/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/000714.MBXT R O U B L E D C O M P A N Y R E P O R T E R Friday, July 14, 2000, Vol. 4, No. 137 Headlines AGRIBIOTECH: Farmers Still Far From Collecting AGRIBIOTECH: Simplot Purchases Most of Seed Assets For $24.5MM CHESAPEAKE/GOTHIC ENERGY: Ratings Under Review; Possible Upgrade CONNEAUT LAKE: Trustees Don't Plan To Sell COSTILLA ENERGY: Announces Filing of Amended Plan EAGLE GEOPHYSICAL: Announces Emergence From Bankruptcy EURO UNITED: Creditors Meeting Set For July 13, 2000 FLOORING AMERICA: Carpet Exchange Founders Buy 12 Stores FRUIT OF THE LOOM: Committee Objects to Sr Noteholder Payments GENESIS/MULTICARE: Multicare's Seeks Approval of $50MM DIP GNI GROUP: Receives $7.5 MM Offer To Finance Purchase of Notes IGF INSURANCE: S&P Assigns Ratings INDUSTRIAL HOLDINGS: Resumes Trading Under 'IHII' as of July 13 INTEGRATED HEALTH: To Employ Special Counsel; Blass & Driggs LAIDLAW: Records Half-Billion Dollar Loss in Third Quarter LAIDLAW: Taps Zolfo Cooper LOEWEN: Motion To Examine Bankers' Trust Pursuant to Rule 2004 MKR HOLDINGS: Delay in Filing Annual Financial Report PAFCO GENERAL: S&P Assigns Ratings PATHMARK STORES: Receives Bondholder Approval; Files Prepack Plan PATHMARK STORES: Case Summary and 20 Largest Unsecured Creditors PIXELON CORP: More Troubles Arise PRODUCTION RESOURCE: Ratings Lowered (Sr Subordinated To Ca) PROVIDENT AMERICAN: S&P Lowers Ratings RELIANT BUILDING PRODUCTS: Files Voluntary Chapter 11 SAFETY-KLEEN: Applies To Employ Arnold as Environmental Counsel SAFETY-KLEEN: Creditors Object to Financing Request SCAFFOLD CONSTRUCTION: Files Second Amended and Restated Plan SERVICE MERCHANDISE: Authority to Sublease Portion of Stores SUPERIOR INSURANCE: S&P Assigns Ratings TITAN ENERGY: Energy America - Surprise Winning Bidder TOYSMART: Senators Bring Legislation To Bar Sale of Customer List BOND PRICING FOR WEEK OF JULY 10, 2000 ********* AGRIBIOTECH: Farmers Still Far From Collecting ---------------------------------------------- Bankruptcy court officials working to liquidate AgriBioTech Inc. are closer to repaying farmers and other creditors, but farmers owed money by the company are still far from collecting. This week, most of ABT's turf grass and forage seed assets were sold, attorneys said Tuesday. The ABT bankruptcy affected hundreds of farmers nationwide who grew alfalfa seed for the company. The Wyoming farmers in the Big Horn Basin are owed $4.5 million for the 1999 crop. ABT growers in Washington, Oregon, Idaho and Montana also are waiting for their money. Money from the ABT sale will go to repay creditors, but plans to repay the farmers are still uncertain, attorneys say. Kevin Lewis, president of the Wyoming Alfalfa Seed Growers Association, said he thinks it will be awhile before farmers see any money from the bankruptcy. However, Lewis said growers at least now know which company owns their contracts for this year's crop. "There may be a few that won't get picked up, and then it will be up to the grower to market the seed themselves," he said. Based in Henderson, Idaho, ABT filed for Chapter 11 bankruptcy in January, citing financial problems from trying to acquire too many seed operations too quickly. This week's sale brought in about $60 million, well short of the $100 million creditors had hoped for. But there is still an estimated $5 million to $6 million in other assets set for auction. ABT's main lending institution, Bank of America, is owed around $45 million. A group consisting of former ABT president Kenneth Budd, the J.R. Simplot Co., and Dick Olson of the Jefferson-based Proseed Marketing will pay $24.5 million for the lion's share of ABT's grass seed business, attorneys said. The group has been tightlipped about plans for the business. Research Seeds Inc., an entity spun off from a Land O Lakes cooperative in Napa Calif., bought the largest part of ABT's forage business for $15.5 million. The sale, along with the disposition of the other forage related assets retained by ABT, should generate $30 million. AGRIBIOTECH: Simplot Purchases Most of Seed Assets For $24.5MM --------------------------------------------------------------- A consortium of three companies, which includes Simplot Turf and Horticulture, a division of the J.R. Simplot Co., purchased most of the grass seed assets of AgriBioTech for $24.5 million. The companies will not operate together, instead splitting the various assets among them. Simplot bid on the assets because they fit in well with the company's existing turf operations in North Idaho, company spokesman Fred Zerza said. As part of the winning bid, Simplot will get seed distribution centers in Phoenix, Las Vegas and Florence, Ky. and rights to some of the proprietary seed sold to golf courses, Zerza said. Most of the assets of defunct Henderson-based AgriBioTech Inc. sold at auction earlier this week, giving Idaho alfalfa seed growers hope they will receive at least partial payment for last year's crop by the end of the year. AgriBioTech filed for Chapter 11 bankruptcy in January, citing financial problems from trying to acquire too many seed operations too quickly. The auction, which included three seed warehouses in Treasure Valley, also means growers are assured they will have a market for this year's seed, which is already growing and will be harvested later this year. Idaho alfalfa seed growers have claims against AgriBioTech for up to $9 million for seed they produced last year and have not been paid for. Combined with claims from grass seed growers in northern Idaho, the amount owed to Idaho farmers could be as high as $34 million. The sale brought in about $60 million, well short of the $100 million creditors had hoped for. But there is still as much as $6 million in other assets set for auction. Also, AgriBioTech's main lending institution, Bank of America, is owed around $45 million and growers in other states have claims against the company. Still, growers are happy that the seed warehouses will keep operating and their contracts will continue. "A lot of them are relieved," said Marsing farmer Jim Briggs, the chairman of the Idaho AgriBioTech Growers Committee. "Now that they're putting the bees on (to pollinate the crop), they know it's got a home to go to and know the price." AgriBioTech's Allied facility in Nampa, some proprietary seed varieties and some assets outside Idaho were purchased by Research Seeds for $15.5 million. Research Seeds already operates in Nampa under the name Forage Genetics. Dairyland Seed purchased the AgriBioTech seed warehouse in Homedale for $1.6 million. Northwest Seeds bought the AgriBioTech-owned Clark Seeds facility in Nampa for $2.7 million. CHESAPEAKE/GOTHIC ENERGY: Ratings Under Review; Possible Upgrade ---------------------------------------------------------------- Moody's Investors Service confirmed the ratings of Chesapeake Energy Corporation ("Chesapeake") and placed the ratings of Gothic Energy Corporation ("Gothic") under review for possible upgrade due to its pending acquisition by Chesapeake. Moody's review of Gothic's ratings for possible upgrade will reflect Gothic's debt levels post acquisition (to the extent not refinanced) and, importantly, Chesapeake's clear economic and strategic interest in supporting Gothic's debt service post acquisition. Chesapeake's ratings outlook is positive, but dependent on significant deleveraging and its ability to grow production. The Chesapeake confirmation recognizes the strategic fit of the Gothic assets with Chesapeake's property base, but also takes into account the cost and initial leverage on reserves associated with the Gothic transaction. Chesapeake would continue to have a high debt burden on reserves ($1.12/mcfe on proved developed reserves, pro forma at 3/31/00) and a high interest burden on production ($.70/mcfe for pro forma 1Q00) until it is able to materially reduce debt (Chesapeake intends ultimately to refinance Gothic's debt with a combination of debt and equity). In addition, Chesapeake may increase its own senior secured debt levels in conjunction with the Gothic acquisition, which would subordinate the unsecured notes to a greater degree than currently. On the other hand, to the extent incremental secured Chesapeake debt funds the take-out of Gothic's secured debt (non- recourse to Chesapeake pending refinancing), structural subordination to debt at Gothic would be decreased. The ratings also take into account the major changes in Chesapeake's reserve base over the past few years (including the impact of acquisitions from small independents, reserve revisions, and sharp swings in year-end commodity prices and in oil services costs). Chesapeake's acquisitions have diversified and lengthened the life of its reserve base, but the combination of acquisitions with other changes in reported reserves have complicated the establishment of a clear track record of sustainable reserve replacement costs. In addition, the company books a significant portion of reserves based on internal engineering, and has experienced material write-downs of internally engineered reserves (most recently in 1999, in Canada). The ratings further reflect Chesapeake's continuing challenge of offsetting the steep decline curve of its remaining short-lived Gulf Coast/Austin Chalk production (at approximately 25% of production, pro forma for the Gothic acquisition), which adds to the challenge of growing overall production. Chesapeake's pro forma full cycle leveraged unit economics suggest that in a supportive commodity price environment Chesapeake could internally fund reserve replacement if production levels were sustained and reserve replacement costs of $1.15-$1.20/mcfe were achieved. The ratings also recognize that, although debt remains high, Chesapeake has improved its capital structure through the conversion of $152 million of preferred stock and $17 million of associated accrued preferred dividends to common equity through 6/30/00 (66% of the preferred issue). The Gothic assets would add 50 mmboe (or 25%) to Chesapeake's proved reserves. Importantly, they would beneficially intensify Chesapeake's position in long-lived Mid-Continent reserves and may offer potential for meaningful cost savings due to their overlap with Chesapeake's assets. The Gothic reserves have a relatively small proved undeveloped component and relatively low operating costs (due to Amoco-licensed field monitoring technology). The Gothic acquisition would cost approximately $360 million based on the current capital structure of Gothic, of which $83 million would be funded with Chesapeake equity (23% of total cost) and $277 million with cash and assumed debt (77% of total cost). The total cost would represent $1.20/mcfe on Gothic's 12/31/99 proved reserves, and the debt equivalent portion of the acquisition cost (assumed debt plus cash cost) would be high, representing $.92/mcfe on Gothic's 12/31/99 proved reserves. Therefore, on a pro forma basis, absent additional equity, Chesapeake's leverage on reserves would remain high ($1.12/mcfe on proved developed reserves; $.95/mcfe on proved reserves, including Chesapeake's $240 million and Gothic's $25 million of capex requirements on proved undeveloped reserves as a debt-like liability). Chesapeake's pro forma leveraged unit E&P cash margin would decrease slightly as a result of the acquisition, to approximately $1.20/mcfe from $1.27/mcfe on a stand alone basis in 1Q00, not including potential cost savings, estimated at $10 million annually, or approximately $.05/mcfe on pro forma 1Q00 combined production. On an unleveraged basis, Chesapeake's unit E&P cash margin would improve slightly as a result of Gothic's lower production costs, but the unit interest burden would increase (assuming Gothic's discount notes are cancelled and Gothic Production's debt remains at 3/31/00 levels). Overall, pro forma leveraged margins at average 1Q00 revenues of $2.55/mcfe suggest that given supportive commodity prices and the ability to sustain production levels, Chesapeake could internally fund reserve replacement if it can replace reserves at a cost of $1.15 to $1.20/mcfe. Ratings confirmed for Chesapeake include: Chesapeake's senior unsecured guaranteed note ratings on four issues totaling $920 million, rated B2; its $78 million of cumulative convertible preferred stock, rated "ca"; its senior implied rating of B2; and its senior unsecured issuer rating of B3. Chesapeake has a $100 million secured bank credit facility that is unrated. Ratings of Gothic placed under review for possible upgrade include: Gothic's 14.125% senior discount notes, due 2006 ($81 million accreted value as of 6/30/00), rated Caa3; wholly-owned Gothic Production Corporation's ("Gothic Production") $235 million 11.125% senior second secured notes, due 2005, rated B3; Gothic Production's senior implied rating of Caa1; and Gothic Production's senior unsecured issuer rating of Caa2. If Chesapeake completes the acquisition of Gothic as announced, Gothic's 14.125% senior discount notes (96% of which have been purchased to date by Chesapeake) will be cancelled, and Moody's will withdraw its ratings on those notes. Until Gothic Production's bank facility is paid down and its 11.125% senior second secured notes are taken out, they will remain non-recourse to Chesapeake, and Gothic cash flows would be subject to restrictions on distribution to Chesapeake. Given the strategic value of Gothic's assets to Chesapeake, Moody's would expect Chesapeake to have an incentive to support their debt service. Chesapeake Energy Corporation is an independent exploration and production company headquartered in Oklahoma City, Oklahoma. It has reserves in the Mid-Continent, Gulf Coast/Austin Chalk, Western Canada, and the Williston and Permian Basins. Gothic Energy Company is headquartered in Tulsa, Oklahoma, and owns oil and gas reserves in the Mid-Continent and Permian/Delaware Basins. CONNEAUT LAKE: Trustees Don't Plan To Sell ------------------------------------------ The AP reports on July 8, 2000 that Meadville attorney William T. Jorden, Conneaut Lake Park's court-appointed custodian, announced that trustees running the historic amusement park in northwestern Pennsylvania don't have any plans to sell it. He acknowledged rumors that the debt-laden park may be sold, but that "is not the way we're going now," he said. A judge would have to examine the board's ownership agreement and determine if the public trust could be ended if a sale were an option, he added. COSTILLA ENERGY: Announces Filing of Amended Plan ------------------------------------------------- Costilla Energy, Inc. reported on July 12, 2000 that it has filed an amended plan of reorganization with the U.S. Bankruptcy Court for the Western District of Texas, Midland Division. The amended plan provides for the creation of a trust for the distribution of proceeds from the sale of Costilla's oil and gas properties to Louis Dreyfus Natural Gas Corp. (NYSE: LD), and the liquidation of the remaining assets of the company. Under the proposed plan, Costilla's existing common and preferred stock will be cancelled and will receive no distributions. The company also filed a proposed disclosure statement, which contains certain information about the company's plan, including the distribution of estimated proceeds per the plan. After the Bankruptcy Court has approved the adequacy of the information within the disclosure statement, the plan and disclosure statement will be disseminated for consideration. The plan is subject to confirmation by the Bankruptcy Court. EAGLE GEOPHYSICAL: Announces Emergence From Bankruptcy ------------------------------------------------------ Eagle Geophysical, Inc. and its subsidiaries announced that they have emerged from bankruptcy, under which they have been operating since September 29, 1999. The Amended Joint Plan of Reorganization filed by Eagle and its subsidiaries was approved by the Bankruptcy Court on June 28, 2000, with an effective date of July 10, 2000. As previously announced, the Plan provides that all of the previously outstanding shares of common stock of the company have been cancelled with those shareholders of the company receiving no interest in the reorganized company. As previously announced, the company's shares were formally de- listed from trading on Nasdaq shortly after the company filed for bankruptcy court protection. The company's bondholders and various pre-petition general unsecured creditors will receive certain cash distributions and other interests, as well as substantially all of the shares of new common stock issued by the reorganized company in connection with implementation of the Amended Joint Plan of Reorganization. The first distribution is anticipated to occur later this month. The newly issued shares will not be traded on an established securities market at any time in the near future. As part of the implementation of the Plan of Reorganization, a new board of directors has been appointed consisting of Douglas B. Thompson, Chairman; Samuel T. Sloan; Robert Nash; and Gene Davis. Additionally, Mr. Thompson will serve as Chief Executive Officer of Eagle Geophysical, Inc., Mr. Sloan will serve as President - US Operations and Robert Wood will serve as President - Canadian Operations. Eagle Geophysical emerges with stockholders' equity valued at approximately $12 million, secured debt of approximately $3 million and access to a new revolving credit facility. The reorganized company will continue to operate its land seismic acquisition crews primarily in the Texas and Louisiana Gulf Coast area of the United States, as well as Western Canada. EURO UNITED: Creditors Meeting Set For July 13, 2000 ---------------------------------------------------- According to an article in Plastics News on July 10, 2000 Euro United Corp. is in bankruptcy and will have its first creditors' meeting July 13. Several blow molding, injection molding and auxiliary equipment suppliers have pulled their machines from Euro United's plants, according to Peter Tordy, president of Blowmoulding Parts & Systems Inc. of