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/raid1/www/Hosts/bankrupt/TCR_Public/000526.MBXT R O U B L E D C O M P A N Y R E P O R T E R Friday, May 26, 2000, Vol. 4, No. 104 Headlines AAMES FINANCIAL: In Violation Of Financial Covenants ACCESSAIR: Bar Date Notice; Increase In Borrowing Limit AMERISERVE: Probe Initiated By SEC BARNEYS NEW YORK: Comment Letter From SEC Regarding Statements BRAZOS SPORTSWEAR: Hearing on Approval of Disclosure Statement CKE RESTAURANTS: Moody's Lowers Ratings DIAGNOSTIC HEALTH: Seeks To Reject 28 Leases DIGITAL WIRELESS: Confirmation of Plan DLS MANAGEMENT: Case Summary and 16 Largest Unsecured Creditors EMPLOYEE SOLUTIONS: Reports Progress With Bondholder Negotiations FIDELITY BANCORP: Reports Second Quarter Earnings of $1.1MM FRUIT OF THE LOOM: Committee To Examine Farley Under Rule 2004 GLOBAL OCEAN: Seeks To Retain Valuation Consultants GST TELECOMMUNICATIONS: Postpones Annual Shareholders' Meeting HARNSICHFEGER: Application To Employ Piper Marbury HARVARD PILGRIM: Court Ensures To Pay Creditors LIL' THINGS: Order Approves Final Distribution; Case Dismissed MARINE MILITARY ACASDEMY: files Chapter 11 MARINER: Omnibus Motion To Settle Prepetition PI Claims MEDICAL SPECIALISTS: Files for Bankruptcy MICROAGE: Final Approval For $210MM DIP Financing NANTUCKET INDUSTRIES: Deadline For Filing Proofs of Claim NEW YORK BAGEL: New World Completes Acquisition of Stores NOXSO CORP: Completes Implementation of Confirmed Plan NTT DATA CORP.: Posts 18B Yen group net loss OXFORD HEALTH PLANS: Revenues For Quarter Down 3.6% PACIFIC GATEWAY: Class Action on Behalf of Shareholders PETSEC: Worried Shareholders Grill Board SAMSONITE: Annual Meeting Will Be Held On June 22, 2000 SUN HEALTHCARE: Application To Employ KPMG LLP as Consultants THERMATRIX INC: Results For Fiscal Year Ended December 31, 1999 VENCOR: Ventas/Vencor Form Tax Agreement ********* AAMES FINANCIAL: In Violation Of Financial Covenants ---------------------------------------------------- Aames Financial Corp. said it is in violation of financial covenants following a $61.5 million fiscal third-quarter loss, jeopardizing its ability to continue loan production. In a Securities and Exchange Commission filing, the Los Angeles home- equity lender said it failed to meet covenants at March 31 and April 30 and doesn't expect to meet them at May 31. The company is seeking amendments from its lenders to bring itself into compliance. Without the amendments, the lenders can declare a default, which could "jeopardize the company's ability to continue to operate as a going concern," Aames said in the filing. Aames also isn't in compliance with its insurer's net- worth and cash- liquidity requirements, and is seeking amendments from the insurer. Obtaining the amendments is a condition for Aames to receive an additional equity investment of $50 million from its lead stockholder, Capital Z Financial Services Fund II LP. ACCESSAIR: Seeks Increase In Borrowing Limit -------------------------------------------- AccessAir, Inc., debtor is seeking an order increasing the amount that AccessAir is authorized to borrow from Ruan, Inc. or its designee from $1.6 million to $4 million. AccessAir further requests that the court hold an expedited preliminary hearing in order to consider an increase in authorization of $500,000 in the immediate future as necessary to avoid immediate and irreparable harm to the bankruptcy estate. AMERISERVE: Probe Initiated By SEC ---------------------------------- According to an article in The Wall Street Journal on May 25, 2000, the Securities and Exchange Commission has begun an informal inquiry into events surrounding AmeriServe Food Distribution Inc.'s Chapter 11 bankruptcy- reorganization filing, including a September 1999 bond offering underwritten by Donaldson, Lufkin & Jenrette Inc. However, the article points out that if the SEC decides a case is worth pursuing, DLJ would enjoy a significant legal shield because the bonds were private placements, or unregistered securities sold only to "qualified institutional buyers" under the SEC's Rule 144a. Therefore, the bonds aren't subject to all the securities laws designed to protect investors in public securities. Reportedly, the SEC has asked parties involved for information about the $200 million bond offering for AmeriServe; about AmeriServe's communications with DLJ; about AmeriServe's relationship with Burger King Corp., a crucial customer; and about financial transactions in the year prior to the filing. AmeriServe and DLJ have been accused by bondholders of failing to fully disclose AmeriServe's problems at the time of the $200 million bond issue led by DLJ. Those bonds are now trading at about 16 cents on the dollar. DLJ and AmeriServe founder and former Chief Executive John Holten both maintain that they provided the proper level of disclosure. They also say that money they put into AmeriServe several weeks prior to the reorganization filing shows they had confidence in the company's ability to survive. A $100 million loan DLJ made to AmeriServe in December was senior to the junk bond DLJ underwrote in September, meaning DLJ gets repaid $100 million before the bondholders get anything. The bondholders are pushing for "equitable subordination," arguing that the DLJ loan should be reduced to below the seniority of the bond, so the bondholders would get paid first. BARNEYS NEW YORK: Comment Letter From SEC Regarding Statements -------------------------------------------------------------- Barneys New York, Inc., a Delaware corporation, is the parent company of Barney's, Inc., a New York corporation, which together with its subsidiaries, is a leading upscale retailer of men's, women's and children's apparel and accessories and items for the home. The company is engaged in three distribution channels which encompass its various product offerings: the full-price stores, the outlet stores and the warehouse sale events. In addition, the company is involved in licensing arrangements under which the "Barneys New York" trade name is licensed for use in Asia. Barneys operates seven full-price stores (three of which are flagship stores located in New York, Chicago and Beverly Hills and four of which are regional stores) and eight outlet stores throughout the United States under the "BARNEYS NEW YORK" trade name. Barneys merchandise is priced at the upper end of the market and appeals to sophisticated customers whose income levels are above average. Its merchandising philosophy stresses a variety of fashion viewpoints. It offers a mix of