/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/001012.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, October 12, 2000, Vol. 4, No. 200 Headlines AMERICAN METROCOMM: Seeks Court Approval To Abandon Faulty Equipment C.T. PRODUCE: Case Summary CMS ENERGY: Fitch Assigns BB+ Rating To 9-7/8% Senior Notes Due 2007 DAEWOO INTERNATIONAL: Seeks Extension of 365(d)(4) Deadline to Dec. 12 DICKINSON THEATRES: Case Summary DRYPERS CORPORATION: Diaper Maker Files Chapter 11; $25M DIP Pact Obtained EAGLE FOOD: Moody's Assigns B2 Rating To $85 Mln 11% Senior Unsecured Notes EDWARDS THEATRES: Asks for More Time to Make Lease Disposition Decisions ELDER-BEERMAN: Revises Dutch Auction Purchase Price to $5.00 per Share FARMERS COOPERATIVE: Case Summary and 20 Largest Unsecured Creditors GENESIS/MULTICARE: Enters Into Fund Calculation Agreement with Fireman's GRAHAM-FIELD: Committee Retains Houlihan Lokey as Financial Advisors HARNISCHFEGER INDUSTRIES: What's a Debtors to do with Blank Claim Forms? HEILIG-MEYERS: Asks Court to Approve Bidding Procedures for 302 Leases HOME HEALTH: Obtains Extension of Exclusive Period through January 29, 2001 ICG COMMUNICATIONS: Wolf Haldenstein Files Securities Class Action Suit INVESTCORP: Fitch Affirms Long & Short Term BBB Rating With Neg. Outlook LOEHMANN'S, INC: Reorganization Plan Confirmed & Emerges from Chapter 11 LOEWEN GROUP: Mercedes-Benz Credit Corporation Seeks Relief From Stay NEVADA BOB: Golf Retailer Suffers Cash Squeeze & Considers Bankruptcy NSC CORPORATION: With No Assets Left, Seeks Dismissal of Chapter 11 NUTRAMAX PRODUCTS: Miza Pharmaceuticals Objects to Plan Confirmation OWENS CORNING: Court Restrains Lenders from Attacking Foreign Entities PACIFICARE HEALTH: Announces 3Q Earnings Lower Than Analysts Expected QUALITY VENEER: Sawmill Operator Files for Bankruptcy Protection RECYCLING INDUSTRIES: Judge Brooks to Consider Disclosure Statement Oct. 23 RITE AID: Announces Improved Store Sales and Earnings in Second Quarter SAFETY-KLEEN: Judge Walsh Moves Hearing on Landfill's Plan to Oct. 17 SIGNAL APPAREL: Announces Corporate Officers Leaving Their Posts STEWART ENTERPRISES: Fitch Lowers Bank Facility & Senior Unsecured Ratings STROUDS, INC: Great American Gets Okay to Liquidate Nine Stores SUN HEALTHCARE: Debtors Move to Divest 22 Underperforming Facilities TEXFI INDUSTRIES: Requests Exclusivity Extension through February 9 VENCOR, INC.: Agreed to Modify Stay to Liquidate Claim & Pursue Insurance ********* AMERICAN METROCOMM: Seeks Court Approval To Abandon Faulty Equipment -------------------------------------------------------------------- Dow Jones reports on the recent squabble between American MetroComm Corp., and Cisco Systems Inc. AMC seeks authority from the bankruptcy court to abandon the gear it acquired from the telecommunications and network equipment firm. "The failure of the Cisco equipment to perform properly not only substantially delayed and hindered the (AMC's) deployment efforts, it ultimately threatened their very existence," AMC stated in its recent filing with the U.S. Bankruptcy Court in Delaware. Cisco filed a lawsuit against AMC for refusing to pay the phone and data switching equipment amounting to $47.8 million. The Company, together with its affiliates, is a Digitally-based Competitive Local Exchange Carrier (DLEC) headquartered in New Orleans, Louisiana providing corporate-class, fully integrated voice and data services in the southeastern United States. The Company utilizes digital subscriber line (DSL) technology and unbundled network elements on the "last mile connection" and the latest soft-witch technologies to provide local and long-distance services. AMC filed for Chapter 11 in Delaware having $110 million in assets over a $96 million of debt. C.T. PRODUCE: Case Summary -------------------------- Debtor: C.T. Produce, Inc. 2225 Avenida Costa Este Suite 1100 San Diego, CA 92173 Chapter 11 Petition Date: October 2, 2000 Court: Southern District of California Bankruptcy Case No.: 00-09608 Judge: James W. Meyers Debtor's Counsel: Jeffrey D. Schreiber, Esq. Schreiber and Shiff 4130 La Jolla Village Dr., Ste #201 La Jolla, CA 92037 (858) 643-1100 Total Assets: $ 10 Million Above Total Debts : $ 10 Million Above CMS ENERGY: Fitch Assigns BB+ Rating To 9-7/8% Senior Notes Due 2007 -------------------------------------------------------------------- Fitch has assigned a rating of 'BB+' to CMS Energy's (CMS) $500 million 9 7/8% senior notes due 2007. All of the proceeds from the offering will initially be used to reduce outstanding bank loans, and some of the proceeds will ultimately be used to refinance $300 million of maturing senior notes. CMS' rating outlook remains negative, pending the successful implementation of debt reduction initiatives described below. Fitch also affirmed ratings of outstanding CMS securities as follows: senior notes, general term notes, and CMS X-TRAS Pass Thru Trust I notes at 'BB+'; and CMS Energy Trust I and CMS Energy Trust II convertible trust securities at 'BB-'. The company successfully sold some non-core assets earlier this year, producing $853 million cash proceeds or transfer of debt related to the assets sold. Nonetheless, consolidated debt remains extremely high, with financial leverage of around 70% at present; the ratio of EBITDA to consolidated interest expense is around 2.7 times. Furthermore, the company is burdened by approximately $3 billion of debt at the CMS parent. CMS announced this week a new program to reduce debt leverage via the sale of $300 million of new issue CMS common stock and an initial public offering of shares representing a 50% ownership stake in CMS Oil & Gas, now a wholly owned subsidiary. Management projects that these two initiatives can produce proceeds of $800 million before mid-2001 to be used to reduce CMS debt and improve CMS's capitalization. Successful implementation of these initiatives depends on favorable common equity market conditions for CMS and CMS Oil & Gas. Additionally, CMS management foresees some more asset sales for 2001. All together, CMS management forecasts that the initiatives outlined above will reduce the ratio of debt to capital to 63-64% by year-end 2001 and to 60% by year-end 2002. While CMS has announced several prior plans to reduce leverage, the current initiatives do not depend on regulatory approval and are more within CMS's management discretion. Also, recent increases in oil and gas prices are a favorable factor for valuing the shares of CMS Oil & Gas. CMS' credit profile will hinge on near-term progress toward the successful execution of its debt reduction program. Positively, CMS' credit profile benefits from the solid credit quality of its two principal regulated subsidiaries, Consumers Energy Co. (Consumers) and Panhandle Eastern Pipe Line Co. (PEPL). Consumers and PEPL are a stable foundation for CMS Energy's asset and cash flows, offsetting some higher risk unregulated independent power projects and the oil and gas E&P businesses. Consumers and PEPL account for approximately 80% of CMS' EBITDA; distributions from these operations also provide relatively stable sources of cash for CMS' fixed obligations. The sale of some investments in less developed countries and of half of the oil and gas exploration and production business should also reduce the risk profile and volatility of the remaining business portfolio. While Consumers' cash flow and earnings have generally been a stabilizing element for CMS, the current high natural gas price environment is substantially reducing cash flow of Consumers Energy's gas distribution business. Consumers is in the final six months of a special three-year program at fixed tariffs without adjustment for gas commodity prices. The tariff incorporates a fixed commodity price of $2.84 per thousand cubic feet (mcf) for three years, while current wholesale market prices of gas are in excess of $5.00 per mcf. Consumers did not fully hedge its gas supply requirement, and as a result of the substantial increase in natural gas market prices this year, the utility's gas tariff will not cover the higher commodity cost of gas it purchased to meet its supply requirement. Consumers recorded a loss of $45 million in the second quarter of 2000 to reverse the prior earnings recorded under this tariff. Consumers has now hedged a large part of its exposure at a loss, and the fixed gas tariff will expire at the end of March 2001. It should be noted that high gas and oil prices are beneficial for the cash flow produced by CMS Oil & Gas and by CMS's LNG terminal operation, and this acts as a partial hedge at the parent level for the adverse impacts on cash available to CMS from Consumers. Fitch rates Consumers' senior secured debt 'BBB+' and preferred stock/trust originated preferred securities at 'BBB-'. CMS Panhandle Holding Co. senior notes and Panhandle Eastern Pipe Line senior unsecured debentures are rated 'BBB'. The outlook for Consumers, CMS Panhandle Holding Co., and PEPL is stable. CMS Energy is an international energy company with businesses in electric and natural gas utility operations; independent power production; natural gas pipelines and storage; oil and gas exploration and production; and energy marketing, services and trading. DAEWOO