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/raid1/www/Hosts/bankrupt/TCR_Public/000731.MBXT R O U B L E D C O M P A N Y R E P O R T E R Monday, July 31, 2000, Vol. 4, No. 148 Headlines AMERICA'S VOICE: Letter of Intent To Acquire Cable Channel AMERISERVE: Equipment Division Sale Approved AMERISERVE: DIP Financing Extended CERPLEX, INC.: Case Summary and 20 Largest Unsecured Creditors CERPLEX INC: Files for Chapter 11 Bankruptcy CERPLEX INC: Trouble Paying Its Bills COMPLETE MANAGEMENT: To Sell Collection Rights CONSECO: Announces Restructuring Program; Second Quarter Results DEUTSCHE HYPOTHEKENBANK: Moody's Downgrades Ratings DRKOOP.COM: Class Action Update EATON'S: Former Employees Payout Moved To 6 Months GLOBAL TISSUE: Case Summary and 20 Largest Unsecured Creditors GORGES QUICK: Moody's Investors Service Downgrades Notes GRAND UNION: Delisted From Nasdaq HARNISCHFEGER: Beloit Taps Merrill Lynch To Sell APP Note HARNISCHFEGER: Motion To Sell BWRC's Interests in Beloit Italy INTEGRATED HEALTH: Announces New Management KAUFMAN FOOTWEAR: Receivership Ends for Footwear LEE COUNTY HOSPITAL: Files To Reorganize Under Chapter 11 LOGAN GENERAL: Lays Off 7% of Workers LOGAN GENERAL: Names New CEO MARINER: Oakwood To Lift Stay to Terminate Management Contracts NORTHLAND CRANBERRIES: Renegotiated Loan Default Agreements PLATINUM ENTERTAINMENT: Case Summary and 20 Largest Creditors TERRA INDUSTRIES: Moody's Lowers Senior Notes From Caa1 to Caa2 VENCOR INC: Court Approves Extension of Exclusivity WARNACO GROUP: May Possibly File For Bankruptcy Protection ********* AMERICA'S VOICE: Letter of Intent To Acquire Cable Channel ---------------------------------------------------------- Two little-known companies have signed a letter of intent to acquire bankrupt cable channel America's Voice. The political-talk network plans to merge with Minneapolis-based Wild Frontier Network Inc. and Deerfield Beach, Fla.-based Carleigh Films Inc., according to a copy of the agreement filed in bankruptcy court and obtained last week. America's Voice also plans to convert its analog channel into three or four digital channels, including one new service that chief financial officer Rosemary Swanson said will be "something that's along the Discovery Channel model." The network will also look to lease space for digital channels to start-up networks, and to offer both West Coast and East Coast feeds for America's Voice, Swanson said. But many issues remain unresolved, including how the sale will affect a five-year deal America's Voice signed in March to allow beleaguered 5th Avenue Channel Corp. to program 12 hours of its schedule with its own programming. The US. Bankruptcy Court in Washington, D.C., must also sign off on the deal. Wild Frontier and Carleigh may spend up to $ 2 million in cash for America's Voice, which counts 14 million subscribers, including part-time subscribers. Under the terms of the deal, Wild Frontier plans to acquire Carleigh and simultaneously merge WFN/CFI into America's Voice. WFN/CFI agreed to have $ 2 million in cash available at the closing, and the combined company will commit $ 1.3 million of the cash to pay off some of America's Voice creditors. The network reportedly has $ 29 million in debt. WFN/CFI also agreed to lend America's Voice between $ 200,000 and $ 400,000. America's Voice recently submitted the letter of intent to the bankruptcy court. It plans to submit a reorganization plan to the court within the next 10 days, David Mark, a bankruptcy attorney at Roseman & Colin, which represents America's Voice, said last Thursday. America's Voice executives offered few details about the backgrounds of their potential owners. Chairman Robert Sutton said Carleigh chairman Irving Brand has "owned a lot of film companies. He likes to take companies, put them together and make a good business out of them." America's Voice has struggled to gain cable carriage. Sutton said the network counts 14 million subscribers, including part-time carriage and over-the-air distribution. He added that it only has about 1 million cable subscribers on systems owned by AT&T Broadband, MediaOne Group Inc. and Comcast Corp. Most of its distribution comes from carriage on EchoStar Communications Corp., C-band homes and PrimeStar, which is now owned by DirecTV Inc. America's Voice has cut its staff from 90 employees to 52 since the bankruptcy proceedings began, Sutton said. AMERISERVE: Equipment Division Sale Approved -------------------------------------------- AmeriServe Food Distribution, Inc. announced that the United States Bankruptcy Court in Wilmington, Del., has approved the sale of AmeriServe's Equipment Division assets, subject to the entry of a Sale Order by the Court, to North Texas Opportunity Fund LP, for $26 million. North Texas was the successful bidder at the auction conducted by AmeriServe. The approved sale is scheduled to close on or before Aug. 15, 2000. AmeriServe, headquartered in Addison, Texas, a suburb of Dallas, is one of the nation's largest distributors specializing in chain restaurants, serving leading quick service systems such as KFC, Long John Silver's, Pizza Hut and Taco Bell. AMERISERVE: DIP Financing Extended ---------------------------------- AmeriServe Food Distribution, Inc. and their DIP lenders have agreed on an extension of the maturity date of the DIP financing facility to and including September 28, 2000. AmeriServe, headquartered in Addison, Texas, a suburb of Dallas, is one of the nation's largest distributors specializing in chain restaurants, serving leading quick service systems such as KFC, Long John Silver's, Pizza Hut and Taco Bell. CERPLEX, INC.: Case Summary and 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Cerplex, Inc. 111 Pacifica Avenue, Suite 300 Irvine, CA 92618-7428 Type of Business: The debtor provides repair and logistics services and parts sourcing and service management for manufacturers of computer, communications and electronic office equipment Chapter 11 Petition Date: July 27, 2000 Court: District of Delaware Bankruptcy Case No.: 00-03172 Judge: Mary F. Welrath Debtor's Counsel: Norman L. Pernick Saul, Ewing, Remick & Saul LLP 222 Delaware Avenue, P.O. Box 1266 Wilmington, DE 19899 Tel.: (302) 421-6824 Total Assets: $ 10,490,461 Total Debts: $ 40,594,892 20 Largest Unsecured Creditors LG Electronics 201 James Record Road Building #3 Huntsville, AL 35806 Tel.: (256) 772-4503 Fax : (256) 772-8987 Trade $ 459,643 Merrimack Valley Industrial Association 145 Rosemary Street-Entry E Needham, MA 02194 Tel.: (781) 449-9000 Fax : (781) 449-9050 Trade $ 375,965 Purcell Staffing Inc. Trade $ 195,760 Video Display Trade $ 146,290 Dell Financial Services Trade $ 107,887 Legacy Partners Trade $ 86,881 Thunderbird Enterprises Trade $ 80,380 SysTech Trade $ 78,122 Whittington Realty Partners Trade $ 77,704 Ingram Micro Trade $ 74,528 Strategic Staffing Trade $ 71,098 Priority Computer Parts Trade $ 69,491 Entegee/ATSI Trade $ 62,552 Micro Product Distributors Trade $ 61,529 Innovative Computer & Networking Trade $ 56,514 Seacoast Electronics Trade $ 54,370 Gates Arrow Trade $ 52,244 North American Tech Trade $ 43,789 Advanced Computer Services Trade $ 42,707 Micro Tech Consultants, Inc. Trade $ 40,357 CERPLEX INC: Files for Chapter 11 Bankruptcy -------------------------------------------- The Cerplex Group, Inc. (OTC Bulletin Board: CPLX) announced that Cerplex, Inc., a wholly-owned subsidiary, has filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. This filing follows the previously announced consent by The Cerplex Group, Inc., to an involuntary bankruptcy petition filed against it on June 20, 2000 and Cerplex's agreement to sell selected elements of its repair business to Teleplan Holdings USA, a subsidiary of Teleplan International, NV. (PRNewswire 7/27) CERPLEX INC: Trouble Paying Its Bills ------------------------------------- According to a report in the Los Angeles Times on July 28, 2000, financially ailing Cerplex Group Inc. filed for bankruptcy protection from its creditors to speed the sale of four units after the Tustin provider of computer repair services failed to make payments due on debt securities. In documents filed Thursday in U.S. Bankruptcy Court in Wilmington, Del., Cerplex listed $ 10.4 million in assets and $ 40.5 million in debts. Last week, the company said a U.S. unit of Dutch rival Teleplan International NV would buy four Cerplex units in Kentucky, Massachusetts and California. Included in the sale would be the technical support call center in Irvine. Cerplex would retain its headquarters, a business-to- business online parts operation in Irvine and a repair facility in Enfield, England. As a condition of the transaction, Cerplex said, it voluntarily filed a bankruptcy petition to reorganize debts under Chapter 11 of the federal bankruptcy code. The filing was a response to an involuntary petition filed last month by some holders of more than $ 10 million in certain Cerplex debt securities. The company had failed to make a $ 2.2- million payment due on the debt. Last week, the company said it would consent to the involuntary petition. Cerplex officials in May said the company was having trouble paying its bills because of recurring operating losses. Shares of parent company Cerplex Group Inc, which reported $ 93.3 million in 1999 sales, closed unchanged Thursday at 7 cents a share in over-the-counter trading. COMPLETE MANAGEMENT: To Sell Collection Rights ---------------------------------------------- On August 9, 2000, at 9:30 a.m., in Courtroom 523 of the United States Bankruptcy Court for the Southern District of New York, before the Honorable Jeffry H. Gallet, United States Bankruptcy Judge, Complete Management, Inc., a chapter 11 debtor in possession ("CMI"), shall conduct an auction sale (the "Sale Hearing") of its right, title and interest (the "Collection Rights") in the collection of a portfolio of medical accounts receivable (the "Receivables"), as more fully described in an agreement, dated June 9, 2000 (the "Collection Agreement"), by and among CMI and: (i) the Creditors' Committee in CMI's chapter 11 case (the "Committee"); (ii) Medical Receivables Corp. ("MRC"), a wholly-owned subsidiary of CMI that bought certain Receivables and then pledged them as collateral for a loan; (iii) Medical Management, Inc. ("MMI"), a wholly-owned subsidiary of CMI that has operated magnetic resonance imaging facilities in the New York City area; (iv) DVI Business Credit Corporation ("DVIBC"), which asserts a valid, duly-perfected first lien on the Receivables, based on MRC's pledge of the Receivables as collateral for DVIBC's loan; (v) Greater Metropolitan Neurology Services, P.C., Complete Medical Services, P.C. and Objective Medical Evaluation (collectively, "GMMS"), now-defunct medical practices to which the majority of the Receivables are owed; and (vi) HealthShield Capital Corporation ("HealthShield"), a 63.5%- owned subsidiary of CMI which has proposed (in the Collection Agreement) to undertake the collection of the Receivables, in consideration of which HealthShield will receive certain consideration, as defined in section 3 of the Collection Agreement. As additional consideration, and pursuant to a Reallocation Agreement, HealthShield will also issue to CMI additional shares of stock in HealthShield; CMI and its financial advisors have estimated the value of this additional stock (the "HealthShield Stock") at approximately $1,600,000. Please note that CMI does not own the Receivables, but only a right to collect the Receivables. At the Sale Hearing, CMI will seek to sell its Collection Rights in and to the Receivables to HealthShield in exchange for the HealthShield Stock, subject to higher and better offers. Copies of (i) CMI's application to enter into the Collection Agreement and Reallocation Agreement, (ii) its reply papers in further support of its application (to which both the Collection Agreement and Reallocation Agreement are annexed as exhibits), as well as (iii) the July 21, 2000 order of the Bankruptcy Court, authorizing CMI to put the Collection Rights up for auction at the Sale Hearing, are available electronically by accessing the Bankruptcy Court's website at http://www.nysb.uscourts.gov. Potential bidders interested in making higher and better offers for CMI's Collection Rights should contact CMI's financial advisors, Loeb Partners Corporation, 61 Broadway, New York, New York 10006, (212) 483-7086, attention: Harvey Tepner or Bruce Kaufman, CMI's bankruptcy counsel, Salomon Green & Ostrow, P.C., 485 Madison Avenue, New York, New York 10022, (212) 319-8500, attention: Alec P. Ostrow, Esq., or Gary I. Selinger, Esq., in advance of the August 9 hearing. CONSECO: Announces Restructuring Program; Second Quarter Results ---------------------------------------------------------------- Gary C. Wendt, chairman and chief executive officer of Conseco, Inc. (NYSE:CNC) announced a restructuring plan for the company's Conseco Finance subsidiary as well as a program to sell or run off several non-strategic assets. Separately, the company reported second quarter results indicating that earnings from its two primary business activities -- insurance and finance -- were essentially stable. NEAR-TERM ISSUES BEING CONFRONTED -- Repayment of debt as due, particularly that scheduled for the next 12 months. -- Restoration of credit ratings, particularly the A.M. Best rating, which was decreased to B++ during the second quarter. -- Repositioning Conseco Finance so that it will be a cash generator to, rather than a user from, the parent company. "To manage those three issues efficiently without diminishing shareholder value, three of my former GE associates, Paul Street, Mike Borom and Peter Keenoy, have joined our team of "restoration activists." Their experience in managing similar situations while working together at GE Capital is already being applied with notable progress. ACTIONS UNDERWAY Issue No. 1 -- Meeting our debt obligations. Several non-strategic assets have been identified and are positioned to be sold or run off. They include: -- Assets acquired at the holding company through Conseco Private Capital Group, including the Lawrenceburg riverboat and Tritel. -- A sub-prime auto portfolio which has already resulted in cash proceeds of approximately $150 million. -- Five units of Conseco Finance -- asset-based lending, vendor finance, bankcards, transportation, and park construction, will be sold or closed and run off. -- The bankcard portfolio has already been sold, resulting in additional cash realized of $152 million. -- Additionally, enhanced utilization of assets held by Conseco Finance can produce immediate cash benefits. -- Certain insurance lines which are not operating profitably will, after some additional examination -- and unless they are easily fixable -- be disposed of, thereby releasing capital. These actions have already generated cash sufficient to pre- pay$300 million of principal due on Sept. 1, 2000. When fully realized, these items should be sufficient to manage all principal due this year and well into 2001. The company intends to manage debt payments due from 2000 through 2002 while minimizing any change in our strategic position and/or any loss to future income-generating potential. Management believes this is a realizable goal. While reinsurance of existing blocks of business can provide additional cash (if necessary, for debt repayment), at this time, the company does not believe such reinsurance will be necessary to manage current debt payment obligations. Issue No. 2 -- Restoring our ratings, particularly our "A- level" A.M. Best rating for insurance activities. To restore rating agency confidence in its insurance operations, the company intends to demonstrate its ability to consistently manage holding company debt obligations. Capital adequacy of the combined insurance company is 2.54 times required capital (versus the principal life companies of Equitable (2.37), John Hancock (2.52) and Northwestern Mutual (2.37)). We can state that the insurance company operations are very healthy and should require only stabilization of the parent company's balance sheet to restore the higher rating. However, until the rating can be restored, the company will actively pursue and implement "rented equity" (reinsurance) from other insurance sources. These products are available in many forms, and can be utilized in conjunction with Conseco products so that the Conseco brand name will remain visible and available to the public. The company believes that one form or another of "rented equity" will be announced within the next 30 days. Issue No. 3: Conseco Finance. "For the past several quarters, Conseco Finance has been portrayed as the 'demon' in the Conseco house," Wendt said, adding that several actions are being taken to remove this label: -- The disposition of five business units. -- Better utilization of existing assets so as to increase cash available to the parent. -- Restructuring cost cuts of approximately $155 million per year, $137 million of which are associated with ongoing businesses. The recurring cost savings comes from streamlining the field force in manufactured housing finance (from 48 offices to 33 offices) and home equity (from 158 offices to 127 offices). Conseco Finance management believes that this streamlining of their organization can be done without diminishing their market effectiveness. -- Because of these moves, employment at CFC will decline by approximately 2,000 over the next few months. -- When completed, Conseco Finance will be operating under a new business model, which will enable growth plus the ability to upstream funds to the parent on an ongoing basis. "My hat is off to the associates at Conseco Finance," Wendt said. "They were aware of the issues confronting them when I arrived and had already begun looking at various options that would solve the problem. The combination of disposing of non-strategic business units, streamlining the field force without harming marketing capabilities and increasing the utilization of non-core assets to pay corporate debt are excellent responses and should allow them to enhance their business strengths and provide positive support to the parent in the future." SECOND QUARTER RESULTS: OPERATING ACTIVITIES -- Conseco Insurance pre-tax operating earnings were $154 million, up from $ 148 million in the first quarter of this year and $110 million in the fourth quarter of 1999. -- Conseco Finance reported marginally lower pre-tax operating earnings than in the previous two quarters: $28 million versus approximately $35 million. While 60+-day delinquency has risen, it remains well within manageable levels and is not expected to affect earlier predicted 2000 write-offs. "Revenue and/or receivable generation also remained remarkably good," Wendt said, "given the environment in which Conseco associates have been working over the last two plus quarters." -- Quarter-end managed receivables at Conseco Finance increased by 2.1 percent (to $48.2 billion) over first quarter and up 5.3 percent over year-end 1999. On balance sheet receivables increased by 15 percent over the first quarter and by 49 percent over the end of 1999 as the business transitions itself from "gain-on-sale accounting" to more traditional portfolio method practices. -- Total collected premiums in the insurance and annuity business were up 5 percent versus fourth quarter 1999, but down 1 percent versus 1Q00. Conseco's rating downgrade is affecting premium production, however, thus far the impact has not been serious. "The changes adopted last year for Conseco Finance to move to portfolio method accounting -- while clearly necessary -- make usual comparisons in previous periods very difficult. However, the recent change to the portfolio method will provide a much better reflection of Conseco Finance's position in its marketplace and allow for rapid earnings growth as the 'on-book receivable' portfolio grows." SECOND QUARTER RESULTS: HOLDING COMPANY As expected, the holding company incurred significant special items and charges during the second quarter. These items and charges, which totaled $352.3 million after tax. The total impact of holding company activities during the second quarter including the charges summarized above, corporate interest expense, minority interest, mark to market of the company's investment in Tritel and other corporate income and expense was $432.1 million after tax. Consistent with the announcement regarding the Conseco Finance restructuring, the company is reviewing all of its Finance Company assets, which, management believes, will result in a significant decrease in the capital investment in Conseco Finance. Capital levels remain very strong in the insurance operations. Corporate liquidity, excluding proceeds from recent asset sales, remained stable with cash at the holding company of approximately $460 million at June 30, 2000. The company is in compliance with all debt covenants. "While perhaps appropriate for their time, the fluctuations in GAAP earnings resulting from highly technical accounting issues is something that the company must de-emphasize in the future," Wendt said. "Obviously some non-recurring, extraordinary items will cause accounting effects while the restructuring process takes place. We do not believe that these items will have a significant balance sheet impact other than producing cash to pay back debt." Headquartered in Carmel, Ind., Conseco is one of middle America's leading sources for insurance, investment and lending products. DEUTSCHE HYPOTHEKENBANK: Moody's Downgrades Ratings --------------------------------------------------- Moody's Investors Service has placed under review for possible downgrade the C+ financial strength rating of Deutsche Hypothekenbank Frankfurt-Hamburg AG (Deutsche Hyp). At the same time, Moody's has confirmed the short- and long-term deposit and debt ratings of Prime-1/Aa3 respectively. Moody's also confirmed the Aaa/Aaa Public-Sector and Mortgage Pfandbrief ratings of Deutsche Hyp. The review of the mortgage bank's financial strength rating follows the announcement that Deutsche Hyp will create an additional gross loan loss provision of around Euro 200 million during 2000, and that three board member have been suspended. The loan loss provisions are primarily related to real estate exposure in the Eastern Federal states dating back to a period between 1995 and 1997 and follow the conclusion of a group audit carried out in recent months by Deutsche Hyp's parent -- Dresdner Bank (rated Aa3/P-1/B with a negative outlook). Moody's says that it views positively the creation of these meaningful additional loan loss provisions. However, the review will focus on the extent to which sufficient loan loss reserves have been built-up in relation to the bank's significant East German commercial real estate portfolio and also on the extent to which Deutsche Hyp's financial flexibility, in part in the form of operating reserves, is affected. According to the rating agency , the confirmation of the Aa3 long-term deposit and debt ratings as well as the Aaa Pfandbrief ratings reflect Moody's view that Deutsche Hyp is an integral part of the Dresdner Bank group. Deutsche Hypothekenbank Frankfurt-Hamburg AG is a German mortgage bank, headquartered in Frankfurt, with consolidated assets of Euro 92 billion as of December 31, 1999. DRKOOP.COM: Class Action Update ------------------------------- On July 14, 2000, Finkelstein, Thompson & Loughran filed a securities fraud class action lawsuit in the United States District Court for the Western District of Texas on behalf of investors who bought common stock of drkoop.com, Inc. (Nasdaq: KOOP; "drkoop" or the "Company") between February 15, 2000 and March 30, 2000, inclusive (the "Class Period"). The complaint alleges that the Company and certain of its officers and directors, namely: Donald Hackett, Pres. & CEO; Dr. C. Everett Koop, Chairman of the Board; Neal K. Longwill, Sr. VP (Corporate Development); and Directors Nancy L. Snyderman and John F. Zaccaro, violated the federal securities laws by making materially false and misleading statements about the Company's business and financial condition during the Class Period. Specifically, on February 15, 2000, the Company's auditors signed and delivered their opinion letter, which contained a "going concern" qualification indicating that the auditors harbored substantial doubt as to the Company's continuing viability. The defendants concealed the going concern qualification and instead made optimistic statements about the Company's earnings and operations. At the same time, the insider defendants were liquidating their drkoop stock positions. Indeed, between February 18 and February 25, 2000, while in possession of the materially adverse non- public information concerning the qualified auditor's opinion, insiders sold more than 400,000 shares of drkoop stock, for aggregate proceeds of more than $4.5 million. It was not until March 30, 2000, when drkoop filed its Annual Report on Securities and Exchange Commission ("SEC") Form 10-K, that defendants disclosed for the first time the material fact that its auditors doubted the Company's ability to continue as a "going concern." Following these revelations, the Company's stock plummeted from a previous close of $6.25 (which itself was down from the Class Period high of $13 5/8) to a close of $3 11/16 on March 31, 2000 -- a one day drop of approximately 41%. Plaintiff seeks to recover damages on behalf of all investors who purchased drkoop stock during the Class Period and who suffered damages as a result, and is represented by the law firm of Finkelstein, Thompson & Loughran, of Washington, DC, among others. Finkelstein, Thompson & Loughran has over thirty years of securities litigation experience, has broad experience in representing defrauded investors in shareholder class actions, and has been appointed to lead positions in many such actions in federal and state courts throughout the United States. If you are a member of the Class described above, and if you meet certain other legal requirements, you may, not later than September 12, 2000, move the Court to serve as a lead plaintiff. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact Donald J. Enright with Finkelstein, Thompson & Loughran, toll-free at 888-333-4409, or at 202-337-8000, or by e-mail at DJE@FTLLAW.com. If you wish to learn more about Finkelstein, Thompson & Loughran, you can visit the firm's Web page at www.FTLLAW.com. (PRNewswire 7/27) EATON'S: Former Employees Payout Moved To 6 Months --------------------------------------------------- The Toronto Star reports on July 21, 2000 that department store chain, T. Eaton Co. Ltd. will extend the date of its scheduled payouts to its 13,000 former employees for another 6 months. According to Robert Harlang, acting liquidator of Montreal-based Richter & Partners Inc., "We hope to have it substantially completed before the end of the year, but realistically there are a lot of claims that are in dispute." The report cited more than $110 million in claims to former employees who filed severance and termination claims and $52 million for long-term disability and health benefits for 10,000 retirees. GLOBAL TISSUE: Case Summary and 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Global Tissue LLC 400 Mahannah Avenue Memphis, TN 38107 Type of Business: Manufacturer and Converter of paper napkins any bathroom and facial tissues for private-label customers such as supermarket chains and discount retailers Chapter 11 Petition Date: July 17, 2000 Court: District of Delaware Bankruptcy Case No.: 00-03104 Judge: Peter J. Walsh Debtor's Counsel: Norman L. Pernick Saul, Ewing, Remick & Saul LLP 222 Delaware Avenue, P.O. Box 1266 Wilmington, DE 19899 Tel.: (302) 421-6824 Total Assets: $ 79,157,000 total Debts: $ 93,095,000 20 Largest Unsecured Creditors Ponderosa Fibres Of America P.O. Box 1000 Dept. 410 Memphis, TN 38148-0410 Tel:(901) 525-0404 Fax:(901) 523-7637 Trade $ 1,587,717 Treasurer, City Of Memphis 125 North Main, Room 375 Memphis, TN 38103-2080 Tel:(901) 522-1111 Fax:(9010 576-6304 Property Taxes $ 1,030,953 Innovative Gas Services 101 East Second St. Ste 100 Owensboro, KY 42303 Tel:(270) 684-0459 Fax:(270) 684-8418 Utility $ 994,394 Crystal Print, Inc. 500 Hart Court Little Chute, WI 54140 Tel:(920) 739-9135 Fax:(920) 739-9130 Trade $ 755,960 Bob Patterson, Trustee Shelby County Trustee P.O. Box 2751 Memphis, TN 38101-2751 Tel:(901) 521-1829 Fax:(901) 545-4880 Property Taxes $ 749,156 Kieffer Pulp Mills, Inc. 1220 W. Spring St. Brownstown, IN 47220 Tel:(812) 358-4150 Fax:(812) 358-4122 Trade $ 708,381 International Florest Prod. 1 Boston Place, 35th Flr. Boston, MA 02108 Tel:(617) 723-3455 Fax:(617) 723-3458 Trade $ 501,451 CTS/Continental Traffic Service Clark Tower 15th Flr. 5100 Poplar Avenue Memphis, TN 38137 Tel:(901) 766-1500 Fax:(901) 766-1521 Trade $ 432,355 Americraft Carton-Memphis P.O. Box 87-6303 Kansas City, MO 6418-6303 Tel:(901) 725-5100 Fax:(901) 725-7115 Trade $ 398,780 J & J South-Central P.O. Box 102574 Atlanta, GA 30368-0574 Tel:(256) 859-5770 Fax:(256) 859-9755 Trade $ 297,802 Jari International, Inc. Box 5353 GPO New York, NY 10087-5353 Tel:(416) 450-1057 Trade $ 278,366 Hyster Credit Company P.O. Box 78155 Phoenix, AZ 85062-8155 Tel:(800) 422-2738 Fax:(800) 832-0088 Lease $ 254,894 Du Pont De Nemours & Co., Inc. Trade $ 233,292 Kruger, Inc. Intercompany Advances $ 223,573 Industries James Maclaren Trade $ 222,547 City Treasurer, Environ Engr Utility $ 209,954 Scott Paper Limited Trade $ 205,867 GL & V/Black Clawson-Ken Trade $ 205,315 Voith Fabrics Trade $ 204,500 Marathon Pulp, Inc. Trade $ 195,533 GORGES QUICK: Moody's Investors Service Downgrades Notes -------------------------------------------------------- Moody's Investors Service downgraded the $52 million 11.5% senior subordinated notes, due 2006, of Gorges/Quik-to-Fix Foods, Inc. ("Gorges") to Caa3 from Caa1. The senior implied rating has been lowered to Caa1 from B2, and the senior unsecured issuer rating has been lowered to Caa2 from B3. The company's new senior secured credit facilities are not rated. The ratings outlook is stable, recognizing recent liquidity support backed by its major shareholder. The downgrade reflects Gorges' ongoing weak volume trends in 1999/2000, which have reduced revenues and pressured financial flexibility due to the company's high operating and financial leverage. The volume declines stem from the company's October 1998 strategic decision to no longer manufacture lower margin ground beef products, as well as an ongoing loss in sales volumes of value-added products to national accounts. Resulting weak credit measures have caused the company to repeatedly violate bank facility covenants. Gorges, however, has successfully negotiated covenant waivers to date, and the company has received financial support from CGW Southeast Partners III, L.P., a 74% shareholder. In addition, Gorges is engaged in turnaround initiatives with a new management team, which include consolidating production from three into two facilities by relocating and upgrading production lines and mothballing a plant, to enhance efficiency and reduce fixed costs. Yet, the company's selling, general and administrative infrastructure would be difficult to cut without potential impact on sales volumes, and Moody's remains concerned that the company's high operating and financial leverage, its almost sole product concentration on beef, and the highly competitive market sector landscape are likely to present ongoing challenges to Gorges. Gorges/Quick-to-Fix Foods, Inc. based in Garland, Texas, is a producer and marketer of processed beef products used in the foodservice sector. GRAND UNION: Delisted From Nasdaq --------------------------------- According to a report in The Record (Bergen County, NJ) on July 27, 2000, with its stock price down to 25 cents a share, Grand Union Co. announced after the market closed Wednesday that its common stock was being delisted from the Nasdaq National Market, effective immediately, and that the stock was not eligible for listing on Nasdaq's Small Cap Market. Last month, the company announced that it would appeal the action, but with its stock at the current level, it decided an appeal would be a waste of time and money, a 1 person familiar with the decision said. The stock, which closed Wednesday down 9 3/8 cents in active trading, will still be publicly traded but will be relegated to the less prestigious OTC Bulletin Board. Grand Union announced in May that it was being dropped from the national listing after two years because the stock was trading under $ 5 a share, the Nasdaq minimum. Grand Union applied for inclusion on the Nasdaq Small Cap Market, but the stock fell below that market's $ 1-a-share minimum, and the application was not accepted. The big drop in stock price has also reduced Grand Union's value, with the market capitalization of what its top executive described as a $2 billion company plummeting to $ 7.5 million. That's a fraction of its $330 million market capitalization eight months ago. Though unable to do much about the stock price and where it is traded, company officials have been attempting to boost margins through a new advertising campaign and emphasis on perishables, said Gary Philbin, the president and chief executive. Redesigned weekly circulars, which were introduced this month, are "the most visible piece of what our customer research has shown us, how customers shop today,"Philbin said. "The new format makes it much more readable; it's more logically laid out,"he said."It reflects much more on the perishable side, which customers are saying is very important to them." Perishables have been a focus as well in the limited number of store makeovers and new-store construction the company has completed in recent months, he said."We're now focusing on our core base of stores ... to get customers to buy a little more in those areas,"he said. In the long term, Grand Union is exploring"various strategic alternatives to improve its financial performance, which may include asset sales, store closings or a sale of the company," according to the 10K filing, the annual financial report, made with the Securities and Exchange Commission on June 30. It has retained Merrill Lynch & Co."to provide investment banking advice"and Alvarez & Marsal Inc., a distressed-business consulting company, "to assist in the development of a strategic business plan," the report said. Grand Union announced Nasdaq's decision to delist it 1 May 16, the same day the company reported a 21 percent drop in sales, which led to a loss of $ 201 million in its fourth fiscal quarter. The company appealed the delisting June 23, just before it was to take effect. While waiting for the final determination, Grand Union has remained on Nasdaq's National Market. Grand Union first appeared on the Nasdaq National Market on Oct. 1, 1998, shortly after emerging from Chapter 11 bankruptcy protection. Its stock opened at $ 8 a share, rose to nearly $ 14 in less than three months, and remained mostly in the $ 10 to $ 14 range until January. It has been all downhill since, sparked initially by a Feb. 22 earnings report that the company lost $ 35.6 million in the third quarter, $ 9 million more than a year earlier. The stock closed under $ 1 for the first time May 15, and, following a small rally, has been stuck under $ 1 since June 12. The company's first financial quarter ended Saturday. Earnings are expected to be announced around the time of its annual meeting Aug. 17. HARNISCHFEGER: Beloit Taps Merrill Lynch To Sell APP Note --------------------------------------------------------- Beloit Corporation seeks the court's authority to employ and retain Merrill Lynch, Pierce, Fenner & Smith, Incorporated as Placement Agent to sell the Asia Pulp & Paper Promissory Note, in the aggregate principal face amount of $110,000,000 issued by PT Indah Kiat Finance (IV) Mauritius Limited under certain indenture between Indah Kiat Finance (IV) Mauritius Limited, as Issuer, Asia Pulp & Paper Company Ltd. and PT Indah Kiat Pulp & Paper Tbk, as Guarantors, and The Bank of ew York, as Trustee, dated March 31, 2000. Pursuant to the Merrill Lynch Agreement, Merrill Lynch will act as agent, but not principal, in the secondary placement of the APP Note on a best efforts basis. Beloit asserts that the proposed services by Merrill Lynch are necessary to enable Beloit to maximize the value of its estates and to reorganize successfully because the sale of the APP Note will bring a substantial sum of cash, and given the complexities of APP and the sale of notes of an Indonesian company, Beloit believes taht the best price will be achieved by using an experienced placement agent to sell the APP Note. The Debtors believe that Merrill Lynch is well-qualified to provide the services to Beloit in a cost-effective, efficient and timely manner. Pursuant to the Agreement, Beloit has agreed to pay Merrill Lynch 1.125% of the principal amount of the APP Note, and to reimburse Merrill Lynch for reasonable legal expenses. Beloit also seeks authority to pay Merrill Lynch its fees and expenses, pursuant to section 328 of the Bankruptcy Code, without the need to comply with the Court's order governing the reimbursement of fees and expenses for professionals and the Committee in HII cases. Beloit represents that the compensation arrangement provided for in the Merrill Lynch Agreement is consistent with customary practice. Beloit also represents that Merrill Lynch is a disinterested person as the term is defined in section 101(14) of the Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code. The United States Trustee objects to excusing Merrill Lynch from complying with the Court Order governing the reimbursement of expenses for professionals and committee members. UST says that compliance with the order is not unduly burdensome given that Merrill Lynch will have to compile summary of its expenses in order to ascertain the amount of any reimbursement. (Harnischfeger Bankruptcy News Issue 25; Bankruptcy Creditors' Service Inc.) HARNISCHFEGER: Motion To Sell BWRC's Interests in Beloit Italy -------------------------------------------------------------- Beloit Italy, 99.98% owned by Debtor BWRC, is engaged in the manufacture, sales, service, and supply of pulping equipment and paper-making machinery. Beloit and BWRC tell the Court that Beloit Italy is in a precarious financial situation and it is sound business judgment to sell the company. If not sold, Beloit Italy will have to be liquidated through Italian insolvency proceedings. Should this occur, the Debtors would receive little, if anything, on account of Intercompany Receivables and an Italian liquidator would press to collect on Beloit Italy's Intercompany Receivables. In addition, under Italian insolvency laws, the moving Debtors and ultimately HII might be exposed to claims of Beloit Italy's creditors including claims for considerable employee severance payments. An international search produced two prospective purchasers. Beloit has determined that the offer by Romano Nugo is the highest and best offer for Beloit Italia's shares. Accordingly, the Debtors ask the Court to authorize BWRC to sell its shares of Beloit Italia S.p.a. pursuant to a Shares Sale Agreement between BWRC and Romano Nugo S.p.A., a corporation orgainized under the laws of Italy, or, to sell to a party that makes a bona fide overbid at least two days prior to the Court's hearing on this Motion, and to authorize Beloit to waive certain intercompany claims and take other actions to effectuate the Agreement. Under the Shares Sale Agreement, the Buyer will: (a) pay BWRC $50,000 as consideration for the purchase; (b) cause Beloit Italy to assign to BWRC certain Beloit Italy Intercompany Receivables as agreed, in the aggregate amount of $6,238,844 estimated as of April 30, 2000; (c) pay BWRC an amount of $1,600,000; (d) use its best efforts to keep Beloit Italy in good operational, financial and cash condition so that it remains solvent for three years after the Closing; (e) provide BWRC with a three-year personal guaranty of Mr. Romano Nugo, the principal of the Buyer, for obligations of the Buyer arising under the Agreement, initially in the amount of $3,000,000 gradually diminishing to $2,000,000 for the second year, and to $1,000,000 for the third year; (f) manage Beloit Italy in a prudent way and fund its Interim Costs for operation from the date of the execution of the Agreement through the Closing (the Management Period); (g) cease using the company name Beloit or any name or trade mark of HII and the Harnischfeger Group, as well as any other intellectual property of the Harnischfeger Group that had been used by Beloit Italy upon the expiry of the IP License on October 31, except for Technology of the Site, which according to the Agreement refers to "information in non-tangible form that, without the intent to use the Harnischfeger Group's or a third party's intellectual property for a purpose not permitted by the Agreement, ... is retained in the memories of those persons who have had authorized access to such intellectual property or industrial property." BWRC agrees to: (a) cause Beloit to pay or relieve the Buyer of the liability for certain specified Beloit Italy Intercompany Payables in the aggregate amount of $8,625,823 estimated as of April 30, 2000; and (b) cause Harnischfeger ULC, a solvent non-debtor entity that has continued to repay its obligations to Beloit Italy, to repay Beloit Italy the balance of the intercompany loan that is due and owing to Beloit Italy in the principal amount of $2,545,284, plus $253,418 of accrued interest; (c) stop actively soliciting an Alternative Offer after the execution of the Agreement, and in the event BWRC accepts an Alternative Offer, to remimburse all of the Interim Costs to the Buyer; The Buyer is purchasing the shares of Beloit Italy without any representations or warranties, except as to title, and the parties also agree that, if the transactions contemplated in the Agreement do not take place by August 31, 2000, the Agreement will become null and void. Beloit and BWRC represent that the consideration to BWRC proposed under the Agreement is fair and reasonable, the Agreement is the product of good faith, arm's-length negotiations between Beloit and the Buyer. Beloit and BWRC also tell the Court that the proposed sale of the shares of Beloit Italy is "under a plan" within the meaning of section 1146 of the Bankruptcy Code. The consideration to be paid under the Agreement will be required to fund administrative and other claims under such plan. Consummation of the sale is essential to the preparation and consummation of a liquidating plan for the Moving Debtors. Therefore, the sale of BWRC's shares of Beloit Italy should be exempt from the imposition of any stamp or similar tax. Accordingly, Beloit and BWRC sought and obtained the Court's authority for: (a) BWRC to sell its shares in Beboit Italy pursuant to the Agreement free and clear of transfer taxes; (b) Beloit (on behalf of itself and its non-debtor affiliates) to release certain claims against Beloit Italy; (c) BWRC to sell the shares or assets of Beloit Italy to another third party who, at least two days prior to the hearing on the Motion, submits an Alternative Offer for such shares or assets that, in Beboit's business judgment, is a higher and better offer than that reflected in the Agreement; (d) the Moving Debtors to take all actions necessary to effectuate the closing of the Agreement. (Harnischfeger Bankruptcy News Issue 25; Bankruptcy Creditors' Service Inc.) INTEGRATED HEALTH: Announces New Management ------------------------------------------- Integrated Health Services, Inc. (OTC Bulletin Board: IHSVQ) announced that Joseph A. Bondi of the turnaround consulting firm of Alvarez & Marsal, Inc., has been named as the Chief Restructuring Officer of the Company. In connection with this appointment, Robert N. Elkins, a founder of IHS, has agreed to step down as Chairman, CEO and President upon approval by the U.S. Bankruptcy Court for the District of Delaware of an agreement between Dr. Elkins and IHS. At such time, Mr. Bondi will be named as CEO. Mr. Bondi and Alvarez & Marsal, Inc. have extensive experience in the field of restructuring and reorganization. Mr. Bondi's prior experience includes serving as Chairman-Restructuring of MobilMedia, Inc., Chief Restructuring Officer of Iridium LLC and Senior Vice President of Republic Health Corporation. "Joe Bondi, the creditors and IHS realize that their first commitment is to the continued maintenance of high quality patient care," said Robert N. Elkins, Chairman and Chief Executive Officer. "We all remain dedicated to this as our main goal." Integrated Health Services is a highly diversified health services provider, offering a broad spectrum of post-acute medical and rehabilitative services through its nationwide healthcare network. IHS's post-acute services include home respiratory services, subacute care, long term care and contract rehabilitation services. KAUFMAN FOOTWEAR: Receivership Ends for Footwear ------------------------------------------------ The London Free Press reports on July 24, 2000 that Ernst & Young Inc. was appointed receiver and manager of the 93-year-old bootmaker, Kaufman Footwear, ending the receivership of Kaufman's family. SVP of Ernst & Young, Bill Goss says, he is very much confident that he can find a buyer for the 700 employee bankrupt bootmaker situated in Kitchener, Ontario. "That's the absolute goal," [and] "The business has been here for 100 years, Goss added. It has been at this corner forever, for God's sake, and it should stay here." He also said that he will contact the only company that offered to buy Kaufman, Red Wing Shoe Co. which is based in Minnesota. According to the report, Red Wing's public relations manager, Cindy Taube, said it was too soon to make another offer. LEE COUNTY HOSPITAL: Files To Reorganize Under Chapter 11 --------------------------------------------------------- Lee County Community Hospital has filed to reorganize its finances under Chapter 11 federal bankruptcy protection. The filing Wednesday said the 70-year-old hospital is $5.2 million in debt. The reorganization is expected to eliminate the 80-bed facility's obstetrics services and cost about 30 jobs. The filing came less than three weeks after the hospital's former administrator, James Luther Davis, pleaded guilty to racketeering and conspiracy charges. Federal prosecutors said he and others were part of an equipment-leasing scheme that netted about $7.4 million. Hospital officials have 120 days to submit a financial reorganization plan. Last year, the hospital delivered 125 babies - an insufficient number to support keeping the obstetrics unit open and requiring an annual subsidy of $ 365,000, said acting administrator G.K.U. Kumar. The hospital currently has about 270 employees. The goal is to reduce that number to about 240, Kumar said. LOGAN GENERAL: Lays Off 7% of Workers ------------------------------------- Logan General Hospital laid off 7 percent of its staff Wednesday, and demoted, transferred or cut the pay of another 9 percent because of a $ 4 million budget shortfall, hospital officials said. Some nurses and management, but not doctors, are included in the shakeup at the Logan County hospital as it continues its efforts to emerge from bankruptcy. "Our emphasis in the cost reduction plan is to maintain quality care and ensure minimal impact in nursing and clinical areas," hospital chief Tom Senker said. "This is a difficult process that will affect many people." All told, 49 of the hospital's 692 full-time workers lost their jobs permanently, while another 64 will be reassigned or demoted or lose pay, officials said. Senker said the decision did not involve Genesis Affiliated Health Systems. Logan General has agreed to join the alliance of regional hospitals as part of its plan to emerge from Chapter 11. Though signed, the Genesis agreement does not take effect until after the bankruptcy is resolved, Senker said. Under the agreement, Logan General will hand over some authority to the Genesis board of directors. That board will include a Logan General contingent. The reorganization plan also outlines a five-year financial projection for the 132-bed, non-profit hospital. Though the hospital's expenses as of June 30 fell below that projection by $ 760,000, its revenues failed to meet the projection by $ 4 million, Senker said. "This serious fiscal situation must be addressed immediately not only to meet our financial requirements, but more importantly to ensure the viability of Logan General Hospital as a not-for- profit, community hospital," Senker said. The hospital has grossed $ 64.3 million in patient revenues this year as of June, while it had grossed $ 71.7 million by this time last year, its latest financial filings said. The hospital had hoped to have grossed $ 70.1 million by this time. The hospital once generated more patient revenues per bed than any hospital in the state. It also employed more than 800 people when it sought bankruptcy protection in October 1998. Chronic cash-flow problems prompted the bankruptcy filing, as did a creditor's request to oust longtime Logan General President C. David Morrison. The creditor's concern and the poor cash flow both traced back to Morrison's decision to build a Logan-area mall with more than $ 20 million in hospital funds. Though doctors are not among those laid off or otherwise affected, several may retire or seek jobs elsewhere to help the hospital cut costs, spokeswoman Ronna McClure said. McClure said she was not aware of any hospital departments shutting down entirely because of the staff shakeup. LOGAN GENERAL: Names New CEO ---------------------------- The financially-strapped Logan General Hospital has a new leader. The hospital board of directors has named Thomas Sphatt of Cleveland as chief executive officer. Sphatt will assume full- time leadership Aug. 14. He replaces interim CEO Tom Senker, who has been leading the hospital through bankruptcy proceedings the past several months. Sphatt has more than 20 years of senior management experience in community hospitals, academic medical centers and health care systems. Since 1998, he has worked with financially troubled hospitals for Quorum Health Resources. He said he is familiar with Logan General's problems and feels confident the situation can be turned around. The hospital made its latest budget cuts earlier this week, laying off 49 workers and announcing plans to make position or pay changes to 64 other employees. Hospital officials said the reductions are necessary because of a projected $ 4 million deficit for the first half of this year. The hospital filed for bankruptcy in October 1998. Former CEO C. David Morrison is to stand trial later this year in federal court on embezzlement charges. MARINER: Oakwood Seeks To Lift Stay to Terminate Management Contracts ------------------------------------------------------------ Oakwood Living Centers of Massachusetts, Inc., and Oakwood Living Centers of Virginia, Inc. move the Court for an order to compel MPAN to turn over all records regarding Oakwood's facilities. Oakwood complains that Mariner is not acting according to the agreement reached during Oakwood's relief from the automatic stay granted by the Court to deal with pre-petition contract disputes over Mariner's management of the seven Oakwood facilities. Oakwood asserts that the Term Sheet provides that Mariner would (a) take certain steps to improve its clinical support and personnel functions to insure patient care at the facilities; (b) cooperate with Oakwood's attempts to refinance its mortgage obligations; (c) provide outstanding financial reports; and the parties (d) would reconcile an asserted trade payable of Oakwood to an entity known as Prism Rehab. However, Oakwood alleges that (1) Patient Care Issues Remain Unresolved Oakwood representatives have received calls from facility employees and management and patient families highlighting deficiencies in patient care. In addition, Mariner has also threatened to remove its administrators from the facilities on short notice, demonstrating little concern for the well being of the patients. Mariner also continues to utilize personnel in these facilities with qualifications which are unsatisfactory to Oakwood. + (2) Mariner Did Not Cooperate With The HUD Refinancing Efforts Despite knowledge of Oakwood's then pending HUD financing and the importance of Mariner's production of financial records to close the loans, none of the requested information was supplied and the HUD financing has been denied, resulting in the losss of in excess of $484,000 in commitment fees and nonrefundable deposits. (3) Mariner Continues To Fail To Provide Financial Information Oakwood accuses Mariner of holding financial information hostage in an effect to gain leverage over Oakwood in their financial dealings. In some cases Mariner has failed to provide financial information in a form usable by Oakwood and, in other cases, failed to provide any financial information at all. As a result, Oakwood Massachusetts's Cape Heritage Facility was notified by the Health Care Financing Administration that HCFA must find that Cape Heritage had been overpaid approximately $750,000 and that absent repayment of these amounts, HCFA will withhold future payments to this facility until it has offset this $750,000. In addition, Oakwood Virginia has been unable to supply the Commonwealth of Virginia with a final 1999 audit due to Mariner's unwillingness or inability to provide (a) Oakwood's accountants with the requested information or (b) audited financials of its own. Oakwood is concerned that Oakwood Virginia will be penalized 10% of all future reimbursement requests until that audit is completed. This could cost Oakwood hundreds of thousands of dollars. (4) Mariner Has Not Cooperated In The True-Up Process The Term Sheet provides for a reconciliation process which contemplated the free exchange of information between the parties. However, Oakwood did not receive Mariner's initial attempt to true up the asserted Prism Rehab obligation until May 18, 2000, and Mariner's "reconciliation" consisted solely of providing Oakwood with the gross number that had previously been asserted by Mariner to be due with no backup documentation. In order to avoid further problems in attempts to refinance Oakwood's mortgage obligation and obtain cost reimbursements, Oakwood wants all books and records regarding the facilities be turned over to it. Oakwood asserts that the books and records of the facilities are the property of Oakwood, the information is critical to Oakwood's ability to process its cost reports and evaluate the management of its facilities, and Mariner should not be permitted to hold hostage information regarding the management of Oakwood's facilities and utilize it as "leverage" over Oakwood in their business dealings. Mariner Responds and Alleges Outstanding Management Fees In response, Mariner accuses Oakwood of failing to pay management fees under the Term Sheet which says that Oakwood will manage or arrange for the management of the financial services and Mariner will continue to provide clinical services required under the Management Agreement through June 30, 2000 and the two parties will share 50%-50% the management fees payable under the Management Agreement for the period February 1, 2000 through June 30, 2000. Mariner asserts that the total amount due is $399,778. Mariner also alleges that Oakwood has failed and refused to pay reasonable expenses owed to Mariner, which includes salaries for the facilities' administrators. Mariner points out that Oakwood has no right to withhold management fees or to refuse to enter into a new promissory note for amounts owed to Mariner for rehabilitation services provided to the Oakwood facilities. Mariner argues that it has complied with the Term Sheet, any deficiencies alleged by Oakwood are either not provided, not true, or both, and even if the allegations stand, the sole remedy provided to Oakwood is the right to terminate the Management Agreements as of June 30, 2000. With respect to financial reporting, Mariner points out that compliance will give Mariner an opportunity under the Term Sheet to resume financial management of the Oakwood facilities as of July 1, 2000. Mariner tells the Court it has provided all financial reports due under the Management Agreements for Oakwood's fiscal year which ended on December 31, 1999. With regard to the HUD refinancing efforts, Mariner argues that it has no obligation under the Term Sheet to provide specific information to Oakwood in any predetermined format, but only to cooperate in "good faith", which it has done. About reconciliation process, Mariner tells the cout that on May 12, 2000, seven weeks before the deadline for the parties to reconcile the amounts due to Mariner by Oakwood for rehabilitation services, provided Oakwood with financial information regarding the amount Mariner contends it is owed. Mariner points out that Oakwood had not requested for the `title up" process to begin prior to that. Supporting documents, Mariner says, are maintained at the various Oakwood facilities and accessible by Oakwood. Fighting back, Mariner accuses Oakwood of failing to participate in the "true up" process since receiving Mariner's information on May 12, 2000, and has provided no documentation to indicate that the amounts due and owing are subject to adjustment. With respect to Oakwood's "expectation" of Mariner's "enhancing" clinical support and personnel functions, Mariner argues that it is not required under the Term Sheet or Order to make such change or enhancement. Nevertheless, Mariner disputes Oakwood's contention that it has not provided appropriate clinical management to the Oakwood facilities. Moreover, the Term Sheet provides Mariner an opportunity to continue on as the clinical manager of the Oakwood facilities after June 30, 2000, if it meets certain criteria set forth by Oakwood and performs to Oakwood's satisfaction but Mariner has not been requested to continue as clinical manager for the Oakwood facilities after June 30, 2000. Mariner tells the court hat nothing set forth in the Order or Term Sheet entitles Oakwood to possession of the books and records held by Mariner with respect to its management of the Oakwood facilities. Therefore, Mariner asks the court to deny the relief sought by Oakwood and to enter an order compelling Oakwood to immediately pay all management fees and reimbursable expenses due and owing under the Court's prior Order and requiring Oakwood to execute a promissory note by June 30, 2000, in the amount of approximately $3,281,541.78 should Oakwood fail to provide information supporting an adjustment. Oakwood's Response Oakwood contends that the Term Sheet and Order are written documents which speak for themselves and Mariner's paraphrase of those documents is incomplete and inaccurate. According to Oakwood, Mariner is not entitled to be paid 50% of the management fees as alleged, and the unpaid amount is therefore not due and owing. Oakwood tells Judge Walrath that Mariner has not responded to each request for financial information, has not produced all financial records Oakwood requested, and has not complied with the additional requests from Oakwood's auditors. Moreover, the information provided has been incomplete, untimely, improperly formatted and has numerous other deficiencies associated with it, Oakwood charges. With regard to improper formatting, Oakwood specifies that the information was improperly formatted based on a September 30 year end when the Oakwood books and records required a December 31 year end. Accordingly, the information was not and could not be properly adjusted for Oakwood's year end, and was of little value to Oakwood or its auditors. The reconciliated amount due to Prism as supplied by Mariner, Oakwood notes, was the result of the same compilation of information which the parties acknowledged previously was insufficient to enable Oakwood to engage in the reconciliation process. Oakwood contends that in order for it to meaningfully engage in the process, Oakwood requires the books and records of the facilities including those that Mariner has held hostage. Oakwood tells the judge that it has attempted to participate in the "true up" process but has been hindered due to a lack of information from engaging in the process. To the extent that Mariner seeks payment of expenses due Mariner for, among other things, facilities administrators' salaries, Oakwood tells the judge that these amounts have been paid. Oakwood had a clear expectation that the clinical and other services would be enhanced and patient care improved as a result of the Term Sheet and Order. The Term Sheet and Order required Mariner to provide the clinical services contracted for under the Management Agreements, and Mariner was aware, in February, 2000, of the deficiencies which existed. The continuation of these deficiencies, post February 17, 2000 should not entitle Mariner for compensation for services which were not provided. Oakwood contends that it cannot be compelled to provide the Prism Rehab note until all preconditions to providing the note have been satisfied, including providing Oakwood with all credits due and engaging in a good faith negotiating process which, by necessity, includes a free exchange of information. Accordingly, Oakwood asks the court to deny the Debtors' crossmotion. (Mariner Bankruptcy News Issue 7; Bankruptcy Creditors' Service Inc.) NORTHLAND CRANBERRIES: Renegotiated Loan Default Agreements ----------------------------------------------------------- Northland Cranberries recently completed renegotiating its bank loan default agreements. The SEC filings stated that Northland, which faces higher debt with decreased sales, has agreed to pay 1.25% interest rate against the prime lending rate in its headquarters in Wisconsin Rapids and Massachusetts. Terry Warfield, associate professor of accounting at UW-Madison says that Northland could file for bankruptcy if creditors should declare Northland in default of existing loans. Northland, which has a workforce of 300 and produces the Northland and Seneca bottled juice brands, must have a restructuring plan to improve its source of funding. PLATINUM ENTERTAINMENT: Case Summary and 20 Largest Creditors -------------------------------------------------------------- Debtor: Platinum Entertainment, Inc. 2001 Butterfield Road Suite 1400 Downers Grove, IL 60515 Type of Business: The production, distribution, marketing and sale of music Chapter 11 Petition Date: July 26, 2000 Court: Northern District of Illinois Bankruptcy Case No.: 00-21646 Judge: Eugene R. Wedoff Debtor's Counsel: Michael B. Solow Hopkins & Sutter 3 First National Plaza, Suite 4300 Chicago, Illinois 60602 Tel:(312) 558-6600 Total Assets: $ 15,754,897 Total Debts : $ 52,172,198 20 Largest Unsecured Creditors Steve Devick 1901 Midwest Club Parkway Oakbrook, IL 60521 Tel:(630) 769-0043 Fax:(630) 769-0048 $ 1,079,746 Golden Rule Printing 1505 The Boardwalk Huntsville, AL 35816 Tel:(256) 830-4653 Fax:(256) 830-5621 $ 863,311 Nimbus Manufacturing, Inc. P.O. Box 7247 Charlottesville, VA 22906-7427 Tel:(804) 985-1100x777 Fax:(804) 985-4692 $ 576,851 Cinram 2255 Markham Rd. Scarborough, Ontario MIB 2W3 Canada Tel:(877) 301-2255x382 Fax:(416) 298-1595 $ 400,971 M.C.O.M., Inc. 1045 Firestone Parkway Larergne, TN 37086 Tel:(615) 641-8510 Fax:(615) 641-8566 $ 399,286 The Harry Fox Agency, Inc. 711 Third Avenue 8th Flr. New York, NY 10017 Tel:(212) 922-3260 Fax:(212) 953-2471 $ 327,966 Craig Duchossois 845 Larch Avenue Elmhurst, IL 60126 Tel:(630) 530-6100 Fax:(630) 530-6057 $ 320,252 Ernst & Young 225 Asylum St. Hartford, CT 06103 Tel:(860) 524-3128 Fax:(860) 524-3123 $ 264,750 Computer Associates-Platinum Technology $ 247,988 Katten, Muchin & Zavis $ 241,008 Morrison & Foerster LLP $ 192,997 Born Again Records Inc. $ 133,508 CMC Internationl A/S $ 132,443 Gator Records $ 121,756 Ruf Records $ 113,712 Symbiotic, Inc. $ 111,029 United Parcel Service $ 103,626 Ramblin' Records, Inc. $ 92,426 Paul, Hastings, Janofsky & Wal $ 86,547 TRC Temporary Services $ 83,033 TERRA INDUSTRIES: Moody's Lowers Senior Notes From Caa1 to Caa2 ---------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Terra Industries, Inc.'s (Terra) $225 million secured asset based credit facility, maturing 2003, lowered the ratings of its $200 million senior notes, due 2005, and its $159 million senior notes, due 2003, to Caa2 from Caa1. The senior implied rating is B3, the senior unsecured issuer rating is Caa2, and the rating outlook is negative. The ratings and rating outlook reflect the continued downcycle in its cyclical commodity products (nitrogen fertilizers and methanol), the expected continuing pressure on prices and margins in the intermediate term from global overcapacity in these products, the uncertain timing of recovery from the product downcycles, and additional recent margin pressure from significantly higher U.S. natural gas prices. The ratings also reflect the high leverage, significant negative quarterly operating earnings since the June 1999 sale of the distribution business, possible future asset write-downs, and subordination considerations. The ratings further consider agricultural market risks, including the seasonal nature of agricultural sales, the impact of weather, the effect of farm economies and corn and wheat production on agricultural sales, and the influence of government agricultural policies on planting decisions. However, the ratings also recognize the company's leading positions in nitrogen solutions in North America and in ammonium nitrate in the UK, and the benefits and limitations of the new credit facility. The Caa2 rating of the senior notes reflects that the notes are at the holding company level without the benefit of guarantees and are therefore structurally subordinated to the debt (including substantial senior secured debt) and obligations of the subsidiaries that own substantially all of the assets. Therefore the senior notes are notched down two from the Senior Implied rating. Nitrogen fertilizer products and methanol continue to experience global overcapacity and downcycles with adverse price and margin effects that are expected to continue for the next several years, Moody's notes. Terra announced June 1, 2000 that it had shut down its Blytheville, Arkansas ammonia and urea production for up to six months and curtailed production rates at its other manufacturing facilities by about 13%. However, on July 24 the company announced that it will resume production at Blytheville about August 15, 2000 at about 85% of capacity. The company is highly leveraged with total debt as of 3/31/00 of $651 million (including 1999 operating leases of $165 million at $21 million times 8) compared with LTM revenues of $810 million. Moody's ratings assume that in the intermediate term the company will not distribute cash to public unitholders of TNCLP and will not exercise the right to call the outstanding public units, which would require a cash payment of about $18 million at the current TNCLP stock price. Terra Industries, Inc., headquartered in Sioux City, Iowa, produces nitrogen fertilizer products (ammonia, urea, nitrogen solutions, and ammonium nitrate) and methanol. VENCOR INC: Court Approves Extension of Exclusivity --------------------------------------------------- Vencor, Inc. announced that the United States Bankruptcy Court for the District of Delaware (the "Court") has approved the Company's motion to extend the Company's exclusive right to file its plan of reorganization through August 17, 2000. In support of its motion, the Company informed the Court that it has continued to make progress in the reorganization. The Company noted that it has made substantial progress in its discussions with Ventas, Inc. (NYSE:VTR), the senior bank lenders, holders of the Company's $300 million 9 7/8% Guaranteed Senior Subordinated Notes due 2005 and the advisors to the official committee of unsecured creditors toward a consensual plan of reorganization. The Company also reported to the Court that it has continued its conversations with the Department of Justice regarding a settlement of the ongoing investigations and regarding the negotiation of other agreements with the Company. The Company informed the Court that it is optimistic that it soon will be in a position to file a consensual plan of reorganization. The Company and the lenders under the debtor-in-possession financing (the "DIP Financing") have agreed to permit the Company to seek an extension of the period of time to file its plan of reorganization through August 17, 2000. Vencor and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 with the Court on September 13, 1999. Vencor, Inc. is a national provider of long-term healthcare services primarily operating nursing centers and hospitals. WARNACO GROUP: May Possibly File For Bankruptcy Protection ---------------------------------------------------------- The distributor for clothes maker Calvin Klein (CK) whose sales are suffering due to price markdowns and interest costs, may file for bankruptcy. The estimated revenues for this year were very low compared to the expectations for Warnaco Group Inc. Sales flopped from $1.81 1/4 to $4.93 3/4 in NSYE and lost 82 percent of the value of its stock for the past year. The present lawsuit with CK contributes to the present dilemma of Warnaco. Matthew Hershberg who is an analyst for the S&P Equity Group relates, "They have a high level of debt," [and] "If they continue on the same track, they'll likely file for bankruptcy." Warnaco is also a major player in menswear with Calvin Klein and Chaps by Ralph Lauren brands; its Authentic Fitness unit is the North American distributor of Speedo swimwear. The company sells to discounters, department stores, and through outlets stores in North America and Europe. CEO Linda Wachner owns 7% of Warnaco. The company is tangled in lawsuits with Calvin Klein, each accusing the other of trademark violations. ********* 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. 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