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/raid1/www/Hosts/bankrupt/TCR_Public/981209.MBXT R O U B L E D C O M P A N Y R E P O R T E R Wednesday, December 9, 1998, Vol. 2, No. 240 Headlines ACCESS BEYOND: Order Authorizes Employ of The Bayard Firm AHERF: Bar Date For Filing Proofs of Claim - March 3, 1999 ALLTEL CORP: Files Restated Audited Financials ALLTEL CORP: Registering Shares To Raise $300 Million AMERICAN RICE: Seeks Exclusivity Extension ANGEION: May Be Sold In Near Future BRADLEES INC: Summary of Plan BUTTERWINGS ENTERTAINMENT: Order Authorizes Sale CERION TECHNOLOGIES: Annual Report For Fiscal Year End 1997 CRIIMI MAE: Reaches Agreement With Two Major Creditors DENBURY RESOURCES: Announces Agreement With TPG DIXONS US HOLDINGS: Disclosure Statement Delayed ERD WASTE: Committee Objects to Joint Disclosure Statement FPA MEDICAL: Files Current Report With SEC GOOD ENTERPRISES: To Repay $6 Million Debt Over 10 Years HAYES CORP: Seeks Nod For Incentive/Retention Plan HAYES: Asia Pacific Headquarters Close INDIAN MOTORCYCLE: Fighting Over a Good Name JOTAN INC: Defections Cause Sale LIVENT INC: Judge Releases $5.3 Million MIAMI SUBS: Nathan's Famous Offers $14 Million MOLTEN METAL: Trustee Seeks Special Counsel MUSICLAND: Registration Statement Filed With SEC NATIONAL ENERGY: Banks Accelerating $25 Million Payable NIAGRA MOHAWK: Agreement To Sell 72 Hydroelectric Plants PHELPS TECHNOLOGIES: Deadline For Filing Plan Extended PHP HEALTHCARE: HIP Files $90 Million Lawsuit POCKET: Lenders Ask Court To Rethink FCC Option Ruling PORTACOM WIRELESS: Settlement Agreement With VDC RDM SPORTS GROUP: Notice of Bar Date - January 15, 1999 SOUTHERN PACIFIC: Class Action Lawsuit Filed SWISS WORLD AIRWAYS: Declares Bankruptcy UNISON HEALTHCARE: Races To Close $38M Omega Deal ********* ACCESS BEYOND: Order Authorizes Employ of The Bayard Firm --------------------------------------------------------- By court order dated November 30, 1998, The Official Committee of Unsecured Creditors of Access Beyond Technologies, Inc., et al., is authorized to retain The Bayard Firm as the Committee's co-counsel nunc pro tunc as of October 28, 1998. AHERF: Bar Date For Filing Proofs of Claim - March 3, 1999 ---------------------------------------------------------- The Bankruptcy Court has established a deadline of March 3, 1999 for filing proofs of claim in the case of Allegheny Health Education and Research Foundation and its debtor affiliates. ALLTEL CORP: Files Restated Audited Financials ---------------------------------------------- ALLTEL Corporation is filing restated audited financial statements to reflect the Company's July 1, 1998 merger with 360 Communications Company. The merger was accounted for as a pooling of interests. A full-text copy of the filing is available via the Internet at: http://www.sec.gov/Archives/edgar/data/0000065873-98- 000032.txt ALLTEL CORP: Registering Shares To Raise $300 Million ----------------------------------------------------- Alltel Corporation filed a Registration Statement with the SEC with respect to Debt Securities in the amount of $300,000,000. The Registration Statement provides that ALLTEL Corporation may offer and sell up to $300,000,000 in principal amount of its debt securities on certain terms to be determined at a later time. The debt securities will be unsecured and will rank equally with all other unsecured and unsubordinated debt of ALLTEL. AMERICAN RICE: Seeks Exclusivity Extension ------------------------------------------ The debtor, American Rice Inc., is seeking by emergency motion an extension of the time deadlines within which the debtor has the exclusive right to file a plan of reorganization and to obtain acceptances thereof. The debtor is seeking an order extending the deadlines to January 31, 1999 and April 30, 1999 respectively. Within the first four months of the case, the debtor entered into a sale of the debtor's Olive Business, which was consummated within the last few weeks. The debtor also negotiated a compromise of the Tenzer Company claim, and obtained court authority to enter into a settlement of that dispute. The debtor established an agreement for financing and responded to numerous creditor requests for adequate protection and relief from the stay. The debtor has just begun the process of developing a plan of reorganization. And due to the size and complexity of the case, the debtor states that an extension of its exclusive deadlines is necessary. ANGEION: May Be Sold In Near Future ----------------------------------- The Mergers Acquisitions Report published an article on December 7, 1998 stating that medical device manufacturer Angeion Corp. has retained Raymond James to explore alternatives, which could include a sale of the company. The Minneapolis-based company develops implantable cardioverter defibrillators (ICDs), which monitor heartbeats. The company will consider a broad range of options including financing and business combinations, said Angeion CFO Jill Burchill. The review will be executed quickly, she said, anticipating a resolution by the end of the second quarter 1999. At present, books have not been sent out and Raymond James has not been engaged in response to any offers to acquire Angeion, Burchill said. The company recently received its first Food and Drug Administration product approval, for its Sentinel ICD series, and it is the appropriate time to consider options for moving from an R&D stage to a commercial operation, Burchill said. The Raymond James banker advising the company, John McDonald, could not be reached for comment. Medtronic Inc., St. Jude Medical Inc. and Guidant Corp. own Angeion's niche in the medical device world, with over 99% of the market, said a sell-side analyst who declined to be named. Those much larger companies would not likely buy Angeion because they already have access to its considerable patent library through licensing agreements, he argued. Furthermore, the Federal Trade Commission wants more than three competitors in the industry, he pointed out. A logical buyer would be a large company that already has experience in the ICD business, but would benefit from access to Angeion's patents, such as Johnson & Johnson, the analyst said. The domestic ICD market is over $1 billion and has good margins and 20% growth, he said. Angeion, however, lacks the size to compete in R&D, he said. It is just recently bringing a product to market, which is oversized and not 100% competitive, the analyst remarked. It is possible potential buyers would wait, anticipating the company, with $22 million in 7.5% convertible debentures, tilts into bankruptcy, he said. The conversion price on those notes, set at $3.05 per share, will be adjusted on Dec. 18 based on trading for the previous