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/raid1/www/Hosts/bankrupt/TCR_Public/981120.MBXT R O U B L E D C O M P A N Y R E P O R T E R Friday, November 20, 1998, Vol. 2, No. 228 Headlines AHERF: William P. Snyder Steps Down As Chairman AOKI CORP: TSE Resumes Trading in Aoki Corp. Shares BRADLEES: Receives Approval to Emerge From Chapter 11 CASCO: Plastics Maker Files Chapter 11 CELLPRO: A Biotech Disaster CITYSCAPE FINANCIAL: Sav-A-Loan Biz On Hold CRIIMI MAE: Class Action Commenced CRIIMI MAE: Reports Third Quarter Results HANBO STEEL: USA May Bring Charges To WTO against Hanbo HEARTLAND WIRELESS: Accused Of Inflating Stock Value HILLS STORES: Reports Third Quarter Net Loss of $95.2 M JUICE STOP: Files Chapter 11 and Hires New Management KIA MOTORS: Hyundai reports $602M undeclared debt LEVITZ FURNITURE: Exclusivity Extended 90 Days To March 1 LEVITZ: Top Exec Goes To Kmart LIVENT INC: Files For Bankruptcy, Fires Drabinsky LONG TERM CREDIT: Probes Loan Decisions By Former Execs MERCURY FINANCE: Harshfield Appointed As Consultant MONTGOMERY WARD: Hires Wasserstein For Help With Plan PHOTRAN CORP: Loss Includes Asset Impairment Charge PITTSBURGH PENGUINS: Ask Judge To Ease Order SCOTT CABLE: $165 Million Sale To InterLink Wins Nod WHEELED ELECTRIC POWER: Case Summary & 20 Largest Creditors DLS CAPITAL PARTNERS: Bond Pricing For Week of November 16 ********* AHERF: William P. Snyder Steps Down As Chairman ----------------------------------------------- William P. Snyder III, whose family has been associated with Allegheny General Hospital since close to its founding a century ago, has stepped down as chairman of its bankrupt parent foundation's board of trustees. Snyder is now listed as a trustee emeritus of AGH and has no standing on the board of its parent, the Allegheny Health Education and Research Foundation. As trustee emeritus at AGH, he has no power to vote. AHERF spokesman Tom Chakurda said that Snyder, 80, had decided to retire from his post. Anthony Sanzo, who was named president and chief executive officer of the foundation in a management shakeup in June, has been appointed chairman. Mellon Bank Chairman Frank Cahouet remains chairman of AGH's board. Snyder, retired top executive of a family manufacturing firm, had served as chairman of Allegheny' s parent organization since the late 1980s, Chakurda said. He had been on the hospital board for many years prior to then. He and his family had been among the health system's key benefactors, donating substantially to the construction of AGH's main inpatient facility, which is known as the Snyder Pavilion. Snyder was known as a staunch supporter of AHERF's former chief executive, Sherif Abdelhak, and of Abdelhak's ambitions to turn AHERF into an academic medical center through an aggressive acquisition campaign in Philadelphia. Abdelhak was ousted from his post in June as the foundation's finances were collapsing. How the once-prosperous health care institution's finances were drained and how the expansion went awry are questions very much looming over the $1.5 billion bankruptcy case. Numerous investigations, including a criminal probe launched by the U.S. attorney will attempt to provide some answers. One question on many minds is how much board members knew of AHERF's activities. One of Snyder's few public acts as representative of a board that guarded its privacy was to condemn huge payouts of deferred compensation to six top executives just months before the bankruptcy. At the time, however, Snyder served on the compensation committee that should have approved those payouts. The board that Snyder headed at one time boasted a long roster of high profile executives and civic leaders. As recently as mid-1997, Teresa Heinz, widow of the late senator, and Chryss O' Reilly, wife of H.J. Heinz Co.'s former chief executive, were among them. As recently as last year, the AHERF board had 25 members, according to financial statements filed with the Internal Revenue Service. The number was reduced to 18 in March, according to a list provided by the foundation. According to a list provided yesterday, it has since been reduced to 11. The AGH board has 20 members. (Pittsburgh Post Gazette-11/18/98) AOKI CORP: TSE Resumes Trading in Aoki Corp. Shares ---------------------------------------------------- The Kyodo News reports on November 18, 1998 that The Tokyo Stock Exchange (TSE) first said it would suspend trading in the shares of Aoki Corp. until the exchange checked a newspaper report about a restructuring plan for the financially troubled construction company. The Tokyo Stock Exchange (TSE) said Thursday morning it would resume trading in the shares of Aoki Corp. at 12:30 p.m., following the announcement of a restructuring plan. The Nihon Keizai Shimbun reported that Asahi Bank and the Industrial Bank of Japan, two major creditor banks of Aoki, will forgive a combined 155.7 billion yen in loans to Aoki. Aoki is also asking about 30 other creditor institutions, including Sanwa Bank and the Bank of Tokyo-Mitsubishi, to forgive a combined 45.2 billion yen in loans, the paper said. BRADLEES: Receives Approval to Emerge From Chapter 11 ----------------------------------------------------- Following a vote of Bradlees creditors, the Bankruptcy Court today confirmed Bradlees Plan of Reorganization allowing the Company to emerge from Chapter 11 proceedings. The Company plans to exit bankruptcy at its fiscal year end, January 30, 1999. The