merchandise, including men's, women's and children's clothes and accessories plus decorative items for the home and gifts. The merchandise is from a variety of resources including established designers, new designers, branded goods and private label goods. The company purchases merchandise from a broad range of vendors, domestic and foreign, including designers, manufacturers of branded goods and private label resources. Major designers include Giorgio Armani, Prada, Jil Sander, Donna Karan, Comme des Garcons, Robert Clergerie and Ermenegildo Zegna. Major branded goods include Oxxford and Hickey Freeman, and major cosmetics lines including but not limited to Chanel, Francois Nars and Kiehls. A significant portion of the merchandise is manufactured in Europe (primarily Italy). The flagship stores in New York and Beverly Hills also include restaurants managed by third party contractors. In addition to its full-price retail business, the company has developed two operations which focus on outlet stores and warehouse sale events. On April 21, 2000, Barneys New York, Inc., in response to comments of the staff of the Securities and Exchange Commission, filed amendment no. 3 to its financial information statement. On April 27, 2000, the company received an additional comment letter from the staff of the Securities and Exchange Commission, asking the company to respond to matters related to the financial statements. Because the financial statements contain information required in the company's annual report, and due to the timing of the comment letter and the desirability of completing pending discussions with the SEC staff and responding to their comment letter, Barneys indicates it will not be able to timely file selected financial data on an annual report in a timely fashion. BRAZOS SPORTSWEAR: Hearing on Approval of Disclosure Statement -------------------------------------------------------------- A hearing will be held before the Honorable Peter J. Walsh, US Bankruptcy Court, District of Delaware, on June 15, 2000 at 3:00 PM to consider the adequacy of the information contained in, and approval of, the Disclosure Statements of the debtors, Brazos Sportswear, Inc. and its affiliates. CKE RESTAURANTS: Moody's Lowers Ratings --------------------------------------- Moody's Investors Service lowered the ratings on CKE Restaurants, Inc's debt as follows: $370 million revolving credit facility to B1 from Ba3, $200 million senior subordinated notes, due 2009, to B3 from B2, and $160 million convertible subordinated notes, due 2004, to Caa1 from B3. Moody's also lowered the company's senior implied rating to B1 from Ba3 and its unsecured issuer rating to B2 from B1. The rating outlook is stable. This rating action concludes the review that commenced on January 26, 2000. The rating action reflects the ongoing challenges associated with turn around of the Hardee's chain and moderating operating results at the Carl's Jr. subsidiary, both of which have caused a reassessment of future bondholder protection measures. The depth of problems at Hardee's unexpectedly threatened the company's compliance with bank loan financial covenants, and has led the company to alter its strategy of owning significant Hardee's restaurants. Consequently, the company is attempting to sell a significant number of Hardee's units to franchisees over the next several months. A performance turnaround at the company's hamburger restaurants, especially Hardee's, is further away than we had previously anticipated. The historically strong operating performance at the Carl's Jr. subsidiary is likely to be more moderate going forward, given increased competitive pricing pressure and rising restaurant labor and training costs. The stable outlook contemplates that meaningful leverage reduction will occur in the near term from Hardee's asset sales, but that overall operating performance remain moderately lower than results achieved prior to the Hardee's acquisitions in 1997. We continue to expect that a performance recovery at Hardee's is at least a year away, but that CKE will maintain satisfactory access to liquidity under its recently revised bank facility. The ratings continue to reflect the challenges that management faces in turning around Hardee's as well as the additional burden in restoring profitability at Carl's Jr. to it's prior level, which by most measures is still superior relative to industry peers. The ratings also recognize the intense competition in the quick service segment of the restaurant industry, the moderate geographic diversity of the Carl's Jr. system, and the effective marketing programs of direct competitors such as McDonald's and Jack In The Box. However, the ratings also consider that CKE is one of the largest quick service hamburger operators, that the Hardee's operations improves its geographic diversity, and that Carl's Jr. remains one of the better performing quick service hamburger concepts within the industry. Management's recent efforts to sell Hardee's units also supports the ratings, as does the solid performance at Taco Bueno with good restaurant margins and growing comparable store sales. The B1 rating on the $370 million revolving credit facility recognizes that the banks do not have a perfected interest in company-owned real estate, which would result in only moderate protection in a distressed scenario. The facility is secured by the capital stock of the company's operating subsidiaries, guaranteed by the operating subsidiaries, and secured by the operating subsidiaries non-real estate assets. We expect that availability under the facility will decline to roughly $225 million after the proposed asset sales, and that outstanding draws will approximate $100 million given the corresponding reduction in capital outlays needed at remaining Hardee's units. The B3 rating on the $200 million senior subordinated notes recognizes that these notes are guaranteed by the company's operating subsidiaries, but are contractually subordinated to the bank facility. The Caa1 rating on the $160 million convertible subordinated notes considers that these notes are structurally subordinated to all of the company's other obligations, since they are not guaranteed by the company's subsidiaries. Within the past few months, CKE has embarked on a plan to sell about 500 Hardee's restaurants to franchisees by October 2000. With net sale proceeds estimated by Moody's at $200 million, this should significantly reduce leverage from the $285 million currently outstanding under the bank facility. We believe that such asset sales will moderate the need to incur additional debt to effect management's remodeling plans for Hardee's. CKE has completed the conversion of more than 500 of its 1,354 owned restaurants from Hardee's to Star/Hardee's. Along with a revamped advertising campaign, the conversion of remaining owned and substantially all franchised Hardee's restaurants is designed to add popular Carl's Jr. offerings to the Hardee's lunch and dinner menu, while keeping the strong Hardee's breakfast menu. Net debt was 4.2 times trailing EBITDA, excluding $42 million of restructuring costs, while adjusted debt to EBITDAR reflected the company's higher effective leverage from leased properties at 5.7 times. Adjusted EBITDA was only 2.7 times interest for the twelve months ending January 31, 2000. We expect modest performance improvement over the near term, with debt to EBITDA declining below 4 times, but adjusted debt to EBITDAR remaining above 5 times. Consolidated EBITDA is expected to improve from an adjusted 9.3% in fiscal 2000 to approximately 11% in fiscal 2001, excluding realized losses on the sale of Hardee's units. CKE Restaurants, Inc., headquartered in Anaheim, California, operates or franchises 934 Carl's Jr. and 2,788 Hardee's quick service hamburger restaurants, and 121 Taco Bueno quick service Mexican restaurants. DIAGNOSTIC HEALTH: Seeks To Reject 28 Leases -------------------------------------------- Diagnostic Health Services, Inc. and its various subsidiaries request that the court enter an order authorizing the debtors to reject 28 leases of non-residential real property. The debtors have either made arrangements to close their operations on the leased premises or have already vacated the premises and therefore no longer need the real property referenced in the leases for business purposes. The leases are not necessary to the debtors' reorganization, and rejection of the leases is in the best interests of the debtors, their creditors and other interested parties. The leases cover premises located in Alabama, Arizona, New Mexico, Georgia, Nevada, California, Texas, Missouri, Louisiana and Oklahoma. DIGITAL WIRELESS: Confirmation of Plan -------------------------------------- Advanced Wireless Systems, Inc. (OTC Bulletin Board: AWSS) announced the confirmation of the Plan of reorganization of Digital Wireless Systems, Inc., which occurred Tuesday in the Federal Bankruptcy Court, Middle District of Tennessee. Under the Plan, Advanced Wireless, as the Successor to the Debtor, will acquire all assets of Digital Wireless in exchange for Advanced Wireless common stock and stock purchase warrants, which will be distributed to Digital Wireless' creditors and equity security holders. The Digital Wireless acquisition will increase Advanced Wireless' Broadband wireless (MMDS) holdings by over 700% and will triple its monthly gross revenues. The closing of the sale is expected to occur at the end of June 2000. Digital Wireless owns and/or leases multiple Broadband MMDS frequencies in each of its four markets: Baton Rouge, LA; Shreveport/Bossier City, LA; Clarksville, TN; and Reading, PA. While these frequencies are currently used to provide 'wireless cable' television programming, Advanced Wireless plans to convert the stations' assets to the emerging field of Broadband Access, similar to the services already provided by Advanced Wireless in Mobile, AL. Broadband Access is the ability to deliver a wide variety of telecommunications products and services with a single delivery technology. Advanced Wireless' near future plan is to offer a wide variety of products, including web hosting, web page design, merchant services, E-commerce and T-1 speed Internet access, as well as television and special interest programming, on a wireless basis. Digital Wireless is currently a full-service commercial and residential provider of subscription television and DBS-Internet services in each of its four markets. Television programming is provided primarily through agreements with DirecTV and Dish Network (via direct broadcast satellite transmission) and World Satellite Network (WSNet). DLS MANAGEMENT: Case Summary and 16 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: DLS Management, Inc. 524 East 73rd Street New York, NY 10021 212-453-3773 Petition Date: May 24, 2000 Chapter 11 Court: S. District of New York Bankruptcy Case No.: 00-12349 Debtor's Counsel: Joseph Thomas Moldovan, (0232) Fischbein Badillo Wagner Harding 909 Third Ave New York, NY 10022 Tel: (212) 453-3773 Fax: (212) 644-7485 Email: JMoldova@fbwhlaw.com Total Assets: $ 3,115,051 Total Debts: $ 1,118,330 16 Largest Unsecured Creditors Nancy Esteva 60 Compo Mill Cove Sh Adv & Salary Westport, CT 06880 Owed $ 355,000 Hudson United Bank 1000 MacArthur Blvd. Mahwah, NJ 07430 Bank Loan $ 350,000 Stanley Muss Rent $ 174,648 Rosa Santoro Loan $ 87,630 Rosenman & Collin Legal Fees $ 40,000 Stephen P. Shea Legal Fees $ 16,645 Local 348-S F.C.W. $ 13,538 Mandel & Resnick, PC Legal Fees $ 12,500 NCRI Solutions Trade Debt $ 7,808 Kemper Insurance Insurance premiums $ 4,123 Colonial Elevator Elevator maintenance $ 3,734 Park Plus Trade debt $ 405 Eastcoast Uniforms Uniform services $ 172 PAYCHEX Payroll services $ 167 Little Johns Warehouse Doc storage $ 145 New York City Department of Finance Tax in illum. sign $ 100 EMPLOYEE SOLUTIONS: Reports Progress With Bondholder Negotiations ----------------------------------------------------------------- Employee Solutions, Inc. ("Company")(OTCBB:ESOL) announced that negotiations with its bondholders have progressed to the next step in its efforts to complete a restructuring plan. The Company reports that it has presented a term sheet to the bondholders and has fully cooperated with the bondholders' advisors, who have completed their own independent evaluation of the Company's financial condition and future outlook. As a result, the bondholders have granted the Company forbearance on the April 15, 2000, interest payment to allow sufficient time to complete the negotiations currently underway. "We are pleased with the current progress being made, and everyone is seeking a successful resolution to this restructuring effort. The Company's restructuring plan remains on schedule, and we hope to be able to include a restructuring proposal in the proxy statement to be mailed to shareholders by mid-June. The annual shareholders' meeting is scheduled for mid-July," said Sara Dial, Chairman of the Board of Employee Solutions. FIDELITY BANCORP: Reports Second Quarter Earnings of $1.1MM ----------------------------------------------------------- Fidelity Bancorp Inc.'s results of operations are dependent on net interest income which is the difference between interest earned on its loan and investment portfolios, and its cost of funds, consisting of interest paid on deposits and borrowed money. The company also generates non-interest income such as transactional fees, loan servicing fees, and fees and commissions from the sales of insurance products and securities through its subsidiary. Operating expenses primarily consist of employee compensation, occupancy expenses, federal deposit insurance premiums and other general and administrative expenses. The company reported earnings for the second fiscal quarter ended March 31, 2000 of $1.1 million, compared with $994,000 for the same quarter a year ago, an increase of 13.5%. Earnings for the six-month period ended March 31, 2000 were $2.2 million, compared with $1.9 million for the same six-month period a year ago. FRUIT OF THE LOOM: Committee To Examine Farley Under Rule 2004 -------------------------------------------------------------- The Official Committee of Unsecured Creditors sought and obtained an order from Judge Walsh, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, directing William Farley to furnish all documents relating to the Loan Guaranty and his claimed expenditures of the proceeds. In addition, the committee wants Farley's personal financial statements from February 1, 1999, to December, 1999, documents that relate to his communication with a financial advisor, and documents pertaining to loan collateral. They also want the right to review any papers from meetings of the Board of Directors, or any subcommittees, at which the Loan Guaranty was discussed. Additionally, pursuant to Rule 2004 and Rule 30(b)(6), the Committee is authorized to depose Mr. Farley. The Committee served a Subpoena on Mr. Farley, commanding his appearance at a deposition to commence, in Chicago, on June 8, 2000, and continue from day to day until the Committee's questions about the Farley Loan and other matters are answered. Bank of America and representatives of the Informal Committee of Secured Bondholders are invited to participate. The proceedings may be videotaped, the Official Committee indicates. (Fruit of the Loom Bankruptcy News Issue 6; Bankruptcy Creditors' Services Inc.) GLOBAL OCEAN: Seeks To Retain Valuation Consultants --------------------------------------------------- The debtors, Global Ocean Carriers Limited, et al. seek court authority to retain, employ and pay Jacq. Pierot Jr. & Sons, Inc. as valuation consultant with respect to dry bulk carrier vessels. Compensation will be $10,000 for the firm's valuation report plus $1,000 per certificate for each vessel. Further, Pierot will be paid at the rate of $7,500 per day for providing testimony, plus reimbursement of expenses and other charges incurred by Pierot. The debtors also seek to retain, employ and pay The Commonwealth Group as valuation consultant with respect to container vessels, to provide appraisal and valuation services. Compensation for services to be rendered by Commonwealth will be $12,500 for its valuation report. Further, Commonwealth will be paid at the rate of $2,000 per day for providing testimony, plus reimbursement of expenses and other charges incurred by Commonwealth. GST TELECOMMUNICATIONS: Postpones Annual Shareholders' Meeting -------------------------------------------------------------- GST Telecommunications, Inc. (Nasdaq: GSTXQ) today announced that it has obtained an order of the Ontario Superior Court under the Companies' Creditors Arrangement Act (Canada) recognizing the Chapter 11 proceedings initiated by the Company in the U.S. As a result of these proceedings, the Company will defer its annual shareholders' meeting and hold the meeting in the course of the Company's restructuring. GST Telecommunications, Inc., an Integrated Communications Provider (ICP) headquartered in Vancouver, Wash., provides a broad range of integrated telecommunications products and services including enhanced data and Internet services and comprehensive voice services throughout the United States, with a significant presence in California and the West. Facilities- based GST continues to focus on its western regional strategy by anchoring its next generation networks in local markets and connecting them via long haul fiber networks. HARNSICHFEGER: Application To Employ Piper Marbury -------------------------------------------------- In response to an adversary proceeding brought by Omega Papier Wernshausen GmbH against HII, Beloit and three officers, Mark E. Readinger, Ross J. Altman, and Scott T. Baker, the Debtors seek the Court's approval to employ and retain Piper Marbury Rudnick & Wolfe as Special Counsel to represent the three officers, nunc pro tunc to March 1, 2000. The Debtors and the individual defendants believe that the individual defendants need counsel in the litigation separate from counsel to HII and Beloit. HII and Beloit have notified the insurance company concerned accordingly and requested that the insurer pay PMRW's fees with respect to this matter. Piper Marbury Rudnick & Wolfe was formerly known as Rudnick & Wolfe, who the Court authorized the Debtors to retain and employ as Special Counsel for Real Estate and Certain Corporate Matters. Considering PMRW's previous experience in working with the Debtors, that the attorneys at PMRW are well qualified, are disinterested parties in the Debtors' chapter 11 cases, and do not represent any interest adverse to the Debtors or their estates, the Debtors ask Judge Walsh to authorize them to employ and retain PMRW to represent the three officers in the Omega litigation. (Harnischfeger Bankruptcy News Issue 23; Bankruptcy Creditors' Services, Inc.) HARVARD PILGRIM: Court Ensures To Pay Creditors ----------------------------------------------- Judge Michael Silverstein in a Massachusetts Supreme Judicial Court approved an agreement to ensure the failed HMO in Rhode Island, Harvard Pilgrim Health Care for its creditors to be paid in full, including doctors, hospitals, and former Harvard employees which estimates to a total of $50 - 60 million. LIL' THINGS: Order Approves Final Distribution; Case Dismissed -------------------------------------------------------------- LiL' Things, Inc., debtor is authorized to make final pro rata distributions to all administrative claimants. After such distributions are made to creditors holding allowed claims, the remaining assets of the debtor are de minimis and the case is dismissed by order of the Honorable Harold C. Abramson on March 17, 2000. MARINE MILITARY ACASDEMY: files Chapter 11 ------------------------------------------ Overwhelmed by several pending lawsuits, the Marine Military Academy in Harlingen has filed for bankruptcy protection. The private, all-male institution, founded in 1965, filed for Chapter 11 bankruptcy protection in Arizona, where it was chartered. "We filed for bankruptcy protection to ensure the continued normal operation of school in the face of several burdensome lawsuits," said academy president Wayne F. Rollings, a retired major general with the U.S. Marines. The families of several former students have filed at least three lawsuits against the academy alleging the all-male institution inadequately supervised cadets and knew of alleged hazing incidents that took place between 1993 and 1997. MARINER: Omnibus Motion To Settle Prepetition PI Claims ------------------------------------------------------- The Debtors tell the Court they face 850 personal injury claims as at petition, 590 against MPAN, and 260 against Mariner Health, arisen over periods dating back to 1986. To deal with such a large number of claims as quickly and efficiently as possible, the Debtors ask the Court to authorize a streamlined settlement process for these pre-petition claims, and to dispense the Debtors with the requirement to seek court approval for settlement consummation for each respective claim. The Debtors explain that generally speaking, claims have three components: (i) the deductible or self-insured portion, which should be treated as a general unsecured claim and receive distribution in accordance with the plan; (ii) the portion covered by insurance which should be paid by the insurer; and (iii) the portion that is not covered by insurance, either because it exceeds policy limits, is not covered by the express terms of the policies, or is otherwise subject to coverage defenses. Prior to the Petition Date, the Debtors settled claims in the ordinary course of their business with the assistance of either a Third Party Administrator or the insurer, depending upon the year in which the claim arose, and on the applicable insurance policy. The Debtors propose to continue with their pre-petition process except that: (i) instead of paying the deductible or self-insured portion of a settled claim for which the Debtors are liable, to allow a general unsecured claim for an agreed amount up to that portion; and (ii) to authorize non-debtor parties to pay any settlement amount in excess of the deductible or self-insured portion for which the Debtors are liable without further order of the Court. The Debtors promise they will submit quarterly status reports to the Agent for the Senior Secured Prepetition Lenders and Postpetition DIP Lenders and the Creditors' Committee, indicating: (i) the number of settled claims; (ii) the amount of allowed unsecured claims; (iii) the aggregate number of the settled actions for which payment has been made by the respective non-Debtors; and (iv) the aggregate amount of the payments made. The Debtors contend that continuing with the settlement process may enable them to avoid making substantial cash outlays to litigate personal injury claims when these can be satisfied by the allowance of general unsecured claims. The Debtors remind the Judge that the attorneys' fees and other expenses associated with litigation will be substantial, given that claims of this kind which are the subject of actions pending in state and federal courts throughout the country. The Debtors further assert that with the extensive experience of the parties involved in settling claims, there is no reason to impose on them the burden of seeking court approval on a settlement-by-settlement basis for the large number of claims. The Debtors steer Judge Walrath's attention to Rule 9019(b) of the Federal Rules of Bankruptcy Procedure which provides for the compromise and settlement of creditors' claims. The authorization sought in this Motion is also appropriate, the Debtors contend, because it applies only to the Debtors' liability under the respective deductible or self-insured portion, but does not provide for the payment of such amounts in cash at the time the motion is submitted. The Debtors assure the Court they have ample incentive to attempt to settle claims for as little as possible, without the need for notice and a hearing on a settlement-by-settlement basis. They tell Judge Walrath that they are fully aware that settlements of existing Claims may have repercussions in post-petition or post- plan confirmation personal injury claims. They are also cognizant of the effect that the size of their claims settlements may have on their future relationship with liability insurers. In the present cases, the Debtors tell Judge Walrath that the potential benefits of streamlining the settlement process are great considering the large volume of claims against the Mariner Group. A hearing on the Motion is scheduled for May 24, 2000. (Mariner Bankruptcy News Issue 5; Bankruptcy Creditors' Services, Inc.) MEDICAL SPECIALISTS: Files for Bankruptcy ----------------------------------------- The Richmond Times Dispatch reports on May 19, 2000 that Medical Specialists Inc., a West End medical practice with 13 physicians and 54,000 active patients, has filed for bankruptcy protection and plans to go out of business in about two months. Papers filed in U.S. Bankruptcy Court here say the practice wants to keep operating long enough to liquidate assets and smoothly transfer patients to other health care providers. If they desire it, patients would be able to stay with their current doctor when he or she moves to another practice. All the physicians will continue working for the practice, whose offices are at 7229 Forest Ave. in Henrico County, for about 60 days. The specialties of the doctors in the practice include dermatology, gastroenterology, hematology-oncology, internal medicine and obstetrics-gynecology. Medical Specialists Inc. listed assets of nearly $ 3.6 million and liabilities of nearly $ 3.2 million when its lawyers filed for reorganization May 9. Its reorganization plan must still be approved by the court, but it appears likely most creditors will be paid. MICROAGE: Final Approval For $210MM DIP Financing ------------------------------------------------- MicroAge Inc. announced that it has received final approval from the Bankruptcy Court of its $210 million debtor-in-possession (DIP) financing agreement. Under the DIP agreement, a group of financial institutions led by Citibank, N.A. will provide post-petition financing to MicroAge to purchase goods and services and fund the company's ongoing operations during its voluntary restructuring under Chapter 11. Initially the company had requested and received interim approval from the Court for$225 million in debtor-in-possession (DIP) financing. Since the initial date of Chapter 11 filing on April 13, 2000, the company has re-assessed its needs, and requested and received approval on $210 million in DIP financing. The revised terms of the agreement also provide for greater availability of funds for product purchases and reduced fees. "The DIP financing facility will provide adequate financial resources to fund our post-petition vendor and employee obligations and other operating requirements as MicroAge moves forward with its restructuring," said Jeffrey D. McKeever, MicroAge chairman and chief executive officer. To facilitate the previously announced restructuring necessary to continue its transformation into a business-to-business (B2B) provider of technology procurement solutions, MicroAge and certain subsidiaries filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Arizona in Phoenix on April 13, 2000. MicroAge Inc., a Fortune 500 company, provides B2B technology solutions and infrastructure services. The company is composed of information technology businesses, delivering ISO 9001-certified, multi-vendor integration services and solutions to large organizations and computer resellers worldwide. The company does business in more than 40 countries and offers over 250,000 products from more than 1,000 suppliers backed by a suite of technical, financial, logistics and account management services. More information about MicroAge is available at www.microage.com. NANTUCKET INDUSTRIES: Deadline For Filing Proofs of Claim --------------------------------------------------------- Pursuant to an order of the court dated May 4, 2000, the time within which all creditors of Nantucket Industries, Inc. who have not already done so, may file their proof of claim against the above named debtor's estate to and including the 19th day of June, 2000. NEW YORK BAGEL: New World Completes Acquisition of Stores --------------------------------------------------------- New World Coffee-Manhattan Bagel, Inc. (Nasdaq: NWCI) announced that it has completed the acquisition of the leases and store operating assets of 17 company-owned New York Bagel stores in Oklahoma and Kansas from New York Bagel Enterprises, Inc., a Chapter 11 debtor. New World intends to sell these stores to third parties as Manhattan Bagel branded franchised locations. In addition, New World acquired Bank of America's lien rights to substantially all of the remaining assets of New York Bagel Enterprises, Inc. and its affiliate, Lots 'A Bagels, Inc., which is also a Chapter 11 debtor. As a result, New World now controls the liens on two other company-owned New York Bagel stores in Oklahoma, and on the seven company-owned Lots 'A Bagels stores located in Colorado. New World expects to acquire those stores through the respective bankruptcy cases of New York Bagel Enterprises, Inc. and Lots 'A Bagels, Inc., both of which are pending in the District of Kansas, in Wichita. The acquisition is expected to be accretive to earnings immediately. In addition to the leases, store operating assets and lien rights, New World also acquired all rights to the New York Bagel tradename and trademarks, and may take ownership of New York Bagel Enterprises, Inc.'s rights under its franchise agreements with approximately 13 franchisees. All told, these transactions will add approximately 26 company- owned bagel shops to New World's existing store network, and potentially an additional 13 franchised stores. All of the New York Bagel stores will use frozen dough and cream cheese produced in Manhattan Bagel's Eatontown, NJ factory and coffee roasted at the New World plant in Branford, CT. "The New York Bagel acquisition represents the latest phase of our growth plan," said Ramin Kamfar, New World's Chairman and CEO. "In addition to expanding to three new Midwestern markets, these transactions solidify our position as the No. 1 franchisor in the industry and further leverage our investment in Manhattan Bagel's infrastructure." New World Coffee-Manhattan Bagel, Inc. currently franchises, licenses or owns stores under its four brands in 28 states and Washington, D.C. The Company is vertically integrated in bagel dough and cream cheese manufacturing, and coffee roasting, with plants in New Jersey, California and Connecticut. NOXSO CORP: Completes Implementation of Confirmed Plan ------------------------------------------------------ Noxso Corporation, (OTC: NOXOQ) announced the completion of the implementation of the company's confirmed reorganization plan. The company's confirmed reorganization plan authorized the sale of the company to an investor group and the sale of the company's main asset, the Noxso Technology. Both sales have taken place and are complete as of may 25, 2000. As part of the sale of the company, the current shareholders of record as of the end of business yesterday, May 24, 2000 will cease to have an equity or any interest in the company. Pursuant to the plan, proceeds from the asset sales will be used to pay administrative expenses and to the extent possible, to retire debt. The investor group that purchased control of the company will be distributing 10% of the company's fully diluted equity to the company's unsecured creditor class as part of the confirmed plan. Additionally, as part of the plan the investor group is empowered to elect a new board of directors. NTT DATA CORP.: Posts 18B Yen group net loss -------------------------------------------- Japan's NTT Data Corp. (9613) Monday reported a group net loss of Y18.11 billion for the year ended March 31, compared with net profit of Y16.31 billion the previous fiscal year. Extraordinary losses totaling Y63.8 billion dragged Japan's largest data network services provider into the red. The losses stemmed from payments to cover pension liabilities and the writeoff of expenses related to software systems The company's group pretax profit amounted to Y34.70 billion, an 8.1% on-year decline. NTT Data also reported group operating profit slipped 10.7%, to Y50.74 billion, while group revenue edged 2.1% higher to Y725.35 billion. The company's results for this fiscal year were in line with earning forecast revisions made on March 31. The absence of extraordinary losses following this year's big write-offs, combined with an increase in overall group revenues, will help the company move back into the black for the current fiscal year ending March 31, 2001, it said. NTT Data forecasts group net profit of Y21 billion in the current fiscal year. It estimates group pretax profit will amount to Y38 billion. NTT Data sees group revenues for the current fiscal year of Y774 billion, an 6.7% on-year increase. Overall revenue growth is likely to be supported by 8% growth in orders for its system integration (SI) services. NTT Data also forecasts 8% growth in revenues from its network system services boosted by new Internet-related business. However, the company anticipates that revenue from some systems maintenance services will likely fall. The company also unveiled its mid-term business targets. In the fiscal year ended March 2003, NTT Data aims to generate group pretax profit of Y50 billion on group revenues of Y900 billion. By fiscal 2002, the company also hopes to raise return on equity (ROE) to 7.0% and bring its free cashflow into the black, it said. At a press conference in Tokyo Monday, senior company executives said that the company is planning to improve its cashflow situation by liquidating some of its assets. (Nikkei 22-May-2000) OXFORD HEALTH PLANS: Revenues For Quarter Down 3.6% --------------------------------------------------- Oxford Health Plans Inc.'s revenues consist primarily of commercial premiums derived from its Freedom Plan, Liberty Plan and health maintenance organizations ("HMOs") and reimbursements under government contracts relating to its Medicare+Choice programs, third-party administration fee revenue for its self- funded plan services and investment income. Total revenues for the quarter ended March 31, 2000 were $1.02 billion, down 3.6% from $1.06 billion during the same period in the prior year. Net earnings for the first quarter of 2000 totaled $28.8 million, compared to $3.2 million, for the first quarter of 1999. PACIFIC GATEWAY: Class Action on Behalf of Shareholders --------------------------------------------------------- Goodkind Labaton Rudoff & Sucharow LLP and Girard & Green LLP hereby announce that, pursuant to Section 21(D)(a)(3)(A)(i) of the Securities Exchange Act of 1934, notice is given that a complaint has been filed by in the United States District Court for the Northern District of California against Pacific Gateway Exchange (NASDAQ: PGEX), ("Pacific") and certain directors and senior officers, charging the commission of securities fraud. That lawsuit was filed on Thursday May 18, 2000, on behalf of all persons who purchased Pacific common stock from May 13, 1999 through March 31, 2000. The complaint charges the defendants with manipulating Pacific's stock price by improperly accounting for certain expenses and misleading the public about the Pacific's ability to continue operating as a going concern, resulting in the material misstatements contained in Pacific's financial and operating results from May 1999 through March 2000. The complaint further alleges that the individual defendants sought to profit from their accounting manipulations by selling Pacific's stock at prices artificially inflated by their illegal actions. PETSEC: Worried Shareholders Grill Board ---------------------------------------- In Sydney, Australia, angry investors directed a barrage of questions at the board of Petsec Energy Ltd. over the future of Petsec's troubled US subsidiary. Last month, Petsec Energy Inc (PEI) - which is the core business of oil exporation company Petsec Energy Ltd - filed a voluntary bankruptcy petition in the Louisiana Federal Court under Chapter 11 of the US Bankruptcy code. The court procedure followed negotiations in January between PEI and its US unsecured noteholders, so that the company could reconstruct its balance sheet. Petsec Energy Ltd was ordered not to extend loans to the US company, which owes $107 million to the noteholders. "The outcome of this process is unpredictable and may result in the sale of all of Petsec Energy Inc's assets," Petsec chairman and managing director Terrence Fern told shareholders at the meeting. "A plan of reorganisation is required by the courts within three months. At that time you company will be in a better position to assess its future operating strategy. "Be assured your board and management are dedicated to achieving both a satisfactory resolution and rebuilding of Petsec Energy," he said. One shareholder demanded to know whether the sale of the US assets would impact the Australian company's already troubled balance sheet, and the future proftability of the company. "No, the noteholders only have recourse to the US assets," Mr Fern said. Mr Fern earlier told shareholders that the company's 1999 performance had been insufficient to rectify balance sheet damage borne by the company in 1998. Petsec posted a net loss of $42.098 million for the year ended December 31 1999, which included an abnormal loss of $16.62 million due to impairment of permits and exploration and development. Another shareholder proposed to the board that they should buy back all its shares and then ask shareholders to re-subscribe. "Well, considering that the entire business is based on the US subsidiary...that's one of the options that the board of directors will have before them - to give funds back," Mr Fern said. Petsec's shares closed at 9.7 cents today, down 0.4 cents, from around 46.3 cents a year ago. SAMSONITE: Annual Meeting Will Be Held On June 22, 2000 ------------------------------------------------------- The annual meeting of stockholders of Samsonite Corporation will be held June 22, 2000 at the Hilton Garden Inn, Denver Airport, 16475 East 40th Circle, Aurora, Colorado. The meeting will convene at 10 A.M., Mountain Time. In addition to the regular business of the meeting there will be a report on the company's operations during fiscal 2000, which ended January 31, 2000. Scheduled items on the agenda are: 1) Election of three Class II Directors for a term of three years and until their successors are elected and qualified; 2) Approval and ratification of the appointment of KPMG LLP as independent auditors for fiscal 2001. The Board of Directors has declared only stockholders of record as of the close of business on April 20, 2000 shall be entitled to receive notice of, and to vote, at the meeting. SUN HEALTHCARE: Application To Employ KPMG LLP as Consultants ------------------------------------------------------------- Judge Walrath approved the Debtors' employment of KPMG LLP, to render tax, accounting, and reimbursement consulting services for the first few months of Sun Healthcare's chapter 11 cases. Around December or early January, KPMG expanded its services to the Debtors to include those services formerly rendered by Ernst & Young, LLP. Accordingly, the Debtors sought and obtained the Court's authorization to employ KPMG, nunc pro tunc to October 14, 1999, as their state and local tax consultants, and Medicare and Medicaid reimbursement and regulatory compliance consultants and assistants for the Debtors. For the provision of state and local tax refund services, KPMG will bill the Debtors a contingent fee of 33% of state and local tax refunds. Whether KPMG determines that a transaction is eligible for a refund or not, KPMG will inform the Debtors of any relevant findings or recommendations for improving state sales and use tax reporting procedures. KPMG will also provide Medicare and Medicaid reimbursement and regulatory compliance assistance and consulting services to the Debtors and to the Debtors' special litigation counsel at the firms of Sidley & Austin and Murtha, Cullina, Richter and Pinney, L.L.P. The services provided to the Firms will consist of litigation support and reimbursement and regulatory compliance assistance. KPMG's fees for providing tax consulting services will be based on actual amount of time of work plus reasonable out-of-pocket expenses. KPMG's professionals who will be assigned to this engagement will charge hourly rates of: $195 Senior Manager $150 Manager $125 Senior Staff $100 Staff For the provision of gross receipts/sales and use tax compliance services for subsidiaries of Sun, KPMG will charge hourly rates of: $125 Organization $75 Compliance $125 Registration $125 Due Diligence In providing service to the Debtors' special litigation counsel, KPMG will charge hourly rates of: $325 - 375 Partner $250 - 300 Managing Director $225 - 275 Senior Manager $225 - 250 Clinical Manager $175 - 250 Reimbursement Manager $200 - 250 Clinical Senior Consultant $125 - 175 Reimbursement Senior Consultant $175 - 200 Clinical Consultant $125 - 150 Reimbursement Consultant $100 - 150 Loaned Assurance Staff $100 - 140 Staff Analyst With respect to a subpoena, KPMG's service will be an hourly rate of $375 per hour inclusive of attorneys' fees. Prior to the Petition Date, the Debtors paid KPMG a retainer in the amount of $25,000.00. As of the Petition Date, the Debtors owed KPMG $225,246.00 for prepetition services. Upon approval of the employment of KPMG, KPMG will apply the prepetition retainer to prepetition debt and waive the deficiency. Each of the Debtors shall be jointly and severally liable for fees and expenses of KPMG since each of the Debtors will benefit from the services to be provided. The Debtors tell Judge Walrath that the services to be rendered by KPMG are not duplicative with the services of other professionals retained by the Debtors and KPMG will undertake every reasonable effort to avoid any duplication of services. THERMATRIX INC: Results For Fiscal Year Ended December 31, 1999 --------------------------------------------------------------- For fiscal year 1999 revenues of Thermatrix, Inc. increased to $21.7 million from $5.9 million in the prior year, primarily as a result of the January 1999 acquisition of Wahlco Environmental Systems, Inc. The revenue figures have been restated to account for discontinued operations as a result of the appointment by Wexford Management LLC of an administrative receiver in the United Kingdom for all of the assets of the Company's U.K. subsidiaries. The Company expects the administrative receiver to dispose of all of such U.K. assets. The Company recorded a net loss of $20.6 million, or $2.65 per share for fiscal year 1999 compared to a net loss of $7.9 million, or$1.03 per share for fiscal year 1998. The basic net loss per share of common stock from continuing operations is $2.25 for fiscal year 1999 compared to $0.87 for fiscal year 1998. The basic net loss per share of common stock from discontinued operations is $ 0.40 for fiscal year 1999 compared to $0.16 for fiscal year 1998. A number of unusual and one-time charges were incurred during 1999 that resulted in the net loss per share of $2.65. These included losses on discontinued UK operations of $3.1 million; the write down of goodwill related to the Wahlco acquisition that resulted in an impairment loss of $5.8 million; accretion of expenses related to the June 1999 issue of the Series E preferred shares totaling $3.1 million; and interest expenses related to the Wexford debt and Series E preferred stock totaling approximately $2.3 million. The Company believes that all of these charges will be significantly lower in future periods. The Company's Form 10-K for the fiscal year ended December 31, 1999 is on file with the U.S. Securities and Exchange Commission. Thermatrix is an industrial company primarily serving the global market of continuously operating facilities for a broad range of industries that include refining, chemical, steel, pharmaceutical, pulp and paper, electric utility, co-generation, and industrial manufacturing. Thermatrix provides a wide variety of air pollution control solutions, including its unique flameless thermal oxidation technology, as well as a wide range of engineered products and services to meet the needs of its clients. VENCOR: Ventas/Vencor Form Tax Agreement ---------------------------------------- Ventas Inc., a real estate investment trust, formed a "tax stipulation" agreement with health care company Vencor Inc. that includes $26.6 million in refunds drawn by Ventas from a 1998 tax return, according to a Dow Jones newswire report. The agreement follows negotiations with Vencor over certain disputed refunds, Ventas said yesterday. Vencor, the primary tenant of Ventas, filed for bankruptcy with several of its units on Sept. 13. The agreement calls for each company to hold tax proceeds received on or after Sept. 13 in segregated interest-bearing accounts and contains notice provisions related to the withdrawal of funds from the aforementioned accounts by either company. Each company will reserve all rights and claims to amounts covered by the agreement, Ventas said. In April, Vencor reported that its lenders agreed to amend its debtor-in-possession financing, primarily to revise a financial covenant regarding minimum net amount of accounts receivable. ********* 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, Edem Alfeche and Ronald Ladia, Editors. Copyright 2000. All rights reserved. ISSN 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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