/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/971218.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, December 18 1997, Vol. 1, No. 82 Headlines ALPHASTAR: Operations May Be Divided BARNEY'S: To Extend Key Employee Program BEERS CONSTRUCTION: Gellerstedt Steps Down BOYDS WHEELS: Third Quarter Report BRADLEES: New DIP Financing Package BRAUN'S FASHIONS: Third Quarter Earnings DOEHLER-JARVIS: Committee Responds to Exclusivity Extension DOEHLER-JARVIS: Committee Responds to Sale GUY F. ATKINSON: Court Rejects MK's Agreement MAX: Plan to Pull Out of Bankruptcy MMT: Offer to Purchase Wet Waste MOBILEMEDIA: Contract with MCI MOBILEMEDIA: Needs Time to Assume or Reject Leases MONTGOMERY WARD: Agreement with ValueVision MONTGOMERY WARD: Closing 10 Electric Avenue Store MONTGOMERY WARD: D.I.R. Intervenes for WC Claimants THE WIZ: Files for Chapter 11 TODAY'S MAN: Restatement of 3rd Quarter Results WESTERN PACIFIC: Lender Holds Clout --------- ALPHASTAR: Operations May Be Divided ------------------------------------ The Communications Daily reported on December 17, 1997 that Champion Holding reportedly purchased AlphaStar for $4.6 million. AlphaStar declared bankruptcy in August when it had $105 million in liabilities and $72 million in assets. Champion Pres. Mahmoud Wahba is said to be considering restoring service in the Caribbean before reactivating North American markets. The Company said direct-to-home operations may be divided into 3 divisions: AlphaStar Bcstg., comprising old AlphaStar operations; AlphaStar PC Webcasting, providing video, data and audio via satellite; Champion Private Network and Teleport. BARNEY'S: To Extend Key Employee Program ---------------------------------------- Barney's , Inc., et al. is seeking an order authorizing the debtors to extend the key employee retention bonus program. A hearing will be held on the matter on January 7, 1998. Executives designated to participate in the program include Executive Vice Presidents, Senior Vice Presidents, Corporate Vice Presidents and Divisional Managers, and Corporate Office, Store and Merchandizing Key executives. A portion of the bonuses to be paid under the Extended Bonus Program will be paid only if certain performance criteria are met. The maximum cost of the Extended Bonus Program for fiscal year 1998 is approximately $2,259,155. The debtors believe that the proposed extension of the existing bonus program will insure the continued success of the debtors' efforts to retain its key employees by providing such employees with the incentive to remain in the debtors' employ throughout the reorganization process. BEERS CONSTRUCTION: Gellerstedt Steps Down ------------------------------------------ The Atlanta Journal/Constitution reported on December 16, 1997 that Larry Gellerstedt III will step down as chief executive of Beers Construction Co. on Jan. 1, ending more than 30 years of family management of Atlanta's biggest builder. Gellerstedt, 41, will remain as chairman until June, and then he will become nonexecutive chairman for a year after that to assure a smooth transition. Joe Riedel, who became president nearly a year ago, will be the new CEO. Ted Hudgins, chief operating officer, will become president. The announcement came as a surprise. Beers had shown impressive growth during Gellerstedt's decade as CEO --much of it after he agreed to sell the company to Skanska of Sweden in 1994. "Any time you go from being the majority owner of a company to being the regional CEO of a global company, there's going to be change," Gellerstedt said in an interview Monday. "When I talked to the employees this morning, I told them there's going to be a tremendous amount of speculation: something is wrong with my health, or something is wrong with Skanska. There's nothing there. I just really have a passion to try something new." Gellerstedt took over Beers from his father, Larry Gellerstedt Jr., who had run the company since the early 1960s. "I'm not an engineer by training," said Gellerstedt, who majored in history and psychology in college and has worked at Beers full time for 20 years. "I've always had in the back of my mind interest in a business career other than construction. I absolutely intend to find another job with equal challenges to the ones I've had at Beers. I'm not even close to hanging up the spurs." But Gellerstedt said he doesn't yet know what he will do next. While saying he doesn't regret selling Beers to Skanska four years ago, Gellerstedt said he considers himself more of an entrepreneur than a regional manager. "When you wake up and you have to work a little bit more at something than you are used to, then it's time to look at yourself," Gellerstedt said. "Joe and Ted have done a fabulous job running the company. I can't think of a better time to make a transition." Gellerstedt loves challenges. As chairman of the Fernbank Museum of Natural History, he pulled it back from the brink of bankruptcy. More recently, he has been overseeing the merger of the Egleston and Scottish Rite children's hospitals. He plans to continue his numerous civic