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/raid1/www/Hosts/bankrupt/TCR_Public/981029.MBXT R O U B L E D C O M P A N Y R E P O R T E R Thursday, October 29, 1998, Vol. 2, No. 212 Headlines 2CONNECT EXPRESS: Files Current Report With SEC ARCON HEALTHCARE: Closing Its Doors BOSTON CHICKEN: Judge Approves Reorganization Plan CAMPO ELECTRONICS: Files Current Report With SEC CONTINENTAL AIR: Net Income Impacted By Aircraft Retirement CORNUCOPIA RESOURCES: Current Report Filed With SEC CRIIMI MAE: Strikes Back at Creditor DANNY'S MARKETS: Will Give Pay Raises DOMINION BRIDGE: Granted Extension DOW CORNING: Creditor Panel Seeks Procedures For Media GITIC: Bond Default Shakes Creditors GOLDEN BOOKS: Gets Second Chance HOMELAND HOLDING: Upbeat Despite Loss INCO LIMITED: Reports Third Quarter Loss of $24 Million LOGAN GENERAL: Can't Pay Bills LEVITZ FURNITURE: Gentext Backs Out of $26.5 M Sale NEWSTAR RESOURCES: Announces Corporate Changes NOMURA SECURITIES: Shareholders and Former Execs Agree POCKET COMMUNICATIONS: Lenders Amend Plan To Give FCC Cash SOUTHERN PACIFIC FUNDING: Trustee Names Creditor Panel STREAMLINE INDUSTRIES: Carlyle Proposes Acquisition UNITED COMPANIES: Says Building Sale Routine VENTURE: Hearing Set for Plan Confirmation WESTERN DIGITAL: Reports 1st Quarter Net Loss of $110M ZENITH ELECTRONICS: Reports 3rd Quarter $119m Net Loss ********* 2CONNECT EXPRESS: Files Current Report With SEC ----------------------------------------------- On October 22, 1998 2Connect Express, inc. filed an 8-K current report with the SEC. A full-text copy of the filing is available via the Internet at: http://www.sec.gov/Archives/edgar/data/0000950144-98- 011681.txt On October 16, 1998, 2Connect Express, Inc. issued a Press Release announcing that the Bankruptcy Court, Southern District of Florida, executed an Order confirming 2Connect's Plan of Reorganization. The Effective Date of the Plan of Reorganization will be October 26, 1998, 10 days following the confirmation. The Press Release further stated that, "as previously disclosed, 2Connect entered into an agreement with Sterne, Agee & Leach, Inc. on August 27, 1998 whereby Sterne Agee will, as of the Effective Date of the Plan of Reorganization, acquire out of bankruptcy 100% of the equity interests of 2Connect and 2Connect will retain the Coral square store lease and certain store fixtures. In consideration for such acquisition, Sterne Agee will make a new value contribution to the bankruptcy estate for the benefit of 2Connect's creditors in the amount of $175,000 which funds are currently in escrow. To effect this transaction and in accordance with the Plan of reorganization, as amended, upon the Effective Date, all of the current and existing Common Stock of 2Connect will be forever extinguished and canceled and 2Connect will issue new shares of Common Stock to Sterne Agee which shall constitute 100% of the issued and outstanding shares. Consequently, the existing shareholders of the Common Stock of 2Connect will not retain any interest in the post- bankruptcy estate for their extinguished and cancelled interests. The Company filed an 8-K report with the Securities and Exchange Commission on September 23, 1998 announcing that on September 15, 1998, the Company filed with the U.S. Bankruptcy Court the Debtor's Monthly Financial Report (Business) for the period August 2, 1998 to August 29, 1998. On October 7, 1998, the Company filed an Amendment to the Debtor's Monthly Financial Report (Business) for the period August 2, 1998 to August 29, 1998 reclassifying the Stern Agee new value payment from cash in escrow to Accounts Receivable. ARCON HEALTHCARE: Closing Its Doors ----------------------------------- The Tennessean reports on October 25, 1998 that Venture capitalists, including venerable New York-based Warburg Pincus Capital Partners, pledged some $20 million to help the company grow. "Everyone was real enthusiastic about the new facility," said Soddy-Daisy Mayor Bob Privett, who later would use the clinic twice after nearly severing fingers while working as a contractor. "It was super." Now it's closed. As of Friday, so are the last of eight other clinics Arcon operated in five states, punctuating one of the most high-profile health-care company failures in Nashville's history. Arcon, started in the go-go mid-'90s with a host of other Nashville-based health-care companies, sprinted through some $50 million in venture capital and owes another $50 million to the real estate investment trusts that built its clinics, its lawyer has said. The patients didn't come. Not enough of them, anyway. Said Arcon Soddy-Daisy clinic physician Willis Greer, "Their forecast wasn't realistic." In a nutshell, Arcon was designed to attract patients who want to stay closer to home for health care. It also would provide the care exclusively on an outpatient basis, making it less costly than at a hospital with greater overhead. Clinics such as Soddy-Daisy, which Arcon's U.S. Bankruptcy Court filings show lost more than $2 million in the first half of this year, also had to had to support Arcon's considerable corporate overhead in Nashville. By Sept. 1, Arcon had stopped paying rent to Nationwide, Stokes said. Problems were so severe that Arcon didn't have enough money in one of its accounts to pay a small printing company, which billed it in June for $250.38 worth of paper products such as patient information forms and again in August for $90.24 worth of office supplies such as paper clips and an ink pad, New World Printing alleges in Bankruptcy Court documents. By early October, after failing to interest enough investors in contributing a fourth