five days. The new price cannot fall below $1.52. Angeion's 52-week high, hit last January, was $4.125. The company posted third quarter revenue of $1.6 million, R&D of $5.4 million and a net loss of $7 million, compared to year-earlier revenue of $1.2 million, R&D of $4.6 million and a loss of $10 million. BRADLEES INC: Summary of Plan ------------------------------ Bradlees Inc. filed its confirmed plan of reorganization with the SEC. The plan was confirmed by the court on November 18, 1998. The Plan creates 24 classes of claims against, and interests in, Bradlees, Inc. and its subsidiaries. The Plan provides for approximately $165 million in distributions to creditors inclusive of $16 million of administrative claim payments, $7million in tax and cure notes, $3 million in other distributions, $14 million in cash, $40 million in notes (the "New Notes") primarily payable to the Company's pre-Chapter 11bank group, and new 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 and such shareholders will not receive a distribution under the Plan. The Company has a commitment for a $270 million post- emergence financing facility, which would become effective upon the Effective Date, which includes a $20 million junior secured "last in-last out" facility, with BankBoston, N.A. as Administrative Agent and Issuing Bank. Under the BankBoston Facility, the Company will be allowed to borrow for general corporate purposes, working capital and inventory purchases. Total sales for the third quarter ended October 31, 1998 were$18.6 million or 5.4% below Forecast due primarily to unseasonably warm weather that hurt Fall apparel sales and weak sales of toys. Comparable store sales declined 2.0% in the third quarter. EBITDA before restructuring and property gains(as defined in the exhibit) fell short of Forecast by $2.4million due principally to the below- Forecast sales and associated gross margin, partially offset by a favorable gross margin rate and favorable selling, store operating, administrative and distribution (SG&A) expenses. The gross margin rate exceeded Forecast in the third quarter due primarily to favorable allowances, while SG&A expenses were below Forecast mostly due to favorable home office, advertising and store payroll expenses. The year-to-date net loss was $34.6 million. A full-text copy of the filing is available via the Internet at: http://www.sec.gov/Archives/edgar/0000887356-98- 000020.txt BUTTERWINGS ENTERTAINMENT: Order Authorizes Sale ------------------------------------------------ On December 2, 1998 the court entered an order approving the motion of the debtors, Butterwings Entertainment Group, Inc. and Cookie Crumbs, Inc. requesting authority to sell the Purchased Assets of ten Mrs. Fields Cookie Stores. The stores are located in Missouri, Minnesota and Michigan. PDP Limited Liability Company offered the highest revised bid for the purchased assets in the aggregate amount of $920,000. Pursuant to the order, the Court authorizes and directs the debtors to execute an consummate the purchase agreement. CERION TECHNOLOGIES: Annual Report For Fiscal Year End 1997 ----------------------------------------------------------- On September 14, 1998, the Company's Board of Directors voted to cease operations on or about November 15, 1998 and seek approval from its shareholders for an orderly liquidation of the Company's assets. On November 23, 1998, the aggregate market value of the voting stock held by nonaffiliates totaled approximately $1,244,425 based on the closing stock price as reported by The Nasdaq Stock Market. On November 23, 1998, there were 7,054,593 shares of common stock, $.01 par value, of the registrant issued and outstanding. A Special Meeting of Stockholders of Cerion Technologies Inc. will be held at the Union League Club, 65 West Jackson Street, Chicago, Illinois, on December 29, 1998 at 10:00 a.m., Central Time to consider and act upon the Liquidation Proposal, including adoption of a Plan of Complete Liquidation and Dissolution substantially in the form attached as Appendix A to the Proxy Statement, dated December 3, 1998. A full-text copy of the annual report is available via the Internet at: http://www.sec.gov/Archives/edgar/data/ 0000950135-98-006128.txt CRIIMI MAE: Reaches Agreement With Two Major Creditors ------------------------------------------------------ CRIIMI MAE Inc. has reached agreements with two of its major creditors, Merrill Lynch Mortgage Capital Inc. (Merrill Lynch) and German American Capital Corporation (GACC), under which the company and these creditors will split the monthly cash flow after debt service from 13 classes of CRIIMI MAE's subordinated commercial mortgage- backed securities (CMBS). The total current monthly cash flow before paying floating-rate, LIBOR-based debt service is approximately $5.0 million. The Merrill Lynch agreement has been preliminarily approved by the Bankruptcy Court, and the GACC agreement has been submitted to the Bankruptcy Court for approval. CRIIMI MAE had financed the acquisition of the 13 classes of CMBS with $452.3 million of loans from these two creditors. CRIIMI MAE and two affiliates filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code on October 5. "Without lengthy court proceedings, these agreements help to resolve certain disputed issues with two of our major lenders and assure a continuing flow of income as CRIIMI MAE reorganizes," said Chairman William B. Dockser. "We are continuing to negotiate with our other creditors," though Mr. Dockser gave no assurance that CRIIMI MAE would reach agreements with the other creditors. As part of the agreement with Merrill Lynch, CRIIMI MAE is dismissing without prejudice its October 21 lawsuit asking the lender to turnover funds the company charged Merrill Lynch had wrongly withheld. For its part, Merrill Lynch is dismissing without prejudice its motion for relief from the automatic stay in the bankruptcy proceedings. Under the agreement with Merrill Lynch, CRIIMI MAE will receive approximately $1.5 million representing the October distributions from eight classes of CMBS collateralizing the loan from Merrill Lynch net of October's interest payment to Merrill Lynch. For subsequent months, the agreement calls for CRIIMI MAE to receive distributions of 50 percent of the monthly cash flow from the CMBS, net of interest payable to Merrill Lynch. Merrill Lynch will apply its half of the net distribution to pay down the outstanding principal balance of its loans to CRIIMI MAE. Under the agreement with GACC, CRIIMI MAE each month will receive approximately 50 percent of the cash flow from the CMBS collateralizing the loan from GACC, net of interest payable to GACC. GACC will apply the remaining 50 percent to, among other things, hedge costs and