confirmed Plan provides for approximately $165 million in distributions to creditors inclusive of $16 million of administrative claims payments, $7 million in tax and cure notes, $3 million in other distributions, a $14 million cash payment to creditors, a $40 million note primarily payable to the Company's pre-Chapter 11 bank group, and new Bradlees Common Stock with an estimated value of $85 million. As previously reported, all existing stock will be canceled upon the Company's emergence from bankruptcy with no issuance of new stock to current shareholders. A second lien on the Company's inventory will be granted to those vendors who support Bradlees after emergence, with standard terms. Additionally, all potential preference actions against Bradlees vendors will be waived. Peter Thorner, Chairman and CEO stated, "We are delighted with the operational and financial progress we have achieved over the past two years. We look forward to being able to devote our full-time and energies to rebuilding Bradlees into the discount department store of choice as we leave the administrative burdens of Chapter 11 behind us. We have obtained a firm commitment from BankBoston N.A., as agent for our bank group, for $270 million of exit financing and eagerly look forward to expanding and improving on our already successful merchandising and marketing strategies begun in 1997. We appreciate the continued support and encouragement of our vendors as we enter the holiday selling season." Bradlees, with 103 stores in seven states along the Northeast corridor, is one of the nation's largest regional discount department store chains with total annual sales of $1.4 billion. CASKO: Plastics Maker Files Chapter 11 -------------------------------------- Casco Molded Plastics, Wichita, Kan., has filed for chapter 11 protection, just two months after its subsidiary, Casco Plastics Inc., filed chapter 11, according to The Wichita Eagle. The 19-year-old company manufactures injection- molded plastic products, such as tackle boxes for Rubbermaid and parts for Coleman Co. stoves, Eureka vacuum cleaners and Vornado fans. A $6.5 million bank note became due June 30, and Casco could not get a loan quickly enough to pay it. Casco listed assets of $15.9 million and liabilities of $23.6 million. (ABI 19-Nov-98) CELLPRO: A Biotech Disaster --------------------------- The Seattle Post-Intelligencer reports on November 12, 1998 that despite the euphoria over the company's development of a device to improve bone marrow transplants, and promising sales in Europe, there were hints of trouble on the business side for CellPro almost from the beginning. The technology CellPro had licensed from Fred Hutchinson Cancer Research Center had two components. One piece - a cell separating device - was patented. The other piece - a stem cell antibody used with the device - was not. It was a technicality that would throw CellPro and Baxter Healthcare Corp. into mortal conflict. Unlike CellPro, Baxter had a license for a stem cell antibody. The antibody had been patented by Johns Hopkins University and later licensed to Becton Dickinson, which in turn sublicensed it to Baxter. A year after CellPro was formed, Baxter moved into the stem cell separation market and started developing a device of its own, called the Isolex system. CellPro's investor literature predicted $600 million in sales within five years. On Jan. 13, 1992, Baxter surprised CellPro by offering CellPro a license to use the disputed antibody in exchange for an upfront fee and royalty. There was no mention of marketing rights. Baxter "was using the U.S. patent to blackmail us into giving them the European and U.S. distribution rights," said Chad Waite, a venture capitalist and CellPro board member from the beginning. CellPro turned to Tom Kiley, a founding board member and patent attorney, for guidance. Kiley, an expert in biotech patents, was convinced that Baxter's patents wouldn't hold up in court. Anticipating that Baxter would sue CellPro, he advised CellPro to sue Baxter and Becton Dickinson in a pre-emptive strike. It was a gutsy move in what one participant would later call the battle of "David and Three Goliaths." In April 1992, CellPro sued Baxter and Becton Dickinson in U.S. District Court in Seattle, claiming that Baxter's patents were invalid. It also charged Baxter and Becton Dickinson with antitrust violations. Baxter disagreed, saying CellPro had come to it looking for an overseas marketing partner, and it was only trying to make a deal. CellPro's case was dismissed, however, partly because it didn't name Johns Hopkins in the suit. With the lawsuit dismissed, the parties tried again to negotiate a settlement. But in November 1993, Baxter, Becton Dickinson and Johns Hopkins sued CellPro in U.S. District Court in Delaware. In August 1995, an elated CellPro won the first patent trial, prevailing on all 103 counts. Not only did the jury find the Baxter patents invalid, it also said CellPro had not infringed on them, even if they had been valid. In its annual report that year, a jubilant CellPro said the company "will vigorously pursue antitrust claims after post-trial motions." But the celebration was short-lived. In an unusual move, U.S. District Judge Roderick McKelvie rejected the verdict. In July 1996, after nearly a year of petitioning of post-trial motions by Baxter and its co- plaintiffs, McKelvie said he had made an error in his jury instructions. He ordered a new trial. It