round of capital, Arcon informed trade creditors through a note stuck to a meeting-room door at U.S. Bankruptcy Court in Nashville that it was too broke even to reorganize. ` BOSTON CHICKEN: Judge Approves Reorganization Plan -------------------------------------------------- Bankruptcy Judge Charles G. Case, District of Arizona, approved a multi-million-dollar reorganization plan by Boston Chicken Inc. in order to convince managers not to abandon the company during its chapter 11 case, according to the Associated Press. CEO Michael Jenkins had testified that managers at Boston Market stores had been quitting in large numbers since the chain disclosed its financial difficulties in July. Jenkins said the plan could cost as much as $18 million over the next two years and would feature $15,000 bonuses paid out over two years to general managers, and higher bonuses for upper-level managers. Jenkins argued that it would cost the company three times as much if it were forced to replace those employees. The company, based in Golden, Colo., filed chapter 11 on Oct. 5 when it could not make a $283 million loan payment due Oct. 17. Although the company closed 178 of its stores under the Boston Market name, it continues to operate 759 company-owned stores, and franchisees are running some 900 stores. Attorney Evan D. Flaschen of Hebb & Gitlin, an attorney for the creditors, told Judge Case they wanted another week to study the reorganization proposal. He said "We are not trying to make the point that this is too much; we're trying to make the point that we don't understand it." (ABI 28-Oct-98) CAMPO ELECTRONICS: Files Current Report With SEC ------------------------------------------------ Campo Electronics, Appliances and Computers, Inc. filed a form 8-K current report with the SEC on October 19, 1998. The company reports Effective October 19, 1998, PricewaterhouseCoopers LLP ("PwC") resigned as principal accountants of Campo Electronics, Appliances and Computers, Inc. due to Campo's pursuit of strategic alternatives including the sale of the Company. (b) PwC's reports on the company's consolidated financial statements for the two fiscal years ended August 31, 1996 and 1997, respectively, did not contain an adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope, or accounting principle except that PwC's report on the company's consolidated financial statements for the fiscal year ended August 31, 1997 included an explanatory paragraph regarding the company's ability to continue as a going concern. (c) During the company's two fiscal years ended August 31, 1997 and the subsequent interim period preceding the decision of PwC to resign as independent accountants, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of PwC, would have caused it to make a reference to the subject matter of the disagreement(s) in connection with its reports covering such periods. CITYSCAPE FINANCIAL: Lays Off 53 Percent of Workforce ----------------------------------------------------- Cityscape Financial Corp. laid off 53.5 percent of its work force last week, reducing its staff from 454 to 211 employees. Company officials said the layoffs were part of are structuring plan that includes streamlining and downsizing operations at the sub-prime mortgage lender. In connection with the layoffs, the company has closed its branch operation in California, while maintaining its offices in New York, Georgia, and Illinois. Cityscape, which filed a prepackaged reorganization plan early this month, expects to record a material restructuring charge in the fourth quarter. (The Daily Bankruptcy Review and ABI Copyright c October 28, 1998) CONTINENTAL AIR: Net Income Impacted By Aircraft Retirement ----------------------------------------------------------- The Company recorded consolidated net income of $73 million for the three months ended September 30, 1998 as compared to consolidated net income of $110 million for the three months ended September 30, 1997. Net income was significantly impacted by a $122 million ($77 million after-tax) fleet disposition/impairment loss resulting from the Company's decision to accelerate the retirement of certain jet and turboprop aircraft. a full-text copy of the filing is available via the Internet at: http://www.sec.gov/Archives/edgar/data/0000319687-98- 000014.txt CORNUCOPIA RESOURCES: Current Report Filed With SEC --------------------------------------------------- Cornucopia Resources Ltd. (the "Company") has been in negotiations with several companies since early this year with a view to a corporate combination or the sale of the Company's Mineral Ridge Mine in Nevada. As reported in the Company's Form 10-Q for the second quarter ended June 30, 1998, the Mineral Ridge Mine was not in compliance with certain of the covenants of the mine debt financing facility and the Company was in arrears on interest and principal payments. Continued forbearance by the Company's lender, Dresdner Kleinwort Benson was largely due to the advanced nature of the discussions between the Company, Dresdner and other interested parties. On September 10, 1998, the Company announced that it had entered into a letter of intent with Vista Gold Corp. of Denver, Colorado for the purchase by Vista of all of the shares of the Company's wholly-owned subsidiary, Mineral Ridge Resources Inc. ("MRRI"), which operates the Mineral Ridge Gold Mine in Esmeralda County, Nevada. As consideration, the Company will receive 1,562,500 common shares of Vista valued at $250,000 and Vista will subscribe to a private placement of 2,777,777 common shares of Cornucopia Resources Ltd. valued at $250,000. This transaction, which was