INTERNATIONAL: Seeks Extension of 365(d)(4) Deadline to Dec. 12 ---------------------------------------------------------------------- Daewoo International (America) Corp. seeks an extension of time within which it must decide whether to assume, assume and assign, or reject its unexpired nonresidential real property leases. The debtor, in consultation with the Committee is continuing to analyze the leases to determine whether they are needed in the context of the debtor's reorganized operations. Specifically, the debtor seeks an extension of its time to assume or reject the leases for an additional sixty days to December 12, 2000. Togut, Segal & Segal LLP represent Daewoo International (America) Corp. The debtor is a wholly owned subsidiary of Daewoo Corporation, a company formed under the laws of the Republic of Korea. DICKINSON THEATRES: Case Summary -------------------------------- Debtor: Dickinson Theatres, Inc. 5913 Woodson Road Mission, Kansas 66202 Chapter 11 Petition Date: October 2, 2000 Court: District of Kansas Bankruptcy Case No.: 00-42170 Debtor's Counsel: Paul M. Hoffmann, Esq. Morrison & Hecker L.L.P. 2600 Grand Avenue Kansas City, Missouri 64108 (816) 691-2600 Total Assets: $ 50 Million Above Total Debts : $ 50 Million Above DRYPERS CORPORATION: Diaper Maker Files Chapter 11; $25M DIP Pact Obtained -------------------------------------------------------------------------- Drypers Corporation (Nasdaq: DYPR) announced that it has filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The petition was filed with the bankruptcy court in Houston in the Southern District of Texas. Under Chapter 11, the Company is able to continue to conduct business in the ordinary course, while it devotes efforts to develop a reorganization plan. The Company also announced it has reached an agreement with Procter & Gamble providing Drypers with the necessary intellectual property licenses to continue manufacturing its products and, subject to bankruptcy court approval, entering into a payment plan which resolves the outstanding disputes and litigation between the companies. Along with its Chapter 11 petition, the Company immediately sought preliminary court approval for a new $25.0 million debtor-in-possession financing facility provided by Fleet Capital Corporation. The new facility will provide an immediate source of funds to the Company, enabling it to satisfy the customary obligations associated with the daily operation of its business. "The decision to file Chapter 11 was difficult but necessary in order to protect our ability to meet our obligations to our customers," stated Walter V. Klemp, Chairman and Chief Executive Officer of Drypers Corporation. We are committed to providing our customers with superior products and high quality customer service. Protecting customer interests and providing them with premium quality, value-branded products has been and remains one of our top priorities." "It was a long hard battle to build the strong branded and private label business we now have in the US," Klemp continued. "The dedication of our people has been unwavering and this step finally clears the way to better match our financial structure with the business they have fought so hard to build." Drypers Corporation manufactures and markets premium quality disposable diapers, training pants and pre-moistened wipes under the Drypers(TM) brand and is a major provider of private label disposable baby diapers and training pants. Drypers Corporation is committed to the development of value brands and to building lasting global brand equity through product innovation and differentiation in a vital category. Headquartered in Houston, Texas, the Company operates in North America, Latin America, Southeast Asia, and other international markets. EAGLE FOOD: Moody's Assigns B2 Rating To $85 Mln 11% Senior Unsecured Notes --------------------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to the $85.0 million 11% senior unsecured notes due 2005 of Eagle Food Centers, Inc. The senior implied rating is B2, and the senior unsecured issuer rating is B2. The rating outlook is stable. Moody's had rated the debt of Eagle Food Centers prior to its February 29, 2000 Chapter 11 bankruptcy filing. The rating action follows the August 7, 2000 emergence of the company from bankruptcy protection. The company had filed for Chapter 11 protection after being unable to refinance the 8 5/8% $100 million senior unsecured notes due April 15, 2000. The pre-bankruptcy notes were exchanged for $85 million of post-bankruptcy replacement notes, $15 million in cash, and up to 15% of the company's common stock. The ratings reflect the company's leveraged financial condition when including adjustments for off balance sheet debt, the store concentration in rural Central and Northern Illinois and adjoining regions of Iowa, and the company's small size relative to efficient national supermarket chain competitors. The ratings also consider that, while the pace of competitive new store openings has slowed from 15 to 20 annually in recent years, we believe that larger supermarket competitors still intend to open at least 10 new stores per year within Eagle Food Centers' trade area. However, the ratings recognize the relatively modern condition of the company's post-bankruptcy store base (average of three years since construction or major remodel), the elimination of 20 lower performing stores as part of the reorganization plan, and the relatively short distance from the Milan, Illinois distribution center to the stores. The ratings also recognize that the company's stores are often the only convenient supermarkets for residents of some rural areas. All ratings recognize the simple organizational structure in which all debt is issued by the operating company; there is no holding company or significant operating subsidiaries. The B2 rating on the senior unsecured notes considers that the unsecured debt is effectively subordinate to other debt collateralized by specific company assets. The borrowing base for the unrated $40.0 million revolver is comprised of eligible inventory, while the bulk of the company's real estate has been sold and leased back to provide funds for further capital expenditures. However, we anticipate that the company will draw on the revolver only for temporary cash flow timing differences. Barring a significant setback, we believe that the senior unsecured notes would achieve full recovery in a distressed scenario. The stable rating outlook reflects our opinion that the company will be able to cover interest expense and capital expenditures from operating cash flow and that the company's post-bankruptcy store base will adequately confront strong competitive challenges. As part of the reorganization plan, the company closed 20 stores and rejected the associated leases. The closed stores, smaller, older, and less productive than the average Eagle Food Center store, did not generate significant store level profits. We believe that Eagle Food Centers can improve margins by maintaining the same absolute level of operating profit on a 15% revenue reduction. Going forward, we anticipate that moderate investments in capital expenditures, largely for remodels and replacement stores (in contrast to stores in new markets), will be partially offset by selling and leasing back the newly constructed stores. The environment in which the company operates continues to be intensely competitive. While competitors such as Hy-Vee, Wal-Mart Supercenters, Dominick's (Safeway), and Meijer have cut in half the number of new store openings in the company's trade area compared to recent years, we expect that the company will still face considerable challenges in responding to the larger and financially stronger competition. However, we believe that Eagle Food Centers has become more proficient in preparing for and combating a new competitive store in a particular market. In addition, a substantial fraction of the company's stores are in relatively isolated rural towns that will not support another full-service supermarket. Total debt fell to $124 million on July 29, 2000 versus $145 million on January 29, 2000 as the company paid down the senior unsecured notes by $15 million and rejected $10 million of store leases. For the twelve months ending July 29, pro-forma EBITDA (one-time reorganization charges added back) covered interest by 2.1 times and adjusted debt equaled 5.9 times EBITDAR. With slightly less debt, about the same level of cash flow, and resumption of standard vendor support, we anticipate debt protection ratios will approximate historical norms including interest coverage of 2.5 to 3.0 times and adjusted debt to EBITDAR of less than 5 times within the next 12 months. Eagle Food Centers, Inc., headquartered in Milan, Illinois, operates 64 supermarkets in Illinois and Iowa. EDWARDS THEATRES: Asks for More Time to Make Lease Disposition Decisions ------------------------------------------------------------------------ Edwards Theaters Circuit, Inc. and its debtor-affiliates seek an extension of the time to assume, assume and assign, or reject unexpired leases of non-residential real property. A hearing will be held on October 19, 2000 at 3:00 PM, US Bankruptcy Court, Central District of California, Santa Ana Division. The motion seeks an extension of time for the leases covering 63 parcels of real property upon which the debtors operate theatres and their corporate headquarters. Five parcels of real property are development projects in various stages of construction; and 2 parcels of real property that are used for non-theatre screen purposes. The debtors are requesting an additional six months, to and including April 23, 2001, to evaluate the leases and re-negotiate with the landlords of the leases. The debtors have been handling the pressing problems of obtaining authority to use cash collateral and meeting with their lenders and creditors' committee counsel to begin the process of presenting a plan of reorganization. The debtors are in the process of completing their 59 sets of schedules and statements of financial affairs, and have had to sort through a number of on-going legal and business issues. ELDER-BEERMAN: Revises Dutch Auction Purchase Price to $5.00 per Share ---------------------------------------------------------------------- The Elder-Beerman Stores Corp. (Nasdaq:EBSC) announced updated preliminary results of its self-tender offer, which expired at 12:00 midnight, New York City time, on Thursday October 5, 2000. Elder-Beerman commenced the tender offer on September 8, 2000 to purchase up to 3,333,333 shares of its common stock at a price between $4.50 and $6.00 per share, net to the seller in cash, without interest. Based on an updated preliminary count by the depositary for the tender offer, Elder-Beerman expects to purchase 3,333,333 shares at $5.00 per share from the shares tendered at or below $5.00. Elder-Beerman also expects to purchase an additional 129,285 shares, or approximately 0.9 percent of the outstanding shares, which is the maximum additional amount that may be purchased without amending or extending the tender offer. The total number of shares Elder-Beerman expects to purchase is 3,462,618 shares. Shares tendered at prices higher than $5.00 will be promptly returned. No proration of the shares tendered at or below $5.00 will be necessary. The actual number of shares to be purchased and the purchase price are subject to final confirmation and the proper delivery of all shares tendered and not withdrawn, including shares tendered pursuant to the guaranteed delivery procedure. Payment for shares accepted and return of all shares tendered but not accepted will occur as soon as practicable after determination of the number of shares properly tendered. After completion of the tender offer, Elder-Beerman will have approximately 11,210,068 shares of common stock outstanding. The dealer-manager for tender offer was Wasserstein Perella & Co. The nation's ninth largest independent department store chain, The Elder- Beerman Stores Corp. is headquartered in Dayton, Ohio and operates 62 department stores in Ohio, West Virginia, Indiana, Michigan, Illinois, Kentucky, Wisconsin and Pennsylvania. Elder-Beerman also operates two furniture superstores. Elder-Beerman has announced it will open a new concept store in Jasper, Indiana in November of 2000. FARMERS COOPERATIVE: Case Summary and 20 Largest Unsecured Creditors -------------------------------------------------------------------- Debtor: The Farmers Cooperative Association 2121 Moodie Road P.O. Box 687 Lawrence KS 66044-0687 Chapter 11 Petition Date: September 27, 2000 Court: District of Kansas Bankruptcy Case No.: 00-22385 Debtor's Counsel: John J. Cruciani, Esq. Lentz & Clark, P.A. 9260 Glenwood P.O. Box 12167 Overland Park, KS 66282-12167 (913) 648-0600 Total Assets: $ 10 Million Above Total Debts : $ 10 Million Above 20 Largest Unsecured Creditors: Jean A. Knipp Trust 23575 Sandusky Road Tonganoxic KS 66086 $ 363,909 Country Energy LLC $ 238,039 Arthur Queen $ 201,282 Carroll Eva $ 191,576 Burlington Northern and Santa Fe Railway Co $ 179,411 John and Judy Pierson $ 124,712 Richard Knabe $ 122,280 Winzer Bros $ 91,814 Edwin and Marcene Longanecker $ 90,055 David Badger $ 88,054 John Winchester $ 86,554 Country Energy $ 83,999 John and Faye Hadley $ 83,138 Robert Robe $ 78,359 Corporate Credit LLC $ 75,162 Llloyd Rissen $ 74,648 Ira Fausi $ 71,470 Ruth Stocbener $ 70,915 Wilbur or Curtis Wright $ 66,990 Agrilance LLC $ 65,227 GENESIS/MULTICARE: Enters Into Fund Calculation Agreement with Fireman's ------------------------------------------------------------------------ Prior to the commencement of the GHV Debtors' chapter 11 cases, Fireman's Fund Insurance Company provided workers compensation insurance coverage to Debtors Meridian Healthcare, inc., Meridian, Inc., Meridian Valley Limited Partnership, et. al., and Meridian Healthcare Growth and Income Fund Limited Partnership for the period September 1, 1987 through June 1, 1994. The Debtors tell the Court that the Policies are subject to a large deductible endorsement and retrospectively rated premium endorsement, which provide for periodic premium calculations and billings by FFIC. The Policies are subject to: * a Master Premium Financing Agreement, dated September 1, 1989; * a Security Agreement for Workers Compensation and Employers Liability Large Deductible Policy Provisions, dated September 1, 1991; and * a Security Agreement for Deductible Policy Provisions, dated as of September 1, 1992, as amended and supplemented; between Meridian Healthcare, Inc. and/or Meridian Inc. and Fireman's Fund Insurance Company or its named affiliates. The Financing Agreements specify the retrospectively rated premium cash flows or collateral requirements for the Policies. Under the terms of the Retro Endorsements, FFIC may continue to make premium calculations and billings until such time as the respective Debtors and FFIC agree that a certain premium calculation is the final calculation for the Policies. Pursuant to the Financing Agreements, Meridian furnished FEIC with a $1,000,000 letter of credit. After the Debtors commenced their chapter 11 cases, FFTC exercised its rights under the Financing Agreements to draw the entire balance of the $1,000,000 Letter of Credit. The Retro Programs Final Calculation Agreement The Debtors and FFTC have agreed that, as set forth in the Retro Programs Final Calculation Agreement dated August 30, 2000, upon the Insured's payment the Final Calculation Amount of $500,000, the retrospective premium calculations valued as of June 1, 2000 shall constitute the final calculation of the retrospective premiums under the Policies, and the insured will no longer be liable to FF1C for any further sums with respect to the Policies under the applicable Retro Endorsements and/or Financing Agreements. FFIC will (i) retain $342,296 in return premium due the Insured as of the March 1, 2000 valuation, and $157,704 of the $1,000,000 it previously drew on the Letter of Credit, and (ii) return the remaining proceeds of $842,296 to Mellon Bank, the issuer of the Letter of Credit, for the account of the Insured. The Debtors submit that the agreement is in the best interest of the Debtors and their estates. First, FFIC will no longer calculate any future annual adjustments of the Policies, and thus the Insured will not be obligated for any further amounts with respect to the Policies under the applicable Retro Endorsements and/or Financing Agreements. Second, the amount FFIC is retaining is marginal when compared to the amount of risk it is assuming because the Debtors concur that the estimated outstanding~liabilities under the Policies will be approximately $500,000 and FFIC will be assuming liabilities for the seven year period covered by the Policies for any amount in excess of $500,000. Third, with FFIC's return of $842,296, the Debtors will reduce the amount outstanding under their DIP Facility, which, in turn, will reduce interest of approximately $84,000. The Agreement covers insurance policies: KWP 80275760 09-01-87/88 KWP 80275776 09-01-87/88 KWP 80353404 09-01-88/89 KWP 80353405 09-01-88/89 KWP 80416779 09-01-89/90 KWP 80416781 09-01-89/90 KWP 80479469 09-01-90/91 KWP 80479471 09-01-90/91 KWP 80532373 09-01-91/92 KWP 80545199 09-01-91/92 KWP 80579208 09-01-92/93 KWP 80579210 09-01-92/93 KWP 80620210 09-01-93/06-01-94 Accordingly, the Debtors seek the Court's approval of the Final Calculation Agreement, including the retention of the Final Calculation Amount by FFIC, pursuant to section 363(b) of the Bankruptcy Code. (Genesis/Multicare Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) GRAHAM-FIELD: Committee Retains Houlihan Lokey as Financial Advisors -------------------------------------------------------------------- The Official Committee of Unsecured Creditors of Graham-Field Health Products, Inc. and its affiliated debtors seeks to retain Houlihan Lokey Howard & Zukin as financial consultants to the Official Committee of Unsecured Creditors. The Committee anticipates that Houlihan Lokey will provide financial advisory services to the Committee in connection with the following: a) Analyzing and reviewing the financial and operating statements of the debtors and their subsidiaries; b) Analyzing the business plans and forecasts of the debtors and their subsidiaries; c) Evaluating the assets and liabilities of the debtors and their subsidiaries; d) Providing such specific valuation analyses as the Committee may require in connection with the cases; e) Devising appropriate strategies to maximize the value to be received by the unsecured creditors in the debtors' cases; f) Assessing the financial issues and options concerning the debtors' plan of reorganization; g) Preparation, analysis and explanation of the plan to various constituencies; and h) providing testimony in court if necessary. The debtors shall pay Houlihan Lokey a cash fee of $80,000 per month together with out-of-pocket expenses. HARNISCHFEGER INDUSTRIES: What's a Debtors to do with Blank Claim Forms? ------------------------------------------------------------------------ Creditors and potential creditors not included in the Schedules of Assets and Liabilities filed by Harnischfeger Industries, Inc., were each sent a General Proof of Claim form with no pre-printed claim amount and every creditor listed on the Schedules was sent a Customized Proof of Claim with a pre-printed claim amount in accordance with the Schedules. Some creditors that received Customized Proofs of Claim merely signed and returned their proof of claim form without completing the rest of the form which requests the creditor to indicate the claim amount which may or may not be the same as the pre-printed amount. The Debtors believe that the creditors that filed Blank Claims, that is, those without the Additional Information, did so to indicate their agreement with the Scheduled Amount. Accordingly, the Debtors sought and obtained the Court's authority to treat each of the Blank Claims as if the claim had been filed in an amount equal to the scheduled amount. Altogether there are 122 such claims involving an amount of $1,184,147. The Debtors, however, expressly reserve their right to object to any of the claims on any grounds. (Harnischfeger Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) HEILIG-MEYERS: Asks Court to Approve Bidding Procedures for 302 Leases ---------------------------------------------------------------------- Heilig-Meyers Company and its debtor-affiliates seek approval of certain bidding procedures designed to allow bidding on certain leases subject to proposed sales at auctions calculated to procure the highest or otherwise best offers. On or about August 16, 2000, the debtors publicly announced their intention to close 302 of their store locations. Since such announcement, the debtors have, pursuant to the Going Out of Business Order, engaged the Liquidation Agents to sell off the merchandise at these locations. The Liquidation Agents will be closing the stores in stages upon completion of the GOB sales. To maximize the value of the leases for the debtors and their creditors, currently pending before the court is the debtors' application seeking authority to retain DJM Asset Management and Trammell Crow Company, as real estate agents to assist in marketing the leases. The debtors seek the right, upon selection of a Stalking-Horse Bid, if any, to offer, in consultation with the Creditors' Committee, such bidder protections. Specifically, the bidding procedures provide a break-up fee of up to 2% of the proposed purchase price received from the selected bid, payable only if the relevant Stalking Horse Bid is ultimately not the assignee of the leases as the result of approval of better/higher offers, and an expense reimbursement up to $100,000. The debtors also seek authority to reject those leases that are not sold. The debtors detail the procedures for anticipated bidding, and file with the court a sample agreement to be used in the event of a purchase. HOME HEALTH: Obtains Extension of Exclusive Period through January 29, 2001 --------------------------------------------------------------------------- By order entered on September 27, 2000 by Judge Mary F. Walrath, US Bankruptcy Court, District of Delaware, Home Health Corporation of America, Inc., et al. was granted an extension of the exclusive periods during which the debtors may file and solicit acceptances of a plan or plans of reorganization. The debtors are granted a further extension of time during which they have the exclusive right to file a plan or plans of reorganization through November 28, 2000; and the debtors are granted an extension of time to solicit acceptances of their plan or plans of reorganization through January 29, 2001. ICG COMMUNICATIONS: Wolf Haldenstein Files Securities Class Action Suit ----------------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP commenced a class action lawsuit in the United States District Court for the District of Colorado on behalf of all purchasers of ICG Communications, Inc. (NASDAQ: ICGX) securities during the period between December 20, 1999 and September 18, 2000. A copy of the complaint may be viewed on the firm's website at http://www.whafh.com. The Complaint alleges that ICG and its executives violated Sections 10(b) and 20 of the Securities Exchange Act of 1934 by issuing a series of false and misleading statements and/or failing to disclose information regarding, among other things, ICG's revenue growth and the Company's equipment failures and technical problems. It is further alleged that throughout the Class Period, the Company falsely portrayed ICG as a rapidly growing provider of communications services which had developed a stable and substantial customer base on the basis of its purportedly superior customer service. On September 18, 2000, ICG revealed to the market the Company's true financial condition. In sharp contrast to its prior representations, the Company announced that it had experienced serious customer service deficiencies, and that as a result, several customers had dramatically scaled back on their commitments with ICG and some were threatening to terminate their ties altogether. ICG further revealed that the Company expected to report EBITDA of $17 million for 2000, as compared to its own estimate of $105 million made a few weeks earlier. The following day, the Company further shocked the market when it announced the resignations of its Chief Executive Officer and two of its directors. Following these announcements, the price of ICG's common stock fell 96% from its Class Period high of $39.00. INVESTCORP: Fitch Affirms Long & Short Term BBB Rating With Neg. Outlook ------------------------------------------------------------------------ Fitch, the international rating agency, has affirmed Investcorp S.A.'s (ISA) long- and short-term ratings at 'BBB' and 'F2', respectively. At the same time, its ratings have been removed from Rating Watch Negative where they were placed on Aug. 31, 2000. Additionally, Fitch has assigned individual and support ratings of 'B/C' and '5', respectively to ISA. The long-term Outlook is Negative. These ratings apply to ISA, Investcorp Bank EC, Investcorp Capital Limited (ICL) and Investcorp Holdings LTD as ISA guarantees the bonds and private placement issued by ICL. ISA's ratings reflect its generally favorable track record as one of the leading private equity investors operating in the United States and Europe, demonstrated skills in placing investments with Arabian Gulf investors, moderate leverage targets, and access to on- and off-balance sheet liquidity. In addition, ISA's recent diversification effort focused on the development and expansion of its asset management capabilities, creating a source of more stable recurrent revenues. Fitch has embedded an expectation that growth in these fee-based revenues should assist in counterbalancing expected volatility elsewhere in the business given limited correlation with the core equity portfolio. Earnings for 2000, moreover, are projected to be only slightly below 1999 despite the company, in the first half of 2000, realizing a significant loss within its private equity investment portfolio. The loss was material relative to 1999 fiscal year-end earnings. While the present rating category recognizes that a certain degree of volatility is embedded within ISA's performance measures, the recent loss stemming from the equity investment portfolio underscored its higher risk profile relative to institutions of similar size and rating. This nevertheless, is offset to some degree by the firm's solid knowledge in key industry sectors as well as its appropriate risk management standards. Fitch recently adopted an outlook for its long-term ratings that is designed to provide an indication of the potential direction of the rating over a two-year time frame. In this case, the negative outlook results from ongoing concerns related to certain problem credits still held within the private equity portfolio, the dependence on performance of investments related to the telecommunications and technology industry and a decline in specific provisions relative to historic levels. An increase in earnings volatility could negatively impact ISA's financial flexibility going forward. While growth in fee-based revenues has been good, increased competition within the asset management arena with particular focus on high net worth individuals could prevent ISA from reaching the necessary scale to make this business line a meaningful source of recurrent revenue. LOEHMANN'S, INC: Reorganization Plan Confirmed & Emerges from Chapter 11 ------------------------------------------------------------------------ Loehmann's, Inc. announced that the Company has formally emerged from Chapter 11 bankruptcy protection. The Company's Second Amended Plan of Reorganization, which was filed on July 28, 2000 and confirmed by the U.S. Bankruptcy Court for the District of Delaware on September 6, 2000, set forth the terms for the Company's exit from Chapter 11 and will be effective immediately. The Company also announced that in conjunction with its Chapter 11 emergence, it has closed on a $75 million Senior Secured Exit Financing facility provided by Bankers Trust Company and arranged by Deutsche Banc Alex. Brown. In accordance with the terms of the approved Plan of Reorganization, the Company has formed a new holding company, Loehmann's Holdings, Inc. New common stock, along with Loehmann's Holdings Inc.'s new senior notes, will be distributed to the Company's creditors who have allowed claims in the Company's Chapter 11 case. Distributions of stock, notes and cash will depend on elections that were made by such eligible creditors. The Company expects to make these initial distributions in the near term. The Company's old common stock (OTC: LOEHQ) is being canceled and the holders of such stock will receive no distributions. Robert N. Friedman, Loehmann's Chairman and Chief Executive Officer, commented, "We are very pleased that we have reached this key milestone. Loehmann's successful emergence from Chapter 11 is a testament to the underlying strengths of the Company and is also largely attributable to the dedication of our management team and the support of our employees, vendors, and customers." Mr. Friedman concluded, "While a difficult process, this reorganization has enabled us to effectively move past a number of challenges and establish a strong foundation for solid performance and growth going forward. Looking ahead, we believe Loehmann's is positioned to be a stronger, more competitive company, and we are very excited about the future of our business." Loehmann's, Inc. is a leading specialty retailer of well known designer and brand name women's and men's fashion apparel, accessories and shoes at prices that are typically 30% to 65% below department store prices. Loehmann's operates 44 stores in major metropolitan markets located in 17 states. LOEWEN GROUP: Mercedes-Benz Credit Corporation Seeks Relief From Stay --------------------------------------------------------------------- Mercedes-Benz Credit Corporation tells the Court that Debtor Cusimano & Russo, Inc., an affiliate of Loewen Group International, Inc., purchased a 1995 Mercedes-Benz S420V in 1997 for the amount of $57,160 to be paid in equal monthly installments of $1,191 commencing September, 1997, but has failed to make payment since December, 1999. According to Mercedes-Benz Credit Corporation, the payoff on the account amounts to $24,523 plus interest at the rate of 9.75% per annum. The vehicle credit company tells the Court that the National Automobile Dealer's Association Official Guide places a wholesale value of $34,150 on the vehicle and a retail value of $38,200 as of May, 2000. Therefore, there is equity in the vehicle in excess of the vehicle credit company's lien, the company says. Mercedes- Benz Credit Corporation does not expressly state what action it desires to take. However, the company seeks relief from the automatic stay in connection with the matter. Mercedes-Benz Credit Corp. asserts that there is cause for granting such relief because Cusimano has failed to provide adequate protection of the company's security interest in the vehicle by failing to maintain monthly payments, and because the vehicle is unnecessary to an effective reorganization. (Loewen Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEVADA BOB: Golf Retailer Suffers Cash Squeeze & Considers Bankruptcy --------------------------------------------------------------------- Calgary-based golf retailer Nevada Bob's Canada Inc., Reuters reports, might consider seeking bankruptcy or selling its stores, if it can't secure financial support. Tony Loth will be assuming the role of CFO Allen Smith, who recently left that post. Nevada Bob's has considered selling its 80 stores to reduce debts and provide working capital. The company's total debts has exceeded its total assets by C$30 million ($20 million), and is in default of "certain loan covenants with its senior secured lender," the company related. Nevada Bob's said in a statement that it may "be forced to seek protection under the Companies' Creditors Arrangement Act in Canada and under Chapter 11 or Chapter 7 of the United States bankruptcy code." NSC CORPORATION: With No Assets Left, Seeks Dismissal of Chapter 11 ------------------------------------------------------------------- NSC Corporation, Dow Jones reports, which filed for Chapter 11 on July 17 asks the Manhattan Bankruptcy Court to dismiss its bankruptcy case now that it no longer has anything. During a hearing held on Aug. 22, lender Finova Capital Corp., which NSC owes $11 million, disallowed further use of its cash collateral and urged that the case to be converted to a Chapter 7 proceeding. NSC obtained authorization from the Manhattan court on Sept. 8 to dispose all contracts and projects and all of its equipment leases. NSC was also granted authority to sell personal property, but the proceeds derived from the sale were not divulged in the motion. NSC filed for Chapter 11 protection along with affiliates National Surface Cleaning Inc., National Service Cleaning Corp., NSC Energy Services Inc and Olshan Demolishing Management Inc. The bankruptcy filing posted assets of $37 million and liabilities of $34.6 million. NUTRAMAX PRODUCTS: Miza Pharmaceuticals Objects to Plan Confirmation -------------------------------------------------------------------- Miza Pharmaceuticals USA Inc., an unsecured creditor and party-in-interest, filed an objections to the first amended Chapter 11 plan of reorganization of Nutramax Products Inc., et al. Under the plan, Miza is classified as a member of Class 4, which includes all general unsecured creditors. Without including Miza's claims, the debtors estimate that the allowed claims in Class 4 would be approximately $11 million. The plan provides for $2.75 million in distributable cash for Class 4. Miza objects to broad releases to non-debtors, current officers, directors, agents and employees of the debtor. Miza states that the third party releases are invalid because thy are not supported by consideration. Miza also points out that the court does not have jurisdiction to approve the plan's nonconsensual third-party release provisions and the court does not have jurisdiction to approve the plan's third-party releases because they are not necessary to the reorganization. OWENS CORNING: Court Restrains Lenders from Attacking Foreign Entities ---------------------------------------------------------------------- Delaware Bankruptcy Judge Mary Walrath, Reuters reports, granted Owens Corning an emergency restraining order temporarily preventing its bank lenders from attacking 47 overseas affiliates not included in the bankruptcy filing. Judge Walrath was informed by attorney Charles Monk on how vital the affiliates were to Owens which, "play an important role in providing raw materials." "This order is designed to have the banks dealing with the non-debtor affiliates to stand still and not grab cash to set off claims against Owens Corning," Monk added. Vice president and treasurer Steven Strobel told Reuters that he was pleased with the agreement. PACIFICARE HEALTH: Announces 3Q Earnings Lower Than Analysts Expected --------------------------------------------------------------------- PacifiCare Health Systems, Inc. (Nasdaq: PHSY) announced that it expects to report results ranging from a loss of up to $0.10 per share to break-even for the quarter ended September 30, 2000, based on preliminary data showing higher-than-anticipated commercial and Medicare health care costs. These costs reflect the impact of providers operating under non-capitated agreements, and amounts incurred to improve network stability and maintain member continuity of care. For the quarter ended September 30, 1999, the company reported earnings of $1.54 per share. Shared-risk contracting conversions and provider instability are expected to continue at least for the remainder of the year. As a result, earnings per share for 2000 will not meet the company's expectations set forth in its previous public filings. Higher health care costs will decrease third quarter pretax earnings by $120-$130 million. As a result, the third quarter medical care ratio could range from 88-89 percent for the company's commercial business, and from 91-92 percent for Medicare. Medical claims and benefits payable reserves will be higher than previously expected. Unanticipated third quarter shared-risk costs reflect higher inpatient utilization and outpatient surgery and are estimated to range from $70-$75 million. Additionally, medical claims and benefits payable reserves will increase by approximately $25-$30 million for changes in estimates of medical expenses related principally to the quarter ended June 30, 2000 and prior periods. The company also expects to incur approximately $25 million in the current period for reserves for insolvent providers and the write- off of capitation advances, loans and other settlements. The company's experience year-to-date indicates that daily hospital costs under the new shared-risk arrangements are consistent with expectations. However, member utilization is considerably higher than in calendar year 1999 and the number of members covered by shared-risk hospital contracts has increased from more than 800,000 on December 31, 1999 to approximately 1.9 million as of today. The combination of these factors more than offset the ability of the company's increased medical staffing in 2000 to manage health care costs. The company's third quarter results will also be reduced due to an expected increase in the effective tax rate for 2000. Because earnings expectations have decreased, non-deductible goodwill amortization expense is expected to be a higher percentage of pretax income, causing the year-to-date tax rate to rise from 41.8 percent to approximately 44.1 percent. Looking ahead, the 2001 gross margin for PacifiCare's Medicare+Choice product is expected to decrease significantly compared with the year ended December 31, 2000. The medical care ratio for Medicare+Choice could increase from approximately 89 percent in 2000 to up to 93 percent in 2001, excluding the benefits of corrective actions relating to enrollment, network management and medical management. Current benefit reductions and increases in premiums, both from members and from the U.S. Health Care Financing Administration under the Balanced Budget Act of 1997 (BBA), as amended, are not expected to be sufficient to offset the health care costs under the evolving shared-risk delivery model for PacifiCare's nearly one million members. While legislation to partially restore Medicare+Choice reimbursement is under consideration in Congress, the company cannot assure that financial relief will be provided or legislation enacted. "Since current conditions are not at all reflective of PacifiCare's historical growth rate and targeted future growth, our new management team is undertaking a broad-reaching, in-depth analysis of these third quarter developments," said Robert W. O'Leary, PacifiCare president and chief executive officer. "While we are evaluating each of our businesses individually and in the context of their contribution to the whole, we are temporarily suspending new membership enrollment in our Medicare+ Choice program in selected markets. In evaluating our businesses, we will not act without thorough analysis and consideration of all constituencies, from customers to shareholders to employees. But when we do act, we will act decisively to bolster PacifiCare's strength and earnings power. "PacifiCare owns one of the best brands known to seniors, America's fastest growing population segment, and prides itself in providing valuable programs to four million members of all ages. Since the company's inception 25 years ago, PacifiCare has prevailed through a number of challenging periods, evolving into a substantial corporation generating more than $11 billion in annual revenue." The company will discuss this press release in a conference call for investors and other interested parties beginning at 9 a.m. Eastern time tomorrow, October 11th. To participate, dial (800) 230-1093 or (612) 332- 0107 to access the call. The call will also be broadcast live on the internet through PacifiCare's website at www.PacifiCare.com. Click on About the Company, go to the Investor Relations page and choose Conference Calls. Additionally, a replay of the call will be available beginning at 12:30 p.m. (Eastern time) on Wednesday through Friday, October 13, by calling (800) 475-6701. The company intends to announce third quarter financial results on November 9, 2000. PacifiCare Health Systems is one of the nation's largest health care services companies. Primary operations include managed care products for employer groups and Medicare beneficiaries in nine states and Guam serving approximately 4 million members. Other specialty products and operations include behavioral health services, life and health insurance, dental and vision services, pharmacy benefit management and Medicare+Choice management services. More information on PacifiCare Health Systems can be obtained at www.pacificare.com or by calling 1-877-PHS-STOCK. (1-877-747-7862). QUALITY VENEER: Sawmill Operator Files for Bankruptcy Protection ---------------------------------------------------------------- Quality Veneer & Lumber, The Associated Press reports, filed for bankruptcy protection under Chapter 11 on September 29. Tom Mayr, the lumber company's vice president did not return a phone call seeking inquiries about the filing. Quality Veneer owns three Mayrs Bros. sawmills in Hoquiam, Omak and Hood River, Oregon. Mayr Bros. was founded by Tom's father and uncle. "We just wish (Quality Veneer president) Stu Young or Tom Mayr would get a hold of us and at least communicate with us," said Dave Rux, business representative for Woodworkers Local Lodge W-2 of the International Association of Machinists. Quality Veneer bought the mills two years ago. Tom Mayr had aided Mayr Bros. through the previous Chapter 11 filing, and believed the deal would stabilize the mills. Now, all three mills has shut down and laid off all of its workers. "This is real bad for the community if they don't get back to work," Rux said. "The mill is shut down and I don't think anyone remains on payroll, including Tom Mayr." Further information on the filing was not available during press time. RECYCLING INDUSTRIES: Judge Brooks to Consider Disclosure Statement Oct. 23 --------------------------------------------------------------------------- On September 20, 2000, The Official Committee of Unsecured Creditors, an ad hoc group of certain former owners of the debtors' operations, and Credit Suisse First Boston Corporation and Commercial Company filed their second amended joint plan of reorganization and an accompanying Disclosure statement. A hearing will be held on October 23, 2000 at 10:00 AM before the Honorable Sidney B. Brooks in Courtroom E of the US Bankruptcy Court for the District of Colorado to consider the adequacy of the information contained in the Disclosure statement. Mark K. Thomas, Harley J. Goldstein of Katten Muchin Zavis, Chicago, Illinois and Craig A. Christensen and Shaun A. Christensen of Lindquist, Vennum & Christensen PLLP Denver, Colorado represent Recycling Industries, Inc. and its affiliated debtors. RITE AID: Announces Improved Store Sales and Earnings in Second Quarter ----------------------------------------------------------------------- Rite Aid Corporation (NYSE, PSE: RAD) announced unaudited financial results for the second quarter, ended August 26, 2000. All financial information presents PCS Health Systems, Rite Aid's former pharmacy benefits management subsidiary, as a discontinued operation. During the quarter, Rite Aid completed a significant refinancing of the Company, including reducing debt by $462.6 million; reached a definitive agreement to sell PCS; completed the restatement of its historical financial statements; increased same store sales by nearly 10 percent and improved earnings before interest, taxes, depreciation, amortization and non-recurring expenses (EBITDA) by 24.4 percent as compared to the prior quarter. The sale of PCS to Advance Paradigm, Inc. was completed on October 2. "We're very pleased with all that we've accomplished in the second quarter, and we continue to make good progress," said Bob Miller, Rite Aid chairman and chief executive officer. "We've seen a dramatic turnaround in same store sales, and as we've said previously, we see significant opportunity to improve cash flow in the coming quarters." Revenues for the 13-week quarter were $ 3.4 billion, up 7.4 percent from $3.2 billion in the same period a year ago. Same store sales increased 9.9 percent during the second quarter as compared to the year-ago period, reflecting prescription sales growth of 10.9 percent and an 8.5 percent increase in front-end same-store sales. Prescription revenue accounted for 59.3 percent of total drugstore sales, and third party prescription sales represented 90.0 percent of total pharmacy sales. In last year's second quarter, prescription revenue accounted for 58.8 percent of drugstore sales, and third party prescription revenue represented 87.6 percent of pharmacy sales. Interest expense for the quarter was $182.1 million, consisting of $144.2 million of interest on indebtedness and capital lease obligations and $37.9 million of non-cash interest related to the amortization of debt issue costs and accretion of interest on closed store and other reserves. Proforma cash interest expense for the quarter would have been $120.9 million, or $23.3 million lower, had the sale of PCS and the related $575.0 million paydown of debt, the refinancing activities of the Company and the debt for equity exchanges occurred at the beginning of the quarter. Second quarter EBITDA amounted to approximately $90.7 million or approximately $117.6 million when including PCS. This compares to EBITDA for the first quarter of this fiscal year of approximately $63.0 million or approximately $95.0 million when including PCS. Excluding PCS and a $12.3 million settlement from litigation with certain drug manufacturers, EBITDA improved 24.4 percent in the second quarter as compared to the first quarter of this fiscal year. Net loss from continuing operations for the second quarter was $425.0 million or a loss per diluted share of $1.87 compared to a net loss of $154.4 million or a loss per diluted share of $0.60 in the year-ago period. Including PCS as a discontinued operation, the Company reported a second quarter net loss of $456.5 million or a loss per diluted share of $1.97. Contributing to the net loss from continuing operations were non-cash charges of $210.6 million, including an $83.8 million loss related to the conversion of $462.6 million of the Company's debt into equity and other debt modifications, $77.2 million for impairment of the Company's investment in drugstore.com, $12.5 million representing the Company's share of drugstore.com's losses and $11.1 million for store closing and impairment; and a cash charge of $26.1 million related to the cost of restating the Company's historical financial statements. During the quarter, the Company opened one new drugstore, relocated 19 stores and closed 13 stores. Stores in operation at the end of the quarter totaled 3,767. The Company has revised the number of its planned new/relocated stores for fiscal 2001 from approximately 90 to approximately 75 new/relocated stores. Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of more than $14 billion and approximately 3,800 stores in 30 states and the District of Columbia. Rite Aid owns approximately 15 percent of drugstore.com, a leading online source for health, beauty and pharmacy products. Information about Rite Aid, including corporate background and press releases, is available through the company's website at www.riteaid.com. SAFETY-KLEEN: Judge Walsh Moves Hearing on Landfill's Plan to Oct. 17 --------------------------------------------------------------------- Judge Peter Walsh recently approved a "bridge order," which extends Safety- Kleen Corp.'s deadline for filing its reorganization plan until a hearing on Oct. 17, The Associated Press reports. The Columbia-based, waste management firm asks for six more months to restructure its finances. Safety-Kleen is asking for an extension through April 30, 2001. Safety-Kleen filed for bankruptcy protection on June 9, posting assets and liabilities of $ 4.5 billion and $ 3.1 billion respectively. The company which recently closed its landfill near Lake Marion, is still under investigation for accounting irregularities. SIGNAL APPAREL: Announces Corporate Officers Leaving Their Posts ---------------------------------------------------------------- Signal Apparel Company, Inc. (OTC BB:SIAY) announced that Michael Harary has resigned from his position as Executive Vice President of the Company and Zvi Ben-Haim has resigned from his position as President of the Company. In connection with their resignations, each of Mr. Ben-Haim and Mr. Harary has claimed certain rights and remedies under his respective Employment Agreement based on (i) an alleged "financing default" under the Asset Purchase Agreement pursuant to which the Company acquired the business and assets of Tahiti Apparel, Inc. from Messrs. Ben-Haim and Harary and one other shareholder in March 1999 and (ii) an alleged constructive termination by the Company. Mr. Harary has also resigned as a director of the Company. The Company also announced that Donald R. Rose has been elected to its Board of Directors. New York-based, Signal Apparel deals with sales and marketing apparel primarily to the retail trade. The company filed for Chapter 11 in New York on Sept. 22 having assets of $ 40.9 million and debts of $ 153.8 million. STEWART ENTERPRISES: Fitch Lowers Bank Facility & Senior Unsecured Ratings -------------------------------------------------------------------------- Fitch lowered the bank credit facility and senior unsecured ratings of Stewart Enterprises, Inc. to 'BB' from 'BBB-'. The Rating Outlook for Stewart Enterprises is Negative. The company has been removed from Rating Watch Negative where it was placed on July 14, 2000. In addition to the $600 million bank credit facility, debt securities affected include $100 million 6.7% notes due 2003 and $200 million 6.4% Remarketable Or Redeemable Securities (ROARS) due 2013. The rating action recognizes Stewart's position as the third largest funeral home and cemetery operator-with a broad franchise base focusing on various cluster markets in order to gain synergies and operating efficiencies. While management has been diligent in recent years in maintaining prudence in acquiring new companies, Stewart is competing in a highly difficult operating environment. With both of Stewart's larger competitors in the death care industry facing liquidity issues, Stewart's ability to raise capital via the equity markets has been curtailed. Issues surrounding the near term impact of SAB 101 have limited the company's ability to grow cemetery revenues and the company's operating margins are below historical levels. These events combined with a highly leveraged balance sheet more accurately reflect a 'BB' credit. Flat top line revenues combined with lower operating margins will likely bring EBITDA to roughly $230 million for fiscal-year 2000, slightly below last year's figure of $250 million. Nonetheless, Stewart's average interest costs of 6.7% should produce EBITDA/total interest expense of about 3.8 times (x) for 2000. However, interest expense will likely increase in the intermediate term as the company's current rates are extremely favorable and more indicative of an investment-grade company. Stewart is currently in a cash conservation mode whereby the company has ceased all acquisitions, is limiting capital expenditures and has suspended the payment of dividends. With a cash and marketable securities balance of approximately $90 million, Stewart has sufficient near-term liquidity given that the majority of its debt matures in 2002 and 2003. The company recently announced that it has entered into discussions about the sale of its European operations for an undisclosed sum. Proceeds will likely be used in conjunction with its cash balance to retire a portion of its $600 million revolving credit facility prior to its April 2002 maturity date. Fitch anticipates minimal cash flow impact from the sale of its European operations. STROUDS, INC: Great American Gets Okay to Liquidate Nine Stores --------------------------------------------------------------- A Joint Venture comprised of Great American Group and Gordon Brothers Retail Partners, LLC was approved by the U.S. Bankruptcy Court in Delaware to dispose of the inventory in 9 (nine) Strouds' locations. "We are pleased to have been chosen as the firm to help close these 9 Strouds' locations and assist the Company in its reorganization efforts." stated Brian Yellen, Vice-President, Great American Group. The liquidation sales at the 9 stores will start at once. List of locations: Rowland Heights, California Fresno, California Schaumburg, Illinois Roseville, Minnesota Vernon Hills, Illinois Reno, Nevada Skokie, Illinois Oakbrook, Illinois Santa Barbara, California SUN HEALTHCARE: Debtors Move to Divest 22 Underperforming Facilities -------------------------------------------------------------------- The Debtors have identified approximately 81 underperforming facilities which lose, in the aggregate, approximately $2,496,660 per month. These facilities must be disposed of, the Debtors say, because they represent a huge drain on economic resources which threatens the viability and vitality of SunHealth's businesses and reorganization. While the Debtors expect to be able to transfer more than 60 of the facilities as a going concern pursuant to the Court-approved Transfer Procedures described in the Government Stipulation arrived at after negotiations with HHS/DOJ, they have been unable to reach accord with the Health Care Capital Consolidated, Inc. (HCC), Landlord with respect to 18 of the Debtors' weakest facilities, and the Landlord of four additional underperforming facilities. Fifteen of these HCC Facilities constitute a substantial economic liability aggregating a negative EBITDA estimated to be in excess of $7.6 million over the twelve month period ending June 30, 2000. The other three facilities have operated with a positive EBITDA over the six months ending June 30, 2000 but their economic performance is only marginal. The Debtors have indicated to HCC their possible desire to retain the three marginal facilities but HCC has rejected that notion, based on the existence of certain cross-default provisions contained in the HCC Leases. The Debtors have determined that since the marginal facilities give no guarantee of continued economic viability, it is not worthwhile to litigate the issue of whether the cross-default provisions actually prevent the Debtors' assumption of individual HCC Leases while rejecting others. Therefore, the Debtors have determined to reject the Leases and Provider Agreements associated with all 18 of the HCC Facilities, and commence the Transition Process for those HCC Facilities. Of the remaining four underperforming facilities, two are leased from Beverly Enterprises and the other two each from Ventas Realty, LP and University Center Hotel, Inc. These four together result in negative EBITDA of approximately $3,309,261 accrued during the twelve months ending June 30, 2000. For the same reasons as with the HCC Facilities, the Debtors have determined that, these too, should be disposed of through the rejection of leasess and Provider Agreements. Through lease termination and the cessation of operational and financial responsibility, the Debtors expect to realize annual savings of approximately $10,401,055. The landlords' rejection claims subject to the limitations provided by section 502(b)(6) of the Bankruptcy Code, in the Debtors' estimation would be in excess of $30 milllion, in the absence of mitigation, based on 15% of the rental obligations remaining under the leases, not exceeding three years of the remaining term following the petition date. The Debtors do not anticipate rejection damages for rejecting the Medicare Provider Agreements, given that the Government Stipulation contemplates divestiture of these particular Divesting Facilities. Much as they would prefer to transfer facilities as going concerns, the Debtors tell Judge Walrath, they recognize that landlords are not required to enter into OTAs and LTAs. Indeed, HCC has previously asserted in court that it does not wish to, and it is HCC's prerogative not to, enter into the Debtors' proposed froms of OTAs or LTAs. After consultation with the Creditors' Committee, the Debtors do not believe it would be a responsible exercise of sound business judgment to enter into OTAs and LTAs on terms that are substantially more onerous than those agreed to by numerous other landlords. Therefore, in the Debtors' business judgment, the way to stop the drain on the estates' value would be to reject the leases and provider agreements. To divest the Facilities, the Debtors also seek approval of the Implementation Procedures which provide that: (1) Each Divesting Facility will be subject to divest in accordance with applicable state laws; (2) Within three days of the completion of divestiture of a Divesting Facility, the Debtors will file with the Court and provide the Transition Notice to the Committee, the DIP Lenders, the landlord, HHS/DOJ and the relevant state Medicaid agency of the completion of the state-law Transition Process (the Transition Date); (3) The rejection of Lease or Provider Agreement will be effective as of the Transition Date; (4) The landlord or state Medicaid agency will have thirty days from the date of the Transition Notice for submitting rejection damages claim(s); (5) Rent and other obligations accrued from the date the Court approves the motion to the Transition Date shall be treated as administrative expense, payable on the effective date of any plan of reorganization confirmed in the chapter 11 cases; (6) If the Debtors and the landlord agree on the transfer of a Divesting Facility as a going concern during the state-law transition process, the Debtors can opt out of the Transition Procedures. The Debtors draw Judge Walrath's attention to the opt-out provision in the Implementation Procedures the provision for the effective date for the rejection of the lease or provider agreement to be on the Transition Date. The opt-out mechanism enables the Debtors to transfer a Divesting Facility, upon the consent of the landlord, if a new operator is identified during the Transition Process, the Debtors submit. It also gives the Debtors an added window of opportunity to negotiate with the landlords regarding consensual transfer of the Divesting Facilities on economic terms that are beneficial to the Debtors, their estates and their creditors, the Debtors tell the Judge. With the effective date of the rejection of the Leases and Provider Agreements to be of the actual date of divestiture of the facilities, the Debtors can maintain operations for the benefit of the residents in the Divesting Facilities, the Debtors observe. The Debtors submit that the determination to reject the Leases and Provider Agreements and commence the Transition Process was arrived at in good faith, is based upon the sound business judgment of the Debtors, and should therefore be approved and authorized by this Court. The Debtors believe that establishing the Implementation Procedures are in the best interests of the Debtors, their estates and their creditors. Accordingly, the Debtors seek the Court's approval of: (1) the divestiture of 22 of the SunHealth Facilities in accordance with state law; (2) the rejection of the related real property leases and the Medicare and Medicaid Provider Agreements, effective as of the date of divestiture, pursuant to 11 U.S.C. section 365(a); and (3) the Implementation Procedures governing the transfer of the divesting facilities and the treatment of claims in connection with the divestiture, pursuant to section 363(b). Americorp Financial's Limited Objection Americorp Financial filed a limited objection with the Court voicing its objection to the extent that the Debtors have not specified whether they intend to retrieve equipment in the facilities and whether any of such equipment is Americorp's equipment. Americorp reminds the Court that the status of Americorp's interest in the equipment is an issue that need to be taken care of. (Sun Healthcare Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) TEXFI INDUSTRIES: Requests Exclusivity Extension through February 9 ------------------------------------------------------------------- Texfi Industries, Inc., seeks an extension of its exclusive periods to file a plan of reorganization and to solicit acceptances thereof through and including February 9, 2001 and April 10, 2001, respectively. The debtor, represented by Stephen B. Selbst and Barbra R. Funt of McDermott, Will & Emery, states that is has shown sufficient "cause" warranting the requested 120-day extension of its exclusivity periods, and is continuing to make significant progress in its Chapter 11 case. The debtor retained Atlas Partners, LLC as special real estate agent and Hart Corporation and Coldwell Banker as special marketing agents for the debtor. They are currently assisting the debtor in the sale of its real property in Fayetteville, North Carolina and Olanta, South Carolina. The debtor sold certain timber property at auction and substantial amount of unused equipment located at its Fayetteville plant. The proceeds of these sales have been used to pay down debtor's outstanding obligations under its term loan from Back Bay Capital LLC, which has a first priority security interest and lien in debtor's real estate, machinery and equipment. The debtor also awaits approval of its CIT Financing, post-petition financing. The debtor is seeking to extend exclusivity so that it may achieve confirmation of a consensual plan. It has made a concerted effort throughout its proceedings to maintain an open dialogue with he principal constituencies, cooperate with them, and to respond to any concerns that they may have. The debtor's post-petition earnings are 197% of those forecasted pre- petition and debtor is current on all of its post-petition obligations. The debtor continues to explore alternative strategic partners and alliances regarding a plan. VENCOR, INC.: Agreed to Modify Stay to Liquidate Claim & Pursue Insurance ------------------------------------------------------------------------- The Debtors consent to modification of the automatic stay to permit the plaintiff to prosecute her claims against the Debtors to final judgment in the action captioned, Rosetta Angelita Simon v. Alta Vista Health Care, et al., Case No. 342772 in the Superior Court of the State of California for the County of Riverside. The Debtors have determined that there is an insurance policy in favor of the Debtors relating to the allegations made by the plaintiff. The lift of automatic stay is limited to the sole purpose of determining all issues of liability and damages, if any, against the Debtors. Any settlement of recovery is limited to applicable insurance proceeds. The Debtors do not consent to any further distribution from the Debtors' estates on account of the judgment that may be entered, or to any collection from the Debtors or the Debtors' current and former employees, directors and officers. The plaintiff waives any and all claims for punitive damages and for recovery against Vencor and their present or former employees, officers and directors, any person or entity indemnified by the Debtors, and the Debtors' insurers. The Debtors agree that any settlement of the underlying action will include a general release of the plaintiff. (Vencor Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency-related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles available from Amazon.com -- go to http://www.amazon.com/exec/obidos/ASIN/189312214X/internetbankrupt-- or through your local bookstore. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* 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, Ronald Ladia, Zenar Andal, and Grace Samson, Editors. Copyright 2000. All rights reserved. ISSN 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. 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