to pay down the outstanding principal balance. Before filing for reorganization, CRIIMI MAE had been actively involved in acquiring, originating, securitizing and servicing multifamily 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. DENBURY RESOURCES: Announces Agreement With TPG ----------------------------------------------- Denbury Resources Inc. announced that it has reached an agreement in principle with its largest shareholder, the Texas Pacific Group ("TPG"), to issue $100 million of common shares at $5.39 per share to an affiliate of TPG. The purchase price was negotiated between TPG and a committee of the Company's independent directors and represents a 41% premium over the closing market price of the Company's common shares as of December 1, 1998. The transaction is subject to, among other things, (i) the receipt of a fairness opinion as to the price at which the shares are to be sold, (ii) completion of a definitive agreement between TPG and the Company, and (iii) shareholder, regulatory and other customary approvals. Currently, TPG holds 8.7 million common shares or approximately 32 percent( 30% on a fully diluted basis) of the approximately 26.8 million outstanding common shares. Subject to regulatory approval, the Company plans to issue 18.55million additional shares in this transaction following approval of the sale by shareholders at a meeting expected to be held in February or March of 1999. Following this transaction, TPG will own approximately 60 percent ( 58% on a fully diluted basis) of the outstanding common shares. At the meeting, it is also anticipated that shareholders will be asked to approve a proposal to change the legal domicile of the Company from Canada to the United States as a Delaware corporation. Both matters will be covered by proxy soliciting materials which must first be submitted to U.S. and Canadian regulatory authorities. TPG's purchase will not be subject to the approval of the change of legal domicile. TPG is currently represented by three designees on the Company's board of directors, Messrs. Bonderman, Price and Stanton. The Company does not anticipate any changes to the current board of directors, management or operations of the Company as a result of this transaction. The net proceeds of approximately $98.5 million (after deduction of estimated costs of the transaction) will initially be used to reduce the borrowings under the bank credit facility, the outstanding balance of which at December 1, 1998 was $100 million, with an additional $30 million currently available under the line. The Company plans to ultimately use the funds for oil and gas property acquisitions. Denbury is a Dallas based independent oil and gas company engaged in acquisitions, development and exploration activities primarily in the states of Louisiana and Mississippi. DIXONS US HOLDINGS: Disclosure Statement Delayed ------------------------------------------------ Dixons U.S. Holdings Inc. has put off filing a disclosure statement for its Oct. 23 liquidating plan in order to continue negotiations with the official creditors' committee, and the defunct electronics retailer expects to submit the document in about 60 days. The company and committee recently agreed to a 90-day exclusivity extension, through Jan. 25. The Oct. 16 effectiveness of the global settlement between Dixons, former parent Fretter Inc., and their respective creditor panels was among the grounds cited as justification for an extension. The settlement resolves myriad litigation primarily surrounding Fretter's acquisition of Dixons in December 1993. Proceeds from the settlement will be used to fund the proposed plan. (The Daily Bankruptcy Review and ABI Copyright c December 8, 1998.) ERD WASTE: Committee Objects to Joint Disclosure Statement ---------------------------------------------------------- The Official Committee of Unsecured Creditors states that the Disclosure Statement of ERD Waste Corp. et al. does not contain "adequate information" concerning the plan and should not be approved. The Committee states that the Disclosure Statement fails to adequately disclose the value to be received by unsecured creditors under the plan. Pursuant to the plan, the general unsecured creditors are to receive: the avoidance actions and either a portion of the proceeds from the Long Beach Litigation or 5% of the reorganized debtors' net profit (EBITDA) for calendar years 1999, 2000 and 2001 on a consolidated basis. The Disclosure Statement is devoid as to the estimated amount of recoveries from these items. The Committee also states that the Disclosure Statement fails to describe any of the debtor's assets, that it fails to provide any financial information, that the debtors do not describe any legal or economic basis for consolidation, that Class Five secured claims are not adequately described, that there is inadequate disclosure concerning the amount of Chase's secured claim, and that there is no adequate information concerning the possibility that the debtors either collectively or individually may possess net operating losses. Further, the Disclosure statement does not provide how the debtors intend to confirm their plan in the event that there exists an impaired non-consenting class of claimants. According to the Committee, the Disclosure Statement also fails to disclose the terms of compensation of management and violates the Absolute Priority Rule inasmuch as it may provide for Chase to receive payment upon its unsecured claim before payment to general unsecured creditors and provides for the debtors to retain an interest in their assets without contributing sufficient new value. FPA MEDICAL: Files Current Report With SEC ------------------------------------------ FPA Medical Management Inc. filed a Form 8-K Current Report with the SEC. On September 23, 1998, the Bankruptcy Court (i) authorized the Debtors to implement a key employee retention program, (ii) extended the time period in which the Debtors could assume or reject unexpired leases of non-residential property, (iii) authorized the rejection of certain leases of non-residential property, (iv) authorized the rejection of payor agreements related to discontinued business operations, (v) implemented a procedure to sell certain equipment and property, (vi) authorized the sale of certain assets related to the Registrant's Orange Coast operations, and (vii) implemented a transition plan and cessation of operations related to the Debtors' operations at the Virginia Medical Clinic. On September 30, 1998, the Debtors filed with the Bankruptcy Court their Joint Disclosure Statement and Plan of Reorganization. The terms of the Plan of Reorganization closely follow the terms of the pre- negotiated plan term sheet agreed to with the