subject to final due diligence and regulatory approval, was contingent upon Vista finalizing agreements with MRRI's major creditors, including Dresdner with respect of the $13.3 million mine debt financing facility. In the interim, Vista will assist in the management of the Mineral Ridge Mine. On October 21, 1998, the Company announced that the sale of the Mineral Ridge Mine to Visa had been completed. The Company received 1,562,500 shares of Vista as consideration for the sale and Vista had subscribed to a private placement of 2,777,777 common shares of the Company for proceeds of US$250,000. Vista had entered into agreements with Dresdner and MRRI's principal creditors which relieve the Company of all its liabilities, including guarantees, with respect to the $13 million loan agreement with Dresdner and approximately $2 million due to major trade creditors. Non-transferable share purchase warrants, previously issued to Dresdner Bank AG for the purchase of up to 1,750,000 shares of Cornucopia at C$1.35 per share have now been repriced at C$0.20 per share, and the term of the warrants had been extended from January 17, 2001 to December 31, 2001. On September 10, 1998, it was also announced that, subject to all required regulatory approvals, incentive stock options be granted to directors and employees of the Company for the purchase of a total of 1,415,000 shares in the capital of the Company. The options were granted at the exercise price of Cdn.$0.15 per share, which was above the closing price of the Company's shares on the Toronto Stock Exchange on September 9, 1998 The options are exercisable for a five year term expiring on September 10, 2003. CRIIMI MAE: Strikes Back at Creditor ------------------------------------ The Daily Record, Baltimore reports on October 22, 1998 that Criimi Mae Inc. struck back at one of its principal financiers, yesterday filing a lawsuit against Merrill Lynch Mortgage Capital Inc. over actions by Merrill that forced the Rockville firm into bankruptcy. The move followed a lawsuit filed Tuesday against another creditor, Morgan Stanley & Co. International Inc., to prevent Morgan from disposing of hundreds of millions of dollars of Criimi Mae's assets. Both actions came after Criimi Mae won a ruling last week that barred yet another creditor, Citicorp Securities Inc., from seizing assets, and signaled that Criimi Mae executives, intend to fight to restore their firm's solvency. The Rockville-based commercial mortgage company filed for Chapter 11 bankruptcy protection on Oct. 5, after caught in a cash squeeze. In a statement yesterday, Criimi Mae Chairman William B. Dockser used unusually frank language to accuse Morgan Stanley of "using the current temporary market turmoil to pay an absurdly low price" to take over mortgage assets that are performing as expected. Criimi Mae has billions of dollars in assets -- specifically, sub-investment grade commercial mortgage- backed securities (CMBS) -- but it cannot reasonably hope, in the near term, to turn them into much- needed cash. That's because the market for CMBS has dried up in the face of widening interest rate spreads. Those widened spreads (the difference between interest paid on CMBS and on treasuries) are said to have forced the bankruptcy. Last month, Merrill Lynch loaned Criimi Mae almost $275 million to buy commercial mortgage bonds. When the spreads suddenly and unexpectedly widened, the value of the bonds dropped. That prompted Merrill Lynch to place a "collateral call" on Oct. 2. By taking the move, Merrill Lynch sought to reduce its loan exposure by forcing Criimi Mae to hand over cash or additional collateral to make up the deficit. According to the lawsuit, filed by Baltimore's Venable, Baetjer and Howard LLP, Merrill Lynch demanded $20 million from Criimi Mae to make up what it calculated to be the margin deficit. Criimi Mae executives have characterized that amount as being "unreasonable" -- though they have not given an amount they consider to be proper -- and refused to pay. Instead, they filed for bankruptcy protection. Other lenders, notably Citicorp and Morgan Stanley, have also allegedly seized or attempted to seize assets that Criimi Mae executives say belong to the company. That prompted Criimi Mae to go to court to try to fend off the creditors. The suit against London-based Morgan Stanley & Co. International, a subsidiary of Morgan Stanley Dean Witter & Co., alleges that Morgan Stanley willfully violated the bankruptcy code by moving to obtain assets that it did not have a right to take. Specifically, Morgan Stanley went after commercial mortgage-backed securities with a face value of $286.8 million. Morgan Stanley allegedly valued Criimi Mae's equity in the assets at $237,127.93. Criimi Mae says its share of the CMBS is $54.5 million. Criimi Mae's suit also accuses Morgan Stanley of "planning an even more flagrant and damaging violation;" specifically, the sale of CMBS into an already depressed market. That move, Criimi Mae suggests, would be ruinous to the company, its shareholders, its other creditors and others in the CMBS market. Jeanmarie McFadden, a spokesman for Morgan Stanley, said the company has reviewed Criimi Mae's lawsuit and found it to be without merit. "We will defend ourselves vigorously against it," she added. Criimi Mae is facing about a dozen shareholder lawsuits alleging its executives made false statements about the viability of the company in an attempt to inflate the stock price. Criimi Mae's stock price, normally around $12 per share, closed yesterday at $1.88. DANNY'S MARKETS: Will Give Pay Raises ------------------------------------- Employees at Danny's Markets Inc. on Sunday agreed to a wage increase based on seniority until a formal contract can be worked out, company attorney Robert Finkel said Monday. Danny's employees last year took a 23-percent pay cut to help pull the local supermarket chain out of bankruptcy. Their contract expired Monday. Company officials wouldn't release details of the agreement. "The company just wanted to give something back to its employees, who helped the company out when it needed them," Finkel said. "It wasn't a formal agreement, just a good-faith gesture while we continue to negotiate." Officials at Teamsters Local 339, which represents Danny's cashiers and other workers, declined to comment. DOMINION BRIDGE: Granted Extension ------------------------------------ Dominion Bridge Corp. and its subsidiaries were granted an extension to file their proposal to their respective creditors under the Bankruptcy and Insolvency Act, according to a newswire report. The group's parent company and subsidiary Cedar Group of Canada were granted an extension until Nov. 5; shipbuilding subsidiary Industries Davie Inc. was granted an extension until Dec. 10. DOW CORNING: Creditor Panel Seeks Procedures For Media -------------------------------------------------------- As Dow Corning Corp. and its tort claimants' committee put the finishing touches on a joint reorganization plan and disclosure statement, the company's official unsecured creditors' committee is asking the court to establish procedures to govern a media campaign expected to be launched by the company with the plan's filing. Dow Corning and the tort committee have resolved all issues but one and were confident that a plan and disclosure statement could be filed by Oct. 27. However, if the plan was not ready by today, Dow Corning intends to delay filing the plan until the day after the national elections on Nov. 3 because the company plans to make the filing "a media event" and does not want the filing to be dwarfed by election issues. (Federal Filings Inc. 28-Oct-98) GITIC: Bond Default Shakes Creditors ------------------------------------ The International Herald Tribune reports on October 28, 1998 that one of China's most prominent investment companies has defaulted on an international bond payment, banking officials said Tuesday, the first time such a Chinese company had done so since the Communist revolution in 1949. At the same time, a new report indicated that Chinese corporate debt held by overseas banks largely in Japan and Europe might stand at more than double the previous estimates, even as doubts spread over how much of it would be repaid. The default by Guangdong International Trust & Investment Corp., known as GITIC, immediately raised the question of whether the Chinese government would stand behind the huge debts of China's regional investment companies, including Guangdong, as financial tremors continue to shake Asia and the growth of China's economy slows. Guangdong defaulted on an $8.75 million interest payment on a $200 million bond, according to Joanne Shephard, a Chase Manhattan Bank spokeswoman. In the past, China has always repaid foreign loans from shuttered institutions, but Guangdong is different, possibly heralding a new and much more risky phase in the financing of China's development. Since the bankruptcy of Guangdong on Oct. 6, information has been slow to emerge about the exposure of foreign banks to China's other international trust and investment companies, known as ITICs, which are backed by the Chinese government or by provincial governments to raise money abroad. Potentially more worrying, however, is the debt of Chinese companies known as "red chips," which are incorporated in Hong Kong and quoted on the stock exchange here but controlled by Beijing. According to a report by Goldman, Sachs & Co., the red chips may have borrowed more than twice as much money from overseas banks as was estimated earlier this month. "We estimate aggregate debts for major red-chip companies amount to 100 billion Hong Kong dollars," or $13.35 billion, the report says Analysts say that, like the international trusts, red chips have used a lot of their borrowed money to invest in speculative real- estate deals and the stock market. Foreign banks have lent to red chips "without examining credit risks carefully," Goldman Sachs said. This, the U.S. firm said, was because of a "perhaps mistaken assumption" that, in the event of cash flow problems, the government- supported parent companies in China would "eventually honor the payments." Goldman added that leading bank lenders to ITICs represented a "veritable 'who's who' of global banks, including CS First Boston, Commerzbank, Dai-Ichi Kangyo Bank, Dresdner Bank, Sakura Bank, Fuji Bank, Sumitomo Bank, SocGen, Westdeustche Landesbank." It added that according to the Hong Kong Monetary Authority, 80 percent of exposure to the ITICs was on the part of foreign banks. The backing of the Guangdong provincial government was once thought to be enough to guarantee the survival of Guangdong, but that has been proven wrong, a lesson that could extend to other ITICs or red chips that run into major financial trouble. Two clearing houses in Europe Euroclear of Belgium and Cedel Bank SA of Luxembourg said Tuesday that they had already credited some bondholders and may now revoke those payments, Bloomberg News reported. GITIC was famous for its frosty relations with the central government, one reason analysts believe it was shut down before any other large ITICs from other provinces. But lenders who had hoped that Guangdong was a badly managed, one-of-a-kind company might want to reconsider, analysts said. After a series of company visits, Mehdee Reza, a Credit Suisse First Boston banking analyst, said that among Hong Kong's bankers, "GITIC was perceived as being the most financially sound" of the ITICs. Banks from Japan and Germany have been named so far as the biggest lenders to the international trusts, although according to Basis Point, a newsletter that monitors credit markets in Asia, the single most exposed lender to Guangdong might have been Union Bank of Switzerland AG, which has since merged with Swiss Bank Corp. In March 1997, UBS undertook a $205 million floating-rate note for Guangdong Infrastructure Ltd., which is also controlled by the government of the southern province of Guangdong. GITIC acted as a guarantor for that deal, and GITIC itself gave UBS a mandate in August 1997 to issue a $100 million five-year note in its name, Basis Point said. The newsletter's editor, Stewart Man, said Basis Point had never heard anything further from UBS about the deals, and UBS declined to comment. Since GITIC was shut down, two more international trusts from Guangdong Province have failed to meet interest payments. One, a company backed by the municipal government of Guangdong's capital, Guangzhou, failed to make a payment of a $30 million **loan** arranged by Societe Generale SA of France. Like many of the largest lenders to the international trusts, Societe Generale also loaned a lot of money to red chips and, according to Goldman Sachs, was one of the principal bankers of Guangdong Investment. Another major lender to international trusts is Commerzbank AG of Germany, which a week ago failed to receive a payment from another international trust on a $70 million loan(International Herald Tribune - 10/28/98) GOLDEN BOOKS: Gets Second Chance -------------------------------- Golden Books Family Entertainment has negotiated a "standstill agreement" with its bondholders, sparing it from bankruptcy. The deal also allows Golden Books to use its available cash to pay creditors, and have Richard Snyder to stay on as chairman and CEO. Wall Street observers still believe the outcome for Golden Books will ultimately be a merger or takeover by another children- oriented entertainment company such as Cinar Films or Harvey Entertainment. Louise Sansregret, vice president of communications for Cinar said she was "always open to acquisitions" but wouldn't directly address Golden Books. Neither would a spokesperson for Harvey. HOMELAND HOLDING: Upbeat Despite Loss ------------------------------------- The Daily Oklahoman reports on October 17, 1998 that Homeland Holding Corp. reported Friday a third-quarter loss, but officials were upbeat because operating earnings increased 29 percent. Third-quarter net loss, before amortization of excess reorganization value, was $347,000 compared with $196,000 in third quarter 1997. That's a loss of 7 cents a share vs. 4 cents a share a year ago for the regional grocery store chain holding company. For the first nine months, ending Sept. 12, the company had net income of $970,000, or 20 cents a share, vs. $1.835 million, or 39 cents a share, a year ago. Those numbers are excluding amortization of excess reorganization value, which brings the 1998 year-to-date loss to $8.8 million vs. $8.3 million a year ago. In 1996, the company entered a pre- arranged reorganizational bankruptcy, emerging 60 days later with the company owned primarily by bondholders. The company has elected to write-off the reorganizational expenses in an accelerated three-year period. "In our business, the real key is cash flow," President and Chief Executive David B. Clark said. The earnings before interest, taxes, depreciation and amortization in the third quarter were $4.3 million, up from $3.3 million a year ago. Year-to-date, the amount was $14.9 million vs. $14.5 million a year ago. The company's third-quarter net loss was a result of several things, Clark said. A year ago, the company had a tax credit. This quarter, it incurred a tax charge, he said. And, because of four new stores, the company's amount of depreciation increased. The company's same-store sales declined 1.4 percent in the third quarter, blamed on greater competitive promotional spending and competitive store openings. "Total sales for the company are up, and that provides more cash flow," Clark said. "We are ahead of our plans as to where we are right now and where we thought we would be." INCO LIMITED: Reports Third Quarter Loss of $24 Million ------------------------------------------------------- In a Canada Newsire report, Inco Limited reported a loss of $24 million, or 18 cents a common share, for the third quarter of 1998, compared with net earnings of $5 million, or a loss, after preferred and Class VBN dividends, of two cents a share, in the third quarter of 1997. For the first nine months of 1998, the Company incurred a loss of $63 million, or 50 cents a share, compared with net earnings of $79 million, or 32 cents a share, in the corresponding period of 1997. Commenting on the third quarter results, Michael D. Sopko, Chairman and Chief Executive Officer, said that: "The continued deterioration of nickel prices was the principal reason for the Company's third quarter loss. Inco's average realized nickel price of $2.17 per pound in the third quarter of 1998 was the lowest since the second quarter of 1987. We are continuing to reduce costs and expenses to restore our profitability in these difficult market conditions." Nickel unit production costs decreased by approximately 12 per cent in the third quarter of 1998, compared with the corresponding 1997 period, with all operations contributing to these lower costs. The Company's results for the third quarter of 1998 were also adversely affected by the impact of the scheduled and, in the case of Ontario mines, extended shutdowns at its Canadian operations. LEVITZ FURNITURE: Gentext $26.5 M Sale Backs Out ------------------------------------------------ Gentext Capital LLC offered to buy Levitz Furniture Inc.'s fee ownership in six properties and leaseholds in two others for $26.5 million, but has backed out of the proposed arrangement. Genext Capital signed on to purchase the properties, subject to higher offers, but was unable to find acceptable financing and walked away from the deal. Levitz now plans to aggressively market the properties individually or in small groups. The parcels included in the proposed transaction were locations where the retailer previously has or currently is conducting going-out-of- business sales. (Federal Filings Inc. 28-Oct-98) LOGAN GENERAL: Can't Pay Bills ------------------------------ The Charleston Gazette reports on October 24, 1998 that Logan General Hospital has amassed land, buildings, vehicles and other property worth more than $78 million, but lacks the cash to pay nearly $64 million in debts, its federal bankruptcy filing shows. The 132-bed hospital's parent company placed it in Chapter 11 bankruptcy proceedings Thursday, to head off the appointment of a federal receiver who would have taken over the facility. Chapter 11 will allow Logan General to reorganize and plan a payoff of its numerous creditors, but could still spell the ouster of hospital Administrator C. David Morrison and his management team. The filing shows that Logan General's assets include 69 buildings and parcels of land, as well as a fleet of 26 vehicles, including a 1993 limousine and two late-model Jeep Cherokees. Logan General also faces 10 separate lawsuits, the filing reported, including one from a former hospital vice president and five from doctors laid off in February. The bankruptcy filing also shows that hospital revenues appear to have fallen this year when compared to last year's. Hospital lawyers are expected to submit a plan next week outlining how they would satisfy banks, employees, patients, insurers and others owed money. One of its creditors triggered the bankruptcy filing by requesting a court- ordered takeover of the nonprofit hospital earlier this year. The Bank of New York cited payments missed by Logan General on a $31.4 million bond issue involving the bank. The bank also argued that the hospital violated the terms of the bond agreement by transferring millions of dollars to a for-profit sister company, Monterra Development Corp. The bankruptcy filing shows that Monterra now owes Logan General $29.5 million, for loans and accrued interest. A federal grand jury is reportedly investigating the mingling of hospital and Monterra monies. Logan General has listed the $29.5 million among its $78.4 million in assets. Logan General's debts include $44 million in secured claims, held by the The Bank of New York, leasing companies and similar creditors, and $19 million in unsecured claims, such as medical benefits owed employees and refunds owed patients and insurers. NEWSTAR RESOURCES: Announces Corporate Changes ---------------------------------------------- The Canada Newswire reports on October 26, 1998 that Newstar Resources has mailed a notice of meeting and a management information circular to its shareholders in connection with a special meeting to be held on November 23, 1998 to consider approval of a plan of arrangement. The plan of arrangement contemplates: (a) the continuance of Newstar from the laws of Ontario to the laws of the State of Delaware; (b) the change of Newstar's corporate name to "Newstar Oil & Gas, Inc.", or such other name as may be acceptable to applicable regulatory authorities; and (c) the consolidation of the issued and outstanding common shares of Newstar on a basis of not greater than one for five. The plan of arrangement is being proposed to better reflect Newstar's activities as a U.S. based oil and natural gas exploration and production company. Management believes that the plan of arrangement will: (a) eliminate potential future tax problems; (b) facilitate the completion of potential mergers, acquisitions and divestitures; and (c) enhance Newstar's ability to complete future financings in the United States. The proposed plan of arrangement, if completed, will not involve any change in Newstar's business, management, location of principal offices or other facilities, assets or liabilities, and each shareholder's percentage ownership of shares of Newstar will remain the same. In addition to shareholder approval, the plan of arrangement is also subject to the receipt of a final order from the Ontario Court of Justice (General Division) and to all necessary regulatory approvals. Michigan-based Newstar Resources Inc. is an oil and gas exploration and production company with operations in Michigan, Ohio and Texas. The company trades on the NASDAQ National Market System under the symbol NERIF and the Toronto Stock Exchange under the symbol NER. NOMURA SECURITIES: Shareholders and Former Execs Agree ------------------------------------------------------- Kyodo News reports on October 27, 1998 that shareholders and six former executives of Nomura Securities Co. reached a compromise Tuesday at the Tokyo District Court in a damages suit against the executives concerning their illegal payoffs to "sokaiya" corporate racketeers. The case was settled on condition that Hideo Sakamaki, 63, former Nomura president, and five others pay a total of 380 million yen to the company in compensation