was a gamble CellPro lost. In March 1997, the second jury awarded damages of $2.3 million to Baxter and the other plaintiffs, an award that the judge trebled to $7 million for "willful infringement." Judge McKelvie wrote: "One element of the strategy CellPro has adopted in this battle has been to hold itself out as a warrior in a 20th-century holy crusade. It claims it is out to advance science, to save lives, to fight cancer and improve the human condition. . . .This image is a facade constructed by the venture capitalists who started this business. Behind the science, the medicine and the potential for treating cancer patients are investors who have demonstrated that their primary motivation is not humanitarianism, nor even responsible capitalism . . . (but) greed." The court ruled that CellPro knew it had infringed on the patents but had obtained a legal opinion it knew was weak to avoid liability and help ensure that investors would keep pouring money into the company. "That's just not how it happened," Waite said. "We never put a dime into the company until we were satisfied about those patents." According to the ruling, CellPro had violated the patents. In July 1997, the court ordered CellPro to stop selling its product once Baxter obtains Food and Drug Administration approval for Isolex, its competing device. In the interim, it ordered CellPro to pay 60 percent of its profits on any sales to Baxter. Isolex awaits FDA approval. CITYSCAPE FINANCIAL: Sav-A-Loan Biz On Hold ------------------------------------------- Unable to tap the capital markets in the uneasy subprime home equity sector, Cityscape Financial has decided to suspend indefinitely the origination and purchase of its "Sav-A-Loan" mortgage products and expects more layoffs. "Based on the Company's discussions with potential lenders regarding post-reorganization warehouse financing facilities, the Company has determined that it is unlikely that such financing will be provided for its Sav*-A-Loan(R) products," the subprime lender told the Securities and Exchange Commission. Cityscape reports that a charge of about $8 million to $10 million is anticipated. (Federal Filings Inc. 19-Nov-98) CRIIMI MAE: Class Action Commenced ---------------------------------- A class action has been commenced by the law firm Beatie and Osborn LLP in the United States District Court for the District of Maryland on behalf of all persons who purchased the common stock of Criimi Mae Inc. (Nasdaq: CMM) from February 20, 1998 to October 5, 1998, inclusive. Specifically, the Complaint alleges that during the Class Period, defendants issued several false and misleading statements regarding the Company's financial condition. As a result, the price of Criimi Mae's common stock remain artificially inflated during the Class Period. CRIIMI MAE: Reports Third Quarter Results ----------------------------------------- CRIIMI MAE Inc., the commercial mortgage company that filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code on October 5, today reported third quarter results, including higher tax basis earnings, a higher net interest margin and a net loss under generally accepted accounting principles (GAAP). The net loss was largely due to the impact of the recent volatility in the financial markets on commitments related to commercial mortgage loans in the company's securitization pipeline and losses on hedge positions. As a result of the recent volatility in the capital markets and the uncertainties resulting from the bankruptcy proceedings, the company's results of operations at September 30, 1998, are not expected to be indicative of results of operations for future periods during the pendency of the bankruptcy proceedings. As a result of widening commercial mortgage-backed securities (CMBS) spreads and the general market turmoil during the third quarter, the value of CRIIMI MAE's subordinated CMBS declined. Principally due to the decline in value of the CMBS held by the company, CRIIMI MAE's shareholders' equity declined from approximately $702 million ($13.01 per fully diluted share) at June 30, 1998, to approximately $494 million ($8.97 per fully diluted share) at September 30, 1998. The company's estimates of value for its CMBS are based, in most cases, upon quotes obtained from the lender on the related security. As a consequence of the Chapter 11 filing, the company does not expect to pay a dividend during the fourth quarter of 1998. The company is not required to pay a dividend during the fourth quarter to maintain its REIT status. However, in order to maintain its status as a REIT, CRIIMI MAE must distribute 95% of its 1998 taxable income no later than December 31, 1999. Failure to satisfy this requirement could result in the loss of the company's REIT status, with the result that CRIIMI MAE would be taxed as a corporation for 1998. The company intends to use its best efforts to ensure that CRIIMI MAE retains its REIT status for 1998, but there can be no assurance that its efforts will succeed. Tax basis earnings available to common shareholders for the third quarter were $19.9 million or 41 cents per common share, up 32 percent on a per share basis from last year's third quarter of $12.1 million or 31 cents per common share. For the nine months ended September 30, 1998, tax basis earnings available to common shareholders were $57.3 million or $1.22 per common share compared to $39.8 million or $1.09 per common share for the nine months ended