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/raid1/www/Hosts/bankrupt/TCR_Public/980109.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, January 9, 1998, Vol. 2, No. 6 Headlines ALLIANCE ENTERTAINMENT: Last Day to File Proofs of Claim EVANSVILLE BREWERY: Who is Going to Rescue this Deal? FINANCIAL INSTRUMENTS: Collapse Takes Toll on Hundreds FLAGSTAR: Distribution Record Date January 2, 1998 FONE AMERICA: 80% Revenue Loss in Dispute Caused Filing HOMEPLACE: Blames Too Rapid Expansion for Filing KIA: Plans 18 Dealerships in Southeast Michigan MAX: Stays Afloat with A Payment to Planes' Lessor METRO HOME CARE: Caretenders Acquires Florida Provider MIDCOM COMMUNICATIONS: Court Approves Asset Sale to WinStar MOBILEMEDIA: Wants to Lease New Headquarters Space MOLTEN METAL: Limited Objection to The Blackstone Group PARTY WORLD: Administrative Claims Bar Date POCKET: Order Extending Exclusivity POCKET: Order to Compel Lease Cure SA TELECOMMMUNICATIONS: Limited Objection to Cornwell TODAY'S MAN: Effective Date December 31, 1997 TODAY'S MAN: Objection to Motion to Change Ballots ZENITH: Hires Dangremond, Turnaround Expert DLS CAPITAL PARTNERS: Bond Pricing for Week of January 5 -------- ALLIANCE ENTERTAINMENT: Last Day to File Proofs of Claim --------------------------------------------------------- The debtor, Alliance Entertainment Corp. filed a motion requesting that the court set a "Bar Date," that is the final date by which creditors must file proofs of claim. The debtors are requesting that February 27, 1998 is set as the Bar Date. The presentment date is January 16, 1998. The debtors believe that the circumstances justify the fixing of a Bar Date at this time. The debtors have completed and delivered to their major creditor constituencies their long range business plan. This plan is expected to lay the foundation for a plan of reorganization. In order for the debtors to formulate a viable plan or plans, they must ascertain the nature, extent and scope of the claims asserted. EVANSVILLE BREWERY: Who is Going to Rescue this Deal? ----------------------------------------------------- The Evansville Courtier reported on January 3, 1998 that Evansville Brewing officials and the prospective buyer accused each other Friday of breaking promises, apparently leaving the deal to salvage the brewery sale up to a U.S. Bankruptcy Court judge. The dispute is expected to be one point of a hearing scheduled for Tuesday in Indianapolis before Judge Basil H. Lorch III. Michael Lynch, chief executive officer of the investment group Michigan Avenue Partners, missed a deadline of midday Friday to submit a deposit and a signed agreement to extend the time for closing the purchase of the brewery for $3 million. On Tuesday, Lynch postponed a scheduled meeting to close the deal. Brewery bankruptcy attorney Stanley Talesnick said Lynch was to send the signed agreement to Talesnick's Indianapolis office, first by noon Wednesday. After that deadline was missed Lynch agreed to provide the agreement by noon Friday and had agreed to wire $100,000 to cover brewery operations until the closing. Talesnick's office said Friday that Lynch sent neither. In Evansville, brewery President Stephen W. Cook said he did get a copy of a modified extension agreement from Lynch, "but there were so many changes made that it wasn't acceptable." Cook said Michigan Avenue officials added to the agreement their requirement that their brewery permits and licenses be secured first by present brewery management. "We can't do that for them. They have to do that," Cook said. "They have not even made that application yet. They've known about that since August. ... We can advise them but we can't make that application for them." Lynch said Friday he can't run the brewery unless he is licensed to brew beer, and that his financial backers won't release money until all permits are in place. And Lynch charged that it was Talesnick's responsibility to take care of the permits and licenses. Talesnick was not available late Friday to respond. "They have to assign the brewing license to us. That's a condition of the purchase agreement. ... If I have to litigate to get it done, I'll do it," Lynch said. And Lynch said he refused to turn over the $100,000 "because Talesnick wants Cook to have total control." Lynch said he demanded that payroll checks coming out of the deposit be signed both by Cook and Lynch's own chief financial officer, James McCall. Lynch put up $250,000 in earnest money Dec. 16, the day Lorch ruled his the best bid for acquiring the 147-year-old brewer of such labels as Sterling, Falls City and Gerst. He vowed he will not forfeit the sum, a possibility if he is found in default. Talesnick said Friday he had not been contacted by Lynch on Friday before the deadline; Lynch said Talesnick failed to return phone calls from him and from Lynch's