Debtors' largest creditors and filed by the Registrant with the Bankruptcy Court and the Securities and Exchange Commission in July 1998. The present terms of the Plan of Reorganization have not been agreed to by the Official Committee of Unsecured Creditors (the "Committee") in the Debtors' bankruptcy cases and consensual negotiations are continuing among the Debtors, the Committee and the Debtors' pre-petition and post-petition bank groups. On October 28, 1998, the Bankruptcy Court (i) extended the exclusive time period during which the Debtors could file and solicit acceptances of plan or plans of reorganization, (ii) extended the time period during which the Debtors could seek to remove civil actions pending on the dates of commencement of their chapter 11 cases, (iii) authorized the rejection of certain non-residential leases and executory contracts, (iv) authorized the Debtors to enter into an agreement to liquidate certain of the Debtors' accounts receivable relating to closed locations, (v) authorized the Debtors to resolve certain disputes with Mount Airy Emergency Physicians, P.L.L.C. and Primergy,Inc., and (vi) overruled an objection to the Debtors' sale of certain assets related to their Orange Coast operations. On November 19, 1998, the Bankruptcy Court (i) authorized the amendment of the Debtors' schedules of liability to reschedule the claim of Optimal Integrated Solutions, Inc., (ii) authorized Women's Health Care Alliance, Ltd. to conduct an examination of the Debtors under Rule 2004 of the Federal Rules of Bankruptcy Procedure, (iii) granted relief from the automatic stay imposed by section 362 of the Bankruptcy Code, thereby allowing a specific malpractice action, involving a terminally ill plaintiff, to proceed and (iv)denied certain other requests for relief from the automatic stay. On November 24, 1998, the Bankruptcy Court, upon the request of the Debtors, their pre-petition and post- petition bank groups and the Committee, rescheduled the following dates in the Debtors' bankruptcy cases: (i)January 12, 1999 at 11:00 a.m. shall be the rescheduled hearing concerning the Disclosure Statement; (ii) January 20, 1999 shall be the last day to mail solicitation materials concerning acceptances of the Plan of Reorganization;(iii) February 22, 1999 at 12:00 noon shall be the last day and time to file and serve objections to confirmation of the Debtors' Plan of Reorganization; and(iv) February 24, 1999 at 9:30 a.m. shall be the date and time for a hearing concerning confirmation of the Plan of Reorganization. A copy of the revolving credit and guarantee agreement among FPA MEDICAL MANAGEMENT, INC., debtor and borrower, the subsidiaries of the debtor, as guarantors, the several lenders and BankBoston NA, dated of July 20, 1998 is included in the filing. GOOD ENTERPRISES: To Repay $6 Million Debt Over 10 Years -------------------------------------------------------- The Lancaster PA Intelligencer reports on December 5, 1998 that a U.S. Bankruptcy Court judge in Reading has approved a plan giving Good Enterprises Ltd. 10 years to repay more than $6 million in debt. If the Intercourse tourist attraction and publishing firm can't repay its creditors, it would have to sell off its assets. The company, which filed for Chapter 11 bankruptcy protection in 1996, operates The People's Place museum, Old Country Store and Good Books, a publishing company. The store sells quilts, dolls and toys made by local craftspeople. The museum, opened in 1976 by Merle Good and his wife, Phyllis Pellman Good, provides a slice of Amish and Mennonite life through a hands-on museum and a documentary film. Under the reorganization plan, which was adopted jointly by the company and a committee representing about 600 unsecured creditors, Good must repay $6.4 million to the creditors by December 2008 or fulfill 100 percent of that obligation by selling company assets. About one-third of the creditors are owed $1,000 or less; they must be repaid by July 1999. If the company performs much better than expected, it has pledged to pay creditors an extra 25 to 50 cents on the dollar. The plan was approved Nov. 19 by Judge Thomas M. Twardowski. According to financial projections included in the plan, the company hopes to be able to repay $5.8 million in 10 years through annual operations, real estate sales and commercial development. The balance of the $6.4 million would be raised by liquidating company assets. The repayment to unsecured creditors, many of whom are the Goods' friends, employees or family members, represents the principal amount, but not any interest, on the money they loaned over the years for the operation of Good Enterprises. Under the reorganization plan, the unsecured creditors opted for getting repaid over 10 years rather than forcing Good Enterprises to liquidate its assets now. If the assets were sold immediately, there would be only $1.7 million - including real estate, cash, accounts receivable, inventory, and equipment - to pay unsecured creditors after taxes. Under the reorganization plan, the unsecured creditors have more control over the company. A new board of directors is managing the firm and can opt to liquidate the company earlier than 10 years if necessary to repay creditors. Five of the nine board members are new, and one of them is the chairman of the committee of unsecured creditors. The committee retained an independent financial consultant to review the financial records of Good Enterprises before creditors agreed to join the reorganization plan. HAYES CORP: Seeks Nod For Incentive/Retention Plan -------------------------------------------------- Calling the continued support and enthusiasm of its work force "essential to a successful reorganization," Hayes is seeking court approval of a key employee incentive/retention/severance plan. "The proposed employee incentive/retention/severance program will assist the Debtors' efforts in retaining the services of its key operations, technology and management employees in the performance of their duties and such extra duties as may be required of them during the reorganization process, provide financial protection of each key employee in the event of involuntary termination and provide severance benefits to remove the employees' concern about job security," the company said. Without the program, Hayes warned that it would face deteriorating morale and the loss of more critical employees. (Federal Filings Inc. 08-Dec-98) HAYES: Asia Pacific Headquarters Close -------------------------------------- The South China Morning Post reports on December 8, 1998 that the SAR-based headquarters of popular modem maker Hayes Asia- Pacific has closed, but sources say local Hayes executives are scrambling to launch a new company under a different name. Michael Lee, managing director of Tech Pacific Hong Kong, Hayes' largest SAR distributor, was confident that a new company handling Hayes products would open. Kaifa Technology, an SAR-based electronics maker and former investor in Hayes in the US, is talking with former Hayes Asia- Pacific executives about backing the new firm. Meanwhile, the supply of Hayes products had been "slightly interrupted" for the past two weeks, but there should be no other effect on consumers, Mr Lee said. Though it lags badly behind 3Com worldwide, Hayes modems still sell well in less-advanced markets such as the mainland, where 14.4 kbps modems are still common. There, Hayes holds the top spot with 39 per cent of the market, according to Frost & Sullivan, mostly due to its strong brand name and extensive distribution via its partner, Legend Technology, a subsidiary of top PC maker, Legend Holdings. In Hong Kong, it is either "number one or number two", according to Mr Lee. Hayes has strong local ties. SAR- based electronics manufacturers Wong's International and Kaifa were part of a consortium that bought up 49 per cent of Hayes in April 1996 to rescue the firm during an earlier bankruptcy. Both Wong's and Kaifa produce modems for Hayes. But that rescue coalition seems to have dissolved, with at least one partner, Kaifa, selling out its estimated 16 per cent stake this summer to an undisclosed party, according to an executive at Kaifa. At about the same time, Kaifa stopped manufacturing modems for Hayes as unpaid bills - totalling millions of dollars - mounted. INDIAN MOTORCYCLE: Fighting Over a Good Name -------------------------------------------- A federal judge has approved a company's right to resurrect the legendary Indian motorcycle, ending three years of legal wrangling involving dozens of companies and creditors. IMCOA Licensing America Inc., a partnership of California and Canadian motorcycle companies, has proposed paying $17 million in cash for the Indian trademark rights. The bid was made last month after U.S. District Judge Zita Weinshienk eliminated Eller Industries from consideration, ruling the Boulder-area company had failed to live up to its purchase agreement. Lee Kutner, attorney for IMCOA, said Monday he was "thrilled" with the ruling and said the company already has a number of motorcycles ready to hit the road. "The motorcycle is already in production in California under a short-term license with the receiver," he said. He said the company hopes to resolve purchase details for the company early next year. "There's a lot of demand," he said. "You'll be seeing classic Indian Motorcycles back on the street in short order." During a hearing, attorneys for Eller and creditors, as well as two motorcyclists who sat in the audience, asked the judge to reconsider and approve the Eller bid. "This shouldn't be about getting rid of this," motorcycle dealer Steve Halprin said, referring to a push to resolve the bankruptcy. "This should be about doing what is right." Weinshienk ruled that Eller breached the contract with the receiver by not paying administrative costs, by not providing an Intro Bike, and by not being ready to close by Oct. 1. U.S. Magistrate O. Edward Schlatter, who oversaw the case on Judge Weinshienk's behalf, said he believed the Eller contract was terminated properly after company officials and representatives of the court-appointed receiver failed to agree on an extension to a closing deadline. The dispute represents the consolidation of at least four claims to the rights of the cycle first built in 1901 by the Indian Motocycle Co. of Springfield, Mass. The company, which eliminated the "r" from motorcycle, launched America's motorcycle industry. Kutner said his company has put the "r" back in for its production model. Within five years, Indian racers were hitting speeds of 100 mph, spawning America's love of the two-wheeled power vehicle. Indian, plagued by competition from smaller bikes in the post-World War II era, made its last cycle in 1953. But an estimated 30,000 cycles remain in existence and are prized by collectors. Since the original enterprise went out of business, the only American manufacturer of heavyweight machines left is arch-rival Harley Davidson. IMCOA is a partnership between American Indian Motorcycle Company Inc. of Mokelumne, Calif., and Indian Motorcycle Company Inc. of Toronto. Kutner said the company planned to raise $25 million in cash to buy the Indian rights and the California Motorcycle Co. of Gilroy, Calif. He said they are continuing talks to retain the involvement of the Cow Creek Band of Umpqua Tribe in Eugene, Ore. Eller had planned to build a motorcycle production plant on tribal land. JOTAN INC: Defections Cause Sale -------------------------------- Jotan Inc., which had hoped to reorganize under Chapter 11 bankruptcy protection and continue operating, is now planning to sell its business after the defection of several key employees. Jotan said during a hearing yesterday in U.S. Bankruptcy Court in Jacksonville that it expects to file details of the sale within the next week. Jacksonville-based Jotan, which distributes packaging and shipping supplies, filed for Chapter 11 bankruptcy protection on Nov.10 because of mounting losses at a subsidiary it acquired last year called Southland Container Packaging Corp. The original plan called for Jotan to sell Southland, which distributes supplies to the moving and storage and perishable goods industries, and continue operating its Jotan division, which distributes supplies to industrial customers. But that plan changed when seven or eight key salespeople defected to a competitor called Eastern Seaboard Packaging Inc., said Jotan President and Chief Executive Officer Raleigh C. Minor. "Without the sales force, we can't move ahead," he said. Minor said the company contacted possible buyers for the Jotan division and have picked one, but he couldn't give details yesterday. The buyer is expected to keep the business going as is. "There will be no interruption in supplying customers, and employees involved in operations will continue to be employed with a financially sound company," said Gardner Davis, an attorney for Jotan. At the time of its bankruptcy filing, Jotan employed about 30 people in Jacksonville and 200 overall, including the Southland division. Minor said all of the operations employees will keep their jobs but some of the headquarters employees will probably lose theirs. Minor said the company has a couple of offers for the Southland division but no agreements have been reached yet. U.S. Bankruptcy Judge Jerry A. Funk last week issued a preliminary injunction against two former top Jotan sales executives, who left the company for Eastern Seaboard, to stop them from soliciting Jotan customers. According to Funk's order, Alton E. Thompson, former vice president of sales and operations, left Jotan for Eastern Seaboard on Nov.9 and contacted two Jotan customers on that date. The order prohibits Thompson from soliciting business from Jotan's customers and from recruiting more Jotan employees. The order also prohibits Jeff Barnett, Jotan's former national sales representative, from competing for customers with Jotan within 250 miles of Jotan's distribution centers. Barnett also joined Eastern Seaboard on Nov.9. Funk's order said that Jotan had been negotiating a possible sale of the company with Eastern Seaboard in October and that Barnett was Jotan's chief negotiator. Jotan grew out of Atlantic Bag and Paper Co., a 60-year-old Jacksonville business, and was formed in 1993 to offer just-intime delivery of packaging and shipping supplies to businesses. The name Jotan stands for "just on time as needed." The company grew significantly in March 1997 by acquiring Southland, but the deal also caused big losses. After earning a modest profit of $173,658 in 1996, Jotan had a net loss of $38.5 million in 1997, due in large part to the write- off of $33 million in goodwill on its balance sheet from the Southland deal. Jotan Inc. employees who work in operations are expected to keep their jobs when the company is sold. Some who work in the company's headquarters probably won't. LIVENT INC: Judge Releases $5.3 Million --------------------------------------- The Chicago Sun-Times reports on December 5, 1998 that a judge hearing the bankruptcy case of Livent Inc. freed a construction account so that $5.3 million can be paid to the contractors who renovated the company's Oriental Theatre. Last month, general contractor W. E. O'Neil filed an $8.6 million lien on the Ford Center for the Performing Arts/Oriental Theatre at 32 W. Randolph, which it had renovated. O'Neil said it could not pay its 40 to 50 contractors the $6.5 million due them because Livent, owner of the Oriental, had made no payments since August. On Thursday, the bankruptcy judge freed a $5.3 million construction escrow account used to pay for work on the Oriental. The City of Chicago subsidized the renovation of the Oriental with $13.5 million as part of Mayor Daley's plan to revitalize the city's theater district. City officials said they do not expect the city to suffer a loss. Operations at the Oriental, where "Ragtime" is playing, are continuing normally. Theater executives say ticket sales remain strong. Livent may be looking for a buyer, possibly one who would take over the Oriental along with its theaters in New York and Toronto. Livent said in its bankruptcy filing that it hired SG Cowen & Co. to explore options for the troubled company, including a sale. Possible buyers include SFX Entertainment Inc., owner of New York's Pace Theater, and the closely held Shubert Organization, the Broadway theater company founded in 1914, according to analysts and recent reports. Livent now says it lost $106.2 million from 1996 through the first quarter of 1998 - not the $44.7 million it previously had reported. Shares in the publicly held company are suspended on most exchanges. MIAMI SUBS: Nathan's Famous Offers $14 Million ---------------------------------------------- Nathan's Famous, the legendary New York hot dog chain, has entered an agreement to buy Miami Subs in a deal worth about $14 million. Four months ago, Miami Subs called off its proposed merger with Jacksonville based Arthur Treacher's. Nathan's said it has acquired a 30 percent interest in Miami Subs and signed a letter of intent to take over the rest of the company in a stock swap. Shareholders of both companies must approve the deal, which was announced Monday after the stock market closed. Under the terms of the letter of intent, Miami Subs shareholders will receive about 52 cents worth of Nathan's stock for each share of Miami Subs they hold. Executives of Fort Lauderdale-based Miami Subs said they made the deal because the chain, with its limited financing had limited growth prospects. MOLTEN METAL: Trustee Seeks Special Counsel ------------------------------------------- The Chapter 11 Trustee of Molten Metal Technology Inc., and its affiliates request that the court authorize the Estate to employ John Hagerty as Special Counsel to represent the Trustee and provide legal services tot he Estate solely with respect to conducting a sale of real property in South Carolina. Hagerty has agreed that his fees shall not exceed $1,500. MUSICLAND: Registration Statement Filed With SEC ------------------------------------------------ Musicland Stores Corporation filed with the Securities and Exchange Commission under a Registration Statement on Form S-8 with respect to the issuance by the company of up to 2,000,000 shares of Common Stock, $.01 par value, pursuant to stock options and other stock incentives granted under the Musicland Stores Corporation 1998 Stock Incentive Plan. The proposed maximum aggregate offering price is $28,125,000.00. NATIONAL ENERGY: Banks Accelerating $25 Million Payable ------------------------------------------------------- National Energy Group, Inc. (OTC Bulletin Board: NEGX) announced that on December 4, 1998 an Involuntary Petition for an Order and Relief under Chapter 11 of Title 11 of the United States Bankruptcy Code had been filed in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division and which was signed by a group of the Company's 10-3/4% Senior Notes bondholders. The Company had reported earlier it had not made the $8.9 million interest payment, initially due November 2, 1998 and which was subject to a 30-day grace period ended December 2, 1998. The Company has a 20-day period in which to file its response to the Petition with the Bankruptcy Court. The Company also announced that, pursuant to the terms of the Company's Restated Loan Agreement between the Company and Bank One, Texas, N.A. and Credit Lyonnais, New York Branch, et al., the banks' Administrative Agent has given notice to the Company it is accelerating and declaring immediately due and payable all obligations in the outstanding amount of $25 million under the Restated Loan Agreement for certain unspecified Events of Default as defined in the Restated Loan Agreement. National Energy Group, Inc. is a Dallas, Texas based independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations primarily in Louisiana, Texas, and Oklahoma. NIAGRA MOHAWK: Agreement To Sell 72 Hydroelectric Plants -------------------------------------------------------- Niagara Mohawk Power Corp. (NYSE: NMK) announced an agreement to sell its 72 hydroelectric generating plants to an affiliate of Orion Power Holdings, Inc. for $425 million, representing 1.7 times their book value of approximately $250 million. Located on more than 20 rivers and streams throughout Upstate New York, the hydroelectric stations have a combined capacity of 661 megawatts. Orion was formed in March to acquire electric generating plants across the United States and Canada. Orion is headquartered in Baltimore and is jointly owned by GS Capital Partners II, an investment fund managed by Goldman, Sachs & Co., and Constellation Power Source, Inc., a wholly owned subsidiary of Baltimore Gas and Electric Company. Niagara Mohawk will purchase electricity from Orion under a transition power contract in place through September 2001. "This sale is a significant first step in our strategy to exit the generation business and become an energy delivery company," said William E. Davis, Niagara Mohawk's Chairman and Chief Executive Officer. "Proceeds from the sale will be used to accelerate the retirement of debt consistent with our plan to create value for our shareholders. Niagara Mohawk continues to actively pursue the sale of its four fossil-fueled plants and hopes to be in a position to announce the winning bidder or bidders by the end of the year. The four fossil-fueled plants have a combined capacity of 3,256 megawatts. Divestiture of Niagara Mohawk's fossil-fueled and hydroelectric generating facilities is one of the major elements of the company's POWERCHOICE plan to reduce prices and promote competition. The sale is subject to approval by the New York Public Service Commission and various federal agencies. Niagara Mohawk expects to complete the transaction by the middle of 1999. Investment bankers Merrill Lynch & Co. and Donaldson, Lufkin & Jenrette Securities are serving as Niagara Mohawk's financial advisors for the generation asset sale. Niagara Mohawk is an investor-owned energy services company that provides electricity to more than 1.5 million customers across 24,000 square miles of Upstate New York. The company also delivers natural gas to more than 500,000 customers over 4,500 square miles of eastern, central and northern New York. PHELPS TECHNOLOGIES: Deadline For Filing Plan Extended ------------------------------------------------------ The deadline for filing debtors' plan and disclosure statement is extended to December 7, 1998. The confirmation hearing will be set for January 6, 1999. PHP HEALTHCARE: HIP Files $90 Million Lawsuit --------------------------------------------- HIP Health Plan of New York and the HIP Foundation have filed a lawsuit in New York State Supreme Court against three principals of the PHP Healthcare Corporation (NYSE: PPH). The court papers allege massive fraud, misrepresentation of material facts, the diversion of funds, and public damage to HIP Health Plan of New Jersey and HIP Health Plan of New York. The lawsuit demands $15 million compensatory and $75 million punitive damages on five causes of action, all relating to fraud. The lawsuit seeks damages on behalf of HIP-NY. The PHP principals named in the court papers are Jack M. Mazur, a shareholder, member of PHP's Board of Directors, and at the time of the action cited in the lawsuit, President and Chief Executive Officer of PHP, who has since been terminated as PHP's corporate leader; William J. Lubin, Senior Vice President of PHP and a member of PHP's Board of Directors until October 15, 1998; and Jerrold J. Hercenbergh, a Senior Vice President and Counsel for Managed Care of PHP. New York State Supreme Court has jurisdiction over the defendants because PHP is licensed in New York and the defendants have committed tortuous acts in New York. The complaint outlined a series of event started in July 1997,when HIP-NJ engaged PHP to deliver health care to HIP- NJ's 200,000 members for a 20-year period in return for percentages of premium revenues collected by HIP- NJ. The agreement called for PHP to be paid 91.5% of premiums, decreasing gradually to 86.5% for the last 15 years of the agreement. During the period covered by the lawsuit, HIP-NJ paid PHP $345 million in premium revenues, which were to be used to pay claims by HIP-NJ providers, including physicians and hospitals. The court papers asserted that at all times PHE maintained that it had the substantive and financial experience to meet its commitments to pay claims on a timely basis. It was further agreed that PHP would provide HIP-NJ with information on its financial condition and accurate information concerning the processing of claims. By July of 1998, HIP-NJ became aware of complaints about lags in the payment of claims, and aware of a substantial increase in the number of PHE's claims inventory, indicating an improper and unlawful delay in payment of claims. "Upon information and belief, contrary to its obligations under the HSA (Health Services Agreement), PHE has deliberately and with malice diverted Capitation Payments (premium revenues) from their intended purpose -- payment of costs associated with the performance of the HSA -- to its parent PHP, for the benefit of PHP ... PHP has pursued a strategy of purchasing certain of its preferred shares and pursuant thereto has spent in excess of $40 million, some of which includes monies paid to PHE by HIP- NJ as Capitation Payments ... PHE deliberately and with malice diverted to PHP portions of the Capitation Payments that should have been applied to reduce claims. PHE diverted such funds knowing that it did not have other funds to pay claims." As a result of PHE's failure to pay claims, and because HIP-NJ had to assume responsibility for PHE's failure, HIP- NJ's financial report showed a negative statutory net worth of minus $9.5 million as of June 30, 1998, notwithstanding that by generally accepted accounting principles HIP-NJ had a positive net worth. HIP-NJ's apparent financial condition resulted in its being placed into voluntary rehabilitation, supervised by the State of New Jersey. One cause of action relating to fraud asserted that during negotiations leading to the agreement between HIP-NJ and PHP, the defendants knowingly and intentionally concealed from HIP-NJ the following facts: "... PHP and Mazur had been charged by investors with securities fraud in connection with PHP's purchase of its shares and the public offerings of its shares in 1986; Mazur had been outside counsel to PHP in Missouri during the relevant period that fraud charges were made against him and PHP and, in response thereto, Mazur surrendered his license to practice law and was permanently disbarred from the practice of law in Missouri; PHE had undergone drastic changes in its lines of business and had little actual experience managing health care services for HMOs; PHE was highly leveraged, had committed to buyout preferred shareholders, and did not have adequate financial resources to sustain itself through a period of anticipated losses to be incurred in taking over HIP's medical delivery system ..." Actions by the defendants and PHE, the lawsuit asserts, have damaged the reputation of HIP-NJ and HIP-NY and their operations. Under rehabilitation HIP- NJ has been barred from expending monies, including to enroll new accounts. On November 18, with the permission of the State of New Jersey, HIP-NJ terminated the Health Services Agreement with PHE and at the same time elected to place itself in voluntary rehabilitation. Hours after receiving notice of HIP-NJ's termination of the health services agreement, PHP filed for Chapter 11 bankruptcy protection. PHE is currently in arrears on payments to hospitals and other providers by as much as $80 million. HIP Foundation is also a party plaintiff to the lawsuit. Through restructuring, HIP Foundation now owns or contracts with HIP Health Plans and its affiliates, HIP-New York, HIP-New Jersey, and HIP-Florida. The plans are separate corporate entities. At the time of the agreement with PHP, HIP-NY was the company contracting with HIP-NJ. POCKET: Lenders Ask Court To Rethink FCC Option Ruling ------------------------------------------------------ Claiming that Pocket Communications Inc. and its creditors' committee applied "fatally poor reasoning" in electing to retain 15 C-Block licenses and return 28 others under the Federal Communications Commission's debt repayment option, Pocket's lenders are asking the court to reconsider its Oct. 29 decision approving the repayment election. In essence, the company elected to trade 28 wireless licenses worth over $100 million and a $143 million deposit paid to the FCC for a spectrum of 15 licenses worth $15 million to $25 million, the lenders have contended. (Federal Filings Inc. 08-Dec-98) PORTACOM WIRELESS: Settlement Agreement With VDC ------------------------------------------------ On November 24, 1998, Portacom Wireless, Inc. entered into a Settlement Agreement with VDC Communications, Inc. (successor to VDC Corporation Ltd.) ("VDC") resolving the companies disputes with VDC. Pursuant to the Settlement Agreement, VDC agreed to release the company from any claims, including but not limited to claims relating to VDC's fraud allegations, arising from VDC's purchase in June 1998 of 2,000,000 shares of common stock and warrants to purchase 4,000,000 shares of common stock of Metromedia China Corporation in exchange for 5,300,000 shares of common stock of VDC and up to $700,000 in cash. VDC also agreed (i) to assist the company to secure the return of the shares of VDC common stock owned by the Registrant which are pledged to MCC in accordance with the Pledge Agreement in favor of MCC dated June 8, 1998; (ii) to cause VDC counsel to deliver any legal opinions necessary for the resale of shares of VDC common stock held by the Registrant and to cause VDC's transfer agent to remove any restrictive legends from such share certificates; (iii) to provide certain periodic disclosure to the Registrant; and (iv) to refrain from seeking to recover any portion of funds previously escrowed that have been paid or are payable to creditors of the Registrant. In return for VDC's agreements and commitments outlined above, the company has agreed to escrow up to 2,000,000 shares of VDC common stock currently held in the company's name (the "Escrow Shares") for up to eighteen months, with such Escrow Shares to be released to the Registrant for distribution to the company's creditors and/or shareholders upon the satisfaction of any one of a number of conditions. RDM SPORTS GROUP: Notice of Bar Date - January 15, 1999 ------------------------------------------------------- January 15, 1999 is set as the deadline for filing all proofs of claim against the debtors, RDM Sports Group, Inc. and its affiliates. SOUTHERN PACIFIC: Class Action Lawsuit Filed -------------------------------------------- A class action lawsuit was filed in the U.S. District Court for the District of Oregon on behalf of all purchasers of the 11.5% Subordinated Convertible Notes of Southern Pacific Funding Corp. (NYSE: SFCFQ) ("SPF") from October 31, 1997 through October 1, 1998 (the "Class Period") against Imperial Credit Industries, Inc. ("ICII"), one of its directors and certain of SPF's officers and directors, alleging that as a result of their dissemination of false and misleading statements concerning the financial condition of SPF and the Company's materially misleading October 31, 1997 Registration Statement, the defendants created the misimpression that the Company was experiencing and would continue to experience profitability and thereby inflated the market price of the Company's 6.75% Notes. On October 1, 1998, Southern Pacific filed for protection under Chapter 11 of the United States Bankruptcy Code. Plaintiff seeks to recover damages on behalf of class members and is represented by The Law Offices of Dennis J. Johnson and the law firm of Esler, Stephens & Buckley. SWISS WORLD AIRWAYS: Declares Bankruptcy ---------------------------------------- Swiss World Airways said it has declared bankruptcy after just three months of operation. The company, which has just one leased Boeing 767-200, told shareholders it has asked for the appointment under court receivership of an administrator who would deal with creditors while a rescue plan is put into place. SWA's administrative council said after emergency talks aimed at averting a shutdown that it asked the federal civil aviation office (OFAC) to provisionally suspend its flights beginning Dec. 3. Analysts said bankruptcy was inevitable after SWA failed to secure crucial financing from its main backers and was unable to find new investors. The carrier's only service launched in September, six flights a week between Geneva and New York's Newark airport, was flying at one quarter full, according to OFAC, far below break- even point. UNISON HEALTHCARE: Races To Close $38M Omega Deal ------------------------------------------------- Unison Healthcare Corp. is seeking approval of its $38.2 million sale/leaseback transaction with real estate investment trust Omega Healthcare Investors Inc. on an emergency basis, in order to close the proposed deal by Dec. 15 and avoid changes to the negotiated rental rates. "Because of the instability of rates for both long-term borrowing by Omega and other REITs as well as the market rates of such investments, Omega can, therefore, only commit to the currently-negotiated terms of the Signature Sale Leaseback through December 15,1998," the nursing home operator asserted. A hearing is set for Dec. 10. (Federal Filings Inc. 08-Dec-98) *********** 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. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *