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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, May 6, 1998, Vol. 2, No. 90
Headlines
2CONNECT EXPRESS: Hearing on Disclosure Statement
2CONNECT EXPRESS: Plan of Reorganization
AL TECH STEEL: Sammi Steel Begins to Bend in Dispute
APS HOLDING CORP: 4th Quarter and Fiscal Year Results
BANK OF THAILAND: Governor Resigns Before Fired
BARRY'S JEWELERS: Disclosure Statement and Plan
BARRY'S JEWELERS: Seeks Time to Assume or Reject Leases
DOW CORNING: Class 13 Seek One Claim Each In Fixed Amount
FLEXEL INC: Seeks Approval of Liquidator's Settlements
INTERNATIONAL META: Post-Petition Marketing Agreement
L.A. GEAR: Bordan Shoe Opposes Sale to ACI
LEVITZ FURNITURE: To Assign Leases to Levbritt
NAL FINANCIAL: Committee Objects to Term Sheet
NAMCO CYBERTAINMENT: More Time for Removal of Proceedings
PARAGON TRADE: Procter & Gamble Objects to Extension
PHOENIX INFORMATION: Settlement with City Center Assoc
TOSHOKU AMERICA: Last Date for Filing Proofs of Claim
VOICE POWERED TECHNOLOGY: Order Confirms Plan
*********
2CONNECT EXPRESS: Hearing on Disclosure Statement
-------------------------------------------------
In the case of 2Connect Express, Inc., the court has set
May 29, 1998 as the date of the Disclosure Hearing. The
deadline for objections to the Disclosure Statement is May
26, 1998.
2CONNECT EXPRESS: Plan of Reorganization
----------------------------------------
2Connect Express proposes its plan of reorganization.
Administrative Claims and Priority Tax Claims are not
impaired under the plan.
Treatment of Classes that are impaired under the plan:
Class 1 - Allowed Secured Claim of Bay Tech Investments -
$275,000. Bay Tech Investments shall receive payment of
all unpaid principal and accrued interest. Bay tech
Investments shall retain its first priority lien, mortgage
and security interest in and on all of the assets of the
debtor until its allowed secured claim is paid in full.
Class 2 - Allowed Priority Claims - $52,595. The holder of
each Allowed Priority Claim shall receive cash equal to
the amount of each such Allowed Priority Claim.
Class 3 - The Allowed Unsecured Claims - $2,507,000. Each
holder of an allowed unsecured d claim, including
Rejection claims, shall receive a distribution in an
amount equal to their respective pro rata share of the
available cash after payment of all allowed
administrative, secured, priority tax and priority claims.
Class 4 - The Allowed Interest in the debtor - 100% of the
pre-petition equity. In the event the Retained Assets
vest in the reorganized debtor through the New Value
Contribution, then the Allowed Interests in the Debtor
shall not be affected by the plan. All holders of pre-
petition equity securities shall retain such equity
securities. In the event the Retained assets do not vest
in the Reorganized Debtor and the New Value Contribution
is not made, then all Allowed Interests in the debtor
shall be canceled and extinguished.
Prior to the Effective Date of the plan, the debtor
anticipates entering into a certain merger agreement with
Bobby Allison Cellular, however the deal is contingent on
confirmation of the plan and the debtor's emergence from
Chapter 11 with the Retained Assets. Assuming the New
Value Contribution is made, the reorganized debtor shall
reconstitute its board of directors to include those
persons selected by Sterne Agee, which persons shall be
identified prior to the confirmation Date. Sterne Agee
has indicated to the debtor a desire to purchase certain
assets of the debtor as well as the debtor's corporate
entity. The debtor expects to receive an offer to
purchase the Retained Assets for the New Value
Contribution prior to the hearing on the Disclosure
Statement.
AL TECH STEEL: Sammi Steel Begins to Bend in Dispute
----------------------------------------------------
It appears that Al Tech Specialty Steel Corp. will not be
hampered in its plans to use the bankruptcy courts to free
itself from its parent company, Sammi Steel Co. Ltd. of
Seoul, South Korea. "We will emerge with new owners,
although I have no idea who," said Kevin Sanvidge,
corporate director of administration for Al Tech.
McDonald & Co. Securities Inc., an investment banking firm
in Cleveland, was hired April 13 to market Al Tech and to
pursue leads. The company should fetch upwards of $30
million, which is the liquidation value of Al Tech,
Sanvidge said.