Concord, Ontario. The rest of the equipment will be auctioned off by Michael Fox Auctioneers of Baltimore and Perry Videx LLC of Hainesport, N.J. KPMG Corporate Finance Inc. of Toronto had been looking for a buyer of the proprietary consumer goods injection molder or a company that would help restructure the Oakville, Ontario, firm. Euro United first filed for protection Dec. 8 under Canada's Bankruptcy and Insolvency Act under a section equivalent to Chapter 11 of the U.S. Bankruptcy Code. The company was forced into liquidation on June 12. The company's former majority owner and president, Sam Rehani, said GE Capital, Euro United's major lender, petitioned the company into final bankruptcy. Euro United had a total debt load of US$85 million when it sought protection late last year. KPMG Inc. of Toronto is now acting as trustee in bankruptcy for Euro United. KPMG Senior Vice President Harold Fisher said 40 injection molding machines will be auctioned off. Euro United's 15 blow molding machines have been seized by manufacturer Davis-Standard Corp. FLOORING AMERICA: Carpet Exchange Founders Buy 12 Stores -------------------------------------------------------- The Denver Post reports on July 12, 2000 that the founders of Denver-based Carpet Exchange have purchased back from Flooring America Inc. of Florida the original 12 Carpet Exchange stores in Colorado and Wyoming as well as two Colorado Carpet & Rugs stores. Bruce Odette, Gary Schwartz and Michael Goldfarb, who operate as GSO Investments LLC, paid an undisclosed amount of cash for the 14 stores. FRUIT OF THE LOOM: Committee Objects to Sr Noteholder Payments -------------------------------------------------------------- The Official Committee of Unsecured Creditors objects to the proposed adequate protection payments to the holders of Fruit of the Loom Senior Notes prior to the expiration of its Review Period. The Committee asks the Court to direct that the Indenture Trustees withhold any adequate protection payments until the latter of the expiration of the Committee's Review Period or the conclusion of any action the Committee may bring against the Noteholders. The Committee reminds the Court that it has 240 days to review the validity, protection, enforceability and avoidability of liens, security interests and secured claims relative to $1,200,000,000 of secured debt. If the Senior Noteholders are later equitably subordinated or reclassified as unsecured claims, the Committee argues, Fruit of the Loom must reclaim millions of dollars in adequate protection payments from thousands of Noteholders as opposed to three Indenture Trustees. The Unofficial Committee of Secured Noteholders objects to the Committee's Motion, arguing that the doctrine of estoppel applies and prohibits the Official Committee from changing their position at this juncture. The Noteholders direct Judge Walsh's attention to Fields v. General Motors Corp., 121 F.3d 271, 275 (7th Cir. 1997). Clearly, the Noteholders recognize, the adequate protection payments are in dispute. But the Noteholders, the Debtors and the Official Committee actively participated in and supported entry of a Final Adequate Protection Order that (i) outlined the disputed payments and (ii) allowed the payments to be made. That Final Order, the Noteholders relate, was the product of long and difficult negotiation between all of the parties. The Noteholders tell Judge Walsh that two adequate protection payments have already been delivered to Indenture Trustees, the Committee knew about the payments and said nothing. Moreover, the Secured Noteholders say, this is really a non-issue since adequate protection payments made now can be used as credits or advance distributions later under any plan of reorganization. Considering the parties' arguments, Judge Walsh ruled that the Final Order will stand as originally crafted by the Noteholders, Debtors and Committee. To accommodate various technical concerns, Judge Walsh directs the Indenture Trustees to provide the Court and core parties-in-interest with written notice of the record date for adequate protection payments for the benefit of the Secured Noteholders and publish that notice in The Wall Street Journal. (Fruit of the Loom Bankruptcy News Issue 8; Bankruptcy Creditors' Service Inc.) GENESIS/MULTICARE: Multicare's Seeks Approval of $50MM DIP ---------------------------------------------------------- At the Petition Date, MultiCare owed $443,000,000 to the syndicate of Prepetition Lenders led by Mellon Bank, N.A. pursuant to a Senior Credit Facility dated October 9, 1997. Other secured debts owed by MultiCare include: $48,000,000 under 88 Mortgage Notes; and 7,500,000 under various Industrial Revenue Bonds. By this Motion, the MultiCare Debtors seek the Court's authority to pledge all otherwise unencumbered assets and grant a security interest in all post-petition receivables to secure borrowings under a new $50,000,000 superpriority debtor-in-possession financing facility, pursuant to 11 U.S.C. Sec. 364. MultiCare tells the Court that it had $2,500,000 in cash in the bank at the Petition Date. The MultiCare Debtors say that they "may lack sufficient liquidity" without the availability of this new DIP Facility. MultiCare provides no estimates of projected cash needs. In all events, MultiCare tells the Court, the DIP Facility "will instill confidence in trade vendors." MultiCare says that it turned to Mellon for DIP financing because of its experience with the Debtors' businesses and the need for quick action rather than protracted due diligence. MultiCare talked to other prospective DIP Lenders, but their deals were no better than Mellon's. MultiCare is comfortable that the proposal negotiated with Mellon is the best financing available. The DIP Facility terminates (absent the occurrence of an event of default) on December [22], 2001. Subject to a Borrowing Base (equal to 90% of Eligible Receivables plus the value of certain real estate), the Debtors will have access to up to $30,000,000 of Revolving Credit and the DIP Lenders will back up to $20,000,000 of Letters of Credit under an L/C Subfacility. On an interim basis, pending a final hearing on this Motion, the Debtors ask the Court for authority to borrow up to $30,000,000 under the Facility. Those funds will be used to bridge any gaps in MultiCare's cash requirements to find on-going operations and honor obligations under the various First Day Orders allowing payments to so-called Critical Vendors and Suppliers. The DIP Lenders agree to a $3,500,000 Carve-Out from their superpriority lien for payment of professional fees incurred by the MultiCare Debtors, any professionals retained by any official committees, and fees owed to the U.S. Trustee and the Bankruptcy Clerk. The MultiCare Debtors will pay interest at a Mellon's Prime Rate plus 2.5% or LIBOR plus 3.75% on all amounts borrowed under the Revolving Facility. In the event of a default under the DIP Facility, the interest rate increases by 200 basis points. The MultiCare Debtors will pay the Lenders: * a $375,000 Advisory Fee; * a $1,000,000 Facility Fee; * a $125,000 annual Administration Fee; * a $75,000 annual Collateral Monitoring Fee; * an annual 3.00% fee on all outstanding Letters of Credit; and * an annual 1.0% Unused Line Fee for every dollar not borrowed; * for all professional fees incurred by the DIP Lenders, including: -- Drinker, Biddle & Reath, LLP; -- Morgan, Lewis & Bockius LLP; -- Policano & Manzo LLP; and -- Freed Maxwell ABL Services, Inc. The MultiCare Debtors are required to employ Donaldson, Lufkin & Jenrette as their financial advisors and are required to make DLJ personnel available to Mellon. Further, MultiCare must deliver a 2000-2001 Operating Plan to Mellon by September 30, 2000 and a 2001-2003 Financial Forecast to Mellon by December 31, 2000. The MultiCare Debtors covenant with the DIP Lenders that they will not permit EBITDA during each consecutive three-month period ending on the date indicated to be less than a stipulated amount as set forth in the agreement, and ranging from $9.7 million for the period ending July 31, 2000 to $11 million for the period ending December 31, 2001. The MultiCare Debtors agree to limit Capital Expenditures to $2,480,000 per quarter, subject to upward adjustment for any amount not spent in the prior quarter. On the operational level, MultiCare covenants that it will maintain an overall patient census sufficient to fill 89.3% of the beds at its Health Care Facilities. (Genesis/Multicare Bankruptcy News Issue 2; Bankruptcy Creditors' Service Inc.) GNI GROUP: Receives $7.5 MM Offer To Finance Purchase of Notes -------------------------------------------------------------- The GNI Group, Inc. announced that it has received an offer from an investor to provide $7.5 million to finance the purchase of all of the company's 10-7/8% Series B Senior Notes. Conditions include that the shareholders sell their shares to the investor for a nominal value, no material change in assets and certain levels of other indebtedness. This offer