roles. James B. Williams, chairman and CEO of SunTrust Banks, said he plans to go ahead with plans to make Gellerstedt a SunTrust director despite his departure from Beers. "He won't stay unoccupied for long," Williams said. "He's got too much talent." Williams said he knew of no falling-out between Gellerstedt and Skanska but added, "I kind of gathered Larry could have more fun doing something else." Tommy Holder, CEO of Holder Construction, another major Atlanta builder, said he was "not terribly" surprised by Gellerstedt's move. "I have just suspected for a while that that was going to be his exit strategy," he said. Gellerstedt said, however, that leaving Beers wasn't an easy decision. "I thrive on challenge," he said. "But I'm scared. I've never had to look for a job before." BOYDS WHEELS: Third Quarter Report ---------------------------------- The following is a statement from Boyds Wheels' Chairman Gardiner S. Dutton and President David M. Asher: One of the more significant events in the history of Boyds Wheels occurred after the third quarter ended. Boyd Coddington, the company founder, resigned as chairman and chief executive officer Oct. 31, 1997. Boyd has signed a multiyear consulting contract and his duties will include public relations for Boyds Wheels, assisting in design work, and performing sales and marketing functions. Freeing him from day to day operating responsibilities will allow him to focus in those areas where he can make a major impact on the company's future. This should be a great help in our turnaround efforts. Boyd will continue to serve on the board of directors. Gardiner Dutton, a company director, was appointed to serve as interim chairman and CEO. Dutton has an extensive background in managing public manufacturing companies, having recently served for 5 years as CEO of a turnaround defense contractor, Bowmar Instrument Corp., and as CEO for the prior 10 years of Inertia Dynamics Corp. (now Ryobi Outdoor Products), a lawn and garden equipment manufacturer. Both Asher, the company president, and Karkosky, director of operations, were colleagues of Dutton at Ryobi Outdoor Products. At the recent S.E.M.A. show, the largest trade show for automotive after market products, Boyd Coddington and Chip Foose, the company's chief designer, were inducted into the Hot Rod Hall of Fame sponsored by Hot Rod Magazine. This demonstrates the reknown of this company in its niche market and the important contributions made by Boyd and Chip. Financial results continue to be disappointing. On revenues of $4.8 million in the third quarter, the company lost $2.1 million, including a $465,000 write off on an account receivable from one customer which filed for Chapter 11 bankruptcy in September. Nine month net sales totaled $12.6 million with a recorded loss of $7.5 million, including $2.3 million for one time special charges. Loss per share was $0.55 for the quarter and $1.95 for nine months. As previously stated, we do not expect to return to profitability until mid 1998. As of this date, we have not finalized refinancing of the company's bank lines and it may require an equity infusion to accomplish this task. Regardless, we need to complete these actions during the fourth quarter. The company's new marketing strategies headed by Bob Williams and ably assisted by Dave Asher and Boyd Coddington, appear promising. While it is too early to predict, we fully expect to add several new customers in 1998 and report significant increases in sales volume. We have three new sales representative groups with more than 30 sales people working east of the Mississippi river. This is the first time the company has had significant coverage in this territory. As always, we appreciate your support and please feel free to write should you have comments or questions. Cordially, Gardiner S. Dutton David M. Asher Chairman President BRADLEES: New DIP Financing Package ----------------------------------- The American Banker Inc. - Bond Buyer reported on December 16, 1997 that Bradlees Inc. has arranged a new $500 million debtor-in-possession financing package with a group of banks led by BankBoston Corp. The Braintree, Mass.-based discount retailer has been in Chapter 11 bankruptcy since June 1995. The company's problems largely stemmed from competition from larger discount competitors, including Wal-Mart Stores Inc. and the Target chain, owned by Dayton-Hudson Corp. Bradlees' new financing includes a $250 million debtor-in-possession facility with a term of up to 18 months. The credit replaces a $200 million debtor-in-possession credit led by Chase Manhattan Corp. The deal also includes a $250 million post-bankruptcy revolving credit facility. "Bradlees is in its healthiest position since entering Chapter 11, and the new $250 million facility will further strengthen our financial position," said Peter Thorner, chairman and chief executive officer of Bradlees in a statement. The financing, which is subject to bankruptcy court approval, would provide Bradlees with additional liquidity, enhanced borrowing capacity, financial covenants, and lower financing