoveries for unsecured creditors. To date, the process has been closed to creditor scrutiny and has not, in any apparent way, enhanced recoveries for unsecured creditors or expedited the time frame for receipt of such recoveries. According to Charon, the termination of exclusivity will not in any way impede the debtors' progress in the case or in its sale of assets. ********* A listing of Meetings, Conferences and Seminars appears each Tuesday in the TCR. 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