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T R O U B L E D C O M P A N Y R E P O R T E R
Wednesday, April 15, 1998, Vol. 2, No. 73
Headlines
AR ACCESSORIES: Seeks To Auction Assets
AUSTRALIS MEDIA: Plan Includes $113M From Boulos
BIG RIVERS: Opening Brief of Appellee
BRADLEES: Files Plan and Expects To Emerge in August
CHERRY COMMUNICATIONS: Seeks $6M DIP Pact Increase
FRETTER INC: Court Takes Settlement Under Advisement
HARRAH'S JAZZ: To Expand Duties of Special Counsel
KIA MOTORS: Kia Group Says Big Profit - Analysts Say No
L.A. GEAR: Reaches Agreement With Committee After Hearing
MANHATTAN BAGEL: Applies to Retain Trademark Counsel
MANHATTAN BAGEL: Clarifies Scope of Special Counsel
MANHATTAN BAGEL: Seeks Retention of Special SEC Counsel
MARVEL: Confirmation Hearing on Toy Biz' Plan Delayed
MOBILEMEDIA: Panels Delay Disclosure Statement Hearing
MOLTEN METAL: Applies to Employ Special Tax Counsel
MONTGOMERY WARD: Applies to Extend Exclusivity
NAL FINANCIAL: Order Grants Motion to Reject Contracts
PARAGON TRADE: Order Regarding Special Counsel
PEGASUS GOLD: Seeks Bar Date
QUADRAX CORPORATION: Needs Extension to File Schedules
QUADRAX CORPORATION: Seeks Time to Reject or Assume Lease
RICKEL HOME: Federal Class Action Announced
SEARCH FINANCIAL: Equity Objects to Use of Cash Collateral
SUN CITY: Order Directs Appointment of Chapter 11 Trustee
US ONE COMMUNICATIONS: Rejection of Executory Contracts
*********
AR ACCESSORIES: Seeks To Auction Assets
---------------------------------------
After sale efforts failed to produce an agreement, AR
Accessories Group, Inc. and its Wallet Works Inc.
subsidiary are seeking court approval to sell substantially
all of their assets at an auction. While management had
been negotiating with at least two prospective strategic
buyers regarding a sale, including the "Rolfs" and "Amity"
brand names, the talks failed to result in an acceptable
agreement. (Federal Filings Inc. 13-Apr-98)
AUSTRALIS MEDIA: Plan Includes $113M From Boulos
------------------------------------------------
The proposed restructuring of Australis Holdings Ltd.s'
bonds calls for Boulos Holdings Pty Ltd. to provide
up to $13 million of debt financing and make a $100 million
equity investment of cash and other property in parent
Australis Media Ltd. Boulos, of New South Wales,
Australia, has executed commitment letters for the
financing and equity infusion, which are subject to certain
conditions. Negotiations among Australis Holdings, its pay
television affiliates, an ad hoc bondholders' committee,
and Boulos resulted in an agreement in principle on a
proposed restructuring. (Federal Filings Inc. 13-Apr-98)
BIG RIVERS: Opening Brief of Appellee
-------------------------------------
PacifiCorp Kentucky Energy Company (PKEC) and its affiliate,
PacifiCorp Power Marketing, Inc. (PPM) appeal from an order
disallowing two claims. This brief by Big Rivers is in
opposition to the appeal and in support of the
disallowance of the two claims.
Big Rivers' argument is based on the fact that approval of
the PKEC transaction could never have been obtained given
the existence of a superior transaction (the LG & E
transaction, approved by the court) supported by Big
Rivers' constituencies.
Big Rives states that its failure to take certain actions
under the Omnibus Agreement did not constitute a breach of
the agreement under bankruptcy law. The debtor states that
the no-shop provision of the Omnibus Agreement renders it
unenforceable in the context of a Chapter 11 proceeding.
According to the debtor, the maximization principle
supports the analysis of the many grounds for disallowing
the Omnibus Agreement Claim. The bankruptcy court simply
could not, according to the debtors, approve an inferior
deal. PacifiCorp states that Big Rivers had a duty to do
"everything necessary" to effectuate the Omnibus Agreement.
Big Rivers claims that it went to great lengths to have the
PKEC transaction approved and implemented. If Big Rivers
acted in the manner urged by PKEC, Big Rivers would have
violated both its fiduciary duties to creditors and the
express orders of the bankruptcy court.
Big Rivers supports the bankruptcy court's order
disallowing the Substantial Contribution claim. The debtor
describes this as a case of a failed purchaser seeking to
recover a substantial contribution claim for actions that
were taken primarily in the pursuit of the claimant's own
self interest, and as a matter of law, the cases addressing
this issue preclude recovery.
Further the PacifiCorp Entities cannot establish any causal
connection between their actions and the enhanced value
resulting from the LG&E Transaction. The PacifiCorp
Entities continue to engage in conduct that is disruptive
to Big Rivers' reorganization process. This precludes
recovery on the substantial contribution claim.
BRADLEES: Files Plan and Expects To Emerge in August
----------------------------------------------------
Bradlees, Inc. filed its Plan of Reorganization and
Disclosure Statement with the Bankruptcy Court on April 13,
1998. The Company expects to emerge from Chapter 11 in
August, following approval of the Disclosure Statement by
the Court and acceptance of the plan by its creditors.
The plan contains distributable value to creditors of
approximately $145 million including: approximately $20
million of administrative claim payments; a $40 million
note primarily payable to the Company's pre-Chapter 11 bank
group, which is anticipated to be settled through proceeds
of sales of real estate assets and new Bradlees' stock with
an estimated value of $70 million. As previously reported,
the existing Bradlees' stock will be canceled.
Additionally, the plan provides vendors who support
Bradlees after emergence with a second lien on the
Company's inventory. It also proposes that all
potential preference actions against Bradlees' vendors be
waived when the plan is confirmed.
BankBoston and a group of lenders have committed to a three
year, $250 million secured financing facility upon
emergence from Chapter 11. This will provide the Company
with continued enhanced liquidity and financial covenant
flexibility on substantially the same basis as the pre-
emergence financing facility.
Chairman and Chief Executive Officer, Peter Thorner stated,
"We delivered a significantly improved operating
performance in fiscal year 1997 and have achieved above
plan sales and operating results for the first two months
of the first quarter of fiscal year 1998. It is these
operational improvements and the continued support of our
vendors that has enabled us to provide distributable value
to our prepetition creditors and to reach this milestone in
our plan to exit Chapter 11."
"Comparable store sales have been strong for the first two
months of this year due to the merchandising and marketing
initiatives started in 1997 and which continue to build
momentum in 1998. We anticipate that these initiatives
will have a continued beneficial impact on sales and
profitability throughout 1998."
Bradlees reported an EBITDA of $35.1 million and a net loss
of $22.6 million for 1997 compared to an EBITDA loss of
$46.1 million and a net loss of $218.8 million for 1996.
The Company also reported its second consecutive
quarterly net profit in the fourth quarter of 1997.
CHERRY COMMUNICATIONS: Seeks $6M DIP Pact Increase
--------------------------------------------------
Cherry Communications Inc. asked the court to approve an
amendment to the company's $19 million debtor-in-possession
facility with WorldCom Network Services Inc., increasing
the facility to $25 million and extending the termination
date from April 30 to July 31. Cherry said it has borrowed
approximately $16.2 million under the credit facility as of
March 31 and needs the increase to fund operations.
(Federal Filings Inc. 14-Apr-1998)
FRETTER INC: Court Takes Settlement Under Advisement
----------------------------------------------------
The court has taken Fretter's request for approval of the
global settlement under advisement after a hearing held
April 9. The U.S. Bankruptcy Court in Cleveland gave no
indication as to when a decision would be rendered.
(Federal Filings Inc. 13-Apr-98)
HARRAH'S JAZZ: To Expand Duties of Special Counsel
--------------------------------------------------
Harrah's Jazz Company, the debtor, is request that the
court supplement its order authorizing the debtor to
retain Phillip A. Wittmann and Stone, Pigman, Walther,
Wittmann and Hutchinson, LLP as special counsel to
represent the debtor before the Louisiana Supreme Court,
and in any subsequent proceedings arising from or relating
such representation.
The anticipated appeal is to the Louisiana Supreme Court
from the final judgment of the nineteenth Judicial Circuit
Court for the Parish of East Baton, entered on April 3,
1998, in which the Circuit Court held that the Louisiana
Gaming Control board has the authority to renegotiate and
enter into an amended casino operating contract with the
debtor without the State Legislature's approval.
KIA MOTORS: Kia Group Says Big Profit - Analysts Say No
-------------------------------------------------------
Kia Group said its flagship automaker would show a profit
of 150 billion won ($108 million) this year, but analysts
said such optimism was unfounded. Such an accomplishment
would mark a huge turnaround for Kia Motors Corp,
which posted a loss of nearly 262 billion won last year.
A group spokesman said growing exports on the back of the
weak Korean won and an anticipated pick-up in domestic
sales had contributed to the positive outlook. But
analysts were sceptical of Kia's projections.
"It's very hard to believe Kia Motors can even turn to a
profit," said Kang Hun-sok, an automobile analyst at ING-
Baring Securities. Analysts said an exemption from
interest payments following a court-ordered freeze on
Kia's debts would help Kia Motors to some extent but not
enough to turn a profit.
The group said Kia Motors posted a profit of 45 billion won
in the first quarter of this year, compared with a 25
billion loss a year ago. Lee Sang-yong, an analyst at KEB
Smith Barney Securities, said Kia was more vulnerable to
retrenchment following South Korea's bail-out from the
International Monetary Fund.
South Korea's rival Hyundai Group has said openly it wants
to take over Kia Motors, while Samsung Group is believed to
be interested though its denies it. But Ford Motor Co, the
current main shareholder of Kia, has opposed any Korean
company taking over Kia. (Reuters: International - 04/13/98)
L.A. GEAR: Reaches Agreement With Committee After Hearing
---------------------------------------------------------
L.A. Gear Inc. and the creditors' committee struck a deal
the day after last week's disclosure statement hearing.
The U.S. Bankruptcy Court in Los Angeles has set a hearing
for today on the company's motion to amend the disclosure
statement relating to its plan. A confirmation hearing is
set for June 15. (Federal Filings Inc. 14-Apr-1998)
MANHATTAN BAGEL: Applies to Retain Trademark Counsel
----------------------------------------------------
Manhattan Bagel Company, Inc., debtor, states that it is
essential that the debtors have national trademark counsel
as part of the ongoing operation of their business. The
debtors seek authorization to employ the flaw firm of
Lerner, David, Littenberg, Krumholz & Mentlik. The
debtors believe that the retention of the firm is in the
best interest of their estates.
The firm has been performing such work for the company for
about 3 years and is familiar with the status of pending
national trademark matters, with the nature of the debtors'
business, and with the work that is needed to be performed
regarding the trademarks. The attorney in charge of the
debtors' cases, Bruce Sales, charges a current hourly rate
of $310. Other attorneys who may work on the cases have
hourly rates which range from $160-$410. Paraglegals have
a rate of $115 per hour.
MANHATTAN BAGEL: Clarifies Scope of Special Counsel
---------------------------------------------------
The debtors, Manhattan Bagel Company Inc. and I & G Bagel,
Inc., apply for an order clarifying the scope of retention
of Gibbons, Del Deo, Dolan, Griffinger & Vecchione as
special counsel.
The Gibbons firm has been asked to be litigation counsel in
relation to a $6 million claim against the Bagel Brothers,
and its has been working with the debtor in guiding it with
respect to litigation matters relating to the class action
law suit commenced against it by certain former
shareholders of the debtor. The Gibbons firm and the
debtor believe that these services fall within the purview
of the Retention Order. However, because they require the
extensive devotion of legal service by the Gibbons firm,
it is requested that the court clarify the Retention Order
to include the litigation.
MANHATTAN BAGEL: Seeks Retention of Special SEC Counsel
------------------------------------------------------
Manhattan Bagel Company Inc. applies to retain the law
firm of Schulte Roth & Zabel LLP as special SEC counsel.
The debtor requires the services of the firm due to a
formal order of the SEC for an investigation into certain
matters involving the debtor. The Schulte firm will be
responsible for preparation and filing of any submissions
that the debtor wishes to file with the Staff, and perhaps
with the commission. The firm would also advise, consult
and represent the debtor in connection with the
investigation.
The attorney primarily responsible of this case is David
M. Brodsky. His current hourly rate is $520. Associates
and partners in the firm have hourly rates which range
from $145 to $520.
MARVEL: Confirmation Hearing on Toy Biz' Plan Delayed
-----------------------------------------------------
Toy Biz, Inc. announced that the United States Court of
Appeals for the Third Circuit has issued an order granting
a motion to expedite the appeal of a March 30, 1998
decision by the United States District Court for the
District of Delaware that Marvel Characters, Inc., a
wholly owned subsidiary on Marvel Entertainment
Group, Inc. had previously lost voting control over Toy
Biz.
Pending the expedited determination of the appeal, the
Court of Appeals order also stayed the effectiveness of
the District Court's decision and the hearing scheduled
for May 4, 1998 before the District Court on the
confirmation of a bankruptcy plan proposed by Toy Biz and
various senior creditors of Marvel in Marvel's pending
bankruptcy.
The Court of Appeals has not yet set a schedule for
determination of the appeal. Joe Ahearn, CEO and President
of Toy Biz, commented that, "Our plan for the
reorganization of Marvel has gained wide support among
major creditor groups, being supported by Marvel's secured
lenders and creditors' committee, and has been proceeding
rapidly through the District Court. The Court of Appeals
decision does not address the merits of either Toy Biz'
plan or the District Court ruling. We believe that the
District Court's decision will be upheld on appeal and that
the reorganization plan will proceed toward confirmation."
Once a new hearing date for the confirmation of Toy Biz'
reorganization plan has been set, a further announcement
will be made by the Company.
MOBILEMEDIA: Panels Delay Disclosure Statement Hearing
------------------------------------------------------
MobileMedia Corp., the secured lenders' steering committee,
and the official committee of unsecured creditors have
agreed to adjourn today's disclosure statement hearing.
The paging company is continuing to discuss its proposed
stand-alone reorganization plan with the committees, "and
such Committees also are considering certain possible
third-party business combinations involving the Company,"
MobileMedia said. (Federal Filings Inc. 14-Apr-1998)
MOLTEN METAL: Applies to Employ Special Tax Counsel
---------------------------------------------------
Molten Metal Technology, Inc. seeks authority to employ the
law firm of Bass, Berry & Sims PLC of Nashville, Tennessee
as special Tennessee tax counsel in the debtors' Chapter 11
cases, to represent the debtors with respect to tax matters
involving the Tennessee Department of Revenue.
The controversy is over a sales and use tax assessment of
approximately $7.2 million. This assessment was based on a
retroactive revocation of an exemption previously granted
in connection with the debtor's purchase of industrial
machinery and equipment in support of its mixed waste
processing center in Oak Ridge, Tenn.
Given the firm's expertise and prior involvement in these
matters, the debtors believe that the firm is uniquely
qualified to represent the debtors.
MONTGOMERY WARD: Applies to Extend Exclusivity
----------------------------------------------
Montgomery Ward Holding Corp. et al., debtors, filed a
motion for an order further extending exclusive periods to
file plans of reorganization and obtain acceptances
thereof.
The debtors claim that since the filing of these Chapter
11 cases, the debtors have actively pursued their new
business strategy and focused on their reorganization.
The debtors have closed all Lechmere, Home Image and
Electric Avenue & More stores, as well as 48 Montgomery
Ward stores, and either have assumed, rejected or entered
into agreements regarding the disposition of the leases
relating to these stores.
The debtors have also entered into agreements regarding the
sale of the owned properties relating to these stores. In
addition, the debtors claim that they have been making
significant changes in the operation of their remaining
stores. They claim to have dramatically modified the
merchandise carried at the stores, and have enhanced the
appearance and improved the management.
The debtors request the entry of an order further
extending the exclusive filing period through and
including January 29, 1999 and the exclusive solicitation
period through and including March 30, 1999.
NAL FINANCIAL: Order Grants Motion to Reject Contracts
------------------------------------------------------
Judge Paul G. Hyman Jr. entered an order granting the
debtors' motion to reject executory contracts. There are
twelve identified leases and agreements including the
employment agreement between NALF and Robert R. Bartolini
and several equipment leases and a sublease and lease with
respect to certain premises in Florida.
PARAGON TRADE: Order Regarding Special Counsel
----------------------------------------------
The debtor is seeking to employ Finnegan, Henderson,
Farabow, Garrett & Dunner LLP as special counsel to
evaluate patent matters, product designs and to provide
clearance review opinions.
The court states that to obtain approval of the employment
of a professional for a specified special purpose, the
debtor need not show that the professional is disinterested
within the meaning of the code, but that the professional
represents or holds no interest "adverse to the debtor or
to the estate with respect to the matter on which such
attorney is to be employed." The court finds that any
party objecting to the hiring of the firm must file a
written objection by April 28, 1998.
PEGASUS GOLD: Seeks Bar Date
----------------------------
The debtors, Pegasus Gold Corporation, and related
entities move the court for an order approving the notice
of the May 26, 1998 Bar Date for filing proofs of claim
and equity interests in the above-captioned cases.
QUADRAX CORPORATION: Needs Extension to File Schedules
------------------------------------------------------
The debtor seeks an extension to April 9, 198 for the
filing of Schedules of Assets and Liabilities, statement
of Financial Affairs, and Statement of Executory
Contracts.
QUADRAX CORPORATION: Seeks Time to Reject or Assume Lease
---------------------------------------------------------
The debtor, Quadrax Corporation seeks an extension of 120
days within which to determine whether to assume or reject
its non-residentail real estate lease for its Vista,
California facility. The premises houses substantial
equipment, machinery and furnishings of the debtor.
RICKEL HOME: Federal Class Action Announced
-------------------------------------------
To all purchasers of Rickel Home Centers Inc. ("Rickel") 13
1/2% senior Rickel notes due 2001 and warrants to purchase
shares of Rickel common stock from Oct. 28, 1994 through
and including Dec. 15, 1995. On Jan. 26, 1996, a federal
class action entitled Baffa v. Donaldson Lufkin & Jenrette
Securities Corp., et al., 96 Civ. 583 (CBM), was filed in
the U.S. District Court for the Southern District of New
York, asserting claims under the federal securities laws
in connection with the sale of the Notes and Warrants.
The complaint alleges that there were material
misstatements and omissions in the Prospectus for the
public offering of Rickel Notes and Warrants, which
Plaintiff alleges should have revealed that Rickel's
financial condition was precarious. Rickel is now in
bankruptcy proceedings. Plaintiff's counsel wishes to
communicate with persons who purchased Rickel notes or
warrants during the Class period. If interested,
please contact Brian Murray, Rabin & Peckel LLP,
telephone, 800-497-8076; fax, 212-682-1892; or e-mail,
rabinlaw@ix.netcom.com.
SEARCH FINANCIAL: Equity Objects to Use of Cash Collateral
----------------------------------------------------------
The Official Equity Committee states that the stipulation
with Fleet Bank, NA is fundamentally flawed and must not
be approved because it mandates that substantially all of
the assets of debtor MS Financial, Inc., be transferred to
Fleet unless those assets are sold to a third party.
The Stipulation dictates that the MS assets be sold in
fire-sale fashion in the next 60 days or be delivered to
Fleet. The Committee submits that even if disposing of
the MS assets is supported by a sound business judgment -
a forced sale of those assets in the next three weeks is
an unsound approach, and will deprive the estates of the
substantial equity the debtors believe to exist.
SUN CITY: Order Directs Appointment of Chapter 11 Trustee
---------------------------------------------------------
Previously, the court in the case of Sun City Industries
directed the appointment of a Chapter 11 trustee in the
case of Sheppard Foodservice, Inc., a subsidiary of the
debtor.
An examiner was previously appointed in the debtor's case,
and the examiner recommended that a Chapter 11 trustee be
appointed in the substantively consolidated case. The
creditors in attendance and the US Trustee supported such
appointment.
In a separate matter, the court denied as moot the motion
of Sheppard Foodservice, Inc. to continue to operate in
the ordinary course despite the appointment of a Chapter
11 Trustee.
US ONE COMMUNICATIONS: Rejection of Executory Contracts
-------------------------------------------------------
The court in the case of US One Communications Corp., et
al., debtors entered an order approving the rejection of
over 30 executory contracts, most of which were
communications services agreements. Claims arising out or
related to the contracts or the rejection thereof must be
filed by May 8, 1998.
VENTURE STORES: Seeks Approval to Return Prepetition Goods
----------------------------------------------------------
Venture Stores, Inc., debtor, seeks authority to return
defective goods, regardless of vendor consent, for full
credit, at debtor's cost, against the prepetion claims of
the affected vendor. The debtor also seeks authority for
the return of prepetion goods other than defective goods
with vendor consent for full credit, at debtor's cost,
against the prepetition claims of the affected vendor.
As of the petition date, the debtor had approximately $256
million in inventory at cost, of which goods having a cost
of approximately $3 million are defective, damaged,
outdated or otherwise non-conforming. Since filing its
petition in bankruptcy, the debtor has ceased the returns
and the debtor is burdened by the expense of warehousing a
significant volume of goods that are of no benefit to its
estate. Although it believes that the return of the
defective goods is in the ordinary course of business, the
debtor is, out of extraordinary caution, seeking Court
approval for the returns.
The return of non-defective goods with the vendor's
consent, will also save the debtor warehouse space, and
will help the debtor obtain trade credit and merchandise
return rights that will make it possible for the
debtor to obtain credit and the debtor will effectively
manage its inventory.
*********
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