costs, the retailer said. Bradlees also said it has filed a motion seeking bankruptcy court approval of a six-month extension of its right to propose and file a reorganization plan through August 3, 1998. Following the announced closing of six underperforming stores expected to conclude in February 1998, the company will operate 103 stores in seven states. BRAUN'S FASHIONS: Third Quarter Earnings ---------------------------------------- Braun's Fashions reports that operating income rose 4% and EPS exceeded analysts' revised estimates. Last year's EPS benefited from a reversal of reorganization expense and no income tax expense, and thus exceeded this year's EPS. - Total Q3 sales increased 9% to $29.5 million, led by a 14% increase in Nov. same-store sales. - Third quarter same-store sales rose 6% on 164 stores; up 12% for nine-month same-store sales. "While our third quarter finished on a strong note, with excellent post-Thanksgiving sales, we recognize that fourth quarter comparisons will be against last year's exceptionally strong 18% same-store sales increase, which included a 25% same-store sales increase for December," said Nicholas H. Cook, Chairman and Chief Executive Officer. For the third quarter ended November 29, 1997, Braun's net income was $2.4 million or $0.50 per share, compared with $4.8 million or $1.12 per share in the year-ago quarter. Cook added, "Our third quarter earnings are not comparable to last year, as last year's net income benefited principally from a reorganization expense reversal of $0.9 million and no income tax expense. On an operating basis, we had a 4% increase in third quarter operating income to $4.1 million." Sales for the third quarter increased 9% to $29.5 million, as favorable weather conditions and a new color assortment boosted sales in November after modest same-store sales increases in the first two months of the quarter. Same-store sales increased 6% in this year's third quarter on 164 stores operating during the comparable periods. Gross margin was 37.4% compared with 37.2% in last year's third quarter. Selling, general and administrative expenses were $6.2 million or 21.2% of sales, compared with $5.6 million or 20.5% of sales in the prior year, as sales were lower than expected for this year's September and October. Braun's opened two new stores during this year's third quarter to finish the period with 180 stores. The company began last year's third quarter with 186 stores, and closed 15 stores during the period to end with 171 stores. For the nine-month period ended November 29, 1997, Braun's net income rose to $3.7 million or $0.76 per share, from a net loss of $4.9 million or $1.26 per share in last year's nine-month period, which included reorganization expenses of $8.2 million and a tax benefit of $0.9 million. Nine-month fiscal 1998 net income included an extraordinary gain of $113,000 or $0.02 per share related to the purchase at a discount from par of $908,000 principal face amount of 12% Senior Notes due 2005. Sales increased to $72.2 million from $71.4 million, as a 12% rise in same-store sales on 164 stores was offset by fewer operating stores during most of the nine-month period. Operating income climbed 118% to $6.4 million from $2.9 million in the previous nine-month period, which included high markdowns at stores closed during last year's reorganization. Braun's financial condition continues to be solid. Cash and equivalents were $9.4 million at the end of the quarter, sufficient to fund the company's present expansion and operating requirements. Working capital was $18.4 million and shareholders' equity increased to $19.7 million. DOEHLER-JARVIS: Committee Responds to Exclusivity Extension ----------------------------------------------------------- The Official Committee of Unsecured Creditors of Doehler-Jarvis, Inc., et al., responded to the debtors' motion for an order further extending the debtors' exclusive periods to file a plan of reorganization and solicit acceptances thereto. The Committee supports the motion to extend the period of exclusivity, and believes that Mr. Roger G. Pollazzi, recently appointed Chief Operating Officer of Harvard Industries, Inc., should be given the opportunity to familiarize himself with the debtors' businesses and to implement certain initiatives that will be the basis for any plan of reorganization. DOEHLER-JARVIS: Committee Responds to Sale ------------------------------------------ The Official Committee of Unsecured Creditors of Doehler-Jarvis, et al. responded to the dispositions of assets of the debtors' estates. In August of 1997, the Committee filed a complaint against the Lenders alleging that the Lenders failed to perfect certain of the security interests granted in connection with the Prepetition Credit Agreement. As part of the debtors' efforts to emerge from Chapter 11, the debtors have disposed of and anticipate disposing of certain assets of the estates. In light of the lawsuit initiated by the filing of the complaint, the committee states that the debtors' use of proceeds of the dispositions of assets of the estates to pay down the Lenders' claims, as well as any other pay down in accordance with the debtors' DIP financing agreement with the lenders, may be subject to disgorgement. The Committee wishes to put the Debtors, the lenders and other parties-in-interest on notice that any such use of proceeds, as well as any other pay down, are subject to the reservation of all of the Committee's rights and remedies, including the right to seek disgorgement. GUY F. ATKINSON: Court Rejects MK's Agreement --------------------------------------------- The Bankruptcy Court's Rejection of the expense reimbursement agreement With Morrison Knudsen has opened the door for new solicitations by Atkinson. Atkinson (NASDAQ/NMS:ATKNQ) today announced that it is considering several business combination proposals and soliciting others as it seeks to emerge from Chapter 11. Under the terms of the court ruling, all interested parties have until December 29 to exchange term sheets and to provide comment on the period of plan exclusivity. Atkinson's Board is considering a range of options for the highly regarded construction company, which has a portfolio of 40 active projects. Chairman and CEO John F. Whitsett said, "Several of the offers on the table have potential, and we have not ruled out the possibility of remaining independent." MK and Atkinson remain in discussions, although MK withdrew its original proposal following the U.S. Bankruptcy Court's rejection of due diligence expense reimbursement in a hearing last week. Atkinson operates both domestically and internationally providing full service construction to markets for power, infrastructure, industrial process, pulp and paper, mining, transportation, and water and wastewater treatment. MAX: Plan to Pull Out of Bankruptcy ----------------------------------- The Colorado Springs Gazette reported on December 17, 1997 that Mountain Air Express planned to submit to the U.S. Bankruptcy Court a plan detailing how the airline intends to pull itself out of Chapter 11 protection. MAX officials were unavailable to confirm whether the plan had been filed Monday. The plan should include budgets and payment schedules for MAX's creditors. MAX filed for bankruptcy protection November 6, 1997 citing timing problems with revenues as the cause for a temporary cash shortage. But the Colorado Springs-based airline announced November 20 that a Phoenix-based investment group - which included Edward Beuavaise, founder of MAX and its parent company Western Pacific Airlines - would provide up to $3 million in backing. MAX operates five Dornier 328 turboprop planes, each seating 32 passengers, although MAX must return one of the planes to Dornier by next Monday. Besides providing the link for WestPac between Denver and Colorado Springs, MAX flies from Denver to a handful of mountain resorts and Oklahoma City, Tulsa and Kansas City. It employs roughly 300 people, most of whom work in Colorado Springs. MMT: Offer to Purchase Wet Waste -------------------------------- MMT of Tennessee Inc. filed a notice of offer to purchase the estate's Wet Waste business property and assume and asign relaed executory contracts subject to counteroffers. The offeror is NUKEM Nuclear Technologies Corporation, and the offered cash purchase price for the Wet Waste segment of the debtor's business is $6.7 million. The hearing for court approval of the sale was scheduled for yesterday. Any counteroffer price must equal or exceed an amount 5 percent greater than the Offer Price and must be accompanied by a deposit in the amount of $750,000. MOBILEMEDIA: Contract with MCI ------------------------------ MobileMedia Communications, Inc., et al., is seeking authority to enter into and perform under a Carrier Agrreement with MCI Tleecommunications Corportation. A hearing will be held on the matter on January 6, 1998. The debtors' paging buiness is dependent on various telephone services provided by long-distance telephone companies, also known as interexchange carriers. The debtors' long-distance telephone service is currently provided by 18 different long-distance carriers. The debtors believe that they will realize annual cost savings under the agreement of approximately $6 million, including $1.5 million in annual savings already obtained as a result of an initial conversion of certain telephone services to MCI. MCI's services were selected after four other proposals were reviewed by the debtors. The agreement contains a monthly minimum purchase commitment of $1 million, however the debtors currently spend approximately $2 million per month on the services at issue. The debtors are required to provide a security deposit in the form of either a cash deposit or a $2.1 million letter of credit. MOBILEMEDIA: Needs Time to Assume or Reject Leases -------------------------------------------------- MobileMedia Communications, Inc., et al., is seeking court authority to extend the period within which the debtors may assume or reject unexpired leases of nonresidential real property. The debtors represent that the current deadline to assume or reject unexpired real property leases is December 31, 1997. The debtors are requesting that the time be extended an additional 60 days, until March 2, 1998. The debtors are party to more than 300 unexpired leases of nonresidential real property which relate to property used by the debtors for retail stores, sales offices, administrative offices and storage and more than 4,000 leases for tower and other sites at which the debtors have installed transmitters. The lease review process is critical to the debtors' future opertations. The debtors are lookng into both a stand-alone plan and a potential third-party transaction. The debtors are working closely with The Blackstone Group, LP, their financial advisors and investment bankers. The debtors believe that the analysis of which leases are to be assumed and which are to be rejected are determinations that will result both in reduced future liabilities and the preservation of valuable assets which must be done within the framework of a plan of reorganization. MONTGOMERY WARD: Agreement with ValueVision ------------------------------------------- Montgomery Ward Holding Corp., debtor is seeking entry of an order approving the stipulation between the debtor and ValueVision International, Inc. and ValueVision Direct Marketing Company, Inc. Prior to the filing of the debtors' Chapter 11 cases, Montgomery Ward entered into a series of transactions with ValueVision. ValueVision is headquartered in Eden Prairie, Minnesota and operates a television home shopping network serving 40 states. Under the terms of a certain Operating Agreement, Montgomery Ward has agreed to purchase $20 million in advertising time from ValueVision to be placed with television stations and cable operatiors with whom Value Vision has contractual agreements to purchase advertising time. As of the Petition Date, Montgomery Ward purchased and paid for approximately $2.5 million of advertising time and owed ValueVision approximately $1.1 million. Pursuant to the Stipulation between the two parties, Ward's obligation to purchase $20 million of advertising time from ValueVision is reduced to $10 million over a five-year period at the rate of l$2 million per year. Ward may terminate after 3 years. The debtors seek entry of a court order approving the Stipulation, and a hearing is set for December 30, 1997. It is the debtors' business judgment that the benefits of the restructrued arrangements to the estate outweigh the costs. MONTGOMERY WARD: Closing 10 Electric Avenue Stores -------------------------------------------------- Montgomery Ward Holding Corp., et al. requests the entry of an order authorizing the rejection of ten Electric Avenue & More stores. A hearing will be held on December 30, 1997. In the debtor's business judgment, it is in the best interests of the estate to reject the leases. The stores covered by these leases have been closed and Montgomery Ward has no use for the stores. The debtors claim that they attempted to find parties to whom they could profitably assign the leases, but they were unable to do so. MONTGOMERY WARD: D.I.R. Intervenes for WC Claimants --------------------------------------------------- Intervention by the Department of Industrial Relations (DIR) will ensure that injured employees of bankrupt retailer Montgomery-Wards will continue to receive the workers' compensation benefits to which they are entitled, according to Acting Director, John Duncan. Montgomery-Wards was self-insured until 1987 and has been insured since 1987 for compensation to employees with job-related injuries. A 45 day nationwide stay was granted to Wards on evidentiary hearings and trials of fact in its workers' compensation proceedings as a result of an order by the U.S. Bankruptcy Court in Delaware. Following legal intervention by the office of Self Insurance Plans within DIR, the company has turned over payment of its workers' compensation claims in California to its insurance carries and, for older claims to the self insurers' security fund. "The net result is that the processing of all Montgomery-Wards' workers' compensation claims has now returned to normal," said Duncan. "As a direct result of two interventions by DIR in its Bankruptcy proceedings, the workers' compensation claims of Montgomery-Wards, at least in California, have been turned over to the workers' compensation insurance carriers that wrote the company's policies and to the Self Insurer's Security Fund for pre-1988 claims that were self-insured by the bankrupt company." In response to DIR objections filed in September, Montgomery-Wards agreed to let all self-insured workers' compensation claims in California be taken over by the California Self Insurer's Security Fund. The company left self-insurance in mid-1987 and very few self-insured claims remained open at the time of its bankruptcy filing on July 7, 1997. The security deposit posted with DIR will be used to fund payment of these self-insured claims. In October, DIR filed additional objections to Montgomery-Wards' plan to further delay payment of insured workers' compensation claims. As a result, the company agreed to turn over payment of all insured claims to the insurance carriers that wrote large deductible workers' compensation insurance policies for them. Under the policies, Montgomery-Ward was to fund the first $500,000 of every claim. "Under California law the carrier is responsible to pay the entire claim including any deductible amount," Duncan explained, "and collect back the deductible from the employer if it can. In this case, the carriers will pay the insured claims and stand in line with other creditors in the hope of getting some deductible amounts reimbursed to them." The Bankruptcy Court, while ordering the carriers to pay, did give Montgomery-Wards a 45 day reprieve on any evidentiary hearings or trials of fact before any State Workers' Compensation Appeals Boards. This stay ended on December 9, 1997. THE WIZ: Files for Chapter 11 ----------------------------- Nobody Beats The Wiz, an electronics retailer with more than 50 stores in the New York metropolitan area, filed for bankruptcy protection Tuesday, saying it planned to close 17 stores. The Chapter 11 petitions for The Wiz Inc. were filed in U.S. Bankruptcy Court in Manhattan, the company said in a statement. The electronics, music and video retailer, headquartered in Carteret, N.J., employs 4,200 people at more than 50 stores with total annual sales of more than $1 billion. In July, the company announced it was closing all three of its Massachusetts stores and two in Connecticut because they can't compete effectively. It announced at the time that it expected to lay off no more than 300 full- time and part-time workers, 7 percent of its work force at its 63 stores before the closings. The company blamed a "general softness in the consumer electronics industry" for sagging sales that harmed its ability to support its less profitable outlets outside of the immediate New York City area. "The bankruptcy filings provide The Wiz with the flexibility to restructure its finances and reorganize around our core metropolitan area locations," said Lawrence Jemal, the company's president and chief executive officer. The Wiz said it was immediately seeking Bankruptcy Court approval to close 17 stores that were not doing well. It also asked permission to continue all consumer practices, including honoring consumer deposits, gift certificates, refund and exchange policies and other promotional events. TODAY'S MAN: Restatement of 3rd Quarter Results ----------------------------------------------- Today's Man, Inc. (Nasdaq-NNM:TMANQ), operating under the protection of Chapter 11 of the U.S. Bankruptcy Code as a Debtor-in-Possession, today announced the filing of its Form 10-Q with the Securities and Exchange Commission for the quarter ended November 1,1997. As a result of the creditor vote and the confirmation of Today's Man's Plan of Reorganization by the U.S. Bankruptcy Court in Delaware on December 12th, the Company has determined to take a charge in the third quarter for the previously reported $7.3 million plan related payments to creditors. The payments are classified as interest expense in the accompanying Consolidated Statements of Income. As previously reported, the Company's net sales for the third quarter, ended November 1, 1997, increased 8.6% to $48.5 million from $44.6 million in the third quarter of 1996. Income from operations rose to $1,970,300 from $11,000 in the comparable 1996 quarter. The Company reported a net loss for the third quarter of $6,267,900, or ($0.58) per share, versus a net loss of $750,100, or ($0.07) per share, for the third quarter of 1996. Excluding the previously described plan related payments classified as interest expense, net income for the quarter was $996,100, or $0.09 per share. Comparable store sales increased 8.6% for the 25 superstores in operation at the end of each quarter, respectively. As previously reported, the Company's net sales for the nine months increased 4.8% to $142.9 million from $136.3 million for the nine months of 1996. Income from operations rose to $4,747,000 from a loss of $2,611,300 in the comparable 1996 period. The Company reported a net loss for the nine months of 1997 of $5,440,100 or ($0.50) per share, versus a net loss of $5,746,400, or ($0.53) per share, for the nine months of 1996. Excluding the previously described plan related payments classified as interest expense, net income for the nine months was $1,823,900, or $0.17 per share. Comparable store sales increased 7.9% for the 25 superstores in operation at the end of each nine month period, respectively. The Company had 10,861,005 weighted average outstanding shares during all relevant periods presented. WESTERN PACIFIC: Lender Holds Clout ----------------------------------- The Colorado Springs Gazette reported on December 16, 1997 that only one person has more control over the fate of Western Pacific Airlines than president and chief executive Robert Peiser. That person is John Adams. It is Adams, President of New York-based Smith Management Group, who holds the bankrupt airline in his deep pockets. Without Adams, WestPac likely would be a thing of the past. Adams sat down with members of the news media for the first time Monday to discuss his vision of WestPac, what the critical next few days might bring and why he and his company decided to bail out an airline that has averaged nearly $20 million in losses each of the past four quarters. Smith Management offered WestPac $30 million in loans, and up to another $20 million to pull it out of bankruptcy, in exchange for ownership of the airline. Those basic terms were approved two weeks ago by a bankruptcy judge in Denver. That led to the initial $10 million investment, which WestPac used primarily to get aircraft lease payments up to date. But the agreement calls for Smith, should it choose, to offer another $20 million on or after Saturday - money WestPac will need to survive into next year. Officials of Smith Management are still negotiating with a committee representing WestPac's creditors to determine what they will receive out of the bankruptcy. Most likely, the payoff will be a fraction of what the creditors are actually owed, and could include some sort of equity in the reorganized firm. Although budget projections showed WestPac would need more cash by this week, Peiser said Monday that was not the case. And Adams stressed that all or part of the $20 million loan could come before Saturday, should WestPac need it. One key may be the creditor committee's endorsement of the final plan to exit from bankruptcy. Adams said the two sides are very close to a deal. When asked about operations in Colorado Springs, where half of WestPac's 1,500 employees work at the company's headquarters or reservations center, Peiser was quick to jump in. "There are some reasons to stay in Colorado Springs, and some reasons to move (to Denver)," Peiser said, mentioning the cost and inconvenience of moving operations and employees weighed against the convenience of consolidated operations. WESTERN PACIFIC: Lender Looks to Strike Deal -------------------------------------------- The Denver Post reported on December 16, 1997 that Smith Management Co., the New York investment firm that lent Western Pacific Airlines $10 million earlier this month, hopes to strike a deal with WestPac's creditors on the airline's reorganization before it pumps more money into the operation. A new financing plan for WestPac that was approved by a federal bankruptcy judge on Dec. 3 said Smith Management would make available an additional $20 million for the airline to meet expenses beginning Saturday. But Smith President John Adams said in a visit to Denver on Monday that there is no firm deadline for making all or most of the $20 million available to WestPac. If talks with the unsecured creditors committee do not result in a deal by the end of this week, the negotiations could continue next week and Smith could make cash available to WestPac on an as-needed basis while discussions with creditors continue, Adams and WestPac President Robert Peiser said in an interview Monday. Adams said Smith Management plans to put "sufficient capital" into WestPac to make the airline thrive. He said the investment firm plans a new offering of stock in a reorganized WestPac next fall. "We are committed to this airline." A deal with the creditors committee would make WestPac's reorganization proceed more quickly and more smoothly, but Peiser said reorganization can occur without the consent of the committee. Peiser and Adams noted that WestPac and Smith are close to an agreement with the creditors. James Markus, lead attorney for the creditors committee, agreed that talks with officials of WestPac and Smith Management "are progressing meaningfully." WestPac creditors have about $50 million in claims against the airline and the creditors committee - representing the carrier's jet fuel supplier, aircraft maintenance contractor, a computer services company and other creditors, including Denver International Airport - have claims totaling about half of the entire creditor debt. It is expected that creditors will convert a portion of the debt they hold in WestPac into some combination of new equity in a reorganized company, cash and warrants that give them the right to acquire equity in the future. Holders of WestPac's current equity are expected to get little or nothing from the bankruptcy reorganization. In recent weeks, WestPac's stock has been trading at or near its historic low, reflecting the widely held belief that it may be rendered worthless by a reorganization plan. On the OTC Bulletin Board Monday, WestPac's stock closed at 41 cents a share, down 5 cents. Beauvais sold shares A Washington service that monitors purchases and sales of stock reported late last week that WestPac Chairman Edward Beauvais sold 442,000 shares of WestPac stock for between 41 cents and 75 cents a share between Nov. 21 and Nov. 28 and another 194,000 shares between 26 cents and 41 cents a share on Dec. 2. --------- A listing of meetings, conferences and seminars appears every Tuesday. Bond pricing, appearing each Friday, is supplied by DLS Capital Partners, Dallas, Texas. 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 * *