September 30, 1997. Under GAAP, CRIIMI MAE's net interest margin increased to $18.7 million, up 41 percent from $13.2 million for last year's third quarter. The net interest margin increased to $51.3 million year to date from approximately $37.1 million for the first nine months of 1997. Net interest margin is calculated as interest income less interest expense. CRIIMI MAE reported a net loss under GAAP for the quarter ended September 30, 1998 of $8.7 million or 18 cents per basic share as compared to net income of $10.0 million or 26 cents per basic share for the year earlier quarter. GAAP net income for the nine months ended September 30, 1998 was $47.0 million or $1.02 per basic share compared to net income of $36.1 million or $1.00 per basic share for the corresponding period in 1997. The increases in tax basis earnings and the net interest margin for the three and nine months ended September 30, 1998 were primarily due to growth in earnings from CRIIMI MAE's portfolio of subordinated CMBS and earnings from the June 1998 securitization of originated loans. CRIIMI MAE acquired subordinated CMBS for a purchase price of approximately $1.2 billion from October 1, 1997 through September 30, 1998. CRIIMI MAE had originated approximately $870 million commercial mortgage loans during that same period. A portion of these loans was securitized in June 1998. The balance was intended to be securitized later this year. For GAAP purposes, the net loss for the third quarter was primarily due to unrealized losses aggregating $21.7 million resulting from the impact of financial market volatility on commitments related to commercial mortgage loans in the company's securitization pipeline and losses on hedge positions. CRIIMI MAE recorded a $17.6 million unrealized loss related to commercial mortgage loans in the company's securitization pipeline, which consisted of loans originated since CRIIMI MAE's June 1998 securitization of its No-Lock loans. The parties who fund the company's loan originations are required under the relevant agreements to hedge the related loans and to provide timely written hedge position reporting. These reports were not provided to the company at September 30, 1998. In the absence of such reports, the company has based its loss estimates, in part, upon oral communications from these parties. In addition, a $4.1 million unrealized loss was recorded on a U.S. treasury position used to hedge the investment grade bonds retained from the June 1998 securitization. Since these losses were unrealized at September 30, 1998, they do not impact tax basis earnings for the quarter. A significant collateral call made by Merrill Lynch Mortgage Capital, Inc. on October 2 was the event directly precipitating CRIIMI MAE's October 5, 1998 filing under Chapter 11. Although CRIIMI MAE disputes the valuation methodology used by this creditor, the company felt that it was in the best interest of creditors, equity holders and other parties in interest to file for Chapter 11 protection. It is possible that CRIIMI MAE may have to record losses during the fourth quarter, including potential losses based on this and other adverse actions against CRIIMI MAE by its lenders. Before filing for reorganization, CRIIMI MAE had been actively involved in acquiring, originating, securitizing and servicing multi-family and commercial mortgages and mortgage related assets throughout the United States. Since filing for Chapter 11 protection, CRIIMI MAE has suspended its loan securitization, loan underwriting and loan origination businesses. The company, however, continues to hold a substantial portfolio of subordinated CMBS and, through its servicing affiliate, acts as a servicer for its own as well as third party securitizations. Despite the volatility in the capital markets, the mortgage assets underlying the company's portfolio of CMBS continue to experience no losses of principal from defaults. HANBO STEEL: USA May Bring Charges To WTO against Hanbo ------------------------------------------------------- Text of report by the South Korean news agency Yonhap Seoul, 18th November: Prompted by complaints from the US steel industry and the Congress, the US government may bring an action to the World Trade Organization (WTO) against Hanbo Steel on charges that the steelmaker received government subsidies. According to a report Wednesday from the Korea International Trade Association's (KITA) branch in Washington D.C, the US trade representative's office is taking the charges seriously, reviewing the matter with an eye towards bringing it to the WTO. Without elaborating, a KITA official surmised that the fact that US Vice-President Al Gore met with President Kim Tae- chung {Dae-jung} and discussed the matter "strengthens the likelihood of the probable US action to bring the case to the WTO". The US complained that the Korean government provided a subsidy of 5.8bn US dollars to Hanbo Steel, and 670m dollars subsequently, after the steelmaker went bankrupt. The Korean government denied it paid the subsidy, saying that the funds were loans provided by banks. Both the US Congress, and the steel industry requested Washington curb steel imports from Korea because the Korean government pressured the Pohang Iron and Steel Co to cut export prices to the US by 30 per cent from the international market price through its practice of paying subsidies to steelmakers, inflicting serious damage to the US steel industry. (BBC Asia Pac Economic -11/18/98) HEARTLAND WIRELESS: Accused Of Inflating Stock Value ---------------------------------------------------- Officials at Heartland Wireless Communications Inc. [HARTQ], which has filed for Chapter 11 bankruptcy protection, are accused of artificially inflating the company's stock value for nearly three years in a class action complaint filed in the U.S. District Court for the Northern District of Texas. In the most recently quarterly statement available, Dallas- based Heartland on Aug. 14 reported a $50.6 million second quarter loss. Its subscriber revenue had dropped from $2.2 million at the end of last year to $1.8 million as of June 30. The wireless cable provider's outstanding expenses increased from $17.4 million as of Dec. 31, 1997, to $26.2 million at the midpoint of this year. According to its quarterly report, the increase "was primarily due to additions to accrued interest on the company's senior notes as a result of the company's election in April not to make an interest payment of approximately $7.5 million on the 13 percent notes." Heartland announced in early October that it would voluntarily file for Chapter 11 bankruptcy protection to commence a reorganization plan to convert about $323 million in debt into common stock for its creditors. The company planned for holders of its senior notes to receive about 97 percent of the reorganized company's issued and outstanding common stock in exchange for canceling the debt. Hazlet, N.J. law firm Kramer, Kramer & Kilgallen filed the class action complaint stating that the company and certain of its officers and directors engaged in a scheme to artificially inflate the market price of Heartland securities by making misrepresentations and omissions of material fact concerning Heartland's publicly reported revenues, earnings, financial condition and growth prospects." According to the claim, Heartland is accused of inflating its stock value from Nov. 15, 1995 through Aug. 14 of this year. Heartland's stock was de-listed in October from NASDAQ for failing to meet minimum closing bid and net tangible asset requirements. The company expects to emerge from its reorganization with about $15 million of installment notes due to the FCC, for its basic trading areas, as its only long- term debt. Heartland's officials said they had reached the reorganization agreement with the holders of a majority in principal amount of its $115 million in 13 percent senior notes due 2003 and $125 million in 14 percent senior notes due 2004. The plan would will allow the company to convert these senior notes and its 9 percent convertible subordinated discount notes due 2004 into new shares of Heartland common stock. The company said holders of the subordinated notes, existing common stock and certain litigation claims will receive the remaining 3 percent of the reorganized Heartland's common stock. They will also get warrants to buy 10 percent of the common stock of the reorganized Heartland on a fully diluted basis, the company said. The $323 million aggregate amount of debt to be converted includes $240 million in principal amount of the senior notes and $26 million of accrued interest. It also includes $57 million in subordinated notes, the company said. Copyright Phillips Publishing, Inc. Communications Today - 11/18/98 HILLS STORES: Reports Third Quarter Net Loss of $95.2 M ------------------------------------------------------- Hills Stores Company (NYSE:HDS) announced its third quarter financial results for the period ended October 31, 1998. The Company reported a net loss for its third fiscal quarter ended October 31, 1998 of $95.2 million, or $9.08 per basic share, compared with a net loss of $3.9 million, or $0.38 per share, in the third quarter last year. Total sales for this year's 13-week fiscal quarter were $399.7 million compared with $434.6 million during the third quarter last year. Comparable store sales decreased by 8.0%. Gross profit decreased to $105.8 million from $115.1 million last year, and remained flat as a percentage of sales at 26.5%. For the nine months of fiscal year 1998, the Company reported a net loss of $126.0 million, or $12.04 per share, compared with a net loss of $29.9 million, or $2.87 per share, last year. The net loss included a net, non-cash charge to tax expense of approximately $79.5 million, or $7.60 per share, to establish valuation allowances against deferred and interim tax assets, partially offset by other non-cash tax credits. Year-to-date EBITDA was a loss of $0.7 million compared with EBITDA of $21.3 million in the prior year. Total sales for the nine months ended October 31, 1998 were $1,119.9 million this year compared with $1,137.3 million last year, and comparable store sales decreased by 1.5%. Gross profit declined slightly as a rate to sales to 26.0% from 26.2% last year. As announced on November 12, 1998, Hills Stores Company and Ames Department Stores, Inc. (Nasdaq:AMES) signed a definitive agreement providing for the acquisition of Hills by Ames. That transaction is contingent on Ames' successful completion of its tender offer to Hills' shareholders and noteholders, on successfully obtaining final financing, and on regulatory approval and other customary closing conditions. JUICE STOP: Files Chapter 11 and Hires New Management ----------------------------------------------------- Juice Stop International, Inc., a Denver-based national retailer of fresh fruit smoothies, juice and nutritional drinks