In papers filed in the bankruptcy, Al Tech charged that
Sammi Steel was siphoning off cash and other assets to
bolster its own faltering financial position. Al Tech also
charged that Sammi Steel had breached its fiduciary
responsibility to Al Tech, and sought to sever ties to the
parent company.
Sammi Steel, which is publicly traded on the Korean stock
exchange, filed for bankruptcy protection a year ago. It
currently is operating under a court- appointed monitor.
In January, Al Tech was successful in obtaining an
injunction preventing Sammi Steel from tampering with
existing management, and from diverting cash and assets for
its own benefit.
While it had appeared that Sammi Steel would fight the
ruling, the company apparently has backed off. Officials of
Sammi Steel have declined to be deposed in the Al Tech
bankruptcy proceedings, and Sanvidge said it appeared that
the Korean company would permit Al Tech's exit without a
struggle. "Sammi is a non-issue right now. They will let
us go. We are insolvent; we owe the creditors and Sammi
does not have the money to bail us out," Sanvidge said.
Al Tech's bankruptcy plan calls for the company to lose
$700,000 to $900,000 a month; it has been losing $300,000
to $500,000. While that figure still may seem dismal,
Sanvidge said Al Tech lost $23 million in 1997, or nearly
$2 million a month. (Capital District Business Albany -
05/04/98
APS HOLDING CORP: 4th Quarter and Fiscal Year Results
-----------------------------------------------------
APS Holding Corporation today reported reduced sales and an
increased loss for both the fourth quarter and year ended
January 31, 1998 over the comparable fiscal 1997 periods.
Sales for the quarter ended January 31, 1998 decreased 5.3%
to $179.2 million, compared to $189.3 million for the same
period a year ago, reflecting, in part, the closure of 68
Installers' Service Warehouses and 33 company-owned
stores during fiscal 1998.
For the fourth quarter, APS reported a net loss of $79.4
million (a loss of $5.76 per share) compared to a net loss
of $24.3 million (a loss of $1.76 per share) for the same
period a year ago. The significant increase in the net
loss was primarily the result of the recording of a $28.2
million deferred tax asset valuation allowance and write-
down of intangible assets and property and equipment
totaling approximately $20.2 million. None of these fourth
quarter charges involved the use of cash.
For the fiscal year ended January 31, 1998, sales decreased
5.3% to $812.9 million from $858.7 million for the prior
fiscal year. APS reported a net loss for the fiscal year
of $95.3 million, or $6.91 per share, compared to a net
loss of $10.8 million, or $0.79 per share, in fiscal 1997.
"The large write-downs we recorded in the fourth quarter
should have no impact on our ongoing business," stated
Bettina Whyte, President and Chief Executive Officer of APS
Holdings. "We view them as a positive action as they
represent one of several steps the Company is taking to
address its problems."
BANK OF THAILAND: Governor Resigns Before Fired
-----------------------------------------------
Bank of Thailand governor Chaiyawat Wibulswasdi, who
quit Monday, worked his way up the ranks over 11 years
before finding himself in the eye of Thailand's worst
economic storm. Appointed governor in July -- just after
the unpegging of the baht from the US dollar triggered the
regional financial turmoil -- Chaiyawat was hailed as a
straight-talking technocrat better able to withstand
political pressure than his predecessor Rerngchai
Marakanond.
Chaiyawat, 51, resigned Monday rather than face dismissal
when the findings of an independent commission of inquiry
into alleged mismanagement at the bank are presented to
cabinet on Wednesday. Chaiyawat presided over the most
tumultuous period in the Bank of Thailand's 56-year
history, a time of rebuilding and rehabilitation after a
series of crises, including a major banking scandal, the
sudden collapse of the financial sector and the unhinging
of the baht. As official figures subsequently revealed,
decisions made in the BoT in the months before his
promotion from deputy governor almost left Thailand
bankrupt.
Foreign reserves fell from more than 24 billion dollars to
just 2.5 billion dollars in a matter of weeks as the bank
tried unsuccessfully to fend off speculative attacks
against the currency. Through the first half of the year --
when Chaiyawat was deputy to Rerngchai -- the BoT was also
dishing out billions of baht in rescue capital to keep
debt- ridden finance firms afloat.
The bank's Financial Institutions Development Fund ended up
with liabilities worth 1.2 trillion baht (30.8 billion
dollars), most of which will be lost following the closure
of 56 finance companies in December last year.
When he took the governor's job, Chaiyawat was considered
the best man to steer the BoT and Thailand out of its
financial mess under the guidance of the International
Monetary Fund (IMF).