expires July 20, 2000. Additionally, the forbearance agreement with its senior secured lender expired on July 10, 2000 and the company is in default under the credit agreement with its senior secured lenders. The company will hold a conference call for its 10-7/8% Series B Senior noteholders on July 12, 2000 at 10:00 CDST. For information on the conference call you may contact the company at 281/930-0350. The GNI Group, Inc. headquartered in Deer Park, Texas, is engaged in hazardous and non-hazardous waste management and in the manufacture of specialty chemicals. IGF INSURANCE: S&P Assigns Ratings ---------------------------------- Standard & Poor's today assigned its triple-'Cpi' financial strength rating to IGF Insurance Co. The rating action reflects the company's weak liquidity, volatile earnings and a 40.5% adverse one-year loss reserve development. This stock company mainly writes allied lines insurance, with an additional specialization in crop hail and nonstandard auto, and its products are distributed primarily through independent general agents. Its major states of operation -- Texas, Indiana, Iowa, Illinois, and Oregon -- account for more than 55% of its business. The company, which began business in 1973, is licensed in 31 states and based in Des Moines, Iowa (domiciled in Indiana). Major Rating Factors: -- The company has a weak current liquidity ratio of 2.6% and volatile earnings, with returns on revenues ranging from negative 35.8% to positive 102.6% since 1994. The time-weighted average return on revenue for 1996 to 1999 was 15.5%. -- The company's one-year loss reserve development is 40.5%. -- The ratio of agent balances to policyholder surplus has also been very volatile. Results for 1999 reflect an improvement from the four-year high of 266.3% in 1998. -- Capitalization remained extremely strong in 1999, as indicated by a Standard & Poor's capital adequacy ratio of 281.8%. Further, leverage, as measured by premium and liabilities to surplus, was good at 1.3 times. Although the company (NAIC:26891) is a member of Symons International Group Inc. (Nasdaq:SIGC), a mid-size insurance group, the rating does not include additional credit for implied group support from its ultimate parent, Goran Capital Inc. of Toronto (Nasdaq:GNCNF). 'pi' ratings, denoted with a 'pi' subscript, are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. 'pi' ratings are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings. Ratings with a 'pi' subscript generally are not modified with 'plus' or 'minus' designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. INDUSTRIAL HOLDINGS: Resumes Trading Under 'IHII' as of July 13 --------------------------------------------------------------- Industrial Holdings, Inc. (Nasdaq: IHIIE) ("IHI") announced that it has received a favorable determination from The Nasdaq Stock Market, Inc. regarding its continued listing on the Nasdaq National Market. As a result of this ruling, the Company's common stock will resume trading under the symbol "IHII" beginning July 13, 2000. Michael N. Marsh, President and Chief Executive Officer, remarked, "Over the past month, we are pleased to have successfully resolved the events of default that occurred under our senior credit agreement, settled our litigation with Trinity Industries related to our acquisition of Beaird Industries and sold our refinery demolition subsidiary, Blastco Services Company. We continue to execute our turnaround plan. We are also pleased to be in full compliance with Nasdaq requirements and to resume trading under our symbol IHII." Industrial Holdings operates four groups: the Engineered Products Group which manufactures cold-formed fasteners and specialty metal components for sale primarily to original equipment manufacturers in the home furnishings, automotive and electrical components industries; the Stud Bolt and Gasket Group which manufactures and distributes stud bolts, nuts, gaskets, hoses, fittings and other products primarily to the petrochemical, chemical and oil and gas industries; the Heavy Fabrication Group which manufactures and distributes medium and thick-walled pressure vessels, gas turbine casings, heat exchangers, wind towers, heat panels and other large machined weldments; and the Energy Group which remanufactures and sells high pressure valves, pumps and other related products to the petrochemical, chemical and petroleum refining industries, the pipeline transportation and storage industries and energy industry. INTEGRATED HEALTH: To Employ Special Counsel; Blass & Driggs ------------------------------------------------------------ The Debtors sought and obtained permission to employ Blass & Driggs as their Special Corporate and Regulatory Counsel, pursuant to section 327(e) of the Bankruptcy Code. The Debtors have employed Blass & Driggs as corporate and healthcare regulatory counsel since 1989. Since the petition date, Blass & Driggs has continued to perform such services pursuant to the Ordinary Course Professional Order. As the Debtors have determined that the monthly fees and expenses of Blass & Driggs are likely to exceed $25,000 per month, the Debtors submit a separate application for the continued employment of Blass & Driggs as their special counsel. Blass & Driggs will represent the Debtors in connection with certain corporate, regulatory and compliance matters. Blass & Driggs will not undertake representation of the Debtors related to the prosecution of the chapter 11 cases, or any plan of reorganization. Specifically, B&D will advise and assist the Debtors in connection with: (1) licensure and other state and federal regulatory issues; (2) application of state and federal healthcare regulatory requirements; (3) facility licensure and other regulatory issues attendant to divestitures, contracts and other corporate transactions; (4) issues arising from pre-Filing Date acquisitions and other corporate transactions in which Blass & Driggs represented the Debtors, including contractual obligations and reimbursement issues; (5) divestitures and other corporate transactions; (6) negotiation, preparation and execution of contracts. The Debtors believe that Blass & Driggs is well qualified, and is uniquely able to represent the Debtors for its familiarity with pending federal investigations relating to the Debtors' businesses and regulatory affairs. Subject to court approval, the Debtors will pay Blass & Driggs hourly rates of: Michael S. Blass $ 360 Andew Bogen $ 300 Wendy North $ 240 Joshua Dicker $ 275 Jill Cohen $ 245 Sara Damiano (paralegal) $ 100 plus out-of-pocket expenses. The Debtors believe that the charges by Blass & Driggs are reasonable. The Debtors also represent that to the best of their knowledge, the members and associates of B&D do not have any connection with the Debtors or other parties in interest, and the respective attorneys of B&D do not hold any interest adverse to the Debtors or their estates. (Integrated Health Bankruptcy News Issue 6; Bankruptcy Creditors' Service Inc.) LAIDLAW: Records Half-Billion Dollar Loss in Third Quarter ---------------------------------------------------------- According to an article in The Vancouver Sun on July 13, 2000, Laidlaw Inc., North America's biggest bus transport company, Wednesday recorded a half-billion dollar loss in its third quarter due to the writedown of its health-care and waste management operations and higher borrowing costs. Laidlaw, the biggest operator of school buses in North America and owner of Greyhound Lines Inc., posted a net loss in the quarter of $542.5 million US or $1.66 a share, compared with a net loss $227.2 million or 69 cents a share for the 1999 period. The Burlington, Ont.-based company posted a loss from continuing operations of $228.4 million or 70 cents a share, compared with earnings of $60 million or 18 cents a share over the same period last year. Laidlaw wrote down the value of its health-care operations by $314.1 million "to quell potential purchasers' continued concerns about the value of future revenue streams from ambulance services provided to (U.S.) Medicare recipients," the company said in a statement. Three one-time items totaling $232.8 million after tax were recorded in the quarter, including a further $43.8 million writedown in subsidiary Safety-Kleen Corp. Shares of Laidlaw rose earlier this week as some investors believed that, along with the results released Wednesday, Laidlaw would announce a long-awaited solution to its balance sheet problems. Laidlaw is still discussing its $3.5-billion debt load with creditors after missing interest payments due on May 15. The company's problems began when Safety-Kleen, a Columbia, South Carolina-based hazardous waste firm of which Laidlaw owns 44 per cent, suspended three top executives for alleged accounting irregularities. Since then, Laidlaw's stock has been in a steady decline, falling from $4.39 Cdn. on the Toronto Stock Exchange to Wednesday's close of 80 Canadian cents, up 1 Canadian cent. Laidlaw was advanced $30 million by lenders in mid-April LAIDLAW: Taps Zolfo Cooper -------------------------- According to an article in The Toronto Star on July 13, 2000, Laidlaw Inc. hired Stephen Cooper, managing partner of New York- based Zolfo Cooper LLC, yesterday after announcing a third- quarter loss of more than $542 million (U.S.) and a nine-month loss of $1.95 billion. Laidlaw reports its financial results in U.S. dollars. "When companies get into this kind of situation, specialized talent is needed," said Laidlaw vice-president T.A.G. Watson. "This isn't the first step to a bankruptcy filing. We're hoping to avoid that by arranging something with the banks." Cooper, who has been appointed director, vice-chairman and restructuring officer of Laidlaw, will have much to arrange on behalf of the former success story. Since May, the company has defaulted on more than $3.4 billion in bank loans and bonds in the wake of poor performance by its American ambulance division and an accounting scandal at Safety- Kleen Corp., its South Carolina-based waste disposal subsidiary. For the quarter ended May 31, Laidlaw reported income from operations of $74. 8 million before interest, taxes and amortization, down from $90.7 million for the same period last year. Revenue rose to $811.6 million from $715.8 a year earlier. For the nine months ended May 31, income from operations was $220.9 million, compared with $229.3 million a year earlier. Watson said the numbers show that Laidlaw has the basis of a good business, an enterprise that can be saved with some patience from lenders. Speculation that the company might try to solve its debt problems by seeking court-supervised protection from its creditors under Canada's Companies- Creditors Arrangements Act and Chapter 11 of the United States bankruptcy law was one of the reasons given for a spike in the company's share price on the Toronto Stock Exchange earlier this week. On Monday the stock soared more than 34 per cent. Laidlaw shares closed at 80 cents (Canadian) on the Toronto Stock Exchange yesterday, up 1 cent from Tuesday's close. Most of the drop in operating income resulted from two factors, Watson said, higher labour costs and sharply higher fuel costs. Operating income was turned into a net loss by the exclusion of $10.8 million (U.S.) reported last year as Laidlaw's share of Safety-Kleen profits, a $29.6 million increase in interest costs because of the debt default and a reduction of $11.3 million in other income. Laidlaw was forced to further write down the value of its ambulance businesses $314.1 million in response to the concerns of potential purchasers about the future revenue those companies could produce. "We're facing significantly higher interest rates on our bank debt now," Watson said. "Quite simply there is one interest rate schedule when you're healthy and a much different one that applies when you're in trouble." LOEWEN: Motion To Examine Bankers' Trust Pursuant to Rule 2004 -------------------------------------------------------------- The Debtors sought and obtained an ex parte order, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, compelling Bankers' Trust Company, in its capacity as the Collateral Trustee under the Collateral Trust Agreement, to produce documents for examination. The Debtors relate that the Collateral Trust Agreement, entered in May 1996, provides that the holder of any subsequent indebtedness of the Debtors is entitled to the benefits of the security interests in the collateral granted under the Collateral Trust Agreement if (a) the holder or its representative delivers to the Collateral Trustee an Additional Secured Indebtedness Registration Statement signed by the holder or representative, (b) the Collateral Trustee accepts the Additional Secured Indebtedness Registration Statement, and (c) the Additional Secured Indebtedness Registration Statement is registered on the Secured Indebtedness Register maintained by the Collateral Trustee. The debt initially issued under the Collateral Trust Agreement had an aggregate principal balance of approximately $750 million as at petition date. After the date of the CTA, the Debtors issued six additional series of indebtedness in four separate transactions: (a) Series 3 and Series 4 Senior Notes, issued October 1, 1996, in the aggregate principal amount of $350 million; (b) Series 5 Senior Notes, issued September 26, 1997, in the aggregate principal amount of approximately $133 million ($200 million in Canadian dollars converted to U.S. dollars); (c) Series 6 and Series 7 Senior Notes, issued May 28, 1998, in the aggregate principal amount of $450 million; and (d) Pass-Through Asset Trust Certificates, issued September 30, 1997, in the aggregate principal amount of $300 million. The records of the Collateral Trustee that were provided to the Debtors, however, do not contain Additional Secured Indebtedness Registration Statements for (i) the Series 6 Senior Notes, (ii) the Series 7 Senior Notes and (iii) the PATS. Moreover, the Additional Secured Indebtedness Registration Statement for the Series 3 Senior Notes and the Series 4 Senior Notes indicates a current outstanding principal balance for such series of zero. Furthermore, the proofs of claim filed by the Collateral Trustee in these cases do not refer to the Series 6 Senior Notes, the Series 7 Senior Notes or the PATS. As a result, the Debtors say, there is uncertainty as to whether these series of indebtedness are entitled to the benefits of the Collateral Trust Agreement. The Debtors tell the Court they have interviewed informally a variety of the parties involved in drafting the Collateral Trust Agreement and the issuance of each series of Notes. However, the Collateral Trustee has refused to consent to a similar informal interview despite repeated requests. To facilitate analysis of the status of the Series of Notes concerned, and to make appropriate determinations regarding classifications of claims for purposes of preparing a plan of reorganization, the Debtors ask the Court to order the Collateral Trustee to produce to the Debtors, within seven days after the entry of the court order, all document or other tangible thins that relate to: * the designated process or procedures and the procedures actually followed for formalizing and registering indebtedness issued by the Debtors subsequent to the Collateral Trust Agreement; * the Additional Secured Indebtedness Registration Statements for the Series of Notes concerned; and * the Secured Indebtedness Register or to the procedures followed by the Collateral Trustee in keeping other registers of indebtedness. The Debtors also request that the Court order the representative or representatives of the Collateral Trustee to appear for a Rule 2004 examination at a mutually convenient time and place after the Debtors have had an opportunity to review the documents produced. (Loewen Bankruptcy News Issue 24; Bankruptcy Creditors' Service Inc.) MKR HOLDINGS: Delay in Filing Annual Financial Report ----------------------------------------------------- MKR Holdings was unable to complete its filing of the company's annual financial report for the year ended March 31, 2000 on time. Pursuant to the company's joint Chapter 11 plan of reorganization, which was confirmed on October 27, 2000 by order of the United States Bankruptcy Court for the District of Delaware in the Southern District of New York, the company transferred all of its assets (including the equity securities of its subsidiaries) to Marker International GmbH, a GmbH organized under the laws of Switzerland, in return for a 15% interest in Marker International. As an owner of 15% of Marker International, the company must report a proportionate share of Marker International's financial information in its annual report. The company's management has met with considerable delay in obtaining and compiling the necessary information of Marker International. In accordance with the Securities Exchange Act of 1934, MKR Holdings will file its financial report no later than July 17, 2000. The company reported a net loss of $48.0 million for the year ended March 31, 1999. As a result of the sale of all of the company's assets, the company currently anticipates that it will report net income of approximately $28.1 million for the year ended March 31, 2000. PAFCO GENERAL: S&P Assigns Ratings ---------------------------------- Standard & Poor's assigned its triple-'Cpi' financial strength rating to Pafco General Insurance Co. The rating action reflects the company's weak capital ratio, a 63.4% drop in surplus in 1999, poor underwriting results, and weak liquidity. This stock company mainly writes private passenger automobile insurance with a specialization in nonstandard auto, and its products are distributed primarily through independent general agents. Its major states of operation -- Indiana, Colorado, Nevada, Kentucky, and Iowa -- account for more than 80% of its business. The company, which is based in Indianapolis, Indiana and licensed in Colorado, Indiana, Iowa, Kentucky, Missouri, Nebraska, Nevada, Oklahoma, and South Dakota, began business in 1987. Major Rating Factors: -- The company's capital ratios, both on an NAIC risk-based basis and as measured by Standard & Poor's model, are weak. -- The company has a weak liquidity ratio of 67.2% and high leverage, as measured by premiums and liabilities to surplus, of 26.2 times. -- The company's 63.4% drop in surplus (by $10.3 million), in the context of the current operating ratio of 120.8%, is also a concern. The decline in surplus was caused primarily by a loss of $12.8 million in net income, offset by a $3.0 million net remittance from the company's home office. -- The company's net income fell by $9.5 million in 1999, caused primarily by a $12.2 million decline in net underwriting income, offset by a $3.1 million credit in federal income tax incurred. -- The company's five-year average return on revenue of negative 10.7% is poor and combines with volatile earnings (return on assets varying from negative 18.0% to positive 9.3% in the last five years), to further limit the rating. -- The company is somewhat geographically diversified. At year- end 1999, 25.6% of net premiums written were in Indiana. Although the company (NAIC: 29572) is a member of Symons International Group Inc. (Nasdaq: SIGC), a mid-size insurance group, the rating does not include additional credit for implied group support from its ultimate parent, Goran Capital Inc. of Toronto, Canada (Nasdaq: GNCNF). Other group members include Superior Insurance Co., Superior Guaranty Insurance Co., Superior American Insurance Co., and IGF Insurance Co. PATHMARK STORES: Receives Bondholder Approval; Files Prepack Plan ----------------------------------------------------------------- Pathmark Stores, Inc., announced that over 99% of the dollar amount of bonds voted have agreed to accept its proposed prepackaged plan of reorganization (the "Plan"). Accordingly, as planned, the Company has filed a petition for relief under Chapter 11 of the Bankruptcy Code seeking to implement the Plan in the U.S. Bankruptcy Court for the District of Delaware. The Company said that it expects to complete the reorganization proceeding in 45 to 75 days. Under the Plan, trade creditors will not be impaired and will continue to be paid in the ordinary course of business. In addition, there will be no impact on Pathmark's employees or customers, as no stores will be closed or sold and no layoffs will be implemented. As previously announced, the agreement provides that upon consummation of Pathmark's reorganization, current holders of the Company's bond indebtedness will receive 100% of the common stock of the Company and warrants to purchase additional shares of common stock. The ownership percentage excludes shares issuable upon the exercise of options granted in connection with the Company's long term management incentive plan. Jim Donald, Chairman, President and Chief Executive Officer of Pathmark Stores, Inc., said, "The strong support of our bondholders for our prepackaged plan demonstrates their belief that Pathmark's operations are healthy, valuable and have great potential. With nearly$1 billion less debt, the newly reorganized Pathmark, trading as a public company, will be able to invest increased amounts in our business, enabling us to renovate and open new stores and compete more effectively." In support of the Plan, Pathmark has entered into an agreement with The Chase Manhattan Bank for a $75 million debtor-in- possession ("DIP") financing facility. Additionally, as previously announced, Chase has committed to provide $600 million of Exit Financing. The DIP financing, which is subject to Court approval, will enable Pathmark to continue normal operations during the restructuring proceedings. The Exit Financing will be used to repay Pathmark's existing credit facilities in full and provide approximately $200 million of liquidity for post- reorganization operations. Pathmark Stores, Inc., is a regional supermarket company currently operating 136 supermarkets primarily in the New York - New Jersey and Philadelphia metropolitan areas. PATHMARK STORES: Case Summary and 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Pathmark Stores, Inc. 200 Milik Street Carteret, NJ 07008 Type of Business: Regional supermarket company currently operating 136 supermarkets in New Jersey, New York, Pennsylvania and Delaware. Chapter 11 Petition Date: July 12, 2000 Court: District of Delaware Bankruptcy Case No.: 00-02963 Debtor's Counsel: Laura Davis Jones Pachulski, Stang, Ziehl, Young and Jones, PC 919 North Market Street, 16th Floor PO Box 8705 Wilmington, DE 19899-8705 Tel:(302) 652-4100 Total Assets: $ 842,379,000 Total Debts: $ 2,005,422,000 20 Largest Unsecured Creditors U.S. Trust Company of NY 114 West 47th St New York, NY 10036 Tel:(212) 852-1663 Fax:(212) 852-1626 James Logan Bonds $ 472,453,937 Bank of NY 101 Barclay St New York, NY 10286 Tel:(212) 815-5086 Fax:(212) 815-5915 Jack Stevenson Bonds $ 241,200,738 Wilmington Trust Co. Rodney Square North Wilmington, DE 19890 Tel:(302) 651-1428 Fax:(302) 651-8882 Mary St. Amand Bonds $ 211,567,339 Wilmington Trust Co. Rodney Square North Wilmington, DE 19890 Tel:(302) 651-1428 Fax:(302) 651-8882 Mary St. Amand Bonds $ 102,307,563 Amerisource 400 Grove Road Thorofare, NJ 08086 Tel:(800) 562-2526 Fax:(609) 384-2156 Anthony Capone Trade $ 6,836,000 HSBO Bank USA 140 Broadway New York, NY 10005 Tel:(212) 658-1792 Fax:(212) 658-6425 Industrial John Mazzarella Revenue Bonds $ 5,000,000 HSBO Bank USA 140 Broadway New York, NY 10005 Tel:(212) 658-1792 Fax:(212) 658-6425 Industrial John Mazzarella Revenue Bonds $ 3,000,000 Pepsi Hasbrouk 1100 Reynolds Blvd Winston-Salem, NC 27102 Tel:(336) 896-5577 M. Bevilacqua Trade $ 1,996,000 Tuscan Dairy Farms, Inc. 750 Union Ave. Union, NJ 07083 Tel:(908) 851-5763 Santo Sacca Trade $ 1,759,000 Coca Cola of NY 59-02 Borden Ave. Maspeth, NY 11378 Tel:(718) 326-3636 ext 227 Joseph Borrow Trade $ 1,703,000 Pepsi Cola Bottling Co. 1100 Reynolds Blvd. Winstom-Salem, NC 27102 Tel:(336) 89605577 M. Bevilacqua Trade $ 1,355,000 Frito Lay Inc. 7701 Legacy Drive MD-2A-281 Plano, TX 75024-4099 Tel:(972) 334-5818 Bill Nictakis Trade $ 1,219,000 IBM 200 Milik Street Carteret, NJ 07008 Tel:(732) 499-3000 ext 190-4325 Bob Lilenthal Trade $ 1,200,000 Bestfoods Baking Co. 930 N. Riverview Drive Totowa, NJ 7512 Tel:(973) 785-7684 Sandy Labenda Trade $ 1,059,000 PSE&G PO Box 14105 New Brunswick, NJ 08906 Tel:(800) 644-4761 ext 2038 Mary Anderson Trade $ 1,080,000 Wilmington Trust Company Rodney Square North Wilmington, DE 19890 Tel:(302) 651-1428 Fax:(302) 651-8882 Mary St. Amand Guaranty $ 1,045,008 Konica Photo Imaging 725 Darlington Avenue Mahwah, NJ 07430 Tel:(800) 285-6422 Michael Storch Trade $ 1,005,000 Proctor & Gamble Distributing Company 630 Main St Cincinnati, OH 45202 Tel:(513) 945-8045 R.M. (Dick) McCarthy Trade $ 899,000 Forget Me Not Cards Division 10500 American Road Cleveland, OH 44144-2398 Tel:(216) 252-7300 Connie Holland Trade $ 893,000 Valley Media, Inc. 1280 Santa Anita Court Woodland, CA 95776 Tel:(530) 669-5164 Richard Andrade Trade $ 860,000 PIXELON CORP: More Troubles Arise --------------------------------- Officials and backers of Pixelon Corp., the company which filed for Chapter 11 bankruptcy protection after ousting its top managers, have been sued by former investors for allegedly withholding critical information about the troubled San Juan Capistrano start-up to raise money through a private placement, according to Los Angeles Times on July 8, 2000. As reported earlier, last June 30, two Kentucky men who bought 150,000 shares in Pixelon's private offering also filed a lawsuit against the company for omitting or misstating information important to their decision to invest. The lawsuit asked for $800,000 in damages and has sought for a class-action status. PRODUCTION RESOURCE: Ratings Lowered (Sr Subordinated To Ca) ------------------------------------------------------------ Moody's Investors Service lowered the rating of Production Resource Group, L.L.C.'s (PRG) $100 million of 11.5% senior subordinated notes, due 2008, to Ca from Caa1 and lowered the ratings of its Senior Unsecured Issuer Rating to Caa3 from B3. PRG's bank credit facility ratings have been lowered to B3 from B1 and the senior implied rating has been lowered to Caa2 from B2. Following these rating actions, PRG's debt securities' ratings will be withdrawn, given the company is no longer reporting financial information. The downgrades reflect Moody's significant concerns regarding PRG's lack of liquidity. PRG is not in compliance with its bank agreement and as a result all long-term bank debt has been reclassified as short-term. In addition, PRG is not likely to have sufficient cash flow to cover its near term interest expense without a capital infusion. Therefore, the ratings also reflect the high risk of default as well as the potential impairment to the value of the senior subordinated notes. As of 3/31/00 the company's debt was substantial at $184 million. Cash flow is insufficient to fund both the company's capital