and snacks has filed for Chapter 11 reorganization proceedings today. All retail locations throughout the United States will remain open. William S. Glennie, President of JSI and a member of the new management team, said, "Juice Stop has had problems in the past due to an overly aggressive growth plan coupled with undercapitalization. New financing, a stronger brand imaging campaign and a new store design program will be introduced over the next few months to provide us with a successful future." The Chapter 11 filing has the support of JSI's institutional lenders, who have committed to continue providing financing during the reorganization process. It is the Company's hope to emerge from Chapter 11 by next spring. During the reorganization, JSI will be redoubling its efforts to provide excellent service to its entire loyal customer base, as well as to all vendors, employees and franchisees. The Juice Stop concept was founded in 1993 in Lake Forest, California by TJ and Derek Humphreys, who began franchising their concept in 1995. To date the Company has opened 87 franchise and company owned stores in 16 states. The Company relocated to Denver, Colorado in 1997 to better position itself for future growth as Denver is more centrally located within the United States. KIA MOTORS: Hyundai reports $602M undeclared debt ------------------------------------------------- Hyundai Motor Co. Ltd. has found an undeclared debt of $601.5 million after a one-month evaluation of ailing Kia Motors Co. Ltd. and its truck-building affiliate Asia Motors Co. Ltd. Hyundai says it will proceed with the acquisition process for the two automakers as planned and sign the stock purchase contract Dec. 1. State-run Yonhap news agency today is citing a Hyundai official saying the company ``expects things will work out well after talking the matter over with Kia and creditors next week.'' Yonhap quotes an unnamed Kia official saying, ``Hyundai may have counted overdue discount bonds as debts. But opinions can differ in interpreting that amount as extra debt.'' Hyundai has the right to demand renegotiations on the loan write-off, if the actual debt figures exceed the amount revealed by creditor banks by more than 10 percent. LEVITZ FURNITURE: Exclusivity Extended 90 Days To March 1 ---------------------------------------------------------- Levitz Furniture Inc. won an extension of its exclusive periods to file a reorganization plan and solicit plan acceptances from Nov. 30 and Jan. 28 to March 1 and May 1, respectively. The furniture retailer had argued that the extension was needed to complete and test a long-term business plan and to develop, negotiate and propose a reorganization plan based on such a business plan. (Federal Filings Inc. 19-Nov-98) LEVITZ: Top Exec Goes To Kmart ------------------------------ Kmart Corp. has named Michael Bozic vice chairman in charge of finance, systems and logistics. Since 1995, Bozic has been chairman and chief executive of Levitz Furniture Corp., a Boca Raton, Fla.-based furniture retailer that is currently operating under Chapter 11 bankruptcy protection. He was hired to reinvigorate Levitz after he successfully revived discount furniture retailer Hills Stores. Bozic, 57, will report to Floyd Hall, Kmart's chairman, president and chief executive. At one time, Bozic was chairman and chief executive of the merchandise group of Sears, Roebuck and Co. Kmart, based in Troy, Mich., is the nation's third-largest retailer, with 2,160 discount stores across the United States. LIVENT INC: Files For Bankruptcy, Fires Drabinsky ------------------------------------------------- The Canadian theater company Livent Inc. has fired its flamboyant co-founder Garth Drabinsky and filed for bankruptcy protection in a U.S. bankruptcy court. The company said it is considering seeking similar protection in Canada. Livent's problems have been in the spotlight since Drabinsky, producer of "Ragtime," "Kiss of the Spider Woman" and other hit musicals, was suspended in August after an investigation by Livent's new managers led to allegations of financial irregularities. The company said Wednesday that it is seeking protection under Chapter 11 of the U.S. Bankruptcy Code and was considering "appropriate protective action" in Canada. It also took steps to file a $225 million civil damage action against Drabinsky and his partner, Myron Gottlieb, alleging that they committed fraud in connection with Livent financial management before the company was sold earlier this year. The new management team is headed by former Walt Disney executive Michael Ovitz and New York investment banker Roy Furman. Drabinsky and Gottlieb, who were suspended in August, have denied any wrongdoing. They said Wednesday they are filing countersuits against Ovitz, Furman and others for damages totaling $200 million, accusing the new owners of conspiring against them. The news of the firing and bankruptcy filing came a day after two credit- rating agencies, Standard and Poors and Moody's Investor Services, downgraded the company's debt rating. There had been increasingly serious concerns about Livent's ability to pay its debts. Livent's board of directors met Tuesday in Toronto to discuss their financial dilemma and issued a brief statement saying they "were carefully exploring the company's options." Analysts had said one alternative to seeking bankruptcy protection would be selling the company, but Livent's management had acknowledged having