for losses caused by unlawful payoffs. It will be the highest amount of compensation ever paid to a company by corporate executives in such suits, according to the plaintiffs. In the suit, shareholders claimed the brokerage giant suffered losses of about 370 million yen paid to extortionist Ryuichi Koike, 55, in 1995 in exchange for not disrupting the company's shareholders meeting. The Commercial Code prohibits companies from giving financial favors to corporate racketeers. The plaintiffs also maintained that the company marked a loss of about 57 million yen in profits from brokerage commissions after local governments such as Tokyo and Yokohama stopped entrusting Nomura with lead managing municipal bonds for public offerings following the payoff scandal. The six former executives will pay 200 million yen of the compensation money by Nov. 30, and the remaining 180 million yen will be paid by the indicted three on a 20-year installment plan. POCKET COMMUNICATIONS: Lenders Amend Plan To Give FCC Cash ---------------------------------------------------------- Pocket Communications Inc.'s lenders amended their joint reorganization plan for the wireless communications company after the Federal Communications Commission asked them to reframe their proposal to provide an all cash payment for Pocket's 43 C-block licenses instead of the financing set forth in a March 16 term sheet, the basis for the lenders' amended plan. The proposed settlement calls for the FCC to accept cash in an amount left blank in the disclosure statement and plan, as payment in full for the 43 wireless licenses that Pocket's DCR PCS Inc. unit won at the 1996 C- block auction. (Federal Filings Inc. 28-Oct-98) SOUTHERN PACIFIC FUNDING: Trustee Names Creditor Panel ------------------------------------------------------ The U.S. Trustee has appointed an official committee of Southern Pacific Funding Corp.'s unsecured creditors: Mariner Investment Group (chair); Conseco Capital Management; Helix Investment Partners L.P.; Forest Fulcrum; Hacienda Property Valuation; and Bank of New York (ex officio member). The panel has retained Munger Tolles & Olson LLP as counsel. (The Daily Bankruptcy Review Copyright c October 28, 1998) STREAMLINE INDUSTRIES: Carlyle Proposes Acquisition ---------------------------------------------------- Carlyle Industries Inc. announced that its subsidiary, Blumenthal Lansing Company Inc., has offered to acquire the assets of Long Island, N.Y.-based Streamline Industries Inc., a buttons packager and distributor that filed for chapter 11 protection, according to a newswire report. The proposal is subject to the bankruptcy court's approval. (ABI 28-Oct-98) UNITED COMPANIES: Says Building Sale Routine -------------------------------------------- United Companies Financial Corp., whose prospects have dimmed amid tightening credit in financial markets, recently sold a building in its Baton Rouge office park for $18.7 million. But the home lender gave no indication Friday that hunger for cash spurred the Sept. 30 sale of the upscale building, Two United Plaza, which has a prominent spot in the tree- lined office park off Essen Lane that the company first began developing two decades ago. Terrell Brown, the company's chairman and chief executive, issued a statement saying the sale was a routine investment decision. "We constantly review our investments and have considered selling this property many times over the past two or three years. We've received many offers during this time, but this bid was particularly attractive," he said. "We determined that the capital gained from the sale of the building would bring a greater return if it were redeployed into our core business," he said. He described the sale as a "very profitable transaction," and suggested it was keyed to local real estate market conditions. "There is a Class A office space shortage in this city," he said. The company sold the building to Stirling United Properties LLC, a company formed by Edward Songy, president of a Covington real estate company. Stirling has already paid $1.9 million, and the remainder of the $18.7 million price is to be paid in installments, with interest, by next June 29. Stephanie Dixon, director of investor relations for United Companies, said the 10-story building houses only a few offices used by the company. Tenants in the 15-year-old building, at 8550 United Plaza Blvd., include law firms and investment and insurance companies. United Companies, which has headquarters at One United Plaza, still owns 31/2 of the 12 buildings in the park, she said. United Companies makes home equity loans to people considered high-risk, then sells the loans as securities. Like most of its competitors, United Companies' stock has plummeted recently amid concerns that it may not have enough capital to continue making loans. Recent turmoil in the world's financial markets has aggravated the problem by making banks wary of lending to companies perceived as risky, analysts say. On Friday, Standard and Poor's dropped ratings of the company's senior unsecured debt ratings to BB-. It cut its rating of United Companies' preferred stock to B-. The common stock, which last month hit a five-year low of $6.50, closed Friday at $4.88, down 2.5 percent from the day before. The subprime lending industry's troubles are widespread. Two of United Companies' competitors filed for bankruptcy protection from creditors in the past month. Over the last year, analysts have questioned the accuracy of the "gain-on-sale" accounting method used by United Companies and other subprime lenders. Steven Eisman, analyst for CIBC Oppenheimer, says the method lets companies overlook risks in their loan portfolios, and that scares investors. "Wall Street is closed for business with these companies," Eisman said Friday. "Nobody trusts the accounting." The accounting method was one reason Standard & Poor's cited in downgrading the company's securities. But Dixon said United Companies follows rules set by the Financial Accounting Standards Board, and the company considers its accounting accurate and appropriate. She also disputed Eisman's suggestion that Wall Street is not doing business with United Companies, which sells pooled home equity loans as securities. (Copyright 1998 by Capital City Press Advocate Baton Rouge - 10/24/98) VENTURE: Hearing Set for Plan Confirmation ------------------------------------------ Venture Stores, Inc., debtor, published a notice in The Wall Street Journal, October 28, 1998, stating that on October 16, 1998 an order was entered approving the Disclosure Statement for the debtor's First Amended Plan of Liquidation under Chapter 11 of the Bankruptcy Code. A hearing will be held on November 23, 1998 at 12:00 p.m. to confirm the plan. Objections must be filed so that they are received no later than November 16, 1998. WESTERN DIGITAL: Reports 1st Quarter Net Loss of $110M ------------------------------------------------------ Western Digital Corporation (NYSE:WDC) reported revenue of $651 million for its first quarter ending September 26, 1998. The Company reported a net loss of $110.2 million or $1.24 per share, excluding special charges of approximately $85 million. Including the special charges, the Company had a net loss and net loss per share of $194.7 million and $2.20, respectively. In the year ago period, Western Digital reported revenue of $1.09 billion, net income of $62.7 million, and diluted earnings per share of $.67. Addressing the first quarter's performance, Chuck Haggerty, chairman, president and chief executive officer of Western Digital, stated: "The September quarter operating performance reflects tough -- albeit improving -- conditions in the desktop HDD industry, as well as some solid progress in the operations at Western Digital. Pricing remains competitive in the desktop space as the industry works off what is hopefully the last of its excess inventories. We continue to see improving demand from the PC OEMs. "The key to our return to profitability is restoring our desktop business to market leadership," said Haggerty. "We have also maintained an intense focus on asset management," said Haggerty. "The cash balance at quarter's end was $404 million, reflecting improved working capital management in a very challenging environment. Our total inventory turns improved to 16. This included a reduction of in-house finished goods as well as our inventory in the distribution channel. "The focus in the quarters ahead will be on execution of new product programs in both the desktop and enterprise segments of our business, converting qualifications into primary supplier positions at top PC OEMs, and continued focus on improved asset management." Western Digital designs and manufactures hard drives for personal and enterprise-wide computing, and markets them to leading systems manufacturers and selected resellers under the Western Digital brand name. ZENITH ELECTRONICS: Reports 3rd Quarter $119m Net Loss ------------------------------------------------------ Zenith Electronics Corporation reported a third-quarter 1998 net loss of $119 million, or $1.76 per share, including a restructuring charge of $100.4 million. In the 1997 third quarter, including a $10 million asset impairment charge, Zenith reported a net loss of $69.2 million or $1.04 per share. Excluding restructuring and asset impairment charges, Zenith's third-quarter loss narrowed to $18.6 million from $59.2 million a year ago. Total third-quarter sales were $230 million in 1998 and $305 million in 1997. Consumer electronics sales declined in the quarter, reflecting planned sales reductions in lower-margin color TVs and changes in VCR distribution, while sales of Network Systems products increased from the 1997 quarter. For the first nine months of 1998, Zenith reported a net loss of $187.8 million, or $2.78 per share, including restructuring charges of $107.8 million. For the same period last year, the net loss, including the $10 million asset impairment charge, was $143.7 million, or $2.16 per share. Nine-month sales were $675 million in 1998 and $825 million in 1997. As announced on May 21, the company is undertaking a comprehensive restructuring plan designed to reduce its debt, enhance its competitiveness and de-emphasize manufacturing. During the third quarter, the company identified sourcing partners for key components and finished goods for 1999, representing a cornerstone of the plan to position Zenith as a marketing and technology company. In conjunction with its operational restructuring, Zenith is planning to restructure its debt through a prepackaged chapter 11 reorganization. The proposed plan is expected to be filed around the end of the year. The Securities and Exchange Commission review process of Zenith's S-4 registration statement is underway. Zenith, based in Glenview, Ill., is a long-time leader in consumer electronics. Zenith's largest stockholder is LG Electronics Inc., a global leader in electronics with operations in 180 countries and annual sales of more than $10 billion. *********** The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. 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. ISSN 1520-9474. 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. 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