attorney. Talesnick said he sent a letter to Lynch on Wednesday warning that if Friday's deadline was missed, the brewery deal was off. But a statement from his office seemed to leave an opening for "other developments." Lynch said Friday the sale to his company is not in doubt. He said he has the money to close the sale on Tuesday, and said he is scheduled to talk with state Alcoholic Beverage Commission officials about permits and licensing the same day. Tuesday's bankruptcy court hearing is set for 2 p.m. Indianapolis time (1 p.m. in Evansville). In October, Lynch attempted to swing a deal to buy the brewery, but missed a deadline for providing earnest money of $250,000. The brewery then declared bankruptcy. FINANCIAL INSTRUMENTS: Collapse Takes Toll on Hundreds ------------------------------------------------------ The Denver Business Journal reported on January 2, 1998 that the collapse of Financial Instruments Corp. has left a web woven from strands of broken trust and shattered dreams. Investors in the bankrupt Englewood company came from all across the country and all walks of life - savvy entrepreneurs to blue-collar retirees making their first investment. Most gave money based on the strong recommendations of friends, relatives and financial advisers. U.S. Bankruptcy Court records show at least 752 investors could lose most of the $10 million they had invested with the Englewood company. It has $2 million to $3 million in assets located primarily in Costa Rica. Financial Instruments and its related companies borrowed money from investors, promising most returns ranging from 30 percent to 100 percent every nine months. It also sold stock at $1 a share with the promise of a lucrative public offering next year. The company told investors the high returns would come from building and selling affordable housing and other developments in Central America. "It was a Ponzi scheme," said Katherine Addleman of the Securities and Exchange Commission's Central Regional Office. In a Ponzi scheme, money from recent investors is used to pay off earlier investors rather than to generate revenue. The Securities and Exchange Commission has a civil suit pending against the Englewood company's owner, John Aptt, a Castle Rock resident. Regulators obtained a court order to shut the company down and freeze its assets in May. The FBI has joined the investigation, according to Mark Loewenstein, a court-appointed supervisor, and investors said the bureau has contacted them. A spokesman for the FBI said he could neither confirm nor deny any investigation. Loewenstein took Aptt's companies into Chapter 11 bankruptcy in an effort liquidate assets without a costly legal battle. FLAGSTAR: Distribution Record Date January 2, 1998 -------------------------------------------------- Judge Wm. Thurmond Bishop entered an order on December 30, 1997 establishing January 2, 1998 as the Distribution Record Date as defined in the Amended Joint Plan of Reorganization. FONE AMERICA: 80% Revenue Loss in Dispute Caused Filing ------------------------------------------------------- The Communications Daily reported yesterday that Fone America (FA) sought Chapter 11 bankruptcy protection in U.S. Bankruptcy Court, Portland, Ore., citing an 80% revenue loss in a dispute with a major sales agent, DAT Services. The Company said it sued DAT seeking $20 million in damages. FA Pres. Peter Jacobs said it also suffered when Electric Lightwave competitive LEC attached accounts receivables and bank accounts on a "hit-and-run" basis, "making it impossible to plan cash flow or attract additional investment capital." He said the introduction of prepaid cellular phones and wireless messaging products have been successful, although "we could not recover from the loss" of DAT's revenue. HOMEPLACE: Blames Too Rapid Expansion for Filing ------------------------------------------------ The Dayton Daily News reported on January 7, 1998 that HomePlace Stores Inc. blames a too-rapid expansion and the loss of a major loan. HomePlace Stores Inc., a fast- growing Cleveland-area housewares chain with a newly-opened Beavercreek store, has stumbled and filed for Chapter 11 bankruptcy reorganization. The three-year-old chain of home accessory superstores had ballooned to 98 outlets in 22 states before it voluntarily filed for protection from creditors Monday in U.S. Bankruptcy Court, Wilmington, Del. Robert Hurwitz, chairman and chief executive, blamed overuse of debt to finance both the breathless expansion and day-to-day operations. Hurwitz said a planned infusion of $100 million from overseas investors fell through, undermining the company's financial structure. A source close to the company said the uncertain financial climate in Asia caused a major Japanese investor to withdraw. Hurwitz said post-filing loans will keep open all stores including the 55,000 square-foot unit at 2720 Towne Road, Beavercreek, which opened in October. `Our sales associates and employees will continue to be paid as if no proceeding had been filed,' he said. He said the goal is to continue in business after the company completes bankruptcy reorganization. No layoffs were announced, but Hurwitz said the company is evaluating all stores. HomePlace listed assets of $314.3 million and liabilities of $307.2 million. Hurwitz said sales in 1997 exceeded $423 million. He said the company had a successful Christmas season. A professor of marketing at the University of Dayton, said Hurwitz may have let growth get out of control. `It sounds like they were trying to extend themselves to serve a market that was beyond their resources.' Kurt Barnard, president of Barnard's Retail Trend Report, a trade publication, said HomePlace failed to distinguish itself from industry leaders Bed, Bath & Beyond and Linens & Things. `All that HomePlace did was imitate. Instead of getting their house in order, they went on a wild expansion binge.' KIA: Plans 18 Dealerships in Southeast Michigan ------------------------------------------------ The Detroit News reported on January 8, 1998 that Kia Motors Corp., the bankrupt South Korean automaker, plans to open up to 18 dealerships in southeast Michigan beginning later this year. Kia entered the U.S. market in 1994 and wants up to 500 dealers in the 48 continental states by the end of this year. It has 332 U.S. dealers in 32 states now, including 11 outlets that opened in Ohio last month. Kia markets the four-door Sephia compact sedan, priced from $9,995 to $14,555, and the four-door Sportage sport-utility vehicle starting at $14,895. It plans to introduce a two- door Sportage this spring, followed by a minivan and subcompact car in 2000, and a mid-size sedan in 2001. "We're confident Michigan consumers will recognize our products as good, affordable values," said Greg Warner, chief operating officer of Kia's U.S. sales arm. The automaker, struggling under $10.4 billion of debt with the collapse of South Korea's economy, hasn't disclosed specific plans to enter Michigan until now. It had a vehicle display at the 1996 North American International Auto Show in Detroit, but is skipping the 1998 show to cut costs. "We want to focus our auto show efforts on markets we plan to enter in the first six months of 1998," Warner said. "We're targeting Michigan in the second half." Kia's sales jumped 66 percent last year to 55,325 units, doubling its share to 0.4 percent of the U.S. market. Warner says U.S. sales should rise "substantially" this year with an expanded product lineup. MAX: Stays Afloat with A Payment to Planes' Lessor -------------------------------------------------- The Gazette reported on January 6, 1998 that Mountain Air Express made a critical $721,000 payment to the maker and lessor of its airplane fleet Monday, ensuring the commuter airline will continue flying. Last week, a U.S. Bankruptcy Court Judge in Denver ruled that MAX could continue the lease agreement it has had with Dornier Aviation for four 32-seat turboprop planes in its fleet. But MAX would have defaulted on the agreement - and potentially lost its fleet - had it not paid Monday what it owed Dornier in back rent and as a prepayment for January. MAX pays $238,000 per month for four planes. It owed that amount, plus interest, having missed November and December payments. The airline filed for Chapter 11 bankruptcy protection Nov. 6. The company recently received court approval for a financing plan to help pull the airline out of bankruptcy. MAX officials hope to emerge from bankruptcy in March. METRO HOME CARE: Caretenders Acquires Florida Provider ------------------------------------------------------ Caretenders HealthCorp (Nasdaq:CTND) today announced the acquisition of the assets of Metro Home Care, Inc. (Metro) a Ft. Myers, Florida based provider of Medicare- certified home health services. Metro operates in the southwest Florida communities of Sarasota, Port Charlotte, Englewood, Punta Gorda, Cape Coral, Ft. Myers, Bonita Springs and Naples. According to 1996 State of Florida statistics, Metro is the second largest home health provider in its service territory. Metro provided over 160,000 home health visits and generated over $12 million in revenues in the twelve months ended November, 1997 with a substantial presence in each of its branch markets. "We expect Metro to provide us with a strong base of business around which we can further develop our Caretenders SeniorCare Solutions(TM) home health and adult day care product offerings to the area's large senior population," said William B. Yarmuth, Chairman and CEO. "The demographics of the service territory are outstanding. This acquisition should serve as a launching pad and base of operations for expansion of our service offerings, and potentially, for future acquisitions within the State of Florida." Metro had been operating under a plan of reorganization with Caretenders managing its operations under the supervision of the Federal court since mid- November 1997. In the transaction, Caretenders acquired substantially all Metro's assets, assumed certain of its trade liabilities, entered into a settlement agreement with Metro's senior lender and entered into an agreement with the Health Care Financing Administration providing for the assumption of liabilities and Metro's Medicare Provider Agreement. Financial terms of the deal were not disclosed. Caretenders initiated operations in Florida in 1997 with the acquisition of a small Medicare-certified intermittent home health agency in Ft. Lauderdale and the acquisition of an adult day care center in West Palm Beach. The Company has begun planning for the addition of adult day care centers in Metro's service territory and will continue to seek acquisitions of other home health and adult day care providers in the state. Caretenders HealthCorp provides home and community based health care services in Kentucky, Maryland, Alabama, Massachusetts, Connecticut, Indiana, Ohio, Virginia and Florida. MIDCOM COMMUNICATIONS: Court Approves Asset Sale to WinStar ----------------------------------------------------------- MIDCOM Communications Inc. announced on January 7, 1998 that the U.S. Bankruptcy Court has approved the sale of substantially all of the assets of MIDCOM and its Cel-Tech International and PacNet Inc. subsidiaries to WinStar Communications Inc. for $92 million pursuant to the Amended Asset Purchase Agreement entered into between the companies. The anticipated closing date for the sale is on or about Jan. 20, 1998, subject to closing conditions set forth in the agreement. Founded in 1989, MIDCOM provides a broad range of telecommunications services to small and medium-sized businesses nationwide. The company has regional offices throughout the nation and currently invoices approximately 100,000 customer locations monthly. MIDCOM and its subsidiaries filed for protection under Chapter 11 of the U.S. Bankruptcy code on Nov. 7, 1997. WinStar Communications, Inc. is a national local communications company, serving business customers, long distance carriers, fiber-based competitive access providers, mobile communications companies, local telephone companies, and other customers with broadband local communications needs. The company provides its Wireless Fiber(SM) services using its licenses in the 38 GHz spectrum. The company also provides long distance, Internet and information services. MOBILEMEDIA: Wants to Lease New Headquarters Space -------------------------------------------------- The debtors, MobileMedia Communications, Inc., et al, are seeking court authorization to lease new corporate headquarters. The gross annual cost of the current Ridgefield Park Space in Ridgefield Park, New Jersey is approximately $2.2 million. Pursuant to the terms of the new Sublease, covering premises in Fort Lee, New Jersey, the debtor would realize an annual savings in excess of $1 million in base rent. The debtors anticipate cost savings totaling $2.3 million between the two leases, as well as receiving an addition year of occupancy under the new Sublease. These savings do not reflect the cost of a rejection claim by the current Landlord. MOLTEN METAL: Limited Objection to The Blackstone Group ------------------------------------------------------- The Official Unsecured Creditors' Committee filed a Limit Objection to the debtors' application for authority to employ the Blackstone Group L.P. as financial advisor. The Committee objects to the application on the grounds that the proposed restructuring fee of 1.25% of the face amount of any indebtedness restructured is unwarranted because it may be wholly unrelated to the value of any services rendered or results obtained by Blackstone. The Committee does not object to the $125,000 per month fee, or the transaction fee of 1.25% of the total enterprise value of a transaction, but the Committee feels that the restructuring fee is unwarranted in this case. The Committee proposes that any Blackstone success fee be calibrated based on a percentage of the total enterprise value of the restructured debtor and opposes a fee based on face amount of debt. PARTY WORLD: Administrative Claims Bar Date ------------------------------------------- The Bankruptcy Court has established February 19, 1998 as the Bar Date by which all creditors holding Administrative Claims which arose prior to December 29, 1997 must file requests for payment of such Administrative Claims with the Bankruptcy Court. POCKET: Order Extending Exclusivity ----------------------------------- The exclusive period for the debtors to obtain acceptances to their plan or plans of reorganization is extended through and including January 14, 1998. POCKET: Order to Compel Lease Cure ---------------------------------- Judge E. Stephen Derby entered an order compelling the debtor, Pocket Communications, Inc. to timely perform post- petition lease obligations and to immediately assume or reject its unexpired lease of non-residential real property with Ariport Industrial Park Associates. The debtor must cure all defaulted post-petition rents and fees and if not cured within 15 days after this order, Pocket must assume or reject the lease. SA TELECOMMUNICATIONS: Limited Objection to Cornwell ---------------------------------------------------- SA Telecommunications Inc. and certain of its directly or indirectly wholly-owned subsidiaries filed a limited objection to the employment of Cornwell Consulting Services, Inc. as financial and telecommunication consultants to the Official Committee of Unsecured Creditors. The debtor objects to the proposed monthly billing by Cornwell, as there are severe cash shortages and the deb5tors believe that they could receive interim compensation in equal percentages as funds become available, and the debtor objects to the appropriateness of some of the services to be provided by Cornwell as being beyond what is appropriate for the Committee's professionals in these cases. TODAY'S MAN: Effective Date December 31, 1997 --------------------------------------------- Pursuant to the second Amended Jont Plan of Reorganization confirmed by a court order entered December 12, 1997, the Effective Date pursuant to section 9.2 of the Plan occurred on December 31, 1997. TODAY'S MAN: Objection to Motion to Change Ballots -------------------------------------------------- Today's Man Inc. and ifs affiliates oppose the relief sought by OTA, L.P., Leon Frenkel and Cypress Management in their motion to approve amendments to their respective ballots to select the "Maximum Stock Option" offered under the plan of reorganization. The plan described a menu of distribution options that could be selected by unsecured creditors like OTA, Frenkel and Cypress in respect of the plan. OTA, Frenkel and Cypress all voted to reject the plan, and presumptively elected the standard distribution. They later change their rejections to acceptances, after their objection to the plan was resolved. Now, according to the debtors they are asking for relief which will materially change the pattern of distribution already locked in under the plan, asking for Maximum Stock Distributions in lieu of the elected Standard Distribution. The debtor claim that if they receive the relief that they seek, the value of the Maximum Stock Option to all other timely electing creditors will be significantly reduced. Today's Man believes that proper notice should go to affected creditors and that there should be an emergency hearing on the merits of the motion. ZENITH: Hires Dangremond, Turnaround Expert ------------------------------------------- Zenith Electronics Corp. has hired turnaround expert Robert N. Dangremond to try to restore profitability for the Glenview-based television maker. Dangremond, 54, is a principal in Jay Alix & Associates, a New York-based company that specializes in corporate restructurings. He was chairman and chief executive officer of printing equipment maker AM International Inc. - now called Multigraphics Inc. - in Mount Prospect from 1993-95 and then became president and CEO of Forstmann & Co., a New York-based clothing fabrics maker. He steered both companies through bankruptcy reorganizations. He will serve as acting chief financial officer at Zenith, the company said. He replaces Roger A. Cregg, 41, who resigned to join another company. DLS CAPITAL PARTNERS: Bond Pricing for Week of January 5 -------------------------------------------------------- The following are prices for selected issues: Alliance Entertainment 11 1/4 '05 5- 6 (f) Amer Telecasting 0/14 1/2 '04 25 - 29 APS 11 7/8 '06 52 - 54 Bradless 11 '02 5 - 6 (f) Brunos 10 1/2 '05 35 - 36 CAI Wireless 12 1/4 '02 27 - 29 Cityscape 12 3/4 '04 45 - 47 Echo Bay 11 '27 80 - 84 Flagstar 11 1/4 '04 38 - 40 (f) Harrah's Jazz 14 1/4 '01 28 - 30 (f) Hechinger 9.45 '12 73 - 75 HIll's 12 1/2 '03 80 - 81 Grand Union 12 '04 54 - 55 Great Bay 10 7/8 '04 78 - 80 (f) Levitz 9 5/8 '03 34 - 36 Liggett 11 1/2 '99 66 - 69 Marvel 0 '98 4 - 5 Mobilemedia 9 3/8 '07 10 - 14 (f) Mosler 11 '03 77 - 80 Royal Oak 11 '06 71 - 74 Speedy Muffler 10 7/8 '06 67 - 70 Stratosphere 14 1/4 '02 52 - 58 Trump Castle 11 3/4 '03 93 - 94 Wickes 11 5/8 '03 94 1/2 - 95 1/2 Prices firmed this week as year-end selling abated. A lack of supply in the distressed market is still a major complaint. Great Bay (Sands Hotel) filed and joins our list. --------- 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, Editor. Copyright 1998. 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 * * *