difficulty getting a clear picture of its financial condition. Moody's said it was concerned about the "multitude" of class action lawsuits filed against Livent and "evidence of a fundamental deterioration of the company's business performance." Ed Lawrence, a director at Standard and Poor's in Toronto, said Livent's credit ratings were dropped from single-B plus to triple-C, a sign that its ability to meet its debts is "very vulnerable." LONG TERM CREDIT: Probes Loan Decisions By Former Execs ------------------------------------------------------- The Long-Term Credit Bank of Japan (LTCB), now under state control, decided Wednesday to begin in December a probe into loan decisions by former top managers following allegations they inflicted damages on the bank through unlawful lending, LTCB sources said. LTCB decided to establish a committee of 30 experts, including 14 lawyers, to look into allegations that the former managers committed breach of trust by causing losses through suspect lending decisions, the sources said. The nucleus of the committee will be a group of seven lawyers, each of whom will then appoint another lawyer as his or her agent and assistant, they said. LTCB President Takashi Anzai visited the office of the Japan Federation of Bar Associations on Wednesday and asked the federation to recommend appropriate lawyers as the core of the 30-member committee, they said. The new management of the nationalized LTCB wants to receive a report from the committee by March on whether the criminal culpability of the former managers can be pursued, they said. If the committee finds evidence that some unlawful lending decisions by former LTCB managers resulted in damages to the bank, the new management will file a criminal complaint with the Tokyo District Public Prosecutors Office, they said. Under Japan's Commercial Code, an aggravated breach of trust charge can be brought against managers who are found to have intentionally inflicted damages on a bank. This charge has a five-year statute of limitation. But there still remains the possibility that the bank can file a civil lawsuit against the former managers demanding they pay compensation for the damages, they said. The committee will also look into the possibility that it may be able to pursue the managers' legal responsibility concerning the fact that LTCB and Japan Leasing Corp., an LTCB-affiliated nonbank financing company, transferred to paper companies the real estate that had been offered as collateral to back up their problem loans to their borrowers, they added. LTCB was formally nationalized on Nov. 4 to avoid severing credit lines to its longtime corporate borrowers and to avert defaulting on its obligations to creditors. (Kyodo- 11/18/98) MERCURY FINANCE: Harshfield Appointed As Consultant --------------------------------------------------- Mercury Finance Company (OTC Bulletin Board: MFNNQ) today announced that Edward G. Harshfield has agreed to become a consultant to Mercury while the Company pursues its plan of reorganization in the federal bankruptcy court. With the approval of the court and upon judicial confirmation of the plan, Harshfield is expected to be named to the position of chief executive officer of the reorganized company. Harshfield comes to Mercury from the California Federal Bank, where as chief executive officer he led the turnaround of the bank and its subsequent merger. Mercury's selection of Harshfield has the support of the Company's board of directors and its senior lenders, who stand to become the controlling shareholders under the terms of the proposed restructuring plan. Harshfield's engagement commences immediately. MONTGOMERY WARD: Hires Wasserstein For Help With Plan ------------------------------------------------------ Subject to court approval, Montgomery Ward & Co. has hired Wasserstein Perella & Co. as financial advisor to help develop a reorganization plan for the 291-store chain. Pursuant to an Oct. 1 engagement letter, the investment banking firm would receive a $125,000 monthly advisory fee plus expense reimbursement. Wasserstein's services will include assisting in plan development, preparing valuation analyses, and participating in court hearings and providing testimony. If a plan is confirmed during the engagement or six months following an early termination (either party may terminate on 30 days' notice) by the retailer, Wasserstein may apply to the court "for payment of an additional fee based upon its contribution to the Debtors' reorganization." The engagement letter also gives Wasserstein the right of first refusal with respect to investment banking services. (The Daily Bankruptcy Review and ABI Copyright c November 19, 1998) PHOTRAN CORP: Loss Includes Asset Impairment Charge --------------------------------------------------- Photran Corporation (Nasdaq: PTRN) today reported net sales of $165,000, an operating loss of $3.3 million, including an asset impairment charge of $2.2 million, and a net loss of $3.4 million for the quarter ended Sept. 30, 1998. Photran's 1998 third quarter results compare to revenues of $1.14 million, an operating loss of $1.6 million, and a net loss of $1.6 million for the same period last year. Net loss per share was $0.61 for the quarter just ended, compared with a net loss per share of $0.31 for the third quarter of 1997. The third quarter revenues were less than expected due to continued market softness. "We are confident that we have seen the bottom of the market," said Paul T. Fink, Photran president and chief executive officer. "Existing customers have begun to accept previously delayed shipments, and have placed new orders. We also are receiving orders from new customers. Additionally, the P-3 line will decrease our manufacturing costs and gives us the capacity for solid profitable growth," Fink said. The company made significant progress during the third quarter toward completing installation of the P-3 line. The line is expected to be in full production by the end of the fourth quarter of 1998. The highly-automated line uses about the same number of people as Photran's P-1 line while having the ability to coat more sheets of glass than the P-1 and P-2 manufacturing lines combined. At current and anticipated production levels, the P-3 line will be able to meet Photran's production needs, Fink said. Photran plans to sell the P-1 and P-2 lines to provide the cash necessary to reduce debt and fund the company's working capital requirements. These assets will not be classified as "assets to be disposed of" until the P-3 line is fully operational. Based on the lines' estimated selling prices, management has determined that the carrying values of the equipment exceeded the estimated sales proceeds by $2.2 million, and recorded an asset impairment charge in that amount for the third quarter. Revenues for the first nine months of 1998 were $2.8 million, compared to $2.6 million for the same period last year. The company had an operating loss of $5.2 million for the nine months ended September 30, 1998, compared to an operating loss of $3.6 million for the same period in 1997. Net loss for the first nine months of 1998 was $7.4 million or $1.36 per share, compared to a net loss of $3.5 million or $0.68 per share for the same period last year. The loss for the nine months ended September 30, 1998 includes $2.1 million in litigation settlement expenses related primarily to the April 1998 tentative settlement of certain class-action lawsuits. Photran Corporation develops, manufactures and markets high-performance optical and electrically conductive thin- film coated products using proprietary process technology. The company produces products for the flat-panel display industry. PITTSBURGH PENGUINS: Ask Judge To Ease Order -------------------------------------------- The Pittsburgh Penguins are asking a federal bankruptcy judge to ease his order barring the hockey team's discussions with other cities, about a possible move. One of the team's attorneys tells the Pittsburgh Post-Gazette the team is not considering leaving the city, but wants to "gather infromation" about the leases other hockey teams pay in their cities. Last week U.S. Bankruptcy Judge Bernard Markovitz ordered the team to honor a commitment made last year not to move, or hold discussions about moving until 2007. SCOTT CABLE: $165 Million Sale To InterLink Wins Nod ---------------------------------------------------- The court approved the $165 million sale of Scott Cable Communications Inc. to InterLink Communications Partners LLLP Friday and has scheduled a Nov. 23 confirmation hearing. Scott Cable's prepackaged reorganization plan is based primarily on the sale to InterLink, an affiliate of Rifkin & Associates Inc. The cable operator agreed in July to sell substantially all of its assets to InterLink. The government is expected to oppose the plan. (Federal Filings Inc. 19-Nov-98) WHEELED ELECTRIC POWER: Case Summary & 20 Largest Creditors ----------------------------------------------------------- Debtor: Wheeled Electric Power Company 50 Charles Lindburgh Blvd. Ste. 207 Uniondale, NY 11553 Type of business: Manufacturer of power supplies Court: District of Delaware Case No.: 98-2355 Filed: 10/16/98 Chapter: 11 Debtor's Counsel: James L. Patton Jr. Young Conaway Stargatt & Taylor LLP 11th Floor Rodney Square North P.O. Box 391 Wilmington, Delaware (302) 571-6600 20 Largest Unsecured Creditors: Name Amount ---- ------ Cingery Services Corp. $936,984 Bay State Utilities $285,000 Ed Hutchins $280,000 Lyons Community Property Trust $250,000 TPC Corp $244,626 M.B. Long $240,000 NGE Generation Inc. $200,000 John Danzi $125,000 Mark Freeman $125,000 R. Carlsten $120,000 Eastern Power Distribution $112,090 Troy Drayton $100,000 Orange & Rockland Utilities, Inc. $82,000 New England Power $75,910 Keith Jackson $75,000 Ensearch $73,000 Niagra Mohawk $70,000 Astair Partners $65,000 Consolidated Edison of New York Inc. $60,000 Cedric Jones $50,000 DLS CAPITAL PARTNERS: Bond Pricing For Week of November 16 ---------------------------------------------------------- Following are indicated prices for selected issues: Acme Metal 10 7/8 '07 17 - 19 (f) Amer Pad & Paper 13 '05 54 - 57 Amer Telecasting 0/14 1/2 '04 22 - 24 Asia Pulp & Paper 11 3/4 '05 78 - 80 Boston Chicken 7 3/4 '05 6 - 7 1/2 (f) Brazos 10 1/2 '07 10 - 20 Brunos 10 1/2 '05 12 - 15 (f) Cityscape 12 3/4 '04 11 - 14 (f) E & S Holdings 10 3/8 '06 37 - 42 Globalstar 11 1/4 '04 70 - 72 Hills 12 1/2 '03 54 - 55 Liggett 11 1/2 '99 75 - 78 Mobilemedia 9 3/8 '07 17 - 20 (f) Penn Traffic 9 5/8 '05 16 - 17 Planet Hollywood 12 '05 43 - 46 Royal Oak 12 3/4 '06 45 - 50 Samsonite 10 3/4 '08 84 - 86 Service Merchandise 9 '04 49 - 50 Sunbeam 0 '18 12 - 13 Zenith 6 1/4 '11 17 - 20 (f) *********** 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. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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