During Chaiyawat's time at the top, the BoT closed the 56
stricken finance companies, took over and restructured four
commercial banks and unveiled sweeping changes in the
country's banking regulations aimed at bringing the
sector up to world standards by the end of 2000.
Analysts have welcomed the moves as vital steps under
Thailand's IMF-led reform process. But they said the time
eventually would come for the BoT itself to face reform,
especially in its financial supervisory capabilities and
its transparency.(Agence France Presse - 05/04/98)
BARRY'S JEWELERS: Disclosure Statement and Plan
-----------------------------------------------
On or about April 14, 1998, Barry's, the Creditors'
Committee, the Bondholder Committee, the Equity Committee,
the Bank Group, DDJ Capital, and Mitchell Hutchins
executed the agreement regarding consensual Plan of
reorganization. By the Plan Agreement, those entities
agreed to support a plan of reorganization that contained
substantially the terms and conditions of the plan.
The plan provides for the payment in full of allowed
administrative claims, priority claims, and priority tax
claims, the payment in full of the approximately $57.8
million in allowed secured claims of members of the Bank
Group, including the payment of pre and post-petition
interest at the non-default rate provided in the Revolving
Credit Agreement and the payment of the professional fees
and expenses incurred by the Bank Group.
It also provides for the payment of other allowed secured
claims, the distribution of 2.5 million shares of New
Common Stock to Bondholders in satisfaction of their
secured and unsecured claims for payment of the senior
notes, the offer and sale of an and additional 2.25 million
shares of New Common Stock, for an aggregate price of $15
million, to Bondholders who elect to purchase such share,
either if the amount of all other allowed unsecured claims
is equal to or exceeds $17 million, the payment of $2.55
million to holders of such other allowed unsecured claims,
to be distributed on a pro rata basis among such holders,
plus interest at the rate of 5% per annum or if the amount
of all other Allowed Unsecured Claims is less than $17
million, the payment of 15% of the amount of such Allowed
Unsecured Claims, plus 5% interest per annum.
In satisfaction of Allowed Interests, the provision of
263,158 Reorganized Company Warrants, distributed on a pro
rata basis to holders of Existing Common Stock, which
warrants will provide such holders with the right to
purchase up to an aggregate of 5% of the New Common Stock,
on a fully diluted basis.
BARRY'S JEWELERS: Seeks Time to Assume or Reject Leases
-------------------------------------------------------
Barry's Jewelers is a party to 118 leases and seeks an
additional (approximately) three months within which to
assume or reject the leases, through August 31, 1998.
The leases are critical to Barry's reorganization, and the
debtor claims that to prematurely assume leases could be
detrimental to the company's ultimate reorganization.
Barry's has obtained a number of favorable lease
modifications, and intends to move for the assumption of
approximately forty leases within the next few weeks. The
requested extension of time will enable Barry's to
negotiate further lease amendments with these lessors and
to assume the leases. The requested extension of time
should also afford Barry's an adequate opportunity to deal
with the rest of its remaining leases.
With the recent execution of a plan agreement, the
prospects for a successful reorganization appear high. In
light of the progress made, Barry's believes that the
requested extension is reasonable and in the best interest
of the estate and its creditors. Barry's management has
also spent a great deal of time seeking to obtain $50
million in exit financing on favorable terms.
DOW CORNING: Class 13 Seek One Claim Each In Fixed Amount
---------------------------------------------------------
North Mississippi Medical Center, Inc., Denver Children's
Hospital and Pennsylvania Hospital Claimants, (Moving
Hospitals) seek to temporarily allow Class 13 claimants one
claim each in a fixed equal dollar amount for voting
purposes.
Because the debtor's objection (Number 3) is still pending
before the court with respect to the claims of the Moving
Hospitals and other Class 13 claimants, neither the
hospitals nor the other class 13 claimants are entitled to
vote on a plan of reorganization.
The Moving Hospital claimants seek a temporary allowance of
one claim in a fixed equal dollar amount for each Class 13
claimant for voting purposes. They say it would facilitate
the consideration of the debtor's Second Amended Plan by
the court, by the Moving Hospitals and by the other Class
13 claimants, and would enfranchise the Moving Hospitals.
FLEXEL INC: Seeks Approval of Liquidator's Settlements
------------------------------------------------------
Flexel, Inc. a/k/a Flexel Sales, Inc, seeks court approval
of certain settlement agreements negotiated by the
Liquidating Agent.
International Paper made a lump sum payment of $307,622 to
the debtor , and agreed to waive its pre-petition general
unsecured claim in excess of $2.7 million and its
administrative expense claim in excess of $292,377.50.
Aqualon Co. made a lump sum payment of $40,000 to the
debtor and will have an allowed general unsecured claim in
the amount of $112,696. The debtor settled with Ogletree,
Deakins, Nash, Smoak & Stewart, PC (ODNS & S) for the
payment of $42,804 to the debtor and ODNS & S will
waive its general unsecured nonpriority claim.
The court allowed the claim of $514,870 of Marlowe
International Corporation. The parties agreed to settle all
outstanding issues between the parties. Marlowe will have
an allowed claim against the debtor's estate in the amount
of $600,000 of which $498,853 is entitled to treatment as
an as Allowed Secured Claim with the remaining $101,146
entitled to treatment as an Allowed Unsecured Claim
payable under Class 4 of the plan. The debtor's
liquidating agent believes that the foregoing settlements
are all to the benefit of the debtor's estate.
INTERNATIONAL META: Post-Petition Marketing Agreement
-----------------------------------------------------
IPIQ Corporation and International Meta Systems, Inc.,
debtor, filed a joint motion for an order authorizing the
debtor to enter into a post-petition Market Consulting and
Teaming Agreement.
IPIQ is a corporation which has been formed for the
purposes of acquiring certain assets of debtor, subject to
court approval, in order to continue the principal business
of debtor. The agreement provides that IPIQ will provide
sales and marketing assistance in certain cases when
customers are reluctant to do business directly with he
debtor.
This engagement will continue until such time as a plan of
reorganization is confirmed or a trustee is appointed or
the case is converted to Chapter 7. IPIQ shall receive a
marketing fee equal to 3% of all receipts by debtor on
account of services rendered by debtor an licensees granted
based on customer contracts consummated during the term of
the agreement. IPIQ will receive 7% of fees in a case where
IPIQ is serving the customer directly.
L.A. GEAR: Bordan Shoe Opposes Sale to ACI
------------------------------------------
L.A. Gear, Inc. is seeking confirmation of the sale of
296,707 pairs of shoes to ACI. ACI is owned by Steven
Jackson who is also partner in the private investment
partnership PCH Investments LLC which owns all of the
existing series B Preferred Stock of L.A. Gear. He is
currently a member of L.A. Gear's Board of Directors.
According to Bordan Shoe, a competing bidder, the debtor's
sole justification for the confirmation of the sale is that
it is $35,000 higher than the next highest bid. However,
Bordan states that premise is not true. Bordan claims that
the royalty payment submitted by ACI is a preexisting
obligation pursuant to a licensing agreement. ACI's minimum
50 cent royalty to the estate is illusory, and ACI's
submitted bid of $3.75 is significantly lower than Bordan's
bid of$4.13. In order for ACI's royalty payment of 6% net
sales to exceed the minimum guarantee of 50 cents, assuming
net sales equals all sales, ACI must sell each pair of
shoes for more than $8.33 per pair, and according to the
president of Bordan, at least one half of the inventory has
a market value of $5.00 per pair.
Accordingly, Bordan claims that the sale to ACI is not the
best deal for the estate and it does not make reasonable
business sense to accept ACI's bid when Bordan's is
actually greater.
LEVITZ FURNITURE: To Assign Leases to Levbritt
----------------------------------------------
The debtors, Levitz Furniture, Incorporated et al,
seek court approval to sell, assume and assign the
Brittmore Lease (1009 Brittmore Road, Houston, Texas) to
Levbritt, LLC for the sum of $1,020,000. The debtors
believe that the sale and assignment of the Brittmore
Lease to Levbritt maximizes the assets available for
distribution to creditors. The debtors are soliciting
competing bids for their interest in the Brittmore lease.
A qualifying competing offer must be a minimum of
$1,071,000. The debtors determined to discontinue their
retail operations in Houston and have closed their store
located on the Brittmore Realty.
The debtors also seek court approval authorizing
termination of the Salt Lake City Lease (1414 South 500
West, Salt Lake City, Utah) and related relief. The
debtors have not received any serious interest from third-
party purchasers, and the Landlord has agreed to pay the
debtors $875,000 and to release all claims against the
debtors, including any claims for the early termination of
the lease, in exchange for the termination of the lease
and a release of the debtors' claim to the condemnation
proceeds. The debtors also seek to sell any personalty
located on the Salt Lake City Realty to the Landlord or a
third party. The debtors expect to receive less than
$25,000 for any such personalty.
