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/raid1/www/Hosts/bankrupt/TCR_Public/970917.MBX T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, September 17, 1997, Vol. 1, No. 18 In This Issue BARRY'S JEWELERS: Bondholders Oppose Management Contracts BIG RIVERS: Replies to The Chase Manhattan Bank BUMBLE BEE: Committees Back Disclosure Statement CALDOR: Caldor Reports Second Quarter 1997 Results CINCINNATI MICROWAVE: Creditors Object to Details of Sale DOEHLER-JARVIS: Hearing for Asset Purchase Agreement L. LURIA: Closes, Liquidates Remaining Stores MAIDENFORM: Seeks to Assume/Reject Unexpired Leases MARVEL: Asks Court to Enforce Automatic Stay MARVEL: Asks Court to Dismiss Chapter 11 Cases MARVEL: Lenders Want Trustee to Oversee Sale MIDCON OFFSHORE: Hearing Continued NETS: Creditors' Committee OKs Extending Exclusivity PARTY WORLD: Last Date to File Proofs of Claims POCKET COMMUNICATIONS: DIP Lenders on FCC Claim SILAS CREEK: Committee Wants Say in Sale to ABC Fabrics SIZZLER: New Bank Loan Commitment Announced STANDARD BRANDS: Seeks to Consolidate the Debtors' Estates STRAIGHT ARROW: Keeps Counsel on Trademark Issues STRAWBERRIES: Sale of Assets to Record Town WESTERN FIDELITY: Wants to Hire Financial Advisor ----- BARRY'S JEWELERS: Bondholders Oppose Management Contracts ----------------------------------------------------------- The Official Bondholder Committee in the Chapter 11 case of Barry's Jewelers, Inc. opposes an order authorizing executive management contracts and post-petition employment agreements. Specifically, the bondholders object to annual bonuses totaling approximately $1.6 million, fifty percent of which will be paid if the debtor achieves an undisclosed fiscal year-end EBITDA. The Bondholders argue that the debtor's management has been very careful to "hide the ball" with respect to the profitability of the debtor's operations. Furthermore, the Bondholders argue that the aggregate annual salaries for the executives exceeds $3.4 million which is an amount several times larger than the total cash payment the creditors committee has agree to support as a distribution to satisfy more than $17 million of pre-petition claims. In addition, the Bondholder Committee opposes the debtor's motion to extend exclusive periods in which to file a plan of reorganization. The committee states that a confirmable, consensual plan of reorganization is now ready to be filed and prosecuted, and the exclusivity motion has been brought for one purpose, to strengthen management's hand in a negotiation of its employment contracts and its treatment and compensation under a plan of reorganization. BIG RIVERS: Replies to The Chase Manhattan Bank ------------------------------------------------ Big Rivers Electric Corporation states that the Chase Manhattan Bank has elected to pursue its role as the sole supporter of the examiner's fee enhancement application by engaging in an unnecessary and particularly venomous attack on Big Rivers Electric Corporation and its professionals. Big Rivers denies that the company or its professionals have acted inappropriately and inconsistently with their respective fiduciary duties and Big Rivers denies Chase's assertion that the debtor can comfortably pay Mr. Schilling's request for compensation. Big Rivers also denies the accuracy of Chases's discussion regarding sources and uses of cash at closing and the $8 million operating fund. BUMBLE BEE: Committees Back Disclosure Statement ------------------------------------------------ Bumble Bee Seafoods, Inc., and its subsidiary's Official Committees of Unsecured Creditors agree on the terms of the disclosure statement to accompany the debtors' joint plan. The committees say in light of the sale of substantially all of the debtors' assets to a third party, they have reviewed the disclosure statement to ensure it minimizes the accrual of administrative expenses. CALDOR: Caldor Reports Second Quarter 1997 Results -------------------------------------------------- The Caldor Corporation announced its financial results for the 13- and 26-week periods ended August 2, 1997. For the second quarter of 1997, the company's EBITDAR (earnings before interest, taxes, depreciation, amortization and reorganization items) was $13.7 million compared to $6.3 million in 1996, for an increase of $7.4 million. For the six months ended August 2, 1997, EBITDAR was $9.1 million compared to a loss of $6.6 million for the prior year, for an increase of $15.7 million. The company's operating loss for the second quarter of 1997 (results before interest, taxes, and reorganization items) was $1.5 million versus an operating loss of $8.6 million in the period last year. For the six months ended August 2, 1997, operating loss was $21.2 million compared to an operating loss of $34.7 million in the same period last year. The company's net loss for the second quarter was $18.0 million, or $1.07 per share, compared to a net loss of $28.4 million, or $1.67 per share, for the second quarter of 1996. The net loss for the first half of 1997 was $54.3 million, or $3.21 per share. In the comparable period in 1996, the net loss was $71.7 million, or $4.23 per share. The results for the second quarter and the first half of 1997 included reorganization items of $5.6 million and $11.8 million, respectively, principally for retention costs, professional fees, and other bankruptcy related expenses. Net sales for the second quarter of 1997 were $598.2 million compared to $622.2 million for the second quarter of 1996, a 3.9 percent decline. Comparable store sales declined by 2.3 percent for the quarter. For the twenty-six weeks ended August 2, 1997, net sales were $1.12 billion compared to $1.19 billion in the same period last year, a decrease of 5.6 percent. Comparable store sales declined by 4.4 percent for the first half of fiscal 1997. Warren D. Feldberg, chairman and CEO, commented, "The improved results reflect progress being made as a result of the company's new marketing, merchandising, and financial strategies and are in line with the company's business plan." He also noted that the company continues to have significant credit availability under its approximately $450 million Debtor-in-Possession bank facility. Recently, Caldor announced the extension through February 28, 1998 of its exclusive period to file a plan of reorganization, and the period for which it can solicit acceptances for the reorganization plan through April 30, 1998. According to the company, the extension will enable it to implement its strategies through the back-to-school and fourth quarter periods and to make refinements as appropriate. At this point, it appears unlikely that a plan of reorganization would provide for recovery by equity security holders. CINCINNATI MICROWAVE: Creditors Object to Details of Sale --------------------------------------------------------- The Official Committee of Unsecured Creditors objects on a limited basis to the debtor's motion for an order granting authority to sell its real property to Home Depot USA, Inc. for $4.9 million. The Committee states that pursuant to the agreement, Home Depot has the option, but not the obligation to purchase the property, and that the $100,000 earnest money deposit is minuscule. As provided in the agreement, the escrow deposit would be Home Depot's only penalty in the event that it defaults on the purchase of the property. The Committee argues that the purchaser should be required to provide $400,000 in escrow, and that the Seller should not be limited to that amount and waive all other rights and remedies in the event that Home Depot defaults on the purchase. DOEHLER-JARVIS: Hearing for Asset Purchase Agreement ----------------------------------------------------- On September 24, 1997 a hearing will be held at the United States District Court for the District of Delaware to (i) approve terms for submission of competing offers, over-bid procedures, break-up fees and notice requirements; and (ii) scheduling date, time and place for hearing on requested relief. A motion has been served for orders: (A) Approving Terms for Submission of Competing Offers, Over-bid Procedures, Break-up Fees and Notice Requirements (B)(i) Approving Asset Purchase Agreement providing for the Sale of Assets of the Materials Handling Division of the Kingston-Warren Corporation and Authorizing the Kingston-Warren Corporation to Assume its Obligations Thereunder (ii) Authorizing the Assumption and Assignment of Certain Executory Contracts in Connection Therewith (iii) Authorizing the Assumption of a Certain Agreement with Tony Stewart (C) Scheduling Date, Time and Place for Hearing on Requested Relief and (D) Granting Related Relief Kingston Warren, a wholly owned subsidiary of Harvard Industries, Inc., one of the debtors in this case, is seeking a sale of King-Way, a division of Kingston Warren. King-Way is a non core division of Kingston Warren and represents less than three percent of the aggregate book value of Kingston Warren. The asset purchase agreement contemplates sale of the King-Way assets to Stanwich for $18,050,000. L. LURIA: Closes, Liquidates Remaining Stores --------------------------------------------- L. Luria & Son, Inc., has been granted authority to close its six remaining stores and sell the remaining merchandise free and clear of all liens, including the lien of Foothill Capital Corporation. The company will receive a guaranteed amount equal to 32.5 percent of the aggregate retail price of the merchandise plus all petty cash on hand at the stores, with approximately 90 percent or $7.3 million to be paid at the close of the sales and the balance within two days of the final inventory report from liquidating agent Gordon Brothers Partners, Inc. After receiving the guaranteed amount, L. Luria will remit to Foothill via wire transfer $5.955 million in release of all claims of Foothill plus $715,441 in cash collateral for five outstanding letters of credit. The sales will commence on September 10, 1997, and are to be completed by December 21. MAIDENFORM: Seeks to Assume/Reject Unexpired Leases --------------------------------------------------- On September 25, 1997 in Room 601, United States Bankruptcy Court, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004, the debtor will seek an order authorizing and approving the rejection of certain unexpired leases of nonresidential property. MARVEL: Asks Court to Enforce Automatic Stay --------------------------------------------- Marvel Entertainment Group Inc., and Marvel Characters Inc. are seeking emergency enforcement of the automatic stay. Marvel Characters, Inc. (MCI) owns 78 percent of the voting power of Toy Biz, which entitles MCI effectively to control Toy Biz by electing a majority of its board. But since the election of the eight new directors to Toy Biz's board of directors, Marvel alleges that Toy Biz and members of the Toy Biz Group have actively and continuously impaired and exercised control over MCI's rights under its shares of stock, which include the right to control Toy Biz. Marvel alleges that Toy Biz has willfully disregarded MCI's equity and voting interest in Toy Biz, and otherwise attempted to exercise control over - and in fact eliminate - MCI's rights under the shares. The debtor is seeking both the enforcement of the automatic stay and the award of monetary compensation for all damages suffered by the debtor as a result of the violations of the automatic stay, and attorneys' fees. MARVEL: Asks Court to Dismiss Chapter 11 Cases ----------------------------------------------- Marvel Entertainment Group, Inc., wants to dismiss its Chapter 11 cases with the support of the Official Committee of Equity Security Holders, indenture trustee LaSalle National Bank, and the Official Bondholders Committee of Marvel Holdings. The Equity Committee says it upholds the dismissal because it did not receive a proposal from the current lenders that would preserve the shareholder's interest in the company and it looks like the bankruptcy process is not being used to rehabilitate the company. Marvel says negotiations with the prepetition banks have stalled and it does not look like they will ever reach an agreement. The company is about to run out of funds with which to operate the business and satisfy its obligations. Because the court won't let Marvel get DIP financing from the standby purchasers, who are the only acceptable financing source, the company says it believes there is no alternative but to have the cases dismissed. Section 1112(b) of the Bankruptcy Code provides that at the request of a party in interest the court may convert a case; also, continuing loss or diminution of the estate and absence of a reasonable likelihood of rehabilitation or the inability to effectuate a plan merit dismissal. These conditions, says Marvel, have been met. The company says the prepetition banks' proposal to provide their own DIP financing if a Chapter 11 trustee is immediately appointed would violate the company's due process rights. There must be a full evidentiary hearing before such an appointment, but the company doesn't have the funds to survive that long. Also, it says, appointing a trustee is inconsistent with the contractual remedy of foreclosure in pre- and postpetition loan agreements. Liquidation by conversion to Chapter 7 may unearth substantial claims in the nature of fraudulent conveyance, lender liability, and equitable subordination, says Marvel, but there is no means of funding the administrative expenses of a Chapter 7 trustee. Marvel says the banks won't foreclose and the DIP banks have rejected an offer of full and immediate repayment. Since the banks don't want to own Marvel's assets and be forced to dispose of them outside Chapter 11, at this point, they are just using bankruptcy proceedings for their protection. Marvel concludes, "The debtors cannot countenance, and will not assist in the banks' continued abuse of the Chapter 11 process." MARVEL: Lenders Want Trustee to Oversee Sale --------------------------------------------- Chase Manhattan Bank, one of the Marvel Entertainment Group, Inc.'s secured lenders, seeks the immediate appointment of a trustee to oversee the marketing and selling of subsidiaries Panini, S.p.A. and Fleer/Skybox., which are part of the secured lenders' collateral. The sale, says Chase, has been put on hold because although the Icahn Group took over under the terms of a global settlement arrangement, it cannot conclude a deal with ToyBiz. Icahn, says Chase, is "holding these two significant and deteriorating assets hostage." Furthermore, says Chase, Marvel cannot keep holding these companies because they are in desperate need of financing, which Marvel won't provide MIDCON OFFSHORE: Hearing Continued ----------------------------------- The Chapter 11 Trustee, Sheila Macdonald has sought a short continuance from September 15, 1997 to September 19, 1997 for the following matters: (i) Debtor's Motion to Compel Compliance with Agreement Regarding LOE's on South Marsh Island (ii) Debtor's Motion for Authority to Reject Settlement & Compromise Agreement and Mutual Release with Noram (USA) Inc., et al. (iii) Joint Motion of LDNG, The United States of America, and Ponder Industries for Sanctions; and (iv) Motion to Compel Debtor to Assume or Reject Executory Contract filed by a Certain Testamentary Trust. NETS: Creditors' Committee OKs Extending Exclusivity ----------------------------------------------------- The Official Unsecured Creditors' Committee of Nets, Inc. has no objection to the motion of the debtor seeking to extend the exclusivity deadline until October 6, 1997. If an additional extension of exclusivity is sought, the Committee will seek to obtain co-exclusive rights for any extended period. PARTY WORLD: Last Date to File Proofs of Claims ----------------------------------------------- Party World, Inc., announces that proofs of claims and interest must be filed on or before November 13, 1997, in the Central District of California POCKET COMMUNICATIONS: DIP Lenders on FCC Claim ----------------------------------------------- Pocket Communications, Inc.'s DIP lenders (Pacific Eagle Investments, Ltd.; Pacific Eagle Investments (L), Limited; Masa Telcom, Inc.; Ericsson, Inc.; and Siemens Stromberg-Carlson) request that any court order on the company's valuation motion for the FCC secured claim on licenses grant them the right to rely on or challenge the valuation method. The lenders say other determinations of license value may be necessary in these cases, not just section 506(a) of the Bankruptcy Code as set forth in the valuation motion. SILAS CREEK: Committee Wants Say in Sale to ABC Fabrics ------------------------------------------------------- "Given the economic interests of its constituency, the Committee should fully participate in the auction and bidding procedures," asserts the Official Committee of Unsecured Creditors in response to Silak Creek's Motion to sell substantially all of its assets to ABC Fabrics, Inc., or a higher bidder. The Committee asks Judge Balick to modify the bidding procedures suggested by the Debtors to permit the Committee to analyze, review and possibly object to a sale that it doesn't like. Further, the Committee doesn't understand all of the complexities outlined in the Debtors' Motion as they relate to the payment of a break-up fee to ABC if ABC does not emerge as the successful bidder. The Committee urges Judge Balick to direct the Debtors to provide a clear explanation of the events which will lead to payment of a break-up fee. Hopefully, the Committee says, that explanation will comport with the Debtors' explanation as it stood before the Debtors filed the Bidding Procedures Motion. SIZZLER: New Bank Loan Commitment Announced ------------------------------------------- Sizzler International, Inc., announced it has reached agreement in principle with Westpac Banking Corp. of Sydney, Australia, for a five-year, $45 million business loan. The loan, for which a binding term sheet has been signed, will be used to refinance the higher interest debt that was part of the restructuring of Sizzler International undertaken during the company's recently completed Chapter 11 process. The Westpac loan, together with cash realized by the company from property sales and other sources during the one-year Chapter 11 process, will be used to fully repay the $65 million owed to Sizzler prepetition creditors, as confirmed in the plan of reorganization approved by the U.S. Bankruptcy Court on June 2, 1997. According to the company, the Westpac loan has significantly lower interest rates and a more favorable repayment schedule than the debt agreement that was part of the reorganization plan negotiated with the company's creditors and approved by the bankruptcy court. It will be secured, as the reorganization plan debt was, by the assets of Sizzler's international operations. "We are extremely pleased by this refinancing arrangement with a major international bank under terms typical of a business partnership between a lender and a corporation. As well as reducing the burden of a high interest rate, it signals the faith of a major financial partner in Sizzler's future," said James A. Collins, Sizzler International's chairman and CEO. The new Westpac loan commitment does not affect the company's domestic restaurant subsidiary which also recently completed a Chapter 11 reorganization. Sizzler's domestic restaurant subsidiary's reorganization plan calls for approximately $25 million in creditor obligations to be repaid in full, with interest, over four to six years from the cash flow of Sizzler's U.S. business. STANDARD BRANDS: Seeks to Consolidate the Debtors' Estates ---------------------------------------------------------- Standard Brands Paint Company, a California corporation, Standard Brands Paint Company, a Delaware corporation, and Major Paint Company, a California Corporation, filed a joint motion with the Official Unsecured Creditors' Committee for an order authorizing and directing substantive consolidation of the debtors' estates. STRAIGHT ARROW: Keeps Counsel on Trademark Issues ------------------------------------------------- Straight Arrow Products, Inc., has been granted the authority to keep Seidel, Gonda, Tavorgna & Monaco, P.C. as special counsel to represent the company in Japanese trademark matters related to the Chapter 11 proceedings. STRAWBERRIES: Sale of Assets to Record Town ------------------------------------------- Strawberries, Inc., will sell substantially all its assets free and clear -- including real property leases, inventory, accounts receivable, and other tangible and intangible assets -- to Record Town, Inc., a wholly owned subsidiary of Trans World Entertainment Corporation, for approximately $26 million. The sale is subject to higher or better offers; in the event the sale falls through, TWE will get a breakup fee of $750,000 plus expenses. Overbids must be at least $26 million plus a consideration of no less than the breakup fee. There will be an auction September 26, 1997, at which overbids must include an additional consideration of at least $50,000 over the previous bid. Bids must be accompanied by a cash deposit or letter of credit for $500,000 and evidence of the bidder's financial ability to conclude the transaction. A hearing on entry of the sale order is set for September 30, 1997, before Judge Roderick R. McKelvie, in Wilmington, Delaware. WESTERN FIDELITY: Wants to Hire Financial Advisor ------------------------------------------------- Western Fidelity Funding, Inc., seeks to employ Price Waterhouse L.L.P. as its financial advisor to assist in evaluating the prospects for reorganization, drawing up a plan of reorganization and disclosure statement, and aiding with potential financing/sale transactions. 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., Princeton, NJ, and Beard Group, Inc., Washington DC. Debra Brennan and Rebecca A. Porter, Editors. Copyright 1997. All rights reserved. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *