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/raid1/www/Hosts/bankrupt/TCR_Public/980122.MBXT R O U B L E D C O M P A N Y R E P O R T E R Thursday, January 22, 1998, Vol. 2, No. 15 Headlines 2CONNECT: Closed 5 of its 10 Stores Last Week ANCHOR RESOLUTION: Stipulation with Owens Approved BARRY'S JEWELERS: Looking to Buy Computer and Phone System CAMPO ELECTRONICS: Seeks Further Extension to File Plan COMPUSPEAK: Files for Chapter 11 Protection CRAIG ELECTRONICS: Newtech Buys Craig Name DOEHLER-JARVIS: Committee Supports Debtor's Finance Plan ELEK-TEK: Seeks Extension of Exclusive Periods ERD WASTE: Moves to Extend Exclusive Period to File Plan ERD WASTE: Moves to Extend Time to Assume or Reject Leases HARRAH'S JAZZ: Bondholders Committee to Employ Consultant LIL' THINGS: Authorization to Reject Leases LOUISE'S TRATTORIA: Appoints New CFO and Operations VP MANHATTAN BAGEL: Seeks to Retain Trademark Counsel MIDCOM: Discom Wants Relief from Stay MOLTEN METAL: Resolves Concerns about Blackstone's Fee MONTGOMERY WARD: Agrees to Sell Myrtle Beach Lease NCA COMPUTER: Closes its Doors NETS: Committee Objects to Disclosure Statement PARAGON TRADE: Asks for Quick Relief in Court Case PARAGON TRADE: Seeks to Retain Professionals PEGASUS GOLD: Blames Low Gold Prices PHOENIX: Committee Applies to Employ BT Alex. Brown SMITH CORONA: Introduces First Branded Phones TRIMAX: Files for Chapter 11 Protection - Again US ONE COMMUNICATIONS: Hearing for Disclosure Statement Set VENTURE: 9% Decline in Same Store Sales for December WRT ENERGY: Seeks OK for Agreement with Liquidation Trust WELCOME HOME: Order Extends Time to File Plan WESTERN PACIFIC: Amended Disclosure Statement Ordered WIZ INC: Interim DIP Financing Extended YES CLOTHING: Files for Chapter 11 Protection ********* 2CONNECT: Closed 5 of its 10 Stores Last Week --------------------------------------------- Computer Retail Week reported on January 19, 1998 that 2Connect has entered dire financial straits. 2Connect chief executive officer Marc Fishman will be temporarily replaced by Thomas Hicks, 2Connect chief operating and financial officer. Since its inception in April 1996, 2Connect operated in the red. The company reported a net loss of $2.2 million for the first nine months of 1997. Net sales for the period were $2.1 million. On January 18, 1998 2Connect stock was trading at 37.5 cents per share. Fishman attributed the company's net loss to weaker-than- anticipated sales and gross margins and high advertising expenses. ANCHOR RESOLUTION: Stipulation with Owens Approved -------------------------------------------------- Federal Filings Inc. reported on January 21, 1998 that Anchor Resolution Corp. received approval of a stipulation with Owens-Brockway Glass Container Inc. that resolves Owens' $16 million purchase price adjustment claim for $2 million. The U.S. Bankruptcy Court in Wilmington, Del., approved the stipulation at Friday's hearing. In February, Owens and Consumers Packaging Inc. acquired Anchor's assets for about $328.8 million in cash and stock. BARRY'S JEWELERS: Looking to Buy Computer and Phone System ---------------------------------------------------------- The debtor, Barry's Jewelers, Inc. is seeking court approval to purchase a new computer system in order to access reliable information about what inventory is selling, and for the debtor to actively manage its inventory levels and reduce its labor costs. The debtor also is requesting permission to install a new and modern phone system. The total cost to the debtor over three years is set at $4.91 million. The debtor projects three-year savings of approximately $12.05 million. CAMPO ELECTRONICS: Seeks Further Extension to File Plan ------------------------------------------------------- Campo Electronics, Appliances and Computers, Inc. filed a motion to extend the exclusivity period of its reorganization plan in the Eastern District of Louisiana for 30 days to February 14, 1998. The debtor is seeking the extension so that it will be able to ascertain the positional creditors and have a sufficient handle on its prospects for the coming period. The company is currently negotiating with its creditors and believes it highly likely a consensual plan will be filed. Campo further requests that the deadline of March 18, 1998 to obtain acceptances of its plan be likewise extended by 30 days until April 17, 1998. COMPUSPEAK: Files for Chapter 11 Protection ------------------------------------------- The Kansas City Star reported on 01/21/98 that CompuSpeak Inc., an Olathe company that specializes in voice-recognition products for industrial, retail and medical applications, filed for bankruptcy protection last week. A closely held company formed in 1986, CompuSpeak plans to reorganize and to focus on its two main products - wireless devices that use voice-recognition technology to allow workers on the move to talk into a microphone and have the information converted into computer files. In its bankruptcy filing, CompuSpeak listed assets of approximately $2 million and debts of about $7 million. About 200 creditors are involved. CompuSpeak said the company would focus on its Portable Voice Terminal and its wireless dictation device. The company said its products are used by more than 5,000 manufacturers, distributors and medical centers. Voice Cruiser, the company's wireless dictation device, allows users - especially those in the medical field, such as doctors on rounds at a hospital - to dictate directly into a remote dictation system while they roam through a hospital or other workplace. At one time, according to a 1994 newspaper report, CompuSpeak had more than 100 employees and revenues of more than $10 million a year. The company also formerly had a subsidiary that set up computer networks for businesses. That division, CompuNet Engineering LLC, was sold in 1995. CRAIG ELECTRONICS: Newtech Buys Craig Name ------------------------------------------ Audio Week reported on January 19, 1998 that Newtech has added another brand to its lineup, buying Craig name out of bankruptcy with plans for new products later this year. Newtech, which sells CE products under its own brand and White-Westinghouse, will seek to keep the Craig brand at its 2 largest accounts -- Best Buy and Circuit City, Craig left video products in 1996 to focus on portable audio including boom boxes and personal CD players. The company shut down after lenders received bankruptcy court approval to foreclose and sell off inventory and remaining assets, including its trade name. In its Chapter 11 filing, Craig listed $24.1 million in liabilities and $21.7 million in assets. Its top unsecured creditor, Nationsbank Commercial Corp., was owed $1.2 million, but its death blow was a failure to obtain a new credit agreement to replace the one that expired in Aug. with a syndicate of banks led by Bankers Trust Commercial Corp. Craig fired its top executives including President Richard Berger in September following the disclosure of an SEC investigation. The company suffered setbacks earlier in the year when it was forced to switch product reconditioning joint ventures in China after failing to gain governmental approvals. DOEHLER-JARVIS: Committee Supports Debtor's Finance Plan -------------------------------------------------------- The committee of unsecured creditors of Doehler-Jarvis, Inc., et al., agrees to support the debtor's proposal to borrow $25,000,000 to finance their projected operating expenses and capital expenditures. The debtors believe this is critical to their efforts to formulate their reorganization plan. ELEK-TEK: Seeks Extension of Exclusive Periods ---------------------------------------------- Federal Filings Inc. reported on January 21, 1998 that Elek-Tek has asked the court to extend the exclusive periods for filing a reorganization plan and soliciting plan acceptances to Feb. 27 and April 29, respectively. Although the company has made significant progress in formulating its liquidating plan since selling its assets to Creative Computers Inc., the creditors' committee is still evaluating Elek-Tek's proposal to sell its corporate shell. ERD WASTE: Moves to Extend Exclusive Period to File Plan -------------------------------------------------------- ERD Waste Corp., et al. have filed a notice that they will seek to extend by 90 days the period of exclusivity to file a reorganization plan to April 28, 1998. The debtors also seek to solicit acceptances for an additional period of 90 days after the debtor's filing of a plan to June 29, 1998. In their memorandum to support these motions, the debtors, a hazardous waste management company, claim that due to the environmentally sensitive nature of their business and due to the size of the filing, they have cause to seek this extension. ERD WASTE: Moves to Extend Time to Assume or Reject Leases ---------------------------------------------------------- ERD Waste Corp. asks for more time to assume or reject certain leases until April 6, 1998. They have also requested authorization to reject other leases. Their request comes as they seek to extend the period to file their reorganization plan. Until they have this plan, they claim they cannot fully determine which leases to assume or reject. Any hasty decision on leases, they claim, could irreparably damage the debtors. At the same time, the debtors have decided that three leases are no longer beneficial to business operations and should be terminated. GAYLORD COMPANIES: Orders Approving Professionals -------------------------------------------------- The court upon the application of Gaylord Companies, Inc. et al., debtors, approved the employment of Longabach, Giusti, Kuck & Hornberger, Inc. as accountants to the debtors. A retainer of $7500. was approved by the court and monthly invoices will be submitted after the retainer is exhausted. The court has also approved the application of the debtors to employ Schottenstein, Zox & Dunn. The debtors are authorized to pay the retainer described in the application that includes a payment of $50,000 and $10,000 per week until further order of the court. After exhaustion of the retainer, the firm will bill monthly. HARRAH'S JAZZ: Bondholders Committee to Employ Consultant --------------------------------------------------------- The Official Bondholders Committee of the debtor, Harrah's Jazz Company is seeking court approval to employ David C. Treen, a government relations consultant. He will receive compensation at the rate of $7500. per month for a minimum of four months. LIL' THINGS: Authorization to Reject Leases ------------------------------------------- In the Chapter 11 case of Lil' Things, Inc., debtor, the court entered an order authorizing the rejection of leases covering a distribution center and 13 store premises. The stores are located in Texas, Arizona, Oklahoma, and California. LOUISE'S TRATTORIA: Appoints New CFO and Operations VP ------------------------------------------------------ Louise's Trattoria announced the appointment of two key senior executives. Fred LeFranc, president of the chain of 15 casual Italian restaurants, said that Steve Heeley is joining the company as vice president, operations. LeFranc also announced the appointment of Greg S. Levy as chief financial officer. Previously, Levy was with the Big Six accounting firm Deloitte & Touche LLP. Louise's Trattoria filed for protection under Chapter 11 of the Bankruptcy Act in September 1997. In December, the restaurants were positioned to move out of bankruptcy in a court-approved sale of assets to Jon Chait, brother of the chain's co-founder William Chait. That sale will become final this month. It was an earlier expansion effort into the East Coast that resulted in the Chapter 11 reorganization. After successfully operating 15 Louise's Trattoria restaurants in California and one in Milwaukee, the company entered a joint venture with another restaurant company to open additional locations on the East Coast. There, the company encountered higher costs for space, labor and food, especially ingredients that the chain imports directly from Italy. Combined with management problems in the joint venture, this led to the rapid closing of all three East Coast restaurants. The company was left with millions of dollars in unsecured debt. MANHATTAN BAGEL: Seeks to Retain Trademark Counsel -------------------------------------------------- Manhattan Bagel Company Inc. seeks authorization to continue to employ Frankfurt Garbus Klein & Selz as its international trademark counsel. Frankfurt Garbus has spent five years filing trademark applications in several foreign countries for the company. Mr. William Nix will be the attorney in charge of these applications. MIDCOM: Discom Wants Relief from Stay ------------------------------------- In January 1990, Discom Corporation entered into a sales agent agreement with Midcom Consultants, Inc., a corporate entity that subsequently became an alter ego of Midcom. Discom Corporation seeks limited relief from the automatic stay so that the arbitration can proceed to a decision and so that Discom's claim can be liquidated. Discom filed a proof of claim in the Midcom case in the amount of $9,788,663., representing its unliquidated claim in the arbitration proceeding. To date, Discom claims that it has incurred legal expenses and disbursements in excess of $600,000 in the prosecution of its claims against Midcom, Midcom Consultants, Inc. and Pamcom, Inc. The only effort that remains in the arbitration is the preparation of proposed finding of fact and conclusions of law to be submitted to the arbitrators so that they can render a decision. Discom argues that cause clearly exists to modify the stay and to allow the arbitrators to render a decision. MOLTEN METAL: Resolves Concerns about Blackstone's Fee ------------------------------------------------------ As previously reported, Molten Metal Technology, Inc., had objected to the terms and conditions by which they would pay the Blackstone Group L.P.'s restructuring fee. The fee cap is $3,000,000, payable on the effective date of the plan. This addendum does not affect Blackstone's rights to any transaction fee. MONTGOMERY WARD: Agrees to Sell Myrtle Beach Lease -------------------------------------------------- The debtors, Montgomery Ward Holding Corp. et al. seek entry of an order authorizing the assumption, sale and assignment of the lease covering the premises in the Seaboard Commons Shopping Center, Myrtle Beach, South Carolina to Klaff Realty LP for $975,000. Montgomery Ward operated an Electric Avenue & More store on the property, the store ahas closed and Montgomery Ward no longer needs the property. NCA COMPUTER: Closes its Doors ------------------------------ According to Computer Retail Week on 01/19/98, NCA Computer Products, Sunnyvale, Calif., closed its doors again on Dec. 21 after a federal bankruptcy court judge in San Jose allowed one of its primary creditors, Deutsche Financial Services, to strip the retailer of approximately $2 million in inventory. The company first fell into financial trouble in September 1997, when it temporarily closed its seven stores and filed for bankruptcy protection. But it quickly reopened on a smaller scale, with four stores. The company's Sunnyvale store has a sign on the door indicating it is closed for remodeling and will reopen later this month. NETS: Committee Objects to Disclosure Statement ----------------------------------------------- The Official Committee of Unsecured Creditors of Nets Inc. objects to the disclosure statement of the debtor, Nets Inc. The Committee claims that on July 3, 1997 the debtor sold substantially all of its assets with the exception of a multimillion dollar net operating loss (NOL). Since the sale, the debtor has explored a reorganization strategy to create value from the NOL, but no viable strategy has emerged. Nevertheless, the Committee complains, the debtor filed a disclosure statement and plan of reorganization which contemplates the continued existence of the debtor and thus, preservation of the NOL. The Committee believes that it is in the best interests of creditors that a liquidating plan be filed. The Committee states that the disclosure statement is inadequate because e it does not include a viable structure for ensuring creditors receive any value from the NOL. The Committee also says that the disclosure statement fails to predict with any precision the amount of claims that will be allowed in this case, as the debtor states that $200,000 in claims have been filed, leaving creditors without a clear idea of their proposed recovery under the plan. PARAGON TRADE: Asks for Quick Relief in Court Case -------------------------------------------------- Paragon Trade Brands, Inc. (PTB) supplements a prior motion for an order lifting the automatic stay for the purposes of the prosecution of an appeal by PTB of an adverse ruling the US District Court in Delaware. The debtor wants to pursue an appeal even though the debtor has filed a motion for a new trial. On December 30, 1997 the United States District Court issued a "judgment" finding that PTB infringed on two of Proctor & Gamble's diaper patents for an "inner leg gather" feature. PTB has estimated liability to be approximately $160 million to $200 million. PTB strongly disputes the conclusions of the District Court and is intent on seeking redress including appeal. PARAGON TRADE: Seeks to Retain Professionals -------------------------------------------- The debtor, Paragon Trade Brands, Inc. is seeking court approval to employ the investment banker, The Blackstone Group. The Blackstone Group will provide financial and investment banking advisory serviced that the debtor claims will be required during the case. The Blackstone Group is seeking a monthly advisory fee in the amount of $125,000. In addition, upon confirmation of a plan, The Blackstone Group shall have the right to apply to the court for an additional fee in an amount of 1% of the Total Reorganization Value as defined in the letter agreement between the parties. The debtor is also seeking employment of accounting consultants, Arthur Andersen LLP. The accounting firm would assist Paragon with the preparation of its schedules and statement of financial affairs, would perform tax services and render accounting assistance in connection with reports and other financial data required by the court. Arthur Andersen, if approved, will be paid at its standard hourly rates. PEGASUS GOLD: Blames Low Gold Prices ------------------------------------ The Spokesman Review reported on 01/17/98 that Pegasus Gold has a current debt load of $213 million. The outstanding debts are attached to a revolving line of credit and convertible notes used to finance projects like the Mt. Todd gold mine in Australia. Pegasus shut down that operation in mid-November and posted $433 million in losses in the third quarter of last year. Mt. Todd, shut down due to high production costs and low market prices for gold, held half of the company's reserves. On Jan. 9, lenders notified Pegasus that its line of credit debt had been "accelerated" and was considered payable. Pegasus President and Chief Executive Officer Werner G. Nennecker said an 18-year low in gold prices was behind his company's financial problems. Now that the company has filed for Chapter 11 protection, it will not have to continue making interest payments which had been costing the company $15 million to $17 million a year. Pegasus has cash reserves of about $16 million, Pearson said. "That will be our working capital going forward," he said. The company plans to keep its Spokane offices open and the 35 workers there employed. The Montana Tunnels and Diamond Hill projects in Montana appear safest, since production costs there are about $235 an ounce - still below the faltering market price for gold. But Florida Canyon in Nevada, where costs approach $335 an ounce, may be closed if gold can't manage a comeback. "If gold goes down further," he added, "there may be no mines that make sense to operate." Other large mining companies have been hit almost as hard as Pegasus. Echo Bay and Barrick Gold both took $300 million write-downs during the third quarter of 1997. In the months leading up to those losses, mining companies shut down more than 20 gold projects worldwide. PHOENIX: Committee Applies to Employ BT Alex. Brown --------------------------------------------------- The Committee of Equity Security Holders of Phoenix Information Corp. seeks to employ BT Alex. Brown as investment bankers and financial advisors. The committee requires the services of experienced investment bankers and financial advisors to assist it in renewing and analyzing the business of the debtor and determining if the debtor's plan is in the best interest of this committee if any sale or refinance of the debtor takes place. The committee has agreed to pay BT Alex. Brown $50,000 per month for its services plus a transaction success fee: Transaction Value Fee ----------------- --- Up to $25,000,000 2.0% $50,000,000 1.5% $100,000,000+ 1.2% In addition, BT Alex. Brown will receive a financing fee if the debtor seeks to raise new capital: Placement Fee Type of Financing % of Gross Proceeds Raised ----------------- -------------------------- Senior Bank Debt 1% Senior Notes 3% Subordinated Debt 3% Preferred Stock 4% Common Stock 6% BT Alex. Brown seeks full indemnification by the debtor for its engagement by the committee. SMITH CORONA: Introduces First Branded Phones --------------------------------------------- Consumer Electronics reported on January 19, 1998 that Smith Corona, seeking new life after emerging from bankruptcy, has introduced first branded phones. Line consists of two 25-channel models at $89 and $119, 900-MHz analog at $89 and 900-MHz digital spread-spectrum, $159. In corded, company added TelAssistant line with 3 models containing LCD screen. TRIMAX: Files for Chapter 11 Protection - Again ----------------------------------------------- Trimax of Long Island Inc., a plastics recycling company, has filed for Chapter 11 bankruptcy protection for a second time. The company, which converts scrap plastic into plastic lumber used for park benches and marine uses and was founded by Noto in 1989 as a joint venture with Cranford, N.J.-based Polymerix Inc., cited insufficient capital and a need to retool its equipment. Polymerix also filed for Chapter 11. An attorney representing the debtors stated that hundreds of creditors are owed $1.3 million and $2.3 million, respectively. She said the value of the companies' assets hasn't been accurately determined. She noted that emergency financing has already been approved. Trimax, which buys plastic collected through town curbside recycling programs, ran out of cash in 1992 and filed for Chapter 11, but the case was dismissed. US ONE COMMUNICATIONS: Hearing for Disclosure Statement Set ----------------------------------------------------------- A hearing to consider the approval of the disclosure statement of US One Communications Corp., US One Communications Services Corp and US One Communications of New York, Inc., debtors, will be held on February 17, 1998. VENTURE: 9% Decline in Same Store Sales for December ---------------------------------------------------- Venture Stores' operating results deteriorated significantly over the past three years. The company has reported positive same store sales in only one of the past 32 months and experienced a 9% decline in the critical month of December 1997. In addition, Venture's earnings before taxes, interest, depreciation and amortization (EBITDA) for 1997's first three quarters, excluding non- recurring charges of $63.9 million, total a negative $35 million. Standard & Poor's today lowered its ratings on Venture Stores Inc.'s debt to 'D' following the company's announcement on Jan. 20, 1998 that it has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. WRT ENERGY: Seeks OK for Agreement with Liquidation Trust --------------------------------------------------------- WRT Energy Corporation, debtor and the WRT Creditors' Liquidation Trust seek an order and approval of the Clarification Agreement between WRT Energy Corporation and WRT Creditors' Liquidation ("the Agreement"). The agreement provides for the respective responsibility of WRT and the Trust with respect to LLOG causes of action, BSFI causes of action, Marine Equipment causes of action, and Tri-Deck causes of action. The parties agree that WRT retains the right to act with respect to the Napoleonville Field Surface Rights and ISS Compression, the 200% penalty claim, the $106,945 CL & F claim and the Aftech claim. WELCOME HOME: Order Extends Time to File Plan --------------------------------------------- In the Southern District of New York, Welcome Home Inc. has been given an extension of 60 days to file a plan of reorganization to March 17, 1998. The court has also ordered that the time the debtor has to obtain acceptance of a plan is extended from March 17, 1998 to May 15, 1998. WESTERN PACIFIC: Amended Disclosure Statement Ordered ----------------------------------------------------- In the case of Western Pacific Airlines, Inc., Judge Sidney Brooks entered an order requiring the debtor to file an amended disclosure statement on or before January 23, 1998, failing which the court may enter such orders as it deems appropriate without further notice or hearing. WIZ INC: Interim DIP Financing Extended --------------------------------------- Federal Filings Inc. reported on January 21, 1998 that on December 19, Wiz received approval of a $150 million DIP agreement with Congress Financial Corp. on an interim basis through January 15. Two unidentified investor groups have reportedly offered to buy the Carteret, N.J.-based electronics retailer. YES CLOTHING: Files for Chapter 11 Protection --------------------------------------------- Yes Clothing Co. (OTC Bulletin Board: YSCO) announced today that it has filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Guy Anthome, CEO of Yes Clothing, reported that the Company filed a voluntary petition on December 17, 1997 with the U.S. Bankruptcy Court in Los Angeles and is presently operating as a Debtor-In-Possession. Yes Clothing, with 1995 revenues of $28.6 million, was re- capitalized in 1996 when designer and co-founder of Guess?, George Marciano, acquired an 80% stake in the Company and infused approximately $3.3 million in working capital. Marciano still holds approximately 2.7 million shares, or 34% of the Company. According to Anthome, the Company has agreed in principle to retain the Orange County, California law firm of Archer & Weed along with financial workout specialist, Fred G. Luke, to give Yes Clothing immediate assistance in its reorganization. --------- 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 Lexy Mueller, Editors. 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 * * *