NAL FINANCIAL: Committee Objects to Term Sheet
-----------------------------------------------
The Official Committee of Creditors holding Unsecured
Claims objects to the motion of NAL Financial Group, Inc.,
and its affiliated companies, as debtors, for approval of
the Term Sheet Agreement to provide servicing and
administration to securitization trusts, post-petition.
The Committee objects to the following provisions of the
agreement:
(1)The retroactive liquidation and repossession expenses.
If this is approved, it will result in NAL's waiver of its
pre-petition claim in the amount of $843,402 for
retroactive liquidation and repossession expenses.
According to the Committee, there is no justification for
the waiver, and at the very least NAL might reserve its
right to set-off this claim against claims the Holders or
Bankers Trust may assert against it or the other debtors
(2) Noteholder Bankruptcy Claims. This section is,
according to the Committee, manifestly unjust. This
provision provides, upon the natural expiration of the
agreement, through no fault of NAL, all conversion costs
incurred by BT shall be treated as pre-petition unsecured
claims against NAL's estate. The unfairness of this
provision is that Bankers Trust may unilaterally decide
not to extend the Agreement.
(3) NAL's Waiver of Claims. The Committee wants the same
claims assertion period to be the same period of time for
both the Committee and NAL.
(4)NAL's Submission of Long-Term Business Plan to
Noteholders and proposal for extension agreement. This
section excludes the Committee from participating in the
formulation of NAL's long-term business plan. The
Committee wants to be included in this process.
NAMCO CYBERTAINMENT: More Time for Removal of Proceedings
---------------------------------------------------------
The debtor, Namco Cybertainment, Inc., seeks entry of an
order further enlarging the debtor's time within which to
file notices of removal of related proceedings.
As of the petition date, the debtor was a party to various
civil actions and proceedings in a variety of states and
Puerto Rico. The debtor seeks to enlarge the time within
which to file notices of removal of related proceedings by
ninety days, through and including July 28, 1998.
Because the attention of the debtor's personnel and
management have been focused primarily on administering
the bankruptcy proceeding, the debtor and its
professionals have not had sufficient time to review all
such actions to determine if any should be removed.
Unless the enlargement of the period is granted, the
purpose to be served by the commencement of these
bankruptcy case may be frustrated.
PARAGON TRADE: Procter & Gamble Objects to Extension
----------------------------------------------------
Procter & Gamble (P & G) states that it is not unusual for
a debtor to request an extension of the initial exclusive
period. However, Procter & Gamble states, this is not the
usual case, but rather a Chapter 11 driven solely by the
debtor's attempts to escape the consequences of its
wrongful conduct.
P& G states that, "The debtor is no closer today to
successfully emerging from this Chapter 11 case than the
evening it rushed to commence this case without attempting
to amicably resolve the issues confronting it."
"Moreover, there is no realistic prospect that things will
change as long as the debtor retains exclusive control
over the reorganization process." Procter & Gamble states
that there is no cause for the extension of exclusivity,
that the case is not complex, and there has been no
progress in the case. P&G states that if creditors were
allowed to join the process, there might be some progress.
At least, Procter & Gamble argues, any extension of the
exclusivity period should be limited and should not extend
beyond June 26, 1998.
PHOENIX INFORMATION: Settlement with City Center Assoc
------------------------------------------------------
Phoenix Information Systems Corp., Phoenix Systems Ltd.
and Phoenix Systems Group, Inc., debtors, seek approval of
settlement between the debtors and City Center Associates
Ltd. regarding rejection of non-residential real property
lease and withdrawal of proof of claim.
Pursuant to the terms of the Stipulation, all outstanding
arrears under the 12th floor lease are paid through April
30, 1998, the debtor shall have no liability with respect
to the 11th floor lease, and the debtors agree to reject
the 12th floor lease and to vacate the premises. City
Center withdraws its proof of claim in the amount of
$1,068,390.
TOSHOKU AMERICA: Last Date for Filing Proofs of Claim
-----------------------------------------------------
In the case of Toshoku America, Inc., debtor, Judge Jeffry
H. Gallet entered an order setting May 12, 1998 as the
last date for filing proofs of claim against the debtor's
estate.
VOICE POWERED TECHNOLOGY: Order Confirms Plan
---------------------------------------------
On April 29, 1998, Judge Vincent P. Zurzolo entered an
order confirming the amended plan o f reorganization for
Voice Powered Technology International, inc. dated as of
January 21, 1998.
*********
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