expenditures and interest expense. Debt-to-EBITDA was 6.3 times at year end and had risen to 7 times by March 31, 2000. The company's new finance team is implementing measures to reduce expenditures and improve liquidity. Management believes that the industry weakness that has impacted profitability may have reached its nadir. However, Moody's considers the company's current valuation to be materially less than the company's outstanding obligations. Production Resource Group, L.L.C., headquartered in New Windsor, NY, is an integrator, fabricator and supplier of products and services to the live entertainment, corporate event and themed entertainment markets. PROVIDENT AMERICAN: S&P Lowers Ratings -------------------------------------- Standard & Poor's lowered its financial strength rating on Provident American Insurance Co. to triple 'Cpi' from single 'Bpi'. This rating action reflects continuing poor profitability and a deteriorating capital base. This stock company's core line of business is individual accident and health insurance, and it markets its products primarily through agents. Based in Dallas, Texas, and licensed in ten states, the principal states in which it operates are Texas and Louisiana. It commenced operations in 1939. The company is wholly owned by Sonic Financial Inc., of which the controlling interest (86.9%) is held by O. Bruton Smith. Major Rating Factors: -- Profitability has been poor, with a five-year average return on assets of negative 15.3%, and an earnings adequacy ratio, as measured by Standard & Poor's model, of negative 495%. The company has a trend of continued operating losses, earnings volatility, and narrow operating scope. -- Capitalization is very weak, as indicated by a capital adequacy ratio of 21.4%. Total adjusted capital was $1.7 million at year-end 1999 versus $4.5 million in 1998, a decrease of 62.4%. -- The company's risk-asset position is 314.2% of capital. The company (NAIC: 68179) is rated on stand-alone characteristics. RELIANT BUILDING PRODUCTS: Files Voluntary Chapter 11 ----------------------------------------------------- Reliant Building Products, Inc. together with its 12 subsidiaries and affiliates announced that on July 11, 2000 it filed a voluntary petition for Chapter 11 relief in the United States Bankruptcy Court for Northern District of Texas, Dallas Division. The Honorable Judge Barbara Houser has been assigned to hear the bankruptcy proceedings. The consolidated bankruptcy case number is 00-34446-BJH-11. Voluntary petitions and requests for joint administration were filed on behalf of 12 subsidiaries and affiliates of the Company. The Company also announced that concurrent with the Chapter 11 filing, it had closed a $15 million debtor-in-possession (DIP) line of credit with its lenders of which $10 million are new funds. The Company facilities will remain open and the Company continues to operate as a debtor in possession of its assets. The availability of Debtor-In-Possession financing will allow the Company to restore its supplier credit lines and complete the seasonal ramp-up for this building season and restore operational normalcy. In its initial ruling on July 11, 2000, the Court approved all of Reliant's requests for post petition financing and other similar first day order requests. Reliant Building Products Inc., is one of the nation's largest manufacturers of aluminum and vinyl, or non-wood, framed windows. The Company's products are marketed under well-recognized brand names, including ALENCO, BUILDER'S VIEW, CARE-FREE, and ALPINE. The Company has a national manufacturing presence through its acquisition of CareFree Window Group ("Care-Free") on January 28, 1998. Significant delays in completing the recently completed May 4, 2000 recapitalization resulted in serious material shortages as the company headed into the full ramp up of this year's construction season. The strong demands for Company products, coupled with inadequate liquidity created a severe back order and backlog situation. This has contributed to serious operating inefficiencies, culminating in today's announcement. For more information you may call Larry Browder at 972-919-1309 or Reliant's counsel: Strasburger & Price, LLP 901 Main Street Dallas, TX 75202 Lead attorney: Jeffrey Fine 214-651-4583 Email:finej@strasburger.com Fax:214-659-4074 SAFETY-KLEEN: Applies To Employ Arnold as Environmental Counsel --------------------------------------------------------------- The Debtors formally retained Arnold & Porter pursuant to an Engagement Letter dated as of April 5, 2000, for: (a) advice regarding the obligations of SKC under federal and state environmental laws and regulations, including the financial assurance requirements of applicable hazardous waste regulations; (b) advice concerning permit compliance; and (c) analysis of exposure to liability for contamination of soil or groundwater at specific sites. By this Application, the Debtors ask Judge Walsh for permission to continue Arnold & Porter's retention as their Special Environmental Counsel during these chapter 11 proceeding. Arnold & Porter's continued retention will be invaluable, Safety-Kleen says, as the Debtors seek to reorganize their operations and financial affairs. The A&P members and counsel presently expected to work on this matter, and their hourly rates, are: Michael Cerrard $485 Thomas H. Milch $465 Jeffrey S. Bromme $380 Elliot Zenick $210 Arnold & Porter received a $155,000 retainer prior to the Petition Date. Mr. Milch, a member of Arnold & Porter working in A&P's Washington, D.C., office, affirms that A&P represents no interest adverse to any of the Debtors' estates and employment is permissible under 11 U.S.C. Sec. 327(e) notwithstanding A&P's representation of scores of the Debtors' creditors in matters unrelated to Safety-Kleen. (Safety-Kleen Bankruptcy News - Issue 4; Bankruptcy Creditors' Service Inc.) SAFETY-KLEEN: Creditors Object to Financing Request --------------------------------------------------- Creditors of Safety-Kleen Corp. have filed a complaint, objecting to the company's request for special bankruptcy financing. The creditors fear the Columbia waste management firm will use the financing deal to benefit its chief lender, Texas-based Toronto Dominion Inc., according to a petition filed Wednesday in U.S. Bankruptcy Court in Delaware. Toronto Dominion was the lead bank for Safety-Kleen's pre- bankruptcy bank loans, which total more than $1.6 billion, and is listed as the company's largest unsecured creditor. Unsecured creditors do not have their loans backed by collateral. Safety-Kleen is seeking a $100 million "debtor-in-possession" financing agreement, which would allow them to borrow money despite their bankruptcy status. U.S. Bankruptcy Judge Peter Walsh approved $40 million in debtor-in-possession financing last month, but the creditors claim Safety-Kleen doesn't plan to use that money for at least three months. Safety-Kleen filed for Chapter 11 protection from its creditors June 9. In a June 13 hearing, David Kurtz, an attorney for Safety-Kleen, said the company has remained profitable despite suffering a series of severe financial problems. Safety-Kleen is under investigation for accounting irregularities. A hearing on the creditors' petition is scheduled for July 19. Safety-Kleen spokesman John Kyte said the company had no immediate response to the objection. SCAFFOLD CONSTRUCTION: Files Second Amended and Restated Plan ------------------------------------------------------------- Scaffold Connection Corporation continues to operate under the Companies Creditor Arrangement Act (the "CCAA") and reports that it has filed a Second Amended and Restated Plan of Arrangement and Compromise (the "Plan") with the Court of Queen's Bench of Alberta (the "Court"). The Court has approved a date of August 14, 2000 for the meeting of Unsecured Creditors and August 15, 2000 for the Secured Creditors meeting. The Annual and Special Meeting of Shareholders has been set for August 18, 2000. The Plan will be voted on at each meeting. In conjunction with these meetings, the Company will be distributing information circulars, the Plan, and the required proxy and election forms. These documents are expected to be mailed to Creditors and Shareholders by July 14, 2000. The Court has also extended the Stay of Proceedings granted under the CCAA to September 30, 2000. The Company believes that approval of the Plan of Arrangement and Compromise by its creditors and shareholders will provide the Company with the working capital and capital resources necessary to carry on operations. In addition, the operational improvements being implemented are expected to result in a stronger Company, well positioned for success in this buoyant economy. The Company has applied to the applicable securities regulators to have the cease trade orders lifted, but to date no decision has been made. SERVICE MERCHANDISE: Authority to Sublet Portion of Stores ---------------------------------------------------------- The Tennessean reports on July 11, 2000 that Service Merchandise Co. Inc. was granted authority to sublease a portion of 19 of its stores to the parent company of T.J. Maxx, TJX Cos, which plans to put home-furnishings stores in most of the spaces. As part of its bankruptcy reorganization, Service Merchandise is shrinking its stores to roughly half their size and subleasing the remaining space. The company believes the TJX agreement will squeeze more value from its real-estate assets roughly $ 4.5 million in rental revenue per year initially while also attracting additional customer traffic. TJX would pay taxes, insurance and other costs. The company previously received court approval for eight of the 19 store agreements with TJX, but landlords for the remaining 11 stores filed objections to the plan. Chief Judge George C. Paine II approved the subleasing plan but denied the company's request for landlords to be bound by the TJX subleases if Service Merchandise ended its primary tenancy. Rowland said Paine's ruling strikes a balance between the company and the landlords by recognizing the landlords' property rights while also allowing Service Merchandise to go forward with its plan. The decision forces TJX to decide whether it wants to negotiate with individual landlords and move forward with its plans. "We don't know how this decision is going to affect things," said Edwin M. Walker, local counsel for TJX. "We're still trying to understand it ourselves." TJX is interested in pursuing subleases with the stores in question, Walker said. But it is too early to determine the outcomes because each lease will need to be inspected and negotiated, Walker said. SUPERIOR INSURANCE: S&P Assigns Ratings --------------------------------------- Standard & Poor's assigned its triple-'Cpi' financial strength ratings to Superior Insurance Co. and its wholly owned and reinsured subsidiaries, Superior Guaranty Insurance Co. and Superior American Insurance Co. The rating action reflects the parent's high leverage, weak and volatile earnings in an environment of low liquidity, and high one-year reserve loss development. This stock company mainly writes personal and commercial auto insurance, with a specialization in nonstandard automobile, and its products are distributed primarily through independent general agents. The company, which is based in Atlanta (domiciled in Florida), licensed in 15 states, and which derives more than 80% of its business from its major states of operations -- Florida, Georgia, Virginia and California -- began business in 1952. Major Rating Factors: -- Capitalization remained less than good, as indicated by a Standard & Poor's capital adequacy ratio of 81.0% at year-end 1999. The $23.4 million (or 40.6%) decline in surplus in 1999 comprised a loss of $19.2 million in net income, a $3.2 million in change in nonadmitted assets, and $0.8 million in net unrealized capital loss. -- The company was more leveraged than similar companies with respect to its net premiums written plus liabilities to surplus, at 9.7 times at year-end 1999. -- The company's five-year average return on revenue of negative 4.5% is considered weak. Further, the company's returns have been volatile with, for example, return on assets ranging from negative 10.6% to positive 3.5% in the last five years. -- The company's liquidity ratio of 65.1% for 1999 and one- year loss development of 23.4%, in the context of both high leverage and volatile earnings, are also viewed as limiting factors. -- The company is somewhat geographically diversified, with just 23.8% of net premiums written in its lead state of Florida in 1999. Although the companies are members of Symons International Group Inc. (Nasdaq:SIGC), a mid-size insurance group, the rating does not include additional credit for implied group support, either from the group or from its ultimate parent, Goran Capital Inc. of Toronto (Nasdaq:GNCNF), because of continuing debt servicing problems at the parent. Other group members include IGF Insurance Co. and Pafco General Insurance Co. GGS Management Inc., an affiliate, receives a monthly management fee for managing the operations of the company. 'pi' ratings, denoted with a 'pi' subscript, are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. 'pi' ratings are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings. Ratings with a 'pi' subscript generally are not modified with 'plus' or 'minus' designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. TITAN ENERGY: Energy America - Surprise Winning Bidder ------------------------------------------------------ Natural gas marketer Energy America was the surprise winning bidder Wednesday for 50,000 accounts of a competitor that declared Chapter 11 bankruptcy last week. By agreeing to pay about $ 2.2 million for the accounts of Titan Energy of Georgia, the Connecticut-based marketer outbid Shell Energy at an auction in U.S. Bankruptcy Court. The deal was being completed Wednesday night, with Shell Energy standing by with a backup bid in the event of problems in closing the transaction. Titan's customer list almost doubles the number of Energy America's Georgia accounts and makes it the No. 4 marketer in the state's newly deregulated natural gas market. Shell, the No. 3 marketer, earlier offered $ 35 for each of Titan's accounts, or $ 1.75 million, based on estimates of 50,000 Titan customers. Many participants in the process were surprised when Energy America attorneys appeared in the courtroom Wednesday prepared to bid and close the deal quickly. Shell attorneys bid as high as $ 43 for each account before withdrawing. Energy America was then declared the winning bidder with a purchase offer of $ 44 per account, or $ 2.2 million. Energy America also agreed to buy Titan's gas inventories for $ 12,000 and pay Atlanta Gas Light Co. $ 350,000 to switch the accounts. "We are committed to the Georgia market for the long term," said Tom Shales, Energy America senior vice president. "We acquired the customers at a good price." Energy America is currently involved in a "slamming" case with the Georgia Public Service Commission over allegations that its sales representatives switched customers to its rolls without proper authorization. The commission is expected next week to approve a settlement under which the company would provide more than $ 75,000 worth of credits next winter to low-income and elderly customers and pay $ 25,000 to the commission. Titan has said it was forced to seek Chapter 11 protection from creditors by a dispute with its wholesale gas supplier. According to The Atlanta Journal on July 8, 2000, Titan attorney Frank Nason announced that Shell Energy was prepared to pay $1.8 million for the company's customer accounts for, including $35 for each customer plus transfer fees. Last week U.S. Bankruptcy Judge W.H. Drake Jr. gave Georgia-based Titan Energy authority to continue its operations while negotiating with Shell, calling it a "Band-Aid approach" that will allow the company to maintain its customer base and satisfy major creditors. TOYSMART: Senators Bring Legislation To Bar Sale of Customer List ----------------------------------------------------------------- In response to the recent bankruptcy case of Toysmart.com, a former online toy retailer that put all its assets, including its customer records such as names, addresses and credit card numbers, up for sale despite a privacy policy that assured customers the information would remain private, Sens. Patrick Leahy (D-Vt.) and Robert Torricelli (D-N.J.) introduced legislation yesterday that would bar the sale of personal information kept by a defunct company if the sale would have violated privacy policies in effect when the company was in business, according to the Associated Press. Rep. Spencer Bachus (R-Ala.) has already announced plans to introduce a similar bill in the House. "It is wrong to use our nation's bankruptcy laws as an excuse to violate a customer's personal privacy," the Senators said in a letter to colleagues. "Customers have a right to expect a firm to adhere to its privacy policies, whether it is making a profit or has filed for bankruptcy." The legislators say they will try to include the bill in a larger bankruptcy reform package. BOND PRICING FOR WEEK OF JULY 10, 2000 ====================================== DLS Capital Partners Inc. Following are indicated prices for selected issues: Acme Metal 10 7/8 '07 13 - 15(f) Advantica 11 1/4 '08 66 - 68 Asia Pulp & Paper 11 3/4 '05 67 - 69 Conseco 9 '06 66 - 68 E & S Holdings 10 3/8 '06 35 - 37 Fruit of the Loom 6 1/2 '03 49 - 51(f) Genesis Health 9 3/4 '05 11 - 13(f) Geneva Steel 11 1/8 '01 17 - 18(f) Globalstar 11 1/4 '04 31 - 32 GST Telecom 13 1/4 '07 53 - 55(f) Iridium 14 '05 4 - 5(f) Loewen 7.20 '03 34 - 36(f) Paging Network 10 1/8 '07 44 - 46(f) Pathmark 11 5/8 '02 31 - 33(f) Revlon 8 5/8 '08 50 - 52 Service Merchandise 9 '04 7 - 9(f) Trump Atlantic 11 1/4 '06 70 - 72 TWA 11 3/8 '06 36 - 38 ********* 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. 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