/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/000608.MBXT R O U B L E D C O M P A N Y R E P O R T E R Thursday, June 8, 2000, Vol. 4, No. 112 Headlines BIRMINGHAM STEEL: Announces Agreement With AIR CELOTEX: BPB Announces Agreement For Purchase of Businesses COLORADO GREENHOUSE: Sells Two of its Greenhouses COMMERCIAL FINANCIAL: Former Workers To Be Compensated DAEWOO INTERNATIONAL: Hearing to Consider Sale DYNAMATIC CORP: Taps Colmen Capital Advisors EMPLOYEE SOLUTIONS: Jeffrey Colby Resigns EQUIMAR SHIPHOLDING: Moody's Downgrades Mortgage Notes FAMILY GOLF: Secures Final Approval For $15MM In DIP Financing FRANCHISE MORTGAGE: Fitch Downgrades Loan Receivables Trust GOLDEN OCEAN: Approval of Term Sheet GOLDEN OCEAN: Motion To Terminate Exclusivity GS TECHNOLOGIES: Moody's Downgrades Notes HARADA INDUSTRY CO.: Group loss widens in FY99 HARRISBURG EAST: Agrees To Sell Mall HAZAMA CORP: Stock distressed as the company HEDSTROM HOLDINGS: Committee Taps Saul, Ewing, Remick & Saul JOAN AND DAVID: Propose Order To Pay Severance and Retention JOAN AND DAVID: Tap Leonard B. Pack as Special Counsel KAWASAKI HEAVY INDUSTRIES: S&P downgrades citing debt woes LAROCHE INDUSTRIES: Committee Objects To Chanin Capital LEVITZ: Motion For Approval of Seventeenth DIP Facility Amendment MICROBEST: Files Chapter 11 Petition PACIFIC GATEWAY: Exchange Concludes New Agreement With Its Banks SAFETY COMPONENTS: Deadline For Filing Proofs of Claim SAFETY COMPONENTS: Implementation of Severance Program SERVICE MERCHANDISE: Motion To Restrict Claim Trading Activity SILVER CINEMAS: Taps Latham & Watkins as Special Counsel STAGE STORES: $450 Million DIP Facility Receives Interim Approval TEU HOLDINGS: Order Approves Retention of Liquidation Consultants TEU HOLDINGS: Seeks Authority to Retain Sales Consultant WASTE MANAGEMENT: Subsidiary Completes Sale in Australia ZEGARELLI GROUP: Settles Lawsuit ********* BIRMINGHAM STEEL: Announces Agreement With AIR ---------------------------------------------- Birmingham Steel Corporation announced that American Iron Reduction, LLC, ("AIR") has completed a financial restructuring with AIR's lenders. Birmingham Steel and GS Industries, Charlotte, North Carolina, each own a 50% interest in AIR, a Louisiana joint venture that produces direct reduced iron. Among other changes, the new agreement defers interest and principal payments on AIR's debt and reduces the amount of annual direct reduced iron purchase requirements. John Correnti, chairman and chief executive officer of Birmingham Steel, commented, "We are pleased that American Iron Reduction has successfully completed a financial restructuring with its lenders. The terms of the new agreement provide financial and operating relief, and also support Birmingham Steel's desire to eventually terminate our participation in the venture." Correnti continued, "As we have previously stated, AIR is no longer a strategic investment for Birmingham Steel. With AIR's new financing agreement complete, the co-sponsors have enhanced opportunities to explore discussions with parties interested in acquiring the venture. The financial restructuring of AIR is a substantial achievement, and represents yet another significant step in our quest to turnaround Birmingham Steel." Birmingham Steel operates in the mini-mill sector of the steel industry and conducts operations at facilities located across the United States. The common stock of Birmingham Steel is traded on the New York Stock Exchange under the symbol "BIR." CELOTEX: BPB Announces Agreement For Purchase of Businesses ----------------------------------------------------------- BPB plc ("BPB") announces that it has reached agreement for the purchase of the wallboard and ceiling tile businesses of Celotex Corporation ("Celotex") in the USA, subject to regulatory approval and other technical conditions, with completion expected in July 2000. The purchase consideration is $345 million (pnds stlg 230 million) in cash on a debt-free basis and will be financed using existing committed facilities. For the year to 31 August 1999, the wallboard and ceiling tile businesses of Celotex had combined sales of $291 million, EBITDA of $77 million and pre- tax profit of $63 million; the combined net assets at 31 August 1999 were $221 million. They employ some 1,400 people. The acquisition of Celotex considerably strengthens BPB's existing North American presence. Celotex holds a share of almost 4% of the US wallboard market, selling over 100 million square metres per annum from four plants in Iowa, Ohio, Wyoming and Florida, with commissioning soon of a newly constructed 65 million square metre plant in Kentucky at a cost of $72 million, of which $32 million had been spent by 31 August 1999. It has secure sources of gypsum and also operates a dedicated 65,000 tonne per annum wallboard liner mill in Illinois which will supply approximately half the liner requirements of the merged businesses. Celotex meets 10% of the North American demand for ceiling tiles, supplying a range of mineral fibre and laminated products from five plants in Michigan, Wisconsin, Indiana, Pennsylvania and Mississippi. Ceiling tiles and wallboard are sold through similar routes to market and this acquisition represents a significant progression in the development of BPB's strategy to provide fast-track, lightweight building systems using shared operations, logistics and customers. The Celotex operations also complement BPB's existing European leadership in gypsum-based ceiling tiles and provide the foundations for a global ceilings business with pro forma sales of around pnds stlg 100 million per annum. Integration of the Celotex operations with BPB's Canadian subsidiary will provide opportunities to lower the annual operating costs by over $15 million and enhance BPB's existing market positions in the USA. Commenting on yesterday's agreement Richard Cousins, BPB's Chief Executive said: "The acquisition of the Celotex wallboard and ceiling tile businesses will secure one of our key strategic objectives in gaining a direct presence in the American internal linings market. When added to Westroc's existing wallboard sales, Celotex will establish BPB as the fourth largest producer with an 8 to 9% share of the 3 billion square metres of annual sales in North America, a region representing more than 50% of world demand and with long term growth of 3 to 4% per annum." COLORADO GREENHOUSE: Sells Two of its Greenhouses ------------------------------------------ The Albuquerque Journal reports on June 1, 2000 that Colorado Greenhouse Inc. plans to hire an independent company to sell its greenhouse in Estancia, which shut down Feb. 11 after the Colorado-based company filed for Chapter 11, and in Grants, which closed in January, both listed at a combined amount of $25 million, the company's CEO, Martin Wehr said. COMMERCIAL FINANCIAL: Former Workers To Be Compensated ------------------------------------------------------ According to Tulsa World on June 1, Commercial Financial Services Inc. has agreed to pay 1,367 employees laid off between Jan. 8 and Feb 8 of last year. The former workers would then sign a release promising not to sue over the layoffs the company made after filing for bankruptcy on Dec. 11 of 1998. DAEWOO INTERNATIONAL: Hearing to Consider Sale ---------------------------------------------- The debtor, Daewoo International (America) Corp. seeks approval of a certain contract of sale with the Purchaser, Pan Pac International for the sale of a commercial warehouse located at 3206-3232 North Kennicott Avenue, Arlington Heights, Illinois, subject to higher and better offers. The proposed purchase price is $1.9 million and the sale includes the assumption and assignment of two unexpired Service Agreements. DYNAMATIC CORP: Taps Colmen Capital Advisors -------------------------------------------- The debtor, Dynamatic Corporation applies to employ Colmen Capital Advisors, Inc. as its consultants and investment bankers. Among other things, it is anticipated that Colmen will provide advice and consultation in connection with the management of Dynamatic including the development and implementation of sales and marketing plans for the company. Colmen will receive a one time fee of $20,000 and payments of $5,000 per week for time associated with the engagement. EMPLOYEE SOLUTIONS: Jeffrey Colby Resigns ----------------------------------------- The Arizona Republic reports on June 1, 2000 that Employee Solutions Inc. announced that Jeffrey Colby president of TEAM Services, has resigned from its board of directors. TEAM Services was acquired by Employee Solutions in 1996, and the decision to resign for Colby was to avoid the appearance of a conflict of interest between the company, Colby and his business partners. EQUIMAR SHIPHOLDING: Moody's Downgrades Mortgage Notes ------------------------------------------------------ Moody's Investors Service lowered to Caa3 from B3 the rating on the $125 million 9 7/8% first preferred ship mortgage notes due July 2007 issued by Equimar Shipholding Limited and guaranteed by its parent B+H Ocean Carriers Limited and certain subsidiaries. The issuer rating was lowered to C from Caa2 and the senior implied rating to Caa3 from B3. The rating outlook is negative. The rating action was prompted by the company's increasingly tight liquidity position and its announcement that it was seeking bondholder consent to amend the Indenture to permit the application of approximately $2.2 million currently held in trust and up to $1.25 million that may be realized upon a vessel sale or refinancing, to its scheduled July 1, 2000 interest payment. Consent of 100% of the bondholders is required for approval. The company has indicated that absent the consent, the interest payment will not be made as recent efforts to raise capital and liquidity have not been successful to date. In addition, Moody's notes that the company's accounts receivable secured $5 million revolver matures in August 2000. Moody's believes that a restructuring of the company's debt is likely. Given the improved though still relatively depressed spot and charter freight rates for Handy size product tankers, the age of Equimar's fleet, and heightened regulatory and market sensitivity to older tanker vessels following the sinking of the "Erika" (unrelated to B+H Ocean Carriers), we believe that the market value of the collateral vessels supporting the notes is substantially below the initial offering's 80% advance rate. Full realization on the notes is unlikely. The negative rating outlook reflects Moody's concern about projected on-going losses, the possibility that efforts to raise funds to satisfy the July interest payment prove unsuccessful, and concern about the uncertainty and volatility of the realizable value of the secured vessels. B+H Ocean Carriers Limited through its Equimar Shipholdings and Cliaship subsidiaries is one of the larger Handy size product tanker operators in the Indo-Asia Pacific region operating a fleet of 16 vessels (12 operated by Equimar). The company has completed a major fleet restructuring and up dated its fleet during 1999 as it scrapped five 1970's built medium range 30,000 DWT product tankers and acquired for $46 million from Chevron six 35,000 DWT product tankers built in the 1981 to 1983 period, four acquired by Cliaship and two by Equimar. Moody's notes that the Cliaship acquired vessels were financed with secured bank debt and do not provide security to note holders. Over time the fleet pledged to note holders has declined in size and the remaining vessels have depreciated in value. The company's rating has benefited from the stability provided by the multi-year charter contract (typically two to four years) placed for about 60% of the fleet. However, the drop in the spot market rates over the last 2 1/2 years since the notes were issued (in the 30% to 40% range) has also resulted in charter rates to similarly decline upon renewal. Moody's believes that as a result, performance in 1999 will show a loss in excess of $15 million (the fiscal year-end numbers have not yet been released) and EBITDA to interest coverage to be in the 0.5 times range. (The company reported a loss of $11.1 million in the first six months of 1999 compared to earnings of $3.6 million for the period the year earlier.) As a result of the losses and the need to accelerate the timing of a special survey costing about $1.5 million for one vessel, the company's liquidity position has been squeezed. Moody's believes that working capital position is negative and that additional flexibility from the stretching of trade payables is not possible. Equimar Shipholding Limited and B+H Ocean Carriers Limited are both Liberian corporations. The companies' administrative headquarters are in Hamilton, Bermuda with technical and commercial management headquartered in Singapore. FAMILY GOLF: Secures Final Approval For $15MM In DIP Financing -------------------------------------------------------------- Family Golf Centers Inc. (FGCIQ) announced today that it received final approval of the bankruptcy court of its previously announced $15 million debtor-in-possession ("DIP") credit facility from its existing working capital lender, The Chase Manhattan Bank. The company said that the entire DIP facility is now available for, among other things, funding working capital and other post- petition expenses of Family Golf and its U.S. subsidiaries. As previously announced, on May 4, 2000, Family Golf and all of its U.S. subsidiaries filed voluntary petitions with U.S. Bankruptcy Court for the Southern District of New York to reorganize under chapter 11 of the U.S. Bankruptcy Code. Family Golf Centers is an operator of golf centers in North America. The company's golf centers provide a wide variety of practice and play opportunities, including facilities for driving, chipping, putting, pitching and sand play and typically offer full-line pro shops, golf lessons and other amenities such as miniature golf and snack bars. The company also operates sports and family entertainment facilities, including ice rinks and Family Sports Supercenters. Currently, the company owns, operates and has under construction 111 golf facilities and 19 ice rink and family entertainment facilities in 23 states and three Canadian provinces. FRANCHISE MORTGAGE: Fitch Downgrades Loan Receivables Trust ----------------------------------------------------------- Fitch downgrades the following classes of notes under FMAC Loan Receivables Trust, series 1997-C (1997-C): Class B from `AA' to `AA-', class C from `A' to `A-', class D from `BBB' to `BBB-', class E from `BB' to `B-' and class F from `B' to `CCC'. Under FMAC Loan Receivables Trust Series, 1998-A (1998-A) the ratings on the following classes of notes are also downgraded: Class E from `BB' to `BB-' and class F from `B' to `B-'. The rating downgrades are based upon the realized losses on loans related to one restaurant borrower with principal divided between 1997-C ($7,135,718) and 1998-A ($2,310,854) and do not impact any other securitizations originated by Bay View Franchise Mortgage Acceptance Company, LLC (BVFMAC). The Rating Watch Negative remains for all classes of 1997-C and for classes C, D, E and F for 1998-A. The losses in 1997-C and 1998-A are the result of a recently issued bankruptcy judgement on a restaurant borrower where a sale of the bankruptcy estate was ordered by the court. The purchase price allowed the special servicer to recover less than $1,000,000 on the principal balance of $9,446,572 for the collateral units (no other offers on the units were submitted despite public advertising). After servicer advances and expenses are re-paid to the special servicer, there will be no recoveries to either 1997-C nor 1998-A. It should be noted that both 1997-C and 1998-A have additional defaulted borrowers. In 1997-C and 1998-A there is an additional restaurant company with leasehold collateral that has been foreclosed upon by the special servicer. Approximately 88% of the principal balance of this borrower is in the 1997-C securitization. Currently, a management team has been hired to operate the stores, stabilize operations and prepare the restaurant company for sale in the future. The timing of this sale has yet to be determined by the special servicer. In 1998-A there is also an energy borrower that has defaulted with fee simple collateral. The special servicer has foreclosed upon the collateral and is actively pursuing a cash sale of the company to the highest bidder. The special servicer feels the bidding process will be completed within 120 days. The subject sites represent a major share of the Atlanta market for a tier 1 concept (Exxon). Thus, Fitch has greater confidence that relatively higher recoveries will be achieved in relation to the defaulted restaurant company. Fitch will continue to closely monitor the workout process of each defaulted borrower to determine the potential impact on each securitization once recoveries are realized by BVFMAC as special servicer. In addition, BVFMAC has continued to support each of the securitizations through servicer advances on each defaulted borrower. GOLDEN OCEAN: Approval of Term Sheet ------------------------------------ The Official Committee of Unsecured Creditors of Golden Ocean Group Limited, et al. seek court approval of the Term Sheet for the proposed joint plan of reorganization to be funded by Frontline, Ltd., a Break up fee of $2 million and expense reimbursement of Frontline, Ltd. As more fully set forth in the Term Sheet, Frontline will fund the joint plan of reorganization with cash, its own publicly traded common stock, warrants to purchase additional common stock, and certain other property in exchange for issuance of all of the capital stock of the reorganized debtors. Holders of administrative claims would be paid in full up to $11.5 million, after which additional expenses would reduce amounts available to a litigation trust to be formed pursuant to the proposed plan of reorganization and to an employee severance pool to be established by the reorganized debtors; Holders of unsecured priority claims will be paid in full in cash upon the effective date of the debtors' joint plan of reorganization; Holders of general unsecured claims will receive a combination of cash equal to 5% of the allowed amount of such holder's claim, and distributed pro rata per $1 million face amount of allowed unsecured claim, 4,280 Frontline common shares with a guaranteed floor price of $10 and maximum cap price of $12.21 and warrants for 2,000 Frontline common shares with a strike price of $12.21 exercisable for a period of five years; in addition, notheholders shall receive additional consider in consideration for the release of certain upstream guarantees given by certain of the debtors' subsidiaries. Other continent guarantee claims existing in favor of creditors holding secured claims against the vessel-owning subsidiaries shall be assumed by the reorganized debtors, the face amount of which exceeds $1 million; and All existing equity and equity-related instruments, including without limitation, common stock, options and warrants, shall be canceled. GOLDEN OCEAN: Motion To Terminate Exclusivity --------------------------------------------- The Official Committee of Unsecured Creditors of Golden Ocean Group Limited, et al, debtors, seeks a court order terminating the debtor's exclusivity periods with respect to filing and acceptance of a plan of reorganization. The Committee currently consists of the following entities: Bankers Trust Company, Kawasaki Heavy Industries, Capricorn Transport, Inc. (c/o Sumitomo Corp), Sea Winner Shipping Corp. and Hyacinth Shipping Corp. (c/o Nissho Iwai Corporation); Bright Future Maritime SA (c/o Mitsubishi Corp), Griffin Shipping, Inc.(c/o Tomen Corp) DDJ Capital Management LLC and US Bancorp Investments, Inc. The Committee believes that the Frontline Term Sheet presents the highest and best percentage recovery for the Debtors' estates. Termination of exclusively periods ins necessary to preserve the value of the debtors' estates by authorizing the Committee to file a plan of reorganization. To comply with the time-frame set forth in the Frontline term sheet, the Committee believes it must obtain the authority to file and serve a joint disclosure statement and joint plan of reorganization that implements the transaction set forth in the Frontline term Sheet as quickly as possible. . The plan of reorganization will contemplate an effective date of October 1, 2000. GS TECHNOLOGIES: Moody's Downgrades Notes ------------------------------------------ Approximately $250 Million of Debt Securities Affected New York, June 06, 2000 -- Moody's lowered its ratings for GS Technologies Operating Co., Inc. (GSTOC) due to the company's weak cash flow, prospects for a continuation of difficult market conditions for many of its products, and very high leverage. GSTOC's senior implied rating was lowered to Caa3 from B3. GSTOC's $125 million of 12% senior unsecured notes due 2004, and $122 million of 12.25% senior unsecured notes due 2005, were both downgraded to Ca from Caa1. The company's senior unsecured issuer rating was lowered to Ca from Caa2. The rating outlook remains negative. While GSTOC is expected to perform somewhat better in 2000 than 1999, Moody's expects operating cash flow will fall far short of covering interest expense and capital expenditures. Parent company GS Technologies Corporation reported EBITDA of $18.6 million in 1999, its worst year since its formation in 1993. EBITDA should be higher in 2000, aided by modestly higher wire rod prices and reduced losses from American Iron Reduction (AIR), the company's 50%-owned DRI joint venture. However, Moody's anticipates cash flow from GS Technologies' mill liner and grinding media businesses will decline in 2000 as weak metal prices and mining company consolidations will reduce shipments and restrain prices for these products. Overall, Moody's is forecasting consolidated EBITDA for 2000 in the range of $30 to $37 million, which is less than interest expense. Capital expenditures, which the company had at one time estimated to be $33 million for the year, will raise year-end total debt above the March 31 balance of $321 million. Under these assumptions, GS Technologies could end 2000 with debt to EBITDA of around 9 times, and it will have negative equity. Moody's is concerned that GSTOC's cash flow may never expand to a level that will allow it to adequately service debt and fund maintenance capex. The implications of this in terms of enterprise value, refinancing risk, and expected loss are the primary factors behind Moody's downgrade. GSTOC's best year was 1997, when it reported EBITDA of $73.6 million. This exceeded interest and capex by $13.8 million. In every other year since 1994, when GSTOC issued the 12% senior notes, its EBITDA has been less than interest and capex. And the outlook for GSTOC's business is arguably less favorable today than it was from 1995 to 1998, given today's higher wire rod imports, lower rod prices, lower metal prices, and a more fragile US economy. GSTOC received $68.5 million in cash in the first quarter of 2000 from the sale of Florida Wire and Cable. About half of the sales proceeds were used to repay debt. The company has the option of selling other significant assets. GSTOC also arranged a new $130 million five year credit facility in the first quarter. The credit facility is guaranteed by GS Technologies Corporation, which also guarantees the senior notes. The $120 million revolving credit portion of the facility is secured by current assets and the $10 million term loan is secured by fixed assets. The revolver is subject to a borrowing base, has a $25 million availability reserve, but has no financial covenants. Unused availability under the revolving credit facility was $24.5 million as of March 31, 2000. GSTOC has applied for a $50 million five year senior secured bank loan that will be guaranteed by the US government under the provisions of the Emergency Steel Loan Guarantee Act of 1999. It should find out whether or not its application was accepted by the Emergency Steel Guarantee Loan Board in late June or July. GSTOC may have little financial flexibility if it is not successful in arranging the government guaranteed loan. GSTOC operates two steel minimills and two foundries in the US, and GS Technologies operates several grinding media facilities and joint ventures internationally. The company is headquartered in Charlotte, NC. HARADA INDUSTRY CO.: Group loss widens in FY99 ---------------------------------------------- Harada Industry Co. (6904) has reported a 1.24 billion yen consolidated pretax loss for fiscal 1999, up from the 815 million yen loss projected earlier and the 749 million yen loss for fiscal 1998. A new computer system installed at the major antenna manufacturer's U.S. subsidiary experienced problems, boosting transport costs by just over 200 million yen. The unit also faced increased payments for personnel reduction. The company took a 260 million yen extraordinary loss for inventory markdowns at subsidiaries, resulting in a consolidated net loss of 1.46 billion yen, larger than 988 million yen the year before. Group sales fell about 20% to 17.88 billion yen. (Nikkei 06-Jun-2000) HARRISBURG EAST: Agrees To Sell Mall ------------------------------------ The Patriot-News reports on June 1, 2000 that Harrisburg East Mall, an 890,000-square-foot shopping center will be offered for sale. The mall being sold and the planned auction of the property is scheduled to begin at 10 a.m. on July 18 and will be conducted by EQK Realty Investors. HAZAMA CORP.: Stock distressed as the company --------------------------------------------- Hazama Corp. (1837) announced May 24 that it is asking its creditors to forgive 105 billion yen in outstanding debt, and on May 29, its shares fell 7 yen to a record low of 45 yen. On Friday, they closed at 46 yen. On May 26, Dai-Ichi Hotel Ltd. (9710), which has been asking Long-Term Credit Bank of Japan and other creditors to forgive loans, filed for protection under Japan's bankruptcy laws. LTCB is also Hazama's top creditor, so there are fears that the negotiations on its debt waiver may not go well. Hidenori Kawasaki at Kokusai Securities Co. says retail margin players are engaged in both buying and selling. It appears that corporate investors are unwinding cross- shareholdings. Moreover, margin players who bought the stock when it was near last December's high of 86 yen are selling as the due date for closing out these transactions approaches. Many market watchers are concerned about the direction of the company's rehabilitation plan. Along with using debt waivers to help dispose of nonperforming assets held by both the parent and its group companies, a main pillar of Hazama's rehabilitation strategy is its plan to roughly halve its interest-bearing liabilities to 156 billion yen over the next five years. An analyst affiliated with a European brokerage firm says that with the entire construction industry continuing to decline, he does not believe the company will be able to survive without major reorganizing. Some concrete incentives will be required for the stock to stage a real rebound. (Nikkei 05-Jun-2000) HEDSTROM HOLDINGS: Committee Taps Saul, Ewing, Remick & Saul ------------------------------------------------------------ The Official Committee of Unsecured Creditors appointed in the cases of Hedstrom Holdings, Inc., et al. seeks authorization to retain and employ Saul, Ewing, Remick & Saul LLP as local counsel for the Committee. The firm will be compensated at its current standard d hourly rates ranging from $105 per hour for a paralegal to $325 per hour for a partner. The firm will provide, among others, the following legal services: Provide legal advice with respect to the Committee's rights, powers and duties in these cases; Prepare on behalf of the Committee all necessary applications, answers, forms of orders, reports and other legal papers; Represent the Committee in any and all matters involving contests with the debtors, alleged secured creditors and other third parties; Negotiate consensual plans of reorganization; Perform all other legal services for the Committee which may be necessary and proper in these proceedings. JOAN AND DAVID: Propose Order To Pay Severance and Retention ------------------------------------------------------------ The debtors propose an order for the court authorizing the debtor to pay retention bonuses to certain essential employees and severance payments to certain employees who will be terminated due to store closings. The aggregate amount of the Retention Bonuses equals $93,500. The severance payments total $29,500. JOAN AND DAVID: Tap Leonard B. Pack as Special Counsel ------------------------------------------------------ The debtor, joan and david helpern incorporated seek authority to retain Leonard B. Pack as special corporate transactional counsel for the debtor. As special corporate counsel, Pack will perform necessary legal services in connection with the potential sale of the debtor's business as a going concern or such other transaction regarding the sale of substantially all of the debtor's assets. The debtor's representatives are currently negotiating in earnest with several third parties regarding a potential acquisition of the debtor's business as a going concern. In light of the current negotiations, the debtor has determined that the assistance of corporate counsel to work with its other professionals is necessary at this time. Pack's current customary hourly rate is $350 per hour. KAWASAKI HEAVY INDUSTRIES: S&P downgrades citing debt woes ---------------------------------------------------------- US credit ratings agency Standard & Poor's yesterday downgraded Japan's Kawasaki Heavy Industries (KHI), citing the firm's struggle to lower debt as its earnings and sales fall. KHI's debt rating, based on public information, went down to a predominately speculative BB from medium-grade BBB. Japan's third-largest heavy equipment maker had total debt of 487 billion yen (US$4.51 billion) at the end of March, resulting in a total debt-to-capital ratio of 73 percent, the credit risk appraiser noted. Currency fluctuations had hurt KHI's earnings, along with weak orders in its shipbuilding, aerospace and industrial equipment operations. A new management was forging alliances and reducing labor costs in an effort to compete, Standard & Poor's said in a statement. "Nonetheless, these efforts are still at an early stage, and it will be several years before KHI can fully benefit from its improved cost position." The company's restructuring efforts would drive up costs, so it could not expect any major reduction of its debt soon, the agency added. "As a result, the company's cash- flow protection measures should remain weak in the near term." KHI's net loss widened to 18.6 billion yen in the year to March from 6.1 billion a year before. Its revenue shrank to 1,150 billion yen from 1,200 billion. The company said after posting the losses on May 26 that it would close two machinery plants in the current fiscal year to March 2001. In April Standard & Poor's main rival, Moody's Investors Service, said it might downgrade the ratings of KHI and its two bigger competitors, Mitsubishi Heavy Industries and Ishikawajima-Harima Heavy Industries (IHI). One key concern for KHI and IHI was the rising threat posed by South Korean shipbuilders, whose profitability has been enhanced by the depreciation of the won against the Japanese yen, Moody's said. (Business Day 06-Jun-2000) LAROCHE INDUSTRIES: Committee Objects To Chanin Capital ------------------------------------------------------- The Official Committee of Unsecured Creditors of LaRoche Industries Inc. and LaRoche Fortier Inc. objects to the application to retain Chanin Capital Partners as Financial Advisors. In light of the fact that Chanin had already received $300,000 in connection with services already rendered, and much of the restructuring discussions will involve a deleveraging of the company by converting existing debt to equity, the Committee objects tot he $100,000 monthly advisory fee. After some period of time, the Committee asks that the fee be reduced to reflect the fact that a substantial amount of the work that Chanin has been retained to perform should have been completed. The Committee also objects to the Restructuring Transaction Fee of approximately $1,450,000. LEVITZ: Motion For Approval of Seventeenth DIP Facility Amendment ----------------------------------------------------------------- The Debtors advise the Court that, as of May 25, 2000, the total Overadvance Term Loan Commitment was $35,000,000 and $30,000,000 is funded. The Debtors further advise that they expect to file a motion seeking approval of an Eighteenth Amendment to (i) extend the DIP Facility to December 31, 2000, (ii) waive violations of EBITDA covenants required as of March 31, 2000, and (iii) provide for an increase in the Overadvance Term Loan commitment to a total of $45,000,000. Additionally, the Debtors report that they anticipate arranging exit financing before the Confirmation Date comprised of a working capital revolver with a total commitment of approximately $95,000,000. The terms, conditions, collateral requirements and borrowing availability under the working capital facility are expected to be similar to the current DIP Facility. In addition, LHFI is expected to obtain a secured term note in the approximate amount of $47,000.000. Proceeds from the secured term note will be used to fund Levitz' operating and working capital requirements. (Levitz Bankruptcy News Issue 45; Bankruptcy Creditor's Services Inc.) MICROBEST: Files Chapter 11 Petition ------------------------------------ Microbest, Inc. (OTC Pink Sheets: MBST) announced on June 6, 2000 that it filed June 1, for bankruptcy protection under the provisions of Chapter 11 to protect the shareholders, vendors, employees and customers from two former insiders who made a hostile attempt to acquire the assets of the Company to satisfy a judgment they received as a result of a settlement negotiated in 1998. Michael J. Troup, CEO, said, "While engaged in good faith negotiations to resolve the issue, we became aware of separate, aggressive maneuvers to obtain control of the Company's cash flow and physical assets. We moved quickly to protect the Company." Troup further said, "The Company was attempting to expedite the resolution as it was required under the terms of a $2,500,000 financing commitment by Bruderman Brothers, Inc., a Wall Street investment banking firm with which we have had a relationship for several years. We had financing in place, and with the exception of reaching a settlement on this issue, we had responded to the remaining concerns of the SEC regarding our 'fully reporting status,' a requirement to get back on the NASD Bulletin Board." "It is our intention to present our plan of re-organization to the Bankruptcy Court as quickly as possible," CFO Bill Breslin stated. "Having had strong relationships with our vendors for a number of years, I have assured them of our intentions to fully protect them, and they are all working with us to ensure a constant flow of our products to our growing customer base." "Our proprietary BioCleansing(R) Systems are becoming the standard for meeting the Federal requirements for 'Environmentally Preferable' cleaning solutions," Troup explained. "Our systems employing microbial cultures and high-tech cleansers are focused on commercial kitchen and restroom cleaning and are acknowledged to clearly out-perform traditional caustic cleaners. They are user-safe, and digest organic waste such as grease, oils and urine, eliminating odors, keeping drain lines free, reducing slip/fall accident risk and protecting tile and grout. The growing demand for our products and technology reflects a heightened commitment by both our government and private sector communities to solve practical problems and protect workers and our environment." PACIFIC GATEWAY: Exchange Concludes New Agreement With Its Banks ---------------------------------------------------------------- Pacific Gateway Exchange, Inc. (Nasdaq: PGEX) announced it has reached a restated and amended credit agreement with its banks. In combination with its recently concluded sale of assets to Multimedia Fiber Network, the Company's restated and amended credit agreement increases the Company's working capital by approximately $16.6 million, satisfies the $25 million repayment obligation that was due May 15, 2000 and waives all existing defaults. Under its restated credit agreement with Bankers Trust Company and Bank of America, N.A., cash proceeds of approximately $28.8 million from the sale to MFN of the Company's interests in the Japan-U.S. Cable Network and its related Japanese subsidiaries were used to permanently reduce its outstanding obligations to the banks from $75.6 million to approximately $47 million. As part of the deal, the banks have agreed to a continuing revolving line of credit of approximately $47 million, all of which is outstanding after the Company borrowed the balance of approximately $16.6 million of the MFN proceeds. On future asset sales, including the sale of its interest in the TAT-14 cable network to MFN for approximately $10 million, the banks agreed to allow the Company to re-borrow 50% of any such future net proceeds with the remaining 50% used to permanently reduce the obligations under the line of credit. The revolving line of credit matures November 20, 2000. The Company is continuing to pursue other strategic and financing alternatives, including selected asset sales, accounts receivable and asset based lending, and private equity investments. The Company continues to consolidate its business lines to focus on data and VoIP services. In line with that strategy, the Company previously announced a letter of intent for the sale of its U.S. retail operations. In addition, the Company has taken prudent steps to reduce its operating expenses and in that regard has significantly reduced employee headcount. Additional cost cutting measures continue to be implemented as the Company transitions its business focus to its data initiatives. Pacific Gateway is a global facilities-based communications carrier providing voice, bandwidth, data and Internet services to a wide array of domestic and international carriers, ISPs, and retail customers. Pacific Gateway, through its wholly-owned subsidiary, IECom, provides voice, data access, and travel services to the ethnic small office/home office and residential markets in the U.S. Onyx Networks, also a wholly-owned subsidiary of Pacific Gateway, is a global provider of localized IP network solutions, delivering high-performance Internet connectivity, collocation and remote content solutions to Global Enterprise Customers and Network Service Providers worldwide. Onyx is able to substantially extend its global reach and connect major metropolitan areas around the world by leveraging the 45 operating agreements in 29 countries and ownership in 32 undersea fiber optic cable systems of its parent company, Pacific Gateway Exchange. In addition, Onyx has committed peering sessions totaling 274, spanning UK, U.S., and Japan. Onyx presently has Internet exchange points in MAE East, MAEWest, Dallas, PAIX, Pac Bell NAP, Equinix -SJC, Ameritech Advanced Data Services, LINX, and JPIX and is in the process of entering the Amsterdam Internet Exchange. Onyx currently offers global Internet services in the following cities: Hong Kong, Tokyo, Sydney, San Francisco, Los Angeles, Dallas, Chicago, New York, Washington D.C., Atlanta, Miami, Sao Paulo, and London. In addition, Pacific Gateway's domestic network spans 12 major metropolitan cities. The Company presently operates switching and international gateway facilities in New York, Los Angeles, Dallas, the United Kingdom, Russia, New Zealand, Japan, Australia, and Germany. Additional Pacific Gateway information is available at www.pgexch.com. IECom information is available at www.go- iecom.com. Onyx Networks information is available at www.onyx.net. SAFETY COMPONENTS: Deadline For Filing Proofs of Claim ------------------------------------------------------ On May 24, 2000, the US Bankruptcy Court for the District of Delaware entered an order establishing July 7, 2000 as the general claims bar date in the Chapter 11 cases of Safety Components International, Inc. and its affiliates. SAFETY COMPONENTS: Implementation of Severance Program ------------------------------------------------------ Safety Components International, Inc. and its affiliated debtors seek authority for implementation of a Severance Program for Key Executives. The purpose of the Severance program is to minimize executive management turnover and retain four key executives in a tight labor market, thereby ensuring that such key management members continue to provide essential management services during this period. The maximum cost of the severance benefits under the Severance Program is approximately $1,237,500. Safety Components has identified four key executives to receive these benefits upon a triggering event including loss or material change in employment. SERVICE MERCHANDISE: Motion To Restrict Claim Trading Activity -------------------------------------------------------------- The Debtors tell Judge Paine that certain claim traders requested modifications to the proposed procedures. Negotiation, accordingly, resolved objections raised by HSBC Bank USA, a secured lender, and Bank of New York and State Street Bank & Trust Company, the indenture trustees. Contrarian Capital Management, LLC, Touchstone Capital, LLC and Verde Partners, the Debtors say, can't be satisfied. The Debtors have tried to negotiate, but conversations are unproductive. The Debtors present Judge Paine with a Revised Proposed Order incorporating six principal modifications to the Initial Proposed Order: (1) Application Limited to Substantial Claimholders Instead of requiring the filing of a notice or certificate for any transfer of claims, the restrictions under the Revised Proposed Order will apply only to acquisitions by Substantial Claimholders with $25 million or more of claims against the Debtors. The Debtors believe the number of claimholders involved will probably be less than 10. (2) No Stay for Transfer of up to $250 Million But More Reporting Above That While the Initial Proposed Order would have stayed any proposed transfer by large claimholders of claims to which the Debtors objected pending a hearing, the Revised Proposed Order, as the Debtors describe, imposes no restrictions on Substantial Claimholders to acquire claims in the aggregate up to at least $250 million. Because of this, the Debtors argue that if the Contrarian Group is correct in their estimation, that approximately $120 million of Claims are currently in the hands of Substantial Claimholders, then such Substantial Claimholders, in the words of the Debtors, are allowed to more than double their holdings in the aggregate before restrictions on further acquisitions would be imposed under the Order. Alongside this, the Revised Proposed Order requires more detailed information reporting from claimholders holding, or planning to hold, substantial amounts of claims so that the Debtors can use the information to establish a mechanism to monitor the total amount of claims, and if this exceeds a threshold, a Substantial Claimholder would be required to provide the Debtors with notice and an opportunity to object to such acquisition at a hearing before the Court. (3) Elimination of Risk of Selective Enforcement In response to the Contrarian Group's concern over possible bias in challenging trades, the Debtors draw attention to a "first come, first served" rule provided in the Revised Proposed Order. Moreover, the Debtors contend, the high threshold in the holding of claims before the Debtors could object reduces the possibility of bias and cronyism. (4) Provision for Rolling and Flexible Thresholds The Revised Proposed Order would provide for a rolling review and revision of both the definition of a Substantial Claimholder and of the definition of the maximum amount of claims Substantial Claimholders may acquire in the aggregate. The Debtors say that such review and revision will be done automatically as the Debtors' information on the amount of outstanding Claims is refined after the Claims Bar Date. (5) Elimination of Indenture Trustee Duties Other Than Notice The Debtors point out that the only duty that the Revised Proposed Order imposes on the indenture trustee will be to notify the holders on a quarterly basis. (6) Exemption of Secured Claims To remove unnecessary restriction on the trading of secured claims, which is not applicable to satisfaction of the IRC section 382(1)(5) safe harbor, considering that holders of secured claims are not expected to receive stock in exchange of the secured claims, the Debtors have excluded such secured claims from the Revised Proposed Order, with respect to reporting requirements governing Substantial Claimholders, to the extent these claims are secured. The Debtors describes the Contrarian Group's Objection to the Revised Proposed Order as being based on a misapplication of law and fact. The Debtors accuse the Contrarian Group of objecting in order to enhance the profit-making opportunities of a handful of new Claim holders at the expense of the protection offered by the Revised Proposed Order for the benefit of the Debtors, the estate and the other Claim holders. Accordingly, the Debtors ask the Court to overrule the Contrarian Group's objections and approve the Revised Proposed Order. Entertaining arguments from all sides, Judge Paine directs that: (1) A Substantial Claimholder shall provide a Notice of Status to the Court and to the Debtors of their status as a Substantial Claimholder on the later of (a) 60 days after entry of the Order or (b) 10 days after becoming a Substantial Claimholder. (2) A Substantial Claimholder is (i) any beneficial owner of claims or an option or a contract to acquire claims in an aggregate principal amount up to the "Triggering Amount", excluding secured claims, or (ii) any controlled entity through which a Substantial Claimholder owns an indirect interest in claims against the Debtors. (3) The initial Triggering Amount shall be $25 million, calculated to equal approximately 4% of the Debtors' total unsecured claims, estimated at $625 million. If the estimation is adjusted for more than $100 million, the Triggering Amount will be recalculated. (4) Any person who has previously given Notice of Status but ceases to be a Substantial Claimholder shall provide a Notice of Termination of Status. (5) Acquisitions by any Noncompliant Claimholder shall be null and void and the Debtors may further enforce remedies. (6) A Substantial Claimholder shall provide a Notice of Intended Acquisition before any transfer of claims is effected. (a) In the absence of objections, the acquisition, other than Excluded Transfers, will be effective 10 days from the Notice. (b) The Debtors may file an objection with the Court within 10 calendar days on the grounds that such transfer may limit the Debtors' ability to utilize their Net Operating Loss carryovers. In such event, approval of transfer will be stayed pending a hearing which will be on tbe next scheduled Omnibus hearing date that is at least twenty days after the filing of the objection. (7) After 75 days since the entry of the Court Order on April 6, a Substantial Claimholder may ask the Debtors about the Non- Qualifying Amount and get a reply within 5 business days. If the Non-Qualifying Amount is less than $250 million, the Substantial Claimholder may provide an Expedited Notice on the date of the advice for acquisition of claims not exceeding the Non-Qualifying Amount. (a) The term Non-Qualifying Amount shall mean the sum of (i) the total amount of claims (A) held by Substantial Claimholders not being legal holders of such claim for at least 18 months prior to March 15, 1999 with respect to Service Merchandise or March 27, 1999 with respect to the Affiliate Debtors; or (B) not arising in the ordinary course of the trade or business of the Debtors and was not held by such Substantial Claimholder at all times since the incurrence of such claim; and (ii) all outstanding Reserved Amounts. The initial amount of the Non-Qualifying Limit shall be $250 million, calculated to equal approximately 40% of the Debtors' unsecured claims. (b) A Reserved Amount shall be deemed to remain outstanding until the earlier of (i) the receipt by the Debtors of a Notice of Excluded Transfer, or (ii) twenty days after the date of the Expedited Notice relating to such Reserved Amount. In calculating the Non-Qualifying Amount, the Debtors shall be entitled to rely upon all Notices of Status, Notices of Intended Acquisition, Notices of Disposition, and Notices of Termination of Status they receive. (8) A Substantial Claimholder shall provide the Debtors with a Notice of Disposition within 10 days after effectuating any disposition of claims, accompanied by a Notice of Termination of Status as the case may be. (9) Any indenture trustee(s) or transfer agent(s) for any class of bonds or debentures of the Debtors shall provide to the registered holders on a quarterly basis a notice regarding the Court Order, and a registered holder shall, in turn, provide such notice to any holder for whose account such registered holder holds such bonds or debentures. (10) Any Person who sells Claims against the Debtors in the aggregate principal amount of at least $1 million to another Person shall provide a copy of the Court Order to the purchaser. (11) The Debtors shall serve a copy of the Court Order on the parties on the Master Service List established in these cases, as well as on the parties on the 2002 List. (Service Merchandise Issue 12; Bankruptcy Creditors' Services Inc.) SILVER CINEMAS: Taps Latham & Watkins as Special Counsel -------------------------------------------------------- The debtors, Silver Cinemas International, Inc., et al. seeks to employ Latham & Watkins as special counsel to the debtors for postpetition financing and general corporate advice. Latham has agreed to be compensated on a time-spent basis, based upon its usual and customary hourly rates and fees, ranging from $110 per hour to $450 per hour. It is anticipated that the firm will advise the debtors with regard to documentation of a DIP financing agreement and review of periodic filings, if any, filed by the debtor with the SEC. STAGE STORES: $450 Million DIP Facility Receives Interim Approval ----------------------------------------------------------------- On Friday, Hon. Wesley W. Steen (S.D. Texas) approved a number of first-day motions and a debtor-in-possession (DIP) facility of $450 million on an interim basis for Houston-based Stage Stores Inc., which filed for chapter 11 on Thursday in Houston along with two subsidiaries. A hearing for the final approval is set for June 26. The DIP facility is funded by a group of banks for which CITICORP USA INC. is the agent. Bankruptcy counsel are Andrew E. Jillson and Lynnette R. Warman of Jenkens & Gilchrist PC, Dallas. Stage Stores sells brand-name apparel, accessories, cosmetics and footwear to small communities in the U.S., primarily under the names Stage, Bealls and Palais Royal. (ABI 07-June-00) TEU HOLDINGS: Order Approves Retention of Liquidation Consultants ----------------------------------------------------------------- By order entered on May 16, 2000, the US Bankruptcy Court for the District of Delaware entered an order approving the retention of Gordon Brothers Retail Partners, LLC and Maynard's Auctioneers, Ltd., as liquidation consultant to the debtors. TEU HOLDINGS: Seeks Authority to Retain Sales Consultant -------------------------------------------------------- The debtor, TEU Holdings, Inc. and its debtor affiliates seek entry of an order authorizing the debtors to retain Daley-Hodkin Corporation as sales consultant for the sale of certain of the debtors' trademarks, tradenames, and retail and catalog mailing and customer lists. Among other needs the debtors require assistance in marketing the assets for sale and in managing the sale process. The debtors have determined that it is prudent to retain the services of a sales consultant to assist them with the sale of the Assets so that the value of the assets is maximized for the debtors' estates. Daley-Hodkin has agreed to be compensated for its services through a ten percent buyer's premium charged to each buyer of any portion of assets to be sold. The buyer's premium shall not be considered property of the estate and shall constitute Daley-Hodkin's entire fee for all of its services. In the event that there are no acceptable bids received for the Assets or the bids received total less than $100,000, Congress Financial Corporation has agreed to pay Daley-Hodkin a $10,000 fee and to reimburse Daley-Hodkin for any out-of-pocket expense associated with the sale of the Assets up to $30,000. WASTE MANAGEMENT: Subsidiary Completes Sale in Australia -------------------------------------------------------- Waste Management Inc. (NYSE:WMI) today announced that its wholly owned subsidiary has completed its previously announced transaction to sell its waste services operations in Australia to Paris-based SITA. At its completion, the transaction generated proceeds of approximately U.S.$230 million. The sale of the business in Australia stems from Waste Management's strategy to re-focus the Company on its North American solid waste operations. The Company's subsidiaries are in discussions with other parties regarding the divestiture of its other remaining international businesses, as well as non-core and certain non-integrated solid waste assets in North America. The Company intends to use the proceeds of these divestitures primarily to reduce debt and to make selective tuck-in acquisitions of solid waste businesses in North America. Waste Management Inc. is its industry's leading provider of comprehensive waste management services. Based in Houston, the Company serves municipal, commercial, industrial, and residential customers throughout the United States, and in Canada, Puerto Rico and Mexico. ZEGARELLI GROUP: Settles Lawsuit -------------------------------- Zegarelli Group International, Inc. ("ZEGG") announced that it settled the lawsuit with the buyers of its contract packaging business. As a result of the settlement, ZEGG will receive $400,000 through August 2000 and will collect $ 1,700,000 in quarterly installments over six years, plus interest. ZEGG is currently operating under Chapter 11 of the Bankruptcy Act. Alfred E. Booth, Jr., chief executive officer, stated that the settlement will enable the Company to effect a settlement with creditors. The Company's business (principally marketing its line of professional hair care products) is currently operating at a very low level. Mr. Booth stated that the aforementioned payments may enable the Company to expand operations. ********* 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. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *