/raid1/www/Hosts/bankrupt/TCR_Public/010202.MBX
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, February 2, 2001, Vol. 5, No. 24
Headlines
AMAZON.COM: Two Years and Counting . . . Downward
APPLIED MAGNETICS: Looks For New Public Accountant
BETHLEHEM STEEL: May Not be Able to Maintain Net Worth Covenant
BETHLEHEM STEEL: Moody's Junks Senior Unsecured Debt Ratings
CAREMATRIX CORP.: Proposes Employee Retention Program
CAVION TECHNOLOGIES: Liberty Strikes Deal with Major Suppliers
CERPLEX GROUP: Converts Bankruptcy Cases to Chapter 7 Liquidation
CHIQUITA BRANDS: Hires James B. Riley As New VP & CFO
CLARIDGE CASINO: Gaming Regulators Approve Ichan's Park Place Bid
COMPLETE MANAGEMENT: Disclosure Statement Hearing Set for Feb. 16
DOW CORNING: Reports Year-End Financial Results
DRUG EMPORIUM: Receives Management Offer for California Stores
FINOVA CAPITAL: Fitch Lowers Senior Debt To CC
GENESIS HEALTH: Obtains Court Approval of Cardinal Stipulation
GORGES HOLDING: Asks for Extension of 365(d)(4) Period to May 3
JACOM COMPUTER: Wants Until Apr. 30 to Make Lease Decisions
KCS ENERGY: Delaware Court Confirms Debtors' Chapter 11 Plan
KEVCO, INC.: Considering Bankruptcy Protection
LERNOUT & HAUSPIE: Committee Taps BDO Seidman as Accountants
LERNOUT & HAUSPIE: Belgian Court Fixes Feb. 8 Claims Bar Date
LTV CORPORATION: Hires Jones Day as Lead Reorganization Counsel
OWENS CORNING: Employs Lazard Freres As Investments Bankers
OXFORD HEALTH: Texas Pacific Recapitalization Deal Completed
PACIFIC GAS: Independent Audit Says Utility Will Go Broke
REGAL CINEMAS: Jay Alix & Houlihan Continue Turnaround Efforts
RELIANCE GROUP: Icahn's Tender Offer for 9% Notes Expires Today
REVLON, INC.: Secures Amendments to Chase-Led Bank Facility
SEAJETS INC.: Files for Chapter 11 Protection in West Palm Beach
SEGA CORPORATION: Moody's Downgrades Debt Ratings to B3
SHOPKO STORES: Outlines Store Closing & Downsizing Plan
SILVER CINEMAS: Madstone Films Signals $38 Million Bid
SUN HEALTHCARE: Sells Subsidiary To Medline for $6MM
TENNECO AUTOMOTIVE: To Reduce Worldwide Salaried Work Force
TITAN MOTORCYCLE: Appoints New Directors To Board
TOYSMART: Judge Says e-Tailer Can Destroy Customer List
TRANS WORLD: DOT Okays Frequent Flyer Plan With AMR
TUT SYSTEMS: Broadband Company's Revenues Falls & Will Cut Jobs
VANGUARD AIRLINES: J.F. Shea Now Holds 47.11% Of Common Stock
VANGUARD AIRLINES: Hambrecht Trust Owns 50.1% Of Common Stock
VENCOR, INC.: Agrees To Modify Stay For Insured Litigation Claim
W.R. GRACE: Fitch Downgrades Senior Unsecured Debt Rating To CCC
BOOK REVIEW: GOING FOR BROKE: How Robert Campeau Bankrupted the
Retail Industry, Jolted the Junk Bond Market, and
Brought the Booming 80s to a Crashing Halt
*********
AMAZON.COM: Two Years and Counting . . . Downward
-------------------------------------------------
It's getting uglier quarter-by-quarter. Amazon.com, Inc.,
released its pro forma financial results for the fourth quarter
and year ending December 31, 2000 this week, disclosing a $545
million fourth-quarter GAAP net loss. The Company's pro forma
balance sheet speaks for itself:
AMAZON.COM, INC.
Abridged Unaudited Balance Sheet
At December 31, 2000
ASSETS
Current assets $ 1,361,129,000
Non-Current assets 774,040,000
---------------
Total assets $ 2,135,169,000
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities $ 974,956,000
Long-term debt 2,127,464,000
Stockholders' deficit (967,251,000)
---------------
Total liabilities and deficit $ 2,135,169,000
===============
Amazon's liabilities first outpaced assets when the Company
reported last-quarter's results in October 1999. Liabilities now
exceed assets by nearly $1 billion. Moody's Investors Service
and Standard & Poor's assigned their junk rating to Amazon's
public debt nearly a year ago. This week, Amazon's 4.750% Notes
due 2009 trade at 47 to 49 cents-on-the-dollar.
Amazon continues to project losses in 2001. To contain those
losses, Amazon says that it is planning a "reduction in its
corporate staffing and a consolidation of its distribution and
customer service center network, resulting in the closure of a
distribution center in McDonough, Georgia, and a customer service
center in Seattle, Washington. The company's Seattle
distribution center will be operated seasonally. This
restructuring reduces staffing by approximately 15% of
Amazon.com's overall workforce, or 1,300 jobs, and will result in
a charge in excess of $150 million in the first half of 2001. In
addition to a standard severance package, the company has
established a trust fund of Amazon.com stock to be distributed to
affected employees in 2003."
"That stock to be distributed to these 1,300 employees in 2003
will be worth very little, "opines Steven L. Gidumal, Managing
Director for Rediscovered Opportunities Fund in New York City
(sgidumal@hbvllc.com). Mr. Gidumal looked at Amazon from every
financial and operational angle imaginable last year and
concludes that Amazon won't exist on a stand-alone basis by
2003.
"Amazon has been underpricing their product for years. They're
now faced with having to move up the price elasticity curve
in order to generate profits, which few (if any) companies in
American history have done. Therefore with higher prices," Mr.
Gidumal explains, "revenue growth will unquestionably slow,
altering downward investors price estimates. At a growth rate
of 15% per year -- well above average for a normal book and
music business -- the value of Amazon shares will be $1 to $2
per share," Mr. Gidumal argues.
APPLIED MAGNETICS: Looks For New Public Accountant
--------------------------------------------------
On December 4, 2000, Arthur Andersen LLP resigned as auditors of
Applied Magnetics Corporation.
The report of Arthur Andersen LLP for the fiscal year ended
October 3, 1998 was modified as to uncertainty regarding the
ability of the company to continue as a going concern. Arthur
Anderson LLP did not issue an audit opinion on the financial
statements as of and for the fiscal year ended October 2, 1999.
The company is currently in the process of searching for a new
independent public accountant.
BETHLEHEM STEEL: May Not be Able to Maintain Net Worth Covenant
---------------------------------------------------------------
Bethlehem Steel Corporation (NYSE: BS) reported a net loss for
the fourth quarter of 2000 of $118 million on sales of $905
million and shipments of 1,877,000 tons. The fourth quarter
results include a charge of $6 million, or $5 million after-tax,
in connection with closing the slab mill at the Burns Harbor
Division. Excluding this charge, Bethlehem's net loss for the
quarter was $113 million. This compares with a net loss of $38
million on sales of $1.1 billion and shipments of 2,196,000 tons
for the fourth quarter of 1999.
For the year 2000, Bethlehem's net loss was $118 million compared
with a net loss of $183 million in 1999. Included in year 2000
results were net unusual gains of $21 million, or $17 million
after-tax. Excluding these net unusual gains, the net loss for
the year was $135 million. The net unusual gains resulted from
Metropolitan Life Insurance Company's conversion from a mutual
company owned by its policyholders to a publicly held company,
and from the sale of Bethlehem's equity interest in Presque Isle,
a limestone producer, partially offset by the $5 million after-
tax charge for the closing of the slab mill mentioned previously.
For 2000, sales were $4.2 billion compared with $4.1 billion for
1999 and shipments were 8,546,000 tons compared with 8,416,000
tons for 1999.
Duane R. Dunham, Bethlehem's Chairman, President and Chief
Executive Officer, said, "This past year has clearly been a very
difficult one for the steel industry and for Bethlehem. The
worldwide oversupply of steel has forced down prices, shipments
and profitability. Our results were also negatively affected by
sharp increases in natural gas prices and expenses for pensions,
retiree health care and life insurance. We realize that bold
actions are required to compete in this very difficult business
environment and are committed to pursuing any and all appropriate
actions to increase the value of Bethlehem for its stockholders.
"During 2000, we continued to make progress in several areas. At
our Sparrows Point Division, a new, state-of-the-art continuous
cold-rolling mill complex replaced two aging cold mills. This new
facility will allow Sparrows Point to improve both its customer
and product mix at significantly lower costs compared to its
older cold mill facilities that have now been shut down. Our
Columbus Coatings Company joint venture started production in
November and is in the final phases of its startup and
qualification of its galvanized steel products for use by our
automotive customers. Our BethNova Tube joint venture broke
ground in the third quarter and when completed will provide
automakers and their suppliers with a high quality source of
tubing for hydroforming applications. I am also proud that our
Burns Harbor Division was selected for General Motors' Supplier
of the Year Award for the fifth consecutive year. To further
reduce costs and better utilize our operating facilities, our
Bethlehem Lukens Plate Division was consolidated into our Burns
Harbor and Sparrows Point Divisions, and ingot teeming and slab
mill operations were discontinued at our Burns Harbor Division.
In addition, we have nearly completed a 15% work force reduction
that was initiated in 1999. We have continued to reduce our cost
structure and enhance our capability to better serve our
customers in the demanding, high quality markets for steel.
"Despite this difficult business environment, we recorded our
best ever environmental performance in 2000 and, for the fourth
consecutive year, set new records for improved safety performance
in the area of total and OSHA recordable injuries."
Operating Results
Our loss from operations was $122 million for the fourth quarter
of 2000. Excluding the charge related to the closing of the slab
mill discussed above, our loss from operations was $116 million
compared with a loss from operations of $35 million for the
fourth quarter of 1999. The decrease in our operating results was
principally due to lower shipments and higher costs. Shipments
during the fourth quarter dropped about 15%, or 320,000 tons,
from last year's level due to the near record levels of unfair
and injurious steel imports, the resulting relatively high levels
of customer inventories and a slowing economy. Costs per ton
shipped were higher principally due to rising energy costs,
especially natural gas, the impact of lower production volumes
and start-up costs associated with our new continuous cold-
rolling mill complex at Sparrows Point. Also included in the
fourth quarter 2000 results was a credit of $3 million to the $10
million charge recorded in the third quarter as a result of a
fire at our plate facility located in Coatesville, Pennsylvania.
Our loss from operations for 2000 was $75 million. Excluding the
unusual net gains discussed above, our loss from operations was
$96 million compared with a loss of $179 million in 1999. This
improvement resulted primarily from lower costs. Our costs were
lower because of the numerous cost reduction initiatives under
way throughout the company and the absence of about $70 million
of costs incurred in 1999 related to the blast furnace reline and
other planned modernization and maintenance outages at our
Sparrows Point Division. These lower costs were partially offset
by higher pension and other retirement benefit costs, higher
energy costs, principally natural gas, start- up costs at our
Sparrows Point cold-rolling mill and a $7 million loss resulting
from the fire mentioned above.
The $116 million loss from operations, excluding the unusual
items, for the fourth quarter of 2000 compares with a loss from
operations of $24 million for the third quarter of 2000. Sales
declined by about $100 million as a result of about 170,000 tons
of lower shipments and a 2-1/2% decline in average realized steel
prices. Our costs per ton shipped were also higher principally
due to the impact of lower production levels in our finishing
operations.
Liquidity and Cash Flow
At December 31, 2000, our liquidity, comprising cash, cash
equivalents, and funds available under our bank credit
arrangements, totaled $315 million compared with $334 million at
December 31, 1999.
For 2000, cash provided from operating activities was $288
million compared with $217 million in 1999. Other major sources
of cash included new borrowings of $132 million and asset sales,
including sale-leaseback transactions, of $128 million. New
borrowings included about $60 million from our inventory credit
agreement and $50 million from the refinancing of the $60 million
construction loan for equipment at our Sparrows Point cold-
rolling mill. Sale-leaseback transactions totaled $78 million,
including $50 million for the new wide continuous slab casting
equipment at Sparrows Point and $28 million for a lake vessel
that transports iron ore to our Burns Harbor Division. Additional
sources of cash included the proceeds from the Metropolitan Life
Insurance conversion and the sale of Presque Isle. Principal uses
of cash during 2000 included capital expenditures of about $225
million and debt repayments.
Our secured inventory credit agreement contains a covenant that
requires us to maintain a minimum adjusted consolidated tangible
net worth. Certain other financing arrangements contain, or
require compliance with, this covenant. At December 31, 2000,
our adjusted consolidated tangible net worth exceeded that
requirement by about $140 million. Given the current difficult
conditions in the domestic steel industry, there is a risk that
we will not be able to continue to comply with this covenant
throughout 2001. Failure to continue complying with this
covenant could accelerate the maturity of a material amount of
our total debt and financing arrangements. We are, therefore,
aggressively reducing costs and taking other actions to remain in
compliance with this covenant. We are discussing potential
changes to our secured credit agreement and pursuing other
alternatives for improving our liquidity and financial
flexibility.
The intensely competitive environment faced by steel producers in
North America over the past couple of years has caused several
steel companies to seek protection under Chapter 11 of the
bankruptcy code. During December 2000, The LTV Corporation filed
for Chapter 11 bankruptcy protection. LTV is our partner in
several joint ventures, including Columbus Coatings Company
(CCC). CCC is in the final phases of its startup and
qualification of its products for use by our automotive
customers. Its construction costs were financed in part with a
loan under a 1999 agreement that contains a long-term sale and
leaseback during 2001. The full amount of the construction loan
was guaranteed by both Bethlehem and LTV. Due to LTV's
bankruptcy, the lenders are not obligated to make any further
construction loan advances, and they have the right to seek
repayment of the entire construction loan, currently totaling
approximately $116 million. We are currently in discussions with
the CCC lenders to resolve this issue.
In January, we filed a motion with the LTV bankruptcy court
asking it to permit us to exercise certain buyout rights
contained in the CCC joint venture agreement or require LTV to
assume all its obligations under the joint venture and financing
arrangements. The long-term sale and leaseback of the line will
depend on the resolution of these issues.
For the year 2001, we currently expect our major sources of cash
to be primarily from operating activities, including inventory
reductions, and from asset sales. Major uses of cash are expected
to be capital expenditures of about $150 million, debt maturities
of about $55 million and preferred dividend payments of about $40
million. Currently, we expect to maintain adequate liquidity to
meet our current obligations and fund operating requirements.
Outlook
Even though U.S. economic growth is slowing, we continue to
believe that the U.S. will have moderate growth and low inflation
this year. Also, we believe that domestic industry steel
shipments in 2001 will be slightly lower than the estimated 109
million tons shipped in 2000. We continue to be concerned about
the high levels of unfairly traded steel imports which entered
our markets in 2000 in quantities second only to the record
levels experienced in 1998. We believe that imports in 2001 will
be somewhat lower than 2000 levels given the recent favorable
trade case rulings involving hot-rolled sheet products and the
extremely low current market prices for steel.
Currently, steel market conditions remain very competitive
reflecting the slowing economy and, in particular, recent and
planned production cuts by the auto industry aimed at reducing
excess vehicle inventories. Customer inventories, especially at
steel service centers, continue to be at relatively high levels
but they have come down somewhat in recent months. In addition,
energy prices are expected to be higher in 2001 compared with
last year. For the first quarter 2001, we currently expect to
report a loss somewhat lower than the fourth quarter 2000.
However, we currently believe that market conditions will begin
to improve in the near term and, as a result, we have announced
sheet price increases effective with deliveries commencing March
1, 2001.
BETHLEHEM STEEL: Moody's Junks Senior Unsecured Debt Ratings
------------------------------------------------------------
Moody's Investors Service lowered the ratings of Bethlehem Steel
Corporation as follows:
* Inventory secured bank credit agreement to B2 from Ba3,
* Senior implied rating to B3 from B1
* Senior unsecured debentures and notes (including assumed
obligations of Lukens, Inc.) to Caa1 from B2.
The preferred stock rating is confirmed at "caa".
The rating outlook is negative.
According to Moody's, the ratings action is due to rising
concerns about the deterioration of steel market conditions and
the consequent impact on operating performance and debt
protection measurements.
The downgrade also considers the limited potential for a near-
term recovery in steel prices, and the prospect that, with the
continuation of current performance trends, the company could be
challenged to remain in compliance with bank loan covenants over
the coming quarters, Moody's says.
Bethlehem Steel Corporation, based in Bethlehem, Pennsylvania, is
the second largest U.S. steel producer.
CAREMATRIX CORP.: Proposes Employee Retention Program
-----------------------------------------------------
Carematrix Corporation, et al., asks for court authority to
implement an employee retention program for certain management
and key employees. A hearing on the Debtors' Motion will be held
before the Honorable Peter J. Walsh, on February 8, 2001 at 4:00
PM.
Attorneys for the debtors are Michael R. Lastowski (Delaware) and
Paul D. Moore (Massachusetts) of the firm Duane, Morris &
Heckscher LLP.
The plan provides for a retention bonus amount, periodic bonus
amount, severance and emergence bonus for senior management,
middle management and non-management. The debtors do not provide
an estimated total cost of the program in the motion.
CAVION TECHNOLOGIES: Liberty Strikes Deal with Major Suppliers
--------------------------------------------------------------
Liberty Enterprises announced it has agreed to terms with two
major service providers as it continues its efforts to acquire
Cavion Technologies, Inc.
Convergent Communications Services, Inc. and Data Sales Company,
Inc., two of Cavion's most important business partners, have
pledged to continue their service commitment, under proposed new
agreements, if Liberty's acquisition efforts are successful.
Liberty's acquisition decision is expected within the next week.
Liberty, the credit union movement's leading provider of payment
systems, marketing services and technology solutions, has already
signed a letter of intent to purchase the assets of Cavion. Terms
of the agreement have been filed with the U.S. Bankruptcy Court
for the District of Colorado, Denver. Cavion filed for Chapter
11 bankruptcy protection on Dec. 21, 2000.
"We're encouraged by the response of these two important
providers as we move forward with our acquisition efforts," said
Robert D. Anderson, president & CEO of Liberty Enterprises. "The
terms of our new tentative agreements would allow us to remain
committed to credit union service agreements, while at the same
time helping us reach our acquisition goals of positive cash flow
and break-even operating income."
Convergent Communications, Inc. (Nasdaq: CONV), through its
wholly owned subsidiary, Convergent Communications Services,
Inc., is a leading broadband networking and Web services provider
with full-service communications capabilities. The company
specializes in delivering communications, networking and Internet
solutions. Convergent Communications operates a nationwide,
Cisco-based communications network and provided Cavion with
broadband and Web services and computer equipment. Under the
terms of the proposed agreement the company would provide Liberty
and its 5,000 credit union customers with broadband circuits,
network monitoring, and Web security services.
"Our managed service capabilities for broadband network, Web, and
data equipment integration complement the solutions that Liberty
Enterprises will offer these credit union clients moving
forward," said Joe Zell, president and CEO of Convergent
Communications. "We are encouraged with Liberty's acquisition
initiatives and we will work closely with them to create a smooth
transition for our customers."
Data Sales Company, headquartered in Burnsville, Minn., is a full
service dealer of business-essential equipment. Data Sales leased
computer equipment to Cavion. The company emphasizes that its
customers stay ahead of the high-tech curve with the necessary
equipment, while growing their business without taxing cash flow.
"We are pleased to have reached an agreement with Liberty as it
proceeds with efforts to acquire Cavion," said Paul Breckner,
vice president of Data Sales. "We have been impressed with
Liberty's competence and commitment to deploy this suite of
Internet products and services to its expansive (credit union)
customer base."
Liberty's acquisition decision will be based on Cavion customer
response and commitment to new, three-year contracts by Jan. 31.
The letter of intent allows Liberty to withdraw its bid to
purchase if customer response does not meet Liberty's goals. As
of today, Liberty has reached tentative agreement with more than
60 of Cavion's more than 200 credit union customers, with more
commitments expected soon. Liberty's goal is 50 percent retention
of Cavion's credit union partners. If the goal is reached,
Liberty will seek acquisition approval by mid-February from the
bankruptcy court with which Cavion has filed for Chapter 11
protection.
"We're hopeful but still have some significant distance to go,"
said Anderson. "We certainly have been impressed with the credit
unions' positive responses thus far."
Cavion offers secure Internet financial products and services
designed specifically for credit unions. An agreement would
expand Liberty's offerings to include Cavion's security-focused
private network for credit unions, CUiNET, and its Internet
banking platform, CUiBanking, and its Members Emporium Internet
service.
The sale of Cavion would make the company part of Liberty, a 15-
year-old private, employee- and family-owned company with 920
employees. Liberty serves 5,000 credit unions in all 50 states,
Guam and Puerto Rico.
Liberty partners with 5,000 credit unions in all 50 states, Guam
and Puerto Rico. Liberty's core product is the check, still
consumers' leading financial transaction vehicle. The company is
the credit union movement's leading provider of payment systems
(checks, card services, financial supplies), marketing services
(database marketing, creative services, outsource marketing,
market research) and technology solutions (data processing, Web-
site development and hosting, Internet banking). Liberty is
headquartered in Mounds View, Minn., a suburb of Minneapolis-St.
Paul. The company has also established marketing centers in Los
Angeles, St. Louis, Minneapolis and Hartford, Conn.
Cavion Technologies offers products and services for secure
business-to-business communications and secure Internet financial
products and services designed specifically for the needs of
credit unions. The company's Internet software products include
secure Internet access, online transactional banking, cellular
access, online bill payment, and online loan decision products,
along with enabling software for kiosks. Cavion created a
secure, private communications network called CUiNET (Credit
Union interactive Network) exclusively for the credit union
industry. CUiNET provides a secure, high-speed communications
platform for the delivery of services, transactions and
information to and from credit unions and related organizations,
such as trade organizations, corporate credit unions and credit
union vendors. The company's headquarters are located at 6466
South Kenton Street, Englewood, CO 80111. Its telephone number
is 720-875-1900.
CERPLEX GROUP: Converts Bankruptcy Cases to Chapter 7 Liquidation
-----------------------------------------------------------------
The Cerplex Group, Inc. (OTC Bulletin Board: CPLXQ.OB) announced
that it has filed a notice with the United States Bankruptcy
Court for the District of Delaware converting its Chapter 11
bankruptcy case, as well as that of its wholly-owned subsidiary,
Cerplex, Inc., to Chapter 7. The Cerplex Group, Inc. expects that
a Chapter 7 trustee will be appointed to administer its estate,
as well as that of Cerplex, Inc.
CHIQUITA BRANDS: Hires James B. Riley As New VP & CFO
-----------------------------------------------------
Chiquita Brands International, Inc. (NYSE: CQB) announced that it
has appointed James B. Riley as the Company's new Senior Vice
President and Chief Financial Officer. Mr. Riley will be
responsible for financial and administrative functions including
treasury, accounting, information technology, risk management and
auditing.
He reports to Steven G. Warshaw, President and Chief Operating
Officer of the Company. Mr. Warshaw said: "We are extremely
pleased to have a recognized, seasoned executive of Jim Riley's
caliber on our team. His diverse experiences in challenging,
dynamic environments should provide enormous benefit as we
progress to the next stages of Chiquita's evolution."
Mr. Riley had been Senior Vice President and Chief Financial
Officer of Elliott Company in Jeanette, PA, since 1999. He
previously was Executive Vice President and Chief Financial
Officer, and a founding Director of Republic Engineered Steels,
Inc. of Massillon, OH. Mr. Riley's other experience includes the
LTV Steel Company, Inc., Marathon Oil Company and his own
consulting firm.
He was formerly Chairman of the Massillon, OH, Community Health
Group through its final merger into the Akron Health Group in May
1999. A native of Pittsburgh, Mr. Riley earned an MBA in finance-
management from Miami University in Oxford, OH, and a BBA from
the University of Cincinnati. He and his wife, Sue, have two
children and will be relocating to the Cincinnati area.
Chiquita Brands International is a leading international
marketer, producer and distributor of quality fresh fruits and
vegetables and processed foods.
CLARIDGE CASINO: Gaming Regulators Approve Ichan's Park Place Bid
-----------------------------------------------------------------
Gaming regulators ruled Tuesday that Park Place Entertainment
Corp. would not gain undue economic influence in Atlantic City,
N.J., if it buys the bankrupt Claridge casino, paving the way for
a Park Place bid to buy the property to proceed in bankruptcy
court, according to Reuters. The 5-0 ruling by the New Jersey
Casino Control Commission means a bankruptcy judge may ultimately
have to choose between the Park Place plan and a rival plan
submitted by a company controlled by billionaire financier Carl
Icahn.
Lawyers for Icahn had argued during a previous hearing that Park
Place would gain undue economic influence in the Atlantic City
market-in violation of New Jersey law-if it were allowed to buy
the Claridge. But the Casino Control Commission disagreed. "Based
on the entire record of this hearing, we find that Park Place's
acquisition of Claridge would not result in meaningful changes in
the dynamics of the Atlantic City casino market," the panel
wrote. A spokesman for Icahn, who owns about 42 percent of the
first mortgage notes on the Claridge, was not immediately
available for comment.
But Michael Viscount Jr., who represents some of the property's
other major bondholders, welcomed the commission's decision.
"We're excited about the ruling," Viscount said. "Now...the
matter can move to bankruptcy court where it belongs for the
bankruptcy judge and the creditors to make a decision based on
economic factors that are relevant."
Under one plan, Park Place would buy the Claridge for about $65
million in cash and $17 in excess cash held by the property, for
a total of about $82 million. Under the other plan, Icahn's GB
Holdings Inc., parent of the Sands Hotel & Casino, would purchase
the Claridge for about 5.6 million shares of Sands stock and up
to $2.5 million in cash. Sands says the stock is worth about $14
a share, giving the deal a net value of about $81 million.
Viscount said the group of bondholders he represents prefers the
Park Place deal because it offers cash instead of equity and the
value of the GB Holdings stock is also difficult to determine
because the shares do not trade. Because neither side will be
able to garner the 2/3 vote necessary to approve either plan, a
bankruptcy judge will probably end up deciding who buys the
property, Viscount said. (ABI World, January 31, 2001)
COMPLETE MANAGEMENT: Disclosure Statement Hearing Set for Feb. 16
-----------------------------------------------------------------
A hearing will be held at the US Bankruptcy Court, Southern
District of New York, on February 16, 2001 at 9:45 AM to consider
the entry of an order approving the disclosure statement filed by
Complete Management, Inc., and setting a hearing on confirmation
of the debtor's amended Chapter 11 plan of reorganization.
The debtor is represented by Salomon Green & Ostrow, PC, New
York.
DOW CORNING: Reports Year-End Financial Results
-----------------------------------------------
Dow Corning Corp. reported consolidated net income of $104.6
million for 2000, a decline of 5 percent from $109.7 million net
income reported in the prior year. 2000 results included
restructuring charges of $86.1 million before tax ($54.2 million
after tax), chiefly related to work force reduction programs.
Without these charges, net income would have been 45 percent
ahead of the previous year.
Fourth-quarter 2000 consolidated net income was $27.5 million, 22
percent lower than the $35.1 million net income reported in Q4 of
1999. Q4 2000 included restructuring charges of $47.7 million
before tax ($30.1 million after tax). Without these charges, net
income for the quarter would have been 64 percent ahead of the
same quarter in 1999.
Year 2000 sales were $2.75 billion, up 6 percent from $2.60
billion in 1999. Fourth quarter 2000 sales were $671 million,
flat from sales of $672 million reported in the same quarter last
year.
"Restructuring was necessary to ensure a healthy financial
future," said Gifford Brown, Dow Corning's vice president for
planning and finance and chief financial officer. "Dow Corning
has been working hard for several years to create a new future
focused on being a profitable, growing, customer-driven company.
Our leaner cost structure and streamlined supply chain will help
make us more competitive and responsive to customer needs."
Dow Corning, which develops, manufactures and markets diverse
silicon-based products, currently offers more than 7,000 products
to customers around the world. Dow Corning is a global leader in
silicon-based materials with shares equally owned by The Dow
Chemical Company (NYSE: DOW) and Corning Incorporated (NYSE:
GLW). More than half of Dow Corning's sales are outside
the United States.
Consolidated financial statements are available by calling 517-
496-5436.
DRUG EMPORIUM: Receives Management Offer for California Stores
--------------------------------------------------------------
Drug Emporium, Inc. (NASDAQ: DEMP) announced that it has received
a letter of intent to purchase its twenty stores in northern and
southern California. The group purchasing the stores is headed by
Tim Ziemke, currently Senior Vice President of Marketing for Drug
Emporium. Ziemke's financial advisor in the acquisition is the
Chavoya Group, Inc. of Frisco, Texas. Terms of the transaction
were not disclosed, however, Drug Emporium will maintain a
minority equity interest in the new company. Subject to
customary closing contingencies including purchaser financing and
execution of definitive agreements, the deal is expected to close
within the next 45 days.
David Kriegel, Drug Emporium's Chief Executive Officer commented,
"Over the last several weeks, we have been working with Tim and
the group from Chavoya to structure a deal that would be mutually
beneficial to both parties. I feel that we are very fortunate to
have accomplished this, and I look forward to working with Tim
and the Chavoya Group as we move toward a closing of this
transaction." Kriegel added, "The sale of Drug Emporium's
California operations is the first step in a number of strategic
initiatives designed to improve not only Drug Emporium's
financial liquidity but to strengthen the Company's balance sheet
as well. One of its many benefits is that it will enable Drug
Emporium to consolidate its operations to a geographic area that
is concentrated in the midwestern and northeastern parts of the
United States."
Grant Lyon of Odyssey Capital Group, Drug Emporium's financial
advisor, stated, "I am very pleased that I could assist Dave and
the rest of the Drug Emporium management team in negotiating this
transaction. This is a step forward in improving Drug Emporium's
financial situation."
Tim Ziemke stated, "Having owned and/or managed this group of
stores for 14 years prior to joining the Drug Emporium corporate
staff in 1998, I am intimately familiar with the California
operation. I am looking forward to taking over these stores and
building upon the strong base business that Drug Emporium
currently enjoys. I am also thrilled to once again have the
opportunity to work with the knowledgeable management team that
is currently running the Drug Emporium stores in California as
well as to work with the excellent hourly staff that has made the
California operation such a success."
Arthur Chavoya of the Chavoya Group commented, "We are pleased to
be associated with Tim Ziemke and are also glad that we could
assist Tim in structuring this transaction. Tim is an excellent
operator as well as a great motivator and we feel that this is
not only a wonderful opportunity for both Tim and the Chavoya
Group, but also for all of the associates currently involved in
the California operation."
Drug Emporium, Inc. (NASDAQ: DEMP) owns and operates 132 brick-
and-mortar stores under the names Drug Emporium, F&M Super Drug
Stores and Vix Drug Stores. All brick-and-mortar stores operate
full-service pharmacies and specialize in discount-priced
merchandise including health and beauty aids, cosmetics and
greeting cards. The company also franchises an additional 34
stores under the Drug Emporium name. Drug Emporium, Inc. is
headquartered in Powell, Ohio.
FINOVA CAPITAL: Fitch Lowers Senior Debt To CC
----------------------------------------------
Fitch has lowered FINOVA Capital Corp.'s (FINOVA) senior debt
from `CCC+' to `CC'. Additionally, FINOVA Finance Trust's
preferred stock rating is lowered from `CCC-' to `C'. FINOVA's
debt ratings remain on Rating Watch Negative. Ratings in the `CC'
category indicate that default of some kind appears probable.
Approximately $6.7 billion of debt securities were affected by
this rating action.
The rating actions reflect FINOVA's extremely limited financial
flexibility and the heightened uncertainty relating to the
company's ability to successfully restructure its outstanding
debt. The company's cash-on-hand and projected net operating cash
flow will not be sufficient to meet near-term senior and bank
debt maturities. Additionally, attempts to boost liquidity
through asset sales have yielded modest results to date. With
significant debt maturities due in May 2001 and Leucadia National
Corp's $350 million investment withdrawn, FINOVA's ability to
operate as a going concern faces serious challenges. If the
company is unable to restructure outstanding debt, Fitch believes
that FINOVA will likely be forced to seek bankruptcy court
protection.
Future rating actions by Fitch will be driven by the outcome of
FINOVA's debt restructuring negotiations, as well as the terms
and conditions derived thereunder.
Headquartered in Scottsdale, AZ, FINOVA is one of the largest
independent commercial finance companies in the U.S. FINOVA's
core customer base is middle-market companies with funding
requirements ranging from $2 million-$35 million.
GENESIS HEALTH: Obtains Court Approval of Cardinal Stipulation
--------------------------------------------------------------
The Court granted Genesis Health Ventures, Inc. & The Multicare
Companies, Inc.'s motion for approval of a stipulation with
Cardinal Distribution whereby the Debtors are authorized to use
cash collateral, obtain postpetition credit and grant adequate
protection to Cardinal.
Pursuant to the Cardinal Stipulation, the Debtors agreed that
within 90 days after the Final Cardinal Order, the Debtors would
move to assume or reject (i) the service agreement, dated January
19, 2000, between the Debtors and Scriptline, a subsidiary of
Cardinal, and (ii) the equipment leases between the Debtors and
Pyxis, also a subsidiary of Cardinal.
The Debtors, Scriptline, Pyxis, and Cardinal have engaged in
negotiations concerning the assumption or rejection of the
Service Agreement and the Equipment Leases and the timing for
such assumption or rejection. As a result, the parties agreed
that the deadline for the Debtors to move to assume or reject the
Service Agreement and the Equipment Lease would be
extended to November 22, 2000. (Genesis/Multicare Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
GORGES HOLDING: Asks for Extension of 365(d)(4) Period to May 3
---------------------------------------------------------------
Gorges Holding Corporation and Gorges/Quik-To-Fix Foods, Inc.
seeks an extension of time within which the debtors must decide
whether to assume, assume and assign, or reject their unexpired
nonresidential real property leases, pursuant to Section
365(d)(4) of the Bankruptcy Code.
The debtors seek an extension for an additional 90 days, through
and including May 3, 2001, of the time within which they must
assume or reject all their unexpired leases.
The debtors have only identified two such leases at this time,
one for the debtors corporate headquarters and for storage
facilities at their Garland, Texas plant.
The leases are significant assets of the debtors' estates.
Consequently, the premature rejection could jeopardize the
debtors' ability to maximize value for the benefit of all
creditors. In addition, the continued use of the space covered by
the unexpired leases is essential to the debtors' ability to
continue to operate.
JACOM COMPUTER: Wants Until Apr. 30 to Make Lease Decisions
-----------------------------------------------------------
Jacom Computer Services, Inc., UniCapital Corporation and their
affiliated debtors ask for entry of a court order extending the
time within which they can assume or reject unexpired leases of
nonresidential real property for an additional 80 days, to April
30, 2001. A hearing will be held on February 1, 2001 at 10:00 AM
before the Honorable Cornelius Blackshear, US Bankruptcy Court
for the Southern District of New York, to consider the request.
The debtor is represented by Richard S. Miller, Esq., at Dewey
Ballantine LLP in New York.
The debtors say that since the Petition Date, they have not had
sufficient time to properly analyze their various leases. The
debtors require additional time to determine which, if any, of
their leases should be assumed and assigned, and which should be
rejected. The debtors intend to operate their remaining assets
and businesses in a manner that will maximize the value of their
assets for their creditors, and the debtors believe that certain
of the leases may have value. The majority of the debtors' time
and energy is currently focused on stabilizing their operations
and compiling the information required for their Schedules and
Statement of Financial Affairs, which must be filed on or before
March 11, 2001. Until the debtors have had the opportunity to
fully evaluate all their options, the debtors cannot make a
financially prudent decision regarding how to treat the leases.
KCS ENERGY: Delaware Court Confirms Debtors' Chapter 11 Plan
------------------------------------------------------------
KCS Energy, Inc. (NYSE: KCS) announced that its plan of
reorganization was overwhelmingly accepted by its creditors and
stockholders and was confirmed by the United States Bankruptcy
Court for the District of Delaware. The effective date of the
plan is anticipated to be sometime in mid-February. The plan is
subject to the issuance of $30 million of convertible preferred
stock and the funding of a new exit facility on the effective
date. Commitments are in place for both the convertible preferred
stock issue and the exit facility. The funds for the preferred
stock subscriptions were previously deposited into an escrow
account pending confirmation and effectiveness of the plan of
reorganization. The plan and confirmation order allow KCS to
select, on or before the effective date, from two alternative
forms of exit facility, either an approximate $175 million
volumetric production payment for which KCS has a signed
commitment, or a $165 million secured bank loan for which KCS has
a proposed term sheet.
"We are pleased with the confirmation of our plan of
reorganization which will now permit us to focus all of our
attention on building value in the Company," said KCS President
and Chief Executive Officer James W. Christmas. "Once the plan
becomes effective, the Company will formally emerge from Chapter
11."
On the effective date of the plan:
* current shareholders will retain 100% (75% on a fully
diluted basis) of the common stock;
* all past due interest on the Senior Notes and Senior
Subordinated Notes will be paid;
* the Company will repay $60 million of its Senior Notes;
* the remaining $90 million principal amount of its Senior
Notes and $125 million principal amount of its Senior
Subordinated Notes will be renewed under amended indenture
provisions, but without a change in interest rates;
* the maturity date of the Subordinated Notes has been
amended from January 15, 2008 to January 15, 2006; and
* all other creditors will be paid in full on the effective
date or in the ordinary course of business.
KCS is an independent energy company engaged in the acquisition,
exploration, development and production of natural gas and crude
oil with operations in the Mid-Continent and Gulf Coast regions.
The Company also purchases reserves (priority rights to future
delivery of oil and gas) through its Volumetric Production
Payment (VPP) program. For more information on KCS Energy, Inc.,
please visit the Company's web site at http://www.kcsenergy.com
KEVCO, INC.: Considering Bankruptcy Protection
----------------------------------------------
Kevco, Inc. (Nasdaq/NM:KVCO) announced that it is evaluating
alternatives because of the unprecedented decline in the
shipments of new manufactured homes.
Fred Hegi, chairman of the board, president and chief executive
officer, commented, "A number of factors have combined to force
virtually all of our customers to reduce their manufacturing
volumes severely. The extent of the decline is forcing Kevco to
evaluate its alternatives, including protection under federal
bankruptcy laws. Our objective is to avoid a material disruption
in our operations. We are currently in discussions with our
major creditors and are seeking a resolution of this issue as
quickly as possible."
Kevco, headquartered in Fort Worth, Texas, is a leading wholesale
distributor and manufacturer of building products for the
manufactured housing and recreational vehicle industries.
LERNOUT & HAUSPIE: Committee Taps BDO Seidman as Accountants
------------------------------------------------------------
The Official Committee of Unsecured Creditors of Lernout &
Hauspie Speech Products N.V. and affiliated debtors applied for
an order authorizing the Committee to retain BDO Seidman LLP as
its accountants in the cases effective as of December 26, 2000.
The Committee submits that it will be necessary to employ and
retain accountants which may provide the following services:
(a) Analyze the financial operations of the debtors' both
Pre- and Post- Petition Date, as necessary;
(b) Perform forensic investigating services as requested by
the Committee and counsel, regarding prepetition activities of
the debtors in order to identify potential causes of action;
(c) Analyze the debtors' real property interests, including
lease assumptions and rejections and potential real property
asset sales;
(d) Perform claims analysis for the Committee as necessary;
(e) Verify the physical inventory of merchandise, supplies,
equipment and other material assets, such as intellectual
property, and liabilities, as necessary;
(f) Assist the Committee in its review of monthly statements
of operations to be submitted by the debtors;
(g) Assist the Committee in its evaluation of cash flow
and/or other projections prepared by the debtors;
(h) Scrutinize cash disbursements of the debtors on an on-
going basis for the period subsequent tot he Petition Date;
(i) Analyze transactions with insiders, related and/or
affiliated companies;
(j) Analyze transactions with the debtors' financing
institutions;
(k) Prepare and submit reports to the Committee, as
necessary;
(l) Assist the Committee in its review of the financial
aspects of a plan of reorganization to be submitted by the
debtors, or in arriving at a proposed plan of reorganization;
(m) Attend meetings of creditors and confer with
representatives of the creditor groups and their counsel;
(n) Perform other necessary services as the Committee or the
Committee's counsel may request from time to time with respect to
the financial , business and economic issues that may arise.
The Committee is contemplating hiring a financial advisor/
investment banking firm shortly, in light of the debtors' recent
announcement that it may sell certain non-strategic assets.
As set forth in an affidavit prepared by William K. Lenhart, the
hourly rates for BDO Seidman professionals are:
Partners $300 - $450 per hour
Senior Managers $215 - $325 per hour
Managers $150 - $280 per hour
Seniors $100 - $170 per hour
Staff $60 - $150 per hour
LERNOUT & HAUSPIE: Belgian Court Fixes Feb. 8 Claims Bar Date
------------------------------------------------------------
Lernout & Hauspie Speech Products N.V. (EASDAQ:LHSP)(OTC:LHSPQ),
a world leader in speech and language technology, products and
services, wishes to advise creditors that, pursuant to the
Judgment Following A Petition, dated January 5, 2001, of the
Ieper, Belgium Commercial Court, creditors wishing to assert
claims as part of the concordat proceeding must file their
declaration of receivables with the clerk's office of the
Commercial Court at Ieper, Grote Markt 10, Ieper, Belgium, on or
before February 8, 2001.
Lernout & Hauspie Speech Products N.V. also announced that a
separate deadline for filing claims in its chapter 11 bankruptcy
case pending in the United States before the United States
Bankruptcy Court for the District of Delaware will be set at a
later time. However, the filing of a proof of claim with the
United States Bankruptcy Court for the District of Delaware in
connection with Lernout & Hauspie Speech Products N.V.'s chapter
11 bankruptcy case is not a substitute for filing a claim with
the Ieper, Belgium Commercial Court as part of the concordat
proceeding.
Creditors that wish to assert claims against Lernout & Hauspie
Speech Products N.V. should consult their counsel to determine
the advisability of filing such claims in the concordat
proceeding. Creditors of Dictaphone Corporation and L&H Holdings
USA, Inc. (both of which also have chapter 11 bankruptcy cases
pending before the United States Bankruptcy Court for the
District of Delaware) are not required to file claims with the
Ieper, Belgium Commercial Court in the concordat proceeding
unless they specifically are asserting claims against Lernout &
Hauspie Speech Products N.V.
Lernout & Hauspie Speech Products N.V. is a global leader in
advanced speech and language solutions for vertical markets,
computers, automobiles, telecommunications, embedded products,
consumer goods and the Internet. The company is making the speech
user interface (SUI) the keystone of simple, convenient
interaction between humans and technology, and is using advanced
translation technology to break down language barriers. The
company provides a wide range of offerings, including: customized
solutions for corporations; core speech technologies marketed to
OEMs; end user and retail applications for continuous speech
products in horizontal and vertical markets; and document
creation, human and machine translation services, Internet
translation offerings, and linguistic tools.
LTV CORPORATION: Hires Jones Day as Lead Reorganization Counsel
---------------------------------------------------------------
The LTV Corporation sought and obtained authority to employ the
international law firm of Jones, Day, Reavis & Pogue as their
lead bankruptcy counsel to prosecute their chapter 11 cases
before the U.S. Bankruptcy Court in Youngstown.
Specifically, Jones Day will:
(a) Advise the Debtors of their rights, powers and duties as
debtors and debtors in possession continuing to operate and
manage their businesses and properties under chapter 11 of the
Bankruptcy Code;
(b) Prepare on behalf of the Debtors all necessary and
appropriate applications, motions, draft orders, other pleadings,
notices, schedules and other documents, and review all financial
and other reports to be filed in these chapter 11 cases;
(c) Advise the Debtors concerning, and prepare responses to,
applications, motions, other pleadings, notices and other papers
that may be filed and served in these chapter 11 cases;
(d) Advise the Debtors regarding their ability to initiate
actions to collect and recover property for the benefit of their
estates;
(e) Advise the Debtors in connection with the formulation,
negotiation and promulgation of a plan or plans of
reorganization, an accompanying disclosure statement, and any
related documents;
(f) Advise and assist the Debtors in connection with any
potential property dispositions;
(g) Advise the Debtors concerning executory contract and
unexpired lease assumptions, assignments and rejections and lease
restructurings and recharacterizations;
(h) Assist the Debtors in reviewing, estimating and
resolving claims asserted against the Debtors' estates;
(i) Commence and conduct any and all litigation necessary or
appropriate to assert rights held by the Debtors, protect assets
of the Debtors' chapter 11 estates or otherwise further the goal
of completing the Debtors' successful reorganization;
(j) Provide general corporate, litigation and other
nonbankruptcy services for the Debtors to the extent that Jones
Day provided such services prior to the Petition Date or as
requested by the Debtors; and
(k) Perform all other necessary or appropriate legal
services in connection with these chapter 11 cases for or on
behalf of the Debtors.
Jones Day will charge for its legal services on an hourly basis
in accordance with its ordinary and customary hourly rates,
although these rates may be adjusted from time to time. The
following professional persons, their positions, and their hourly
rates are described for those persons expected to appear in these
cases. Jones Day advises additional professional persons may
appear for the Debtors from time to time.
Professional Position Office Rate
------------ -------- ------ ----
David G. Heiman Partner Cleveland $600/hour
Richard M. Cieri Partner Cleveland $550/hour
Jeffrey B. Ellman Partner Columbus $325/hour
Kathleen B. Burke Partner Cleveland $325/hour
Richard A. Chesley Partner Chicago $425/hour
John R. Cornell Partner Atlanta $575/hour
Andrew M. Kramer Partner Washington $575/hour
Richard F. Shaw Partner Pittsburgh $310/hour
Richard I. Werder Partner Cleveland $460/hour
Joseph M. Witzlec Counsel Columbus $275/hour
Michelle M. Morgan Associate Cleveland $250/hour
David A. Beck Associate Columbus $145/hour
Carl E. Black Associate Cleveland $200/hour
S. Todd Brown Associate Cleveland $180/hour
Mark J. Gromala Associate Cleveland $145/hour
Michaella B. Luders Associate Cleveland $165/hour
Leah J. Sellers Associate Cleveland $145/hour
Donna T. Killion Legal Assistant Columbus $140/hour
Marcia Rieves-Bey Legal Assistant Cleveland $104/hour
Betty Yakovich Legal Assistant Cleveland $122/hour
Jones Day disclosed that, prior to the Petition Date, on or about
December 15, 2000, LTV paid a retainer of $250,000 for services
rendered or to be rendered. To date, Jones Day has not applied
any of the retainer.
Further, Jones Day disclosed that it received $3,836,153.86 from
the Debtors during the year immediately preceding the Petition
Date on account of fees and expenses incurred by Jones Day on
matters relating to the Debtors.
Richard M. Cieri, Esq., assures the Court that neither he, nor
Jones Day, nor any partner or associate thereof, as far as he has
been able to ascertain, has any connection with the Debtors,
their creditors, the United States trustee or any other party
with an actual or potential interest in these chapter 11 cases or
their respective attorneys or accountants, but, in the interest
of full disclosure, relates that:
(a) Jones Day does not represent and has not represented,
any entity, other than the Debtors, in matters related to these
chapter 11 cases.
(b) Prior to the Petition Date, Jones Day performed certain
legal services for the Debtors, including corporate counselling,
employee benefits, litigation, and transactional services
(primarily involving the divestitures of certain of the Debtors'
assets) as described in paragraph 11 of the Application. The
Debtors do not owe Jones Day any amount for services performed
prior to the Petition Date.
(c) Morgan Stanley Senior Funding, Inc., and Credit Suisse
First Boston Corporation serve as syndication agent and
administrative agent, respectively, for the Debtors' $225 million
prepetition secured term loan. Jones Day represents or has
represented these agents or certain of their affiliates in
matters unrelated to the Debtors or their chapter 11 cases. In
addition, Jones Day represents or has represented certain other
lenders under the Secured Term Loan or their affiliates in
matters unrelated to the Debtors or their chapter 11 cases. Mr.
Cieri advises that Jones Day will continue providing services to
these parties in connection with pending and future matters, but
not in any matters relating to the Debtors or their chapter 11
cases.
(d) Chase serves as agent under the Credit Facilities, which
together provided the Debtors with a maximum of $650 million of
financing on a revolving basis for working capital and other
general corporate purposes prior to the Petition Date. Jones Day
represents or has represented Chase or its affiliates in matters
unrelated to the Debtors or their chapter 11 cases. In addition,
Jones Day represents or has represented certain other
participants in the Credit Facilities or their affiliates in
matters unrelated to the Debtors or their chapter 11 cases. Jones
Day will continue providing services to such parties in
connection with pending and future matters, but will not
represent these entities in any matters relating to the Debtors
or their chapter 11 cases. Moreover, Hennigan Bennett is proposed
counsel to represent the Debtors with respect to cash collateral
and other finance issues relating to the Credit Facility. See
subsequent entry.
(e) As of the Petition Date, Chase and US Bancorp were the
indenture trustees for the Debtors' approximately $575 million in
outstanding public notes. In addition, since the Petition Date
Jones Day understands that HSBC Bank USA has been appointed as a
successor indenture trustee to Chase. Jones Day represents or has
represented the Indenture Trustees or their affiliates in matters
unrelated to the Debtors or their chapter 11 cases, and will
continue providing services to such parties in connection with
pending and future matters, but will not represent these entities
in any matters relating to the Debtors or their chapter 11 cases.
(f) Prior to the Petition Date the Debtors entered into a
contract with USX Corporation to sell the Debtors' tin facilities
located in Indiana Harbor, Indiana, and Aliquippa, Pennsylvania.
This transaction did not close prior to the Petition Date and
negotiations are ongoing to finalize the terms of a potential
sale of the tin facilities to USX under the existing prepetition
purchase agreement. Jones Day has represented the Debtors in
connection with this transaction. In addition to USX's interest
as a potential purchaser of the tin facilities, USX is one of the
Debtors' direct competitors and one of their largest unsecured
creditors. Jones Day previously has represented USX in a variety
of matters unrelated to the Debtors or these chapter 11 cases,
including the prior representation of Canadian Commercial
Corporation on behalf of the interests of MET-CHEM, a Canadian
affiliate of USX, in an international arbitration. Currently
Jones Day is not representing USX in any of these prior matters
and has no active matters for USX. Jones Day will continue to
represent the Debtors in connection with the sale of the tin
facilities and has obtained a conflict waiver from USX in
connection with this matter.
(g) Jones Day represents one of the Debtors' unsecured
creditors, Therm-all, Inc., in connection with certain antitrust
and intellectual property matters, including: (i) a civil
antitrust class action lawsuit commenced on behalf of certain
purchasers of metal building insulation; and (ii) a criminal
action brought against, among others, Therm-All and its principal
shareholder. These insulation lawsuits arise out of allegations
of a nationwide price fixing conspiracy in the metal building
insulation industry. In August 1997 Therm-All was dismissed as a
defendant in the civil action on a provisional basis and no class
of plaintiffs has yet been certified in this action. Debtor VP
Buildings, Inc., f/k/a Varco-Pruden Buildings, Inc., purchases
metal building insulation in the ordinary course of its business,
and is a customer of Therm-All, and is therefore a potential
member of any class certified in the civil action. Because there
is no adversity between the Debtors and Therm-All in connection
with the civil action, and because the Debtors have expressed no
intent to pursue any direct claims against Therm-All, Jones Day
does not believe that its representation of Therm-All in
connection with the matters described above presents a conflict
of interest. To prevent future potential conflicts, however,
Jones Day will not represent VP Building or the other Debtors in
connection with any proceedings, actions or issues relating to
these matters and any other matter directly adverse to Therm-All,
and has taken certain other precautions described in the
Application.
(h) Based on information available to Jones Day, it appears
that LTV corporation, LTV Steel and Debtor Jones & Laughlin Steel
Incorporated may be potentially responsible parties at certain
superfund sites, including sites commonly known as Four County
Landfill, Diamond Shamrock, and Jack's Creek. Jones Day currently
is representing other potentially responsible parties that are
not debtors in these chapter 11 cases with respect to their
respective potential liabilities at these superfund sites.
Although there is a possibility that the non-debtor parties and
the LTV entities could become adverse with respect to the
allocation of liabilities at the superfund sites, Jones Day does
not believe that the parties currently are adverse. However, to
avoid any potential future conflicts, Jones Day has implemented
procedures similar to those described in (g).
(i) LTV Corporation and Jones & Laughlin are co-defendants
in certain pending litigation in which Jones Day currently
represents another co-defendant. Jones Day has therefore
implemented procedures similar to those described in (g) to avoid
actual or potential conflicts.
(j) In addition to the relationships described above, Jones
Day has, from time to time, represented, and likely will continue
to represent, certain creditors of the Debtors and various other
parties adverse to the Debtors, but only on matters unrelated to
these chapter 11 cases. Other instances are detailed in the
Application. Where appropriate, procedures to avoid actual or
potential conflicts have been initiated.
Despite the Herculean efforts taken to identify and disclose
Jones Day's connections with parties in interest in these cases,
because Jones Day is an international firm with approximately
1,200 attorneys in 23 offices, and because the Debtors are a
multinational enterprise with thousands of creditors and other
relationships, Mr. Cieri cautions that Jones Day is unable to
state with certainty that every client representation or other
connection has been disclosed. In this regard, if Jones Day
discovers additional information that requires disclosure, Jones
Day will file a supplemental disclosure with the Court as
promptly as possible. (LTV Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-00900)
OWENS CORNING: Employs Lazard Freres As Investments Bankers
-----------------------------------------------------------
Judge Walrath entered a revised Order authorizing Owens Corning
to employ Lazard Freres & Co. LLC as its investment bankers
during the course of the Company's chapter 11 restructuring. By
this Order, Judge Walrath approved the employment of Lazard by
the estate, but required several changes in the terms of that
employment.
The Monthly Advisory Fee is to be credited against the Sales Fee
to the same extent that it is to be credited against the
Restructuring Transaction Fee. Further, notwithstanding any term
in the engagement agreement, Owens Corning's counsel shall not
represent Lazard in any matter in these Chapter 11 cases.
Lazard will be compensated according to the terms in the
Application, subject to the modifications directed by Order, but
the indemnification provisions of the engagement agreement are
approved with modifications. The Debtors are permitted to
indemnify Lazard for any claim arising from, related to, or in
connection with Lazard's prepetition performance of the services
described in the engagement letter, and for any claim arising
from, related to, or in connection with its engagement, but not
for any claim arising from, related to, or in connection with
Lazard's postpetition performance of any services other than
those in connection with the engagement, unless such postpetition
services and indemnification therefore are approved by the Court.
Further, the engagement agreement with Lazard is modified by
Judge Walrath to order that the Debtors shall have no obligation
to indemnify Lazard, or provide contribution or reimbursement to
Lazard, for any claim or expense that is either (a) judicially
determined, such determination having become final, to have
arisen solely from Lazard's bad faith or gross negligence, or
(b)settled prior to a judicial determination as to Lazard's bad
faith or gross negligence, but determined by the Court, after
notice and a hearing, to be a claim or expense for which Lazard
should receive indemnity, contribution or reimbursement under the
terms of the engagement agreement, as modified by the Court's
Order.
If, before the earlier of (i) the entry of an Order confirming a
Chapter 11 plan in these cases, which has become final, and (ii)
the entry of an Order closing these Chapter 11 cases, Lazard
believes that it is entitled to the payment of any amounts by the
Debtors on account of the Debtors' indemnification, contribution
or reimbursement obligations under the engagement letter, as
modified by the Order, including without limitation the
advancement of defense costs, Lazard must file an application
therefore in this Court, and the Debtors may not pay any such
amounts to Lazard before the entry of an Order by this Court
approving the payment. The term is intended only to specify the
period of time under which the Court shall have jurisdiction over
any request for fees and expenses by Lazard for indemnification,
contribution and reimbursement, and not a provision limiting the
duration of the Debtors' obligation to indemnify Lazard.
Lazard is also ordered to file interim and final fee applications
in the same manner as any other professional employed by the
estate, but may submit time records in a streamlined or summary
format which sets forth a description of the services rendered by
each professional and the amount of time spent on each date by
each individual in rendering services to or on behalf of the
Debtors. The Debtors are authorized to pay Lazard's monthly
fees and to reimburse Lazard for its costs and expenses as
provided in the Lazard engagement letter, upon approval by the
Court of interim and final applications. All fees and
reimbursements paid or payable to Lazard in accordance with the
engagement agreement and this Order are subject to this Court's
approval. Further, notwithstanding the approval of the Lazard
engagement agreement, with modifications, all fees charged by
Lazard are subject to approval by the Court under a
"reasonableness" standard upon proper application. The Court
expressly reserved the rights of all parties in interest for
future review, but did hold that the approval of the
reasonableness of Lazard's fees and expenses shall not be
evaluated solely on hourly-based criteria.
Subsequent to this Order, and on behalf of Lazard Freres & Co.
LLC, Robert S. Kost submitted a supplemental affidavit regarding
Lazard's relationship with Armstrong World Industries, Inc.,
which has commenced its own Chapter 11 proceeding in Delaware and
which is seeking to employ Lazard as a financial advisor.
Armstrong has stated that one of its primary reasons for filing
is to resolve its asbestos liability. Mr. Kost addressed this
potential conflict by stating that while Armstrong and Owens
Corning both manufacture building products, they are not direct
competitors in that each manufactures different types of building
products. Both the Debtors and Armstrong have prepetition
liabilities to many of the same financial institutions, such as
Chase Manhattan Bank and Bank of America. In addition, both are
co-defendants in certain litigation.
Lazard's services generally include advise to both debtors
concerning tactics and strategies for negotiating with and
participating in meetings with various groups of creditors. Mr.
Kost asserts that it is not unusual for many of the same
creditors to be present in several Chapter 11 filings. He further
claims that the presence of asbestos claimants in these asbestos-
related bankruptcies does not differ materially from typical
instances where debtors represented by Lazard have the same trade
creditors. Mr. Kost therefore believes that the representation of
the Owens Corning group of debtors and the concurrent
representation of the Armstrong group of creditors does not
represent a conflict of interest or any basis for
disqualification of Lazard from retention by these estates.
He advises that to minimize any problems no employee of Lazard
who works on the Owens Corning cases will work on the Armstrong
cases, and vice versa. (Owens Corning Bankruptcy News, Issue No.
8; Bankruptcy Creditors' Service, Inc., 609/392-0900)
OXFORD HEALTH: Texas Pacific Recapitalization Deal Completed
------------------------------------------------------------
Oxford Health Plans, Inc. has completed its obligations under the
TPG Exchange and Repurchase Agreement with Texas Pacific Group
and other investors previously announced on October 25, 2000, and
has successfully closed the related senior bank facilities.
Under the terms of the TPG Agreement, the company paid $220
million to TPG and other investors for (i) certain preferred
stock and (ii) warrants for 11,543,545 common shares. TPG and
other investors simultaneously exchanged their remaining
preferred stock and remaining warrants for 10,986,455 newly
issued shares of common stock. As previously announced, the
company will record a non-cash write-off of unamortized preferred
stock discount and unamortized expenses of approximately $38
million in the fourth quarter. With the closing of this
transaction, the 1998 Investment Agreement between TPG and Oxford
has been terminated. Additionally, in accordance with a Lock-up
Agreement, TPG and other investors agreed not to sell the newly
issued common shares until after February 15, 2001.
The company also has completed the closing of new senior bank
credit facilities totaling $250 million. The credit facilities
consist of a $175 million 5 1/2 year Term Loan which was used to
fund the closing, and a 5 year $75 million Revolving Credit
Facility, which was not drawn at closing.
"These transactions, together with the successful completion of
our Senior Note tender announced last week, conclude our efforts
to repurchase or restructure the turnaround financing obtained in
1998. We have significantly improved our capital structure and
strengthened our balance sheet as we enter 2001", said Kurt B.
Thompson, Oxford's Chief Financial Officer.
Founded in 1984, Oxford Health Plans, Inc. provides health plans
to employers and individuals in New York, New Jersey and
Connecticut, through its direct sales force, independent
insurance agents and brokers. Oxford's services include
traditional health maintenance organizations, point-of-service
plans, third party administration of employer-funded benefit
plans and Medicare plans.
PACIFIC GAS: Independent Audit Says Utility Will Go Broke
---------------------------------------------------------
Pacific Gas & Electric Co. ignored months of warnings that
California was headed toward an energy crisis, according to a
report that castigates the utility for not taking steps auditors
say could have kept it from the brink of bankruptcy, reported the
Associated Press. The state-ordered audit came Tuesday, on the
eve of what was expected to be hours of debate among lawmakers on
proposed solutions to California's energy crisis. California
could be out at least $1.3 billion for emergency electricity
before lawmakers find a fix to the state's botched deregulation
program.
The independent audit confirmed PG&E's warnings that it is about
to go broke. But it also accused the investor-owned utility of
not heeding months of warnings that California's deregulated
electricity market was in trouble. Auditors said the company
failed to realize electricity wholesalers would shut off its
credit until it was billions of dollars in debt. "PG&E did not
anticipate it would be constrained in its borrowings and did not
develop a cash conservation program until December 2000," the
audit said.
According to a report, PG&E turned over nearly one-third of its
cash flow to its corporate parent, PG&E Corp., during the first
nine months of 2000. It paid PG&E Corp. $632 million in dividends
during that time and $4.7 billion since 1997. The audit also
scored PG&E for not moving quickly to save money when things
turned bad. "Deferment or reduction of employee or management
compensation represents one of the most immediate ways to achieve
savings," the auditors said. PG&E disputed that contention,
saying that by laying off employees "the total saving would
amount to less than one month's worth of power at current
prices." (ABI World, January 31, 2001)
REGAL CINEMAS: Jay Alix & Houlihan Continue Turnaround Efforts
--------------------------------------------------------------
Regal Cinemas, Inc., the nation's largest theatre chain, was
advised in mid-December that the administrative agent under the
company's senior bank credit facilities has delivered a payment
blockage notice to the company and the indenture trustee of its
8-7/8% Senior Subordinated Debentures due 2010, prohibiting
payment by Regal of the semi-annual interest payment of
approximately $8.8 million due to debenture holders on December
15, 2000. The notice, which could prohibit Regal from making any
payments on the debentures for a period of up to 179 days, was
delivered as a result of the company's noncompliance with a
formula-based financial covenant, which requires the maintenance
of certain specified leverage ratios.
On December 1, 2000, Regal announced that it had been delivered a
payment blockage notice from its senior bank credit facilities
prohibiting interest payments on its 9-1/2% Senior Subordinated
Notes due 2008.
"Based on the earlier notification with respect to the 9-1/2%
notes, we expected that the bank group would deliver the payment
blockage of the interest payment on the 8-7/8% debentures," said
Regal Cinemas Chairman and Chief Executive Officer Michael
Campbell. "The company continues to explore various strategic
restructuring alternatives, and we anticipate that we will
maintain existing payment terms and remain current with our
vendors, whose continuing support during this process is greatly
appreciated."
The company said that the payment blockage notice is not an
acceleration of the maturity of the company's debt obligations
under the senior credit facilities and that the company is
current in all its payment obligations under those facilities.
However, based on the company's non-compliance with its senior
credit facilities, the company's bank group has the right to
accelerate the maturity of the company's debt obligations
thereunder. Additionally, if the bank group exercises this
option, the trustee of the debentures would have the right to
accelerate the maturity of the indebtedness evidenced by the
debentures. If any of these obligations are accelerated, the
company's business may be materially and adversely impacted and,
as a result, it may be forced to seek protection under federal
bankruptcy laws.
Regal Cinemas continues to work with its financial advisors, Jay
Alix & Associates and Houlihan, Lokey, Howard & Zukin, in
developing a long-term financial plan to address various
restructuring alternatives, including the closure of under-
performing theatres, potential sales of non-strategic assets and
the potential restructuring, recapitalization or reorganization
of the company. No assurances can be given that any such
restructuring, recapitalization or reorganization will be
negotiated on terms that will allow the payment of semiannual
interest to the debenture holders.
Headquartered in Knoxville, Tennessee, Regal Cinemas Inc.
operates 4361 screens at 396 locations in 32 states.
RELIANCE GROUP: Icahn's Tender Offer for 9% Notes Expires Today
---------------------------------------------------------------
Billionaire financier Carl Icahn extended his offer to buy more
of Reliance Group Holdings Inc.'s corporate bonds as part of his
plan to block any unfavorable bankruptcy restructuring the
struggling insurer might be planning, according to Reuters.
Icahn, who already owns some Reliance bonds and bank debt, said
in a statement that his affiliate, High River LP, extended its
offer to buy up to $40 million of Reliance's defaulting 9 percent
senior bonds to Feb. 2 from Jan. 30. This is a second extension
of his offer (previously from Jan. 30 from Jan. 24). Icahn said
he had already received about $21 million of the bonds under the
offer by the close of business yesterday. Under the bankruptcy
law, Icahn needs to hold more than a third of Reliance's $292
million bond issue to block any bankruptcy reorganization plan
the company might put forward. Reliance shares, which were
delisted from trading on the New York Stock Exchange, closed at
less than three cents a share in trading on the Nasdaq's Bulletin
Board. (ABI World, January 30, 2001)
REVLON, INC.: Secures Amendments to Chase-Led Bank Facility
-----------------------------------------------------------
Revlon, Inc. (NYSE: REV) reached an agreement with its bank
lenders amending certain terms of its operating company's bank
credit agreement.
"This is another key step in implementing the turnaround plan we
have put in place for the Company. Our plan focuses on launching
more innovative products, supporting those products with new
advertising and marketing initiatives and getting our cost
structure in order. We believe this amendment demonstrates the
confidence our bankers have in Revlon and allows us greater
flexibility to achieve our goals and to complete the
restructuring efforts we initiated in 2000," said Jeffrey Nugent,
President and CEO of Revlon.
The key terms of the amended agreement:
(a) eliminate the interest coverage ratio and leverage ratio
covenants for 2001;
(b) add a minimum cumulative EBITDA covenant requiring that
Revlon will not permit EBITDA for the period from January 1, 2001
to the date indicated to be less than:
Date Amount
---- ------
March 31, 2001 $25,000,000
June 30, 2001 $60,000,000
September 30, 2001 $120,000,000
December 31, 2001 $200,000,000
(c) limit the amount that Products Corporation may spend for
capital expenditures to $25,000,000 in fiscal year 2001;
(d) permit the sale of certain of Products Corporation's
non-core assets (specifically, the Phoenix Property -- the real
property and improvements thereon, and related equipment, owned
by the Company which are located in Phoenix, Arizona);
(e) permit Products Corporation to retain 100% of the Net
Proceeds (as defined in the Credit Agreement) from such asset
sales;
(f) increase the "applicable margin" by 1/2 of 1%; and
(g) require Products Corporation to provide a mortgage on
its facility in Oxford, North Carolina as security for its
obligations under the Credit Agreement.
The current Bank Group is comprised of THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender; CHASE SECURITIES INC.,
as Arranger; CITIBANK, N.A., as Documentation Agent, as a Local
Fronting Lender in each of Hong Kong, the Netherlands and Italy
and as a Lender; CITIBANK LIMITED, as a Local Fronting Lender in
Australia; LEHMAN COMMERCIAL PAPER INC., as Syndication Agent and
as a Lender; SYNDICATED LOAN FUNDING TRUST, By: LEHMAN COMMERCIAL
PAPER INC., not its individual capacity but solely as Asset
Manager; ABN AMRO BANK N.V., as a Local Fronting Lender in the
Federal Republic of Germany; ABN AMRO BANK N.V., New York Branch;
FLEET NATIONAL BANK (formerly known as BANKBOSTON, N.A.), as a
Local Fronting Lender in the United Kingdom, as a Co-Agent and as
a Lender; NATEXIS BANQUE BFCE (formerly known as BANQUE FRANCAISE
DU COMMERCE EXTERIEUR), as a Local Fronting Lender in France, as
a Co-Agent; THE SANWA BANK LTD., as a Local Fronting Lender in
Japan; THE SANWA BANK, LIMITED, NEW YORK BRANCH; ALLIED IRISH
BANK PLC, Cayman Islands Branch; BANK OF AMERICA, N.A., as a Co-
Agent and as a Lender; and BANK OF AMERICA, N.A. (formerly known
as NATIONSBANK, N.A.
Revlon is a worldwide cosmetics, skin care, fragrance and
personal care products company. The Company's vision is to become
the world's most dynamic leader in global beauty and skin care. A
web site featuring current product and promotional information
can be reached at http://www.revlon.com.Revlon brands include
Revlon(R), Almay(R), Ultima(R), Charlie(R) and Flex(R) and they
are sold worldwide.
SEAJETS INC.: Files for Chapter 11 Protection in West Palm Beach
----------------------------------------------------------------
Seajets Inc., the only provider of passenger service between
Grand Bahama Island and the Port of Palm Beach, FL is seeking
bankruptcy protection just days after port officials forced it to
make good on its debt. Seajets filed for Chapter 11 bankruptcy
Monday in West Palm Beach. Seajets President George Bradley said
that although last winter was "very, very financially rewarding,"
a lack of money ran the company aground. Its passenger ship went
into dry dock in early September for a regular inspection and
hasn't returned to the water since. (New Generation Research,
January 31, 2001)
SEGA CORPORATION: Moody's Downgrades Debt Ratings to B3
-------------------------------------------------------
Moody's Investors Service lowered Sega Corporation's senior
unsecured long-term debt ratings to B3 from B2 due to the
company's weaker-than-expected operating performance and eroding
financial flexibility. The rating outlook is negative. Moody's is
concerned Sega's earnings recovery will be slow.
On January 31, 2001, Sega announced that it would stop production
of Dreamcast, its 128-bit home video game hardware platform and
said it will be a contents provider in its home video game
business mainly by developing game software titles for other game
hardware platforms, Moody's reports.
The company also announced that it would post approximately Yen
58 billion in consolidated net losses in the fiscal year ending
March 31, 2001 and will post approximately Yen 48 billion in
consolidated recurring losses associated with sales of Dreamcast
and significant provision for write-offs of inventory, Moody's
relates. It is said that those losses will be partly offset by
Yen 85 billion of gain on donation of the private assets of Mr.
Ohkawa, Chairman and President of Sega and the company's second
largest shareholder. Moody's says that with these net losses,
Sega's equity cushion will be eroded while its financial
flexibility is weakening. Moody's confirms that it will continue
to assess how soon the company will be able to generate
meaningful financial benefits over the short- to medium term from
its new business strategy, and its liquidity management.
Sega Corporation (formerly known as Sega Enterprises, Ltd.) is
based in Tokyo, Japan. The company is one of the world's largest
suppliers of home video game products. Sega also engages in the
arcade machine business and amusement center operations.
SHOPKO STORES: Outlines Store Closing & Downsizing Plan
-------------------------------------------------------
ShopKo Stores, Inc. (NYSE: SKO) announced that its board of
directors approved a strategic reorganization plan. Under the
plan, 23 ShopKo stores and the company's distribution center in
Quincy, Ill. will be closed. The company's corporate structure
will be downsized with the reduction of approximately 2,500
employees, including 136 people at the company's corporate
headquarters in Green Bay, Wis. The reorganization will result in
a one-time pre tax charge to fourth quarter earnings of
approximately $125 million, or approximately $76 million after
tax.
"This is the culmination of the review launched in November to
re-engineer our capital structure and review the asset base,"
said William J. Podany, chairman, president and chief executive
officer of ShopKo Stores, Inc. "When completed, the financing
agreement announced last week and these actions position ShopKo
well for what has become a challenging retailing environment.
Although difficult for everyone involved, improving the
productivity of assets and reducing debt is necessary for the
ongoing vitality of the company and its employees."
Store and DC Closings
Twenty-three ShopKo stores in Illinois, Indiana, Iowa, Kansas,
Kentucky, Missouri and Nebraska will be closed. ShopKo's Quincy,
Ill. distribution center serves a majority of the stores to be
closed and will also be closing. Remaining traffic will be
transferred to ShopKo's distribution center in Omaha, Neb.
Corporate Restructure
In connection with the strategic reorganization, the company's
total workforce will be reduced by approximately 2,500 employees.
These employees will be offered severance packages and
outplacement services in accordance with the company's
guidelines.
At ShopKo's corporate headquarters in Green Bay, Wis., the
workforce will be reduced by 136 people, representing
approximately 12 percent of the corporate workforce. In Omaha,
Neb., Pamida's corporate workforce will be reduced by 41 people,
representing approximately 10 percent of Pamida's corporate
workforce.
ShopKo Stores, Inc., a Fortune 500 company headquartered in Green
Bay, Wis., operates 394 retail stores in 22 states, primarily in
the Midwest, Western Mountain and Pacific Northwest regions.
Retail operations include 164 specialty discount stores operating
under the ShopKo name in mid-sized and larger cities, and 230
Pamida discount stores in smaller, rural communities. For more
information about ShopKo or Pamida visit our website at
http://www.shopko.com
The twenty-three ShopKo locations to close are:
Illinois (5) Galesburg 888 South Lake Storey Road
Macomb 1620 East Jackson
Moline 2000 36th Avenue
Pekin 3465 Court Street
Rockford 5880 E. State Street
Indiana (2) Evansville 101 N. Green River Road
Evansville 2500 North 1st Ave.
Iowa (8) Bettendorf 1431 Kimberly
Cedar Rapids 5001 1st Avenue
Cedar Rapids 3111 16th Avenue SW
Clinton 1905 Lincolnway
Coralville 2050 8th Street
Keokuk 2323 Main St.
Muscatine 501 West Bypass 61
Spencer 901 11th Street Southwest
Kansas (2) Wichita 2057 N. Rock Road
Wichita 350 S. Tracy Street
Kentucky (1) Paducah 5101 Hinkleville Road
Missouri (3) Hannibal 4417 McMasters
Joplin 101 North Range Line Road
Cape Girardeau 300 West Park Mall
Nebraska (2) Hastings 3202 Osborne Drive West
Omaha 7402 North 30 Street
SILVER CINEMAS: Madstone Films Signals $38 Million Bid
------------------------------------------------------
Madstone Films, a New York producer of modestly budgeted digital
movies, has emerged as the lead bidder for the parent company of
the Landmark Theaters arthouse chain, according to Variety
magazine. Dallas-based Silver Cinemas entered chapter 11 in May
and placed its operations on the sales block. Lenders had been
expected to buy the company for little more than the $35 million
owed in debt, but the U.S. Bankruptcy Court in Wilmington, Del.,
recently extended the process until Feb. 14 to allow Madstone to
formulate a sweeter offer.
An industry insider put the Madstone offer being discussed at $38
million, with assumed costs related to construction projects,
possible employee severance packages and legal liabilities
pushing the figure to $40 million-still far less than the $65
million Silver paid in 1997 for Landmark alone. The other
properties among Silver's 331 screens are mostly discount movie
theaters. Though executives would not comment, Madstone's
interest in exhibition is believed to be twofold. Its films would
be a good fit with Landmark's highbrow offerings, and a
proprietary circuit could be retrofitted for digital projection,
further enhancing the synergy between the cinemas and the
company's digitally produced pictures. (ABI World, January 31,
2001)
SUN HEALTHCARE: Sells Subsidiary To Medline for $6MM
-----------------------------------------------------
Sun Healthcare Group, Inc. sold most of a money-losing medical
supply subsidiary to Medline Industries Inc., a privately held
company in Mundelein, Illinois. The purchase price is $6 million
in cash, according to a filing with the U.S. Bankruptcy Court.
Medline will sell to most of SunChoice's customers, including
nursing home operator Bridge Healthcare Corp., another Sun
Healthcare subsidiary.
SunChoice provides medical supplies, durable medical equipment
and over-the-counter medications, primarily to the long-term
health market.
Medline, the largest privately held manufacturer and distributor
of health care supplies in the country, also agreed to pay Sun an
estimated $7.8 million for inventory and $6.3 million for
accounts receivable, the court filing shows. The actual value
will depend on the inventories and unpaid bills at the time the
deal closes. (Sun Healthcare Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
TENNECO AUTOMOTIVE: To Reduce Worldwide Salaried Work Force
-----------------------------------------------------------
Tenneco Automotive (NYSE: TEN) announced that it intends to
eliminate up to an additional 405 salaried positions worldwide in
response to increasingly difficult industry conditions. This
reduction includes the immediate elimination of 215 positions.
This action is in addition to the cost-reduction plans announced
by the company in October 2000 that included eliminating up to
700 salaried positions worldwide by the end of 2001. Today's
cost-reduction plans are expected to be fully implemented by the
end of the first quarter 2002, at which time the company
anticipates it will have reduced its worldwide salaried workforce
by 22 percent as a result of the two initiatives.
Like many others in the automotive supply sector, the company
continues to be negatively impacted by a persistent weakness in
the global aftermarket, cutbacks in North American light vehicle
production, and a sharp decline in North American heavy-duty
truck production.
"We regret the impact on our people as we eliminate more
positions," said Mark P. Frissora, chairman and CEO, Tenneco
Automotive. "However, we are facing very tough industry
conditions which, coupled with our highly leveraged structure,
make it absolutely necessary to respond as quickly as possible by
continuing to aggressively cut costs and reduce spending."
Tenneco Automotive estimates that this cost reduction plan will
generate approximately $27 million in annual savings when fully
implemented. The company anticipates taking cash charges of up
to $14 million in 2001 related to the reductions announced today.
All work force reductions will be done in compliance with all
legal and contractual requirements including obligations to
consult with worker committees, union representatives and others.
The annual savings are expected to be in addition to the
approximately $45 million in annual savings the company
anticipates it will realize when the workforce reduction plans
announced in October 2000 are completed at the end of 2001.
Tenneco Automotive is a $3.5 billion manufacturing company
headquartered in Lake Forest, Ill., with 23,000 employees
worldwide. Tenneco Automotive is one of the world's largest
producers and marketers of ride control and exhaust systems and
products, which are sold under the Monroe(R) and Walker (R)
global brand names. Among its products are Sensa-Trac(R) and
Reflex(TM) shocks and struts, Rancho(R) shock absorbers,
Walker(R) Quiet-Flow(R) mufflers and DynoMax(R) performance
exhaust products, and Monroe(R) Clevite(TM) vibration control
components.
TITAN MOTORCYCLE: Appoints New Directors To Board
-------------------------------------------------
Titan Motorcycle Co. of America (OTC Bulletin Board: TMOTQ)
announced that, at a meeting of the board of directors held on
January 18, 2001, it appointed two new members to the board: Jock
Patton and Daniel Diethelm. Both Patton and Diethelm have
extensive experience and have enjoyed exceptional success in
guiding companies through the Chapter 11 process.
In recognition of their unique qualifications, Titan's board of
directors approved the formation of a three-member restructuring
committee, comprised of Messrs. Patton and Diethelm, and Harry
Eastlick, another non-management member of the board. The
restructuring committee is charged with the responsibility of
managing Titan's course through Chapter 11 reorganization and
pursuing initiatives specific to facilitating an effective
restructuring.
For 20 years, Jock Patton was the chair of the Corporate
Securities Practice Group for the law firm of Streich Lang
(Phoenix). Since then, he has served on the boards of directors
for several major companies undergoing restructurings in the
United States, including the Baptist Foundation of Arizona (the
largest nonprofit Chapter 11 proceeding in U.S. history),
National Airlines, Inc., Stuart Entertainment, Inc., and Unison
HealthCare Corporation. Patton is also a member of the board of
trustees for the ING Pilgrim family of funds and is a director of
Hypercom Corporation, and JDA Software Group, Inc.
Daniel Diethelm currently serves as a member of the board of
directors for Buick of Scottsdale, Sudan Funding, and Arizona
State Board for Charter Schools. Diethelm, a chartered financial
analyst, also served as chief executive officer and a member of
the board of Sebec Corporation, which acted as an investment and
financial consultant to corporations in a wide range of
industries, as well as Aeropower Resources, an authorized
maintenance center and FAA repair station for Rolls-Royce
aircraft engines.
"The addition of Jock and Dan to the board is a most welcomed
development as Titan continues to work toward a successful
reorganization," said Frank Keery, Titan's chairman and chief
executive officer. "Since the moment they assumed their places on
the board, Jock and Dan have worked tirelessly to bring new
strategies to bear for an expeditious restructuring. The board
believes that their service on the restructuring committee will
open new opportunities for Titan and speed its emergence from
Chapter 11 protection. The board and Titan's executive officers
have the utmost confidence in Jock and Dan and welcome the new
perspective and approach they bring to this process and to the
management of this company." Keery also acknowledged the
commitment and contribution made to Titan since its inception by
Barbara Keery, who has resigned as a member of the board and
secretary.
Founded in 1994, Titan Motorcycle Co. of America is a premier
designer, manufacturer and distributor of high-end, American-
made, V-twin engine motorcycles marketed under various Titan
trademarks. Titan's unique, hand-built configurations, including
the Gecko(TM), Roadrunner(TM), Sidewinder(TM) and Phoenix(TM),
represent the finest available in custom-designed, volume-
produced, performance motorcycles. Manufactured at the Company's
corporate headquarters and manufacturing facility, and available
with a variety of customized options and designs, Titan large
displacement motorcycles are sold through a network of over 80
domestic and international dealers.
TOYSMART: Judge Says e-Tailer Can Destroy Customer List
-------------------------------------------------------
A Massachusetts judge has approved a plan by bankrupt online toy
retailer Toysmart to destroy a customer list that became the
focal point of a privacy-rights maelstrom last summer after the
company offered to sell it to the highest bidder, according to
Newsbytes. On Monday, U.S. Bankruptcy Court Judge Carol Kenner
endorsed a plan to compensate the defunct Waltham, Mass.-based
company $50,000, provided that Toysmart agrees to destroy the
customer list when the liquidation proceedings are wrapped up
later this year.
Earlier this month, Buena Vista Internet Group-which owns a 60
percent stake in Toysmart and is a subsidiary of Walt Disney Co.-
offered $50,000 to purchase and destroy the list detailing the
transactions of an estimated 250,000 former Toysmart customers.
Rather than transfer the list to the Disney subsidiary, however,
Kenner's decision will transfer the money but keep the customer
list in the hands of Toysmart attorneys until all of the claims
against the company by former clients are settled, after which
the company must provide an affidavit describing how the list was
destroyed. The $50,000 then would be disbursed to the insolvent
company's creditors, including Disney. Toysmart owes creditors at
least $18 million. (ABI World, January 31, 2001)
TRANS WORLD: DOT Okays Frequent Flyer Plan With AMR
----------------------------------------------------
American Airlines and TWA received U.S. Department of
Transportation authority to allow American's AADVANTAGE members
to earn AADVANTAGE miles for flights on TWA. The DOT also
authorized the just-announced plans for reciprocal use of
American's Admirals Clubs and TWA's Ambassadors Clubs.
Effective Thursday, Feb. 1, AADVANTAGE members will be able to
earn AADVANTAGE miles for each flight on TWA. Also beginning
Thursday, members of either airline's airport clubs will be able
to use the other's clubs.
"We have just received the green light we were waiting for from
DOT," said Mike Gunn, American's executive vice president -
marketing and planning. "We can now begin to offer TWA customers
some of the benefits they will receive once our purchase of TWA's
assets is finalized."
"Our goal in this process is to take care of our customers,"
added Don Casey, TWA's executive vice president - marketing.
"Thursday we will take two important and tangible steps toward
that goal by offering those customers greater value and choice as
we move toward the proposed acquisition of TWA's assets by
American."
To accrue AADVANTAGE miles when flying on TWA, customers must be
members of the AADVANTAGE program, must request that their miles
be credited to their AADVANTAGE accounts and must fly on an
eligible fare ticket. The request can be made at the time of
booking, or when checking in for the their flight. TWA customers
who are not already members of AADVANTAGE can join by visiting
AA.com or by calling 1-800-433-7300.
Effective Thursday, March 15, AADVANTAGE members will also be
able to use their AADVANTAGE miles for award travel on TWA
flights.
"American wants to make it as easy as possible for TWA flyers to
earn and redeem AADVANTAGE miles," said Gunn. "We urge all
current TWA customers to keep flying the airline, and to take
advantage of this opportunity to earn AADVANTAGE miles."
Under the frequent flyer agreement, TWA joins the more than 30
airlines, 56 major hotel chains and seven rental car companies
who offer AADVANTAGE miles to customers. AADVANTAGE members can
also earn and redeem miles through the unique AOL AADVANTAGE
Rewards program, which offers a wide array of online purchase
opportunities using miles instead of hard currency.
Under the reciprocal airport club agreement, Admirals Club and
Ambassadors Club members will be able to gain access to any of
the American and TWA clubs simply by showing their valid
membership cards and a day-of-flight ticket. They will not have
to pay any special access fees.
The program also will provide access to TWA Ambassadors Clubs for
eligible customers of oneworld, a global alliance that, in
addition to American, includes AerLingus, British Airways, Cathay
Pacific, Finnair, Iberia, LanChile and Qantas.
American Airlines operates 50 Admirals Clubs at major airports
throughout the United States, Canada, the Caribbean, Europe,
Latin America and Japan. TWA has 15 Ambassadors Clubs in the U.S.
and one in Paris.
American previously announced that, pending bankruptcy court and
other regulatory approval of its purchase of TWA's assets,
members of TWA's Aviators(R) frequent flyer program will receive
AADVANTAGE miles for the full balances in their Aviators
portfolios.
"The proposed integration of Aviators and AADVANTAGE offers
exciting new opportunities to TWA's and American's most loyal
customers," said Casey. "Now, whether they choose to receive
AADVANTAGE miles for their TWA flights or choose to continue
accruing Aviators miles, our customers know that their miles are
protected for the future. Those miles will be more valuable than
ever when the transaction between TWA and American is completed."
Aviators members who already participate in AADVANTAGE will not
need to establish a new AADVANTAGE account. Their existing
Aviators account balances will be credited to their current
AADVANTAGE accounts.
Full details on the process will be available once the necessary
approvals are obtained and the arrangements are finalized.
AADVANTAGE, the industry's first frequent flyer program, was
started in May 1981 to recognize and reward American's best
customers. Today, the AADVANTAGE program operates worldwide and
has 35 million participants and more than 70 airline, hotel, car
rental and other service-company participants.
Current AMR Corp. (NYSE: AMR) news releases can be accessed via
the Internet. The address is http://www.amrcorp.com/corpcomm.htm
TUT SYSTEMS: Broadband Company's Revenues Falls & Will Cut Jobs
---------------------------------------------------------------
Tut Systems, Inc. (Nasdaq: TUTS) announced its results for the
fourth quarter of 2000. Revenue for the quarter ended December
31, 2000 was $5.9 million, compared to revenue of $10.6 million
for the quarter ended December 31, 1999.
The net loss for the quarter ended December 31, 2000, excluding
certain noncash purchase acquisition expenses of $2.5 million,
was $(65.5) million, or $(4.12) per share, compared with a net
loss for the quarter ended December 31, 1999, of $(1.5) million
or $(0.13) per share. Net loss for the quarter ended December 31,
2000, including noncash purchase acquisition expenses, was
$(68.0) million.
The foregoing results and other financial matters discussed
herein are the preliminary actual results for the quarter. Tut's
auditors have not yet completed their review of the financial
statements in connection with the annual audit. The audit could
result in adjustments to the preliminary results.
Continuing adverse developments affecting the telecommunications
industry have affected the current financial condition of certain
Tut customers. As a result, Tut has increased its allowance for
doubtful accounts by approximately $22.1 million which is
reflected in general and administrative expenses. In a related
move, Tut recorded a $3.1 million loss to reflect the estimated
impairment of the value of its equity investments in certain
customers. Tut also added a provision for loss on purchase
commitments and abandoned products of $29.3 million which
reflects its decision to reduce future inventory manufacturing
commitments and to exit certain noncore product lines. Tut also
disclosed that included in the balance sheet at December 31, 2000
is a short-term investment of $9.2 million in commercial paper
issued by Southern California Edison Company which is currently
in default. Tut believes that the ultimate realization of this
investment is not currently determinable. Including this
investment, Tut had a cash, cash equivalent and short term
investment position of approximately $102.6 million at December
31, 2000.
To operate more efficiently, Tut will reduce its work force by
10% effective immediately and announced that the company's
marketing and engineering employees will report to Mark
Carpenter, Vice President of Products, and Ian Moir, Vice
President of Technology.
Tut also announced that Tom Warner, Vice President of Engineering
and Matt Taylor, Chief Technical Officer and Board Member, have
left the company to pursue other interests.
Tut Systems, Inc. (TUTS) develops equipment for delivering
broadband services to multi-tenant unit properties (MTUs) such as
hotels, apartments, student housing and multi-tenant commercial
buildings. In partnership with service providers and real estate
investment trusts, Tut has deployed its systems in hotel,
commercial and residential properties worldwide. Tut's products
transport broadband services such as advanced data, Internet
access, high-quality voice and video simultaneously to MTU
tenants via the existing copper wiring in buildings, or via new
copper or fiber networks.
VANGUARD AIRLINES: J.F. Shea Now Holds 47.11% Of Common Stock
-------------------------------------------------------------
The J.F. Shea Company, Inc., holds 14,297,426 shares of the
common stock of Vanguard Airlines, Inc. representing 47.11% of
the outstanding common stock of the company. Mr. John F. Shea,
President and Director of J.F. Shea Co., Inc., additionally
beneficially owns 5,000 common stock shares of Vanguard with sole
voting and dispositive power, representing 47.13% of the
outstanding common stock of the airline. He, together with Edmund
H. Shea, Jr., Vice-President & Director; Peter O. Shea, Jr.,
Vice-President & Director; and James G. Shontere,
Secretary/Treasurer & Director share voting and dispositive power
over the 14,297,426 shares held by the Shea Co.
On December 15, 2000, J.F.Shea Co., Inc. paid Vanguard $3,750,000
in aggregate for the purchase of 50,000 Series B Convertible
Preferred Stock and warrants to purchase 3,208,125 common stock.
The $3,750,000 paid by J.F. Shea Company, Inc. to the airline
consisted of 1)cancellation of Vanguard's debt to J.F. Shea
Company, Inc. in the amount of $1,750,000, and 2) $2,000,000 from
working capital of J.F. Shea Company, Inc.
J.F. Shea Company, Inc.is a Nevada corporation whose principal
business is construction, land development and venture capital
investment, and is regularly engaged in the business of investing
in publicly held and private companies. Its business address is
located in Walnut, California.
In connection with their investments, they analyze the
operations, capital structure and markets of the companies in
which they invest, including that of Vanguard Airlines. As a
result of these analytical activities, one or more of the above
listed persons may suggest or take a position with respect to
potential changes in the strategic direction, operations,
management or capital structure of such companies as a means of
enhancing shareholder value. Such communications may take place
with the airline's management, members of the Board of Directors,
other shareholders, security analysts or others. In particular,
they believe that it would be desirable for Vanguard to explore
various strategic, operating and/or financial relationships with
Frontier Airlines or others, including possible business
combinations.
Mr. Edmund Shea also shares voting and dispositive power with
respect to 15,000 shares of Vanguard Airlines held by Siam with
the other partners of Siam. Siam is a California limited
partnership with its principal business and principal office also
in Walnut, California. The General Partner of Siam is E&M RP
Trust, for which Mr. Edmund Shea is the trustee.
J.F. Shea Co., Inc. holds 151,200 shares of Vanguard's Series A
Preferred Stock, immediately convertible into 1,292,760 shares of
common stock, which was purchased under a Series A Preferred
Stock Purchase Agreement dated March 20, 1998. Shea Co. also
holds 50,000 shares of the airline's Series B Preferred Stock,
immediately convertible into 3,205,128 shares of common stock,
which was purchased pursuant to a Unit Purchase Agreement dated
December 15, 2000. Additionally, the Shea Co. holds warrants to
purchase 6,377,453 shares of common stock, immediately
exercisable, of which warrants to purchase 3,205,128 shares of
common stock were acquired in the Series B Converible Preferred
Stock transaction referred to above.
VANGUARD AIRLINES: Hambrecht Trust Owns 50.1% Of Common Stock
-------------------------------------------------------------
The Hambrecht 1980 Revocable Trust beneficially owns 14,884,070
shares of the common stock of Vanguard Airlines, Inc. with sole
voting and dispositive powers. This amount represents 50.1% of
the outstanding common stock of the company.
The Hambrecht 1980 Revocable Trust is a California revocable
trust, the trustee of the Trust being William R. Hambrecht, whose
occupation is investing in public and private companies. The
Trust address is in the city of San Francisco, California. The
Trust is regularly engaged in the business of investing in
publicly-held and private companies.
On December 15, 2000, the Trust paid the airline $3,750,000 of
Trust funds for the purchase of Series B Convertible Preferred
Stock and warrants to purchase common stock.
Vanguard's securities now held by the Trust are 4,644,685 shares
of common stock, and 10,239,385 shares from derivative
securities, for a total of 14,884,070 shares.
VENCOR, INC.: Agrees To Modify Stay For Insured Litigation Claim
----------------------------------------------------------------
Vencor Nursing Centers East, L.L.C., d/b/a Rehabilitation and
Healthcare Center of Cape Coral, is a defendant in the action
captioned Richard C. Lindner, as Personal Representative of the
Estate of Delia Weist vs. Vencor Nursing Centers East, L.L.C.,
d/b/a Rehabilitation and Healthcare Center of Cape Coral, Case
No. 99-8941 CA JBR, In the Circuit Court of the Twentieth
Judicial Circuit In and For Lee County, Florida.
Vencor, Inc. consented to and obtained Judge Walrath's stamp of
approval for lifting the automatic stay to permit the plaintiff
in the action to prosecute her claim and to collect any judgment
in respect of any recovery of damages in the action from any
available insurance proceeds.
The Debtors have determined that there is an insurance policy
issued in favor of Vencor. Any settlement of or recovery of a
judgment for damages in the Underlying Action will be limited to
applicable insurance proceeds, and the plaintiffs will be
permitted to continue to assert an unsecured perpetition claim in
the Debtors' chapter 11 cases solely for the portion of the
judgment that cannot be satisfied by available insurance
proceeds.
Except as specifically provided in the stipulation, the
Plaintiffs shall not engage in any efforts to collect any amount
from the Debtors or any of Debtors' current and former employees,
officers and directors, or any person or entity indemnified by
Debtors.
The parties also agree to mutual general release of claims over
the matter. (Vencor Bankruptcy News, Issue No. 23; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
W.R. GRACE: Fitch Downgrades Senior Unsecured Debt Rating To CCC
----------------------------------------------------------------
Fitch downgrades W.R. Grace & Co.'s (Grace) senior unsecured debt
rating to `CCC' from 'BBB-' and downgrades Grace's short-term
rating to `C' from 'F3'. Grace remains on Rating Watch Evolving.
Grace previously announced that they are considering filing for
reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Several of Grace's codefendants in asbestos litigation have filed
petitions for bankruptcy reorganization, which company management
suggests as one possible reason for the surge in asbestos-related
claims filed against Grace. Settlement costs in 2000 have also
increased, contributing to the company's decision to take a
$135.2 million charge (net of insurance and tax) to increase the
company's asbestos-related reserves.
The addition to the gross liability associated with the charge
was $294 million, bringing 2000 gross liability to $1.106
billion, up slightly from $1.084 billion in 1999. After record
gross asbestos-related expenditures of $282 million in 2000,
Grace's estimate of future liability has remained essentially
unchanged.
Grace's debt totals $422 million. Net debt totals $126 million
after accounting for $192 million in cash and life insurance
policies with a net cash value of $104 million. The $250 million
credit facility expiring May 2001 was $150 million drawn at year-
end. Grace also has a $250 million credit facility expiring May
2003. Going forward, Grace may require additional sources of
funding to replace or augment existing bank borrowing capacity,
adding uncertainty to the liquidity picture.
Fitch believes that there is a significant risk that Grace will
file for Chapter 11 reorganization based on trends in asbestos
litigation, the financing environment, and the use of bankruptcy
protection by companies in similar situations.
While it is possible that the increase in the number of claims
filed against Grace and the rising costs associated with settling
those claims may be reversed in future years, other factors point
to a rating that captures the significant default risk. Among the
other factors are the alarming rate at which changes have
occurred and management's announcement that they are considering
reorganization under bankruptcy.
Should the asbestos litigation environment improve for
defendants, or should Grace renew its credit facility, allowing
management to avoid taking the Chapter 11 reorganization route,
Fitch will reevaluate the ratings.
BOOK REVIEW: GOING FOR BROKE: How Robert Campeau Bankrupted the
Retail Industry, Jolted the Junk Bond Market, and
Brought the Booming 80s to a Crashing Halt
-----------------------------------------------------------------
Author: John Rothchild
Publisher: Beard Books
List Price: $34.95
Review by Gail Owens Hoelscher
Order a copy today at Amazon.com to read next weekend. Go to
http://amazon.com/exec/obidos/ASIN/1893122611/internetbankrupt/
Robert Campeau, one of 14 children born to a French Canadian
mechanic and blacksmith, invested $5,000 in a modest house under
construction in Ottawa in 1949, doing most of the carpentry work
himself. Foreseeing the post-war suburb boom, and virtually
creating the Ottawa skyline, he went on to build a successful,
sprawling $200 million real estate corporation.
Then, riding the tidal wave of leveraged buyouts of the late
1980s, he borrowed $11 billion from Wall Street to acquire Allied
Stores and Federated Department Stores, both successful and
relatively debt-free retail conglomerates, in hostile takeovers.
Fortune magazine called the Federated buy "the biggest, looniest
deal ever." Two years later, Allied, Federated, and Campeau
Corporation were plunged into Chapter 11 receivership.
Campeau was so many things: risk-taker extraordinaire, charming,
earnest, eccentric, endearing, cocky, extravagant, persistent,
impetuous, commanding, frenetic, and capricious. He shocked the
conservative Canadian business community with his brazenness,
flamboyance and quirky ways. In 1980, he showed up at the home
of the CEO of Royal Trustco, Canada's largest trust company and
real estate brokerage, at breakfast time. His English only
passable, Campeau told the astonished CEO that he was taking over
Royal Trustco that very day. Campeau was summarily thrown out
and the major business players in Canada quickly got together and
bought up all the outstanding shares of Royal Trustco to thwart
his plan.
Campeau was a total stranger to the U.S. investment banking
world. His quest had begun with the intention of buying a U.S.
bank or S&L. Reading about the hostile takeover of Macy's,
however, he abruptly ordered his Canadian financiers to look for
a retail company instead. Once in contact with Wall Street, he
bemused them with his picturesque and baffling ways of doing
business. He invited them moose-hunting and called them at 5:00
a.m. He disappeared without warning to get a facelift in Brazil,
only to reappear months later, calling one banker down from the
ski slopes. He sported jaunty hats with feathers and brought his
chef to meetings. He was discovered to have two families, a wife
and three children in Ottawa, a mistress and two children in
Montreal.
Blinded or dazzled by all this, enticed by the prospect of
colossal fees, and caught up in their times, investment bankers
assembled the funds needed for Campeau's adventure into
retailing. He drastically overbid for both companies. In the
case of Federated, Campeau paid a little over $8 billion for the
company, which had had a market value of $3 billion, and borrowed
about $7 billion. Allied was worth about $2 billion, but he paid
more than $4 billion.
Campeau never found the "synergy between real estate and retail"
he promised the shocked and angry management and employees of the
two companies. Saddled with enormous debt, Campeau's complete
ignorance of the retail industry, his ridiculously high
expectations and broken promises, the companies went into a free-
fall. Casualties included upward of 10,000 employees laid off at
Federated and Allied alone, junk-bond investors, brokerages stuck
with bridge loans, other retailers forced to lower their prices
as Allied and Federated unloaded inventory, and creditors with
claims of over $8 billion.
The first line of Going for Broke reads "This is the story of a
marvelous financial calamity." Read on and be amazed, amused and
saddened.
John Rothchild is a well-known journalist and writer. He has
authored and co-authored eight books, including three co-authored
with Peter Lynch.
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
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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 are
available at your local bookstore or through Amazon.com. Go to
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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 USA, and Beard
Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Aileen Quijano and Peter A. Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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*** End of Transmission ***