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/raid1/www/Hosts/bankrupt/TCR_Public/990104.MBXT R O U B L E D C O M P A N Y R E P O R T E R Monday, January 4, 1999, Vol. 2, No. 255 Headlines AHERF: Creditors Assert Claims on Insurance Policies AMERITRUCK: Sale of Certain Assets To Solana Trading CAL AMERICAN: Accountant Can Be Sued For Bad Audit CML GROUP: Final Hearing On Sale of Smith & Hawken Shares CUSTOM TEXTILES: Plant Permanently Ceases Operations DOW CORNING: Nevada Court Lowers Award GRIFFIN TRADING: Files Chapter 7 HOOTERS: Manhattan Location Files Chapter 11 JOTAN INC: Committee Taps Miller, Canfield JUMBOSPORTS: Still Open After Filing Chapter 11 Petition LACLEDE STEEL: $85M DIP Credit Pact Has Final Okay MERCURY FINANCE: Reports Amended Plan MESA AIR: Notification Of Late Filing ONCOR: President and CEO Resigns PERFORMANCE CAPITAL: Judge Agrees To Appoint Trustee PHILIPPINE AIRLINES: Future Appears Dim PHYSICIANS RESOURCE: Developments Regarding Company Debt PITTSBURGH PENGUINS: Players' Group May Take Control PITTSBURGH PENGUINS: Ticketmaster Pact Still In Doubt QUADRAX CORPORATION: Current Report Filed With SEC RUTHERFORD MORAN: Reports Merger Agreement SCHWEITZER MOUNTAIN: Harbor Resorts Reports Acquisition SERVICE MERCHANDISE: Poor Sales Results SOUTHLAND CONTAINER: Committee Taps Miller, Canfield STAR NEWCO: Seeks To Extend Exclusivity TECHNIMAR INDUSTRIES: Response to Motion to Dismiss UNARCO COMMERCIAL: Files Chapter 11 UNISON HEALTHCARE: Files Quarterly Report WILLIAMS BAY TRADING: Bank One Ordered To pay $2M ********* AHERF: Creditors Assert Claims on Insurance Policies ---------------------------------------------------- Creditors of Pennsylvania's Allegheny Health System, which filed for chapter 11 in July, yesterday staked claim to liability insurance policy money covering Allegheny’s Board of Directors and Officers, policies that Allegheny had quadrupled in value from $50 to $200 million in the 12 days prior to its bankruptcy filing, according to The Philadelphia Inquirer. The creditors took action after U.S. Bankruptcy Judge M. Bruce McCullough gave permission on Tuesday to investigate the actions of the directors and officers; the committee representing Allegheny’s approximately 65,000 unsecured creditors is targeting "the wrongful acts of certain of the officers and directors [that] resulted in losses in excess of $1 billion." The insurance policies were put in place to protect against claims brought for malfeasance or mismanagement for the directors' and officers' respective roles in running the company. The creditors took action yesterday in case the coverage was to expire today. Also yesterday, lawyers representing Health America Pennsylvania Inc. and Coventry Health Care Inc. named 54 present and former Allegheny trustees and executives as defendants in an as-yet-unfiled civil complaint. The two health insurance companies, which are among Allegheny's creditors, claim "significant losses arising from the failure of Allegheny and its affiliates to fulfill their contractual obligations," said Neal D. Colton, who is representing the insurance companies. "Allegheny has acknowledged that its insurance coverage for officers and directors is likely to expire at the end of the year, and accordingly, Coventry and Health America want to preserve any and all sources of recovery which may be available." Allegheny Health System filed for protection for nearly all of its eastern Pennsylvania operations, citing debts that were later totaled at $1.5 billion. Since then, eight of its bankrupt Philadelphia-area hospitals have been sold. (ABI 31-Dec-98) AMERITRUCK: Sale of Certain Assets To Solana Trading ---------------------------------------------------- The debtors, AmeriTruck Distribtuion Corp., et al, seek court authorization for the sale of certain of the debtors' assets to Solana Trading of Florida, Inc. The debtors request authority to sell 489 trailers to Solana. The trailers are encumbered by first liens asserted by FINOVA Capital Corporation, Navistar Financial corporation, Volvo Commercial Finance Inc. and Associates Commercial Corporation. The total purchase price for the trailers is $5,563,000. For each trailer, the proposed purchase price is equal to 100% of the orderly liquidation value determined by Taylor & Martin, Inc., appraiser. The debtors state that they are working with the Official Committee of Unsecured Creditors to propose a consensual plan of reorganization as soon as possible, ideally in the next thirty to sixty days. The debtors' business judgment for consummating the sale is supported by the fact that the sale will facilitate the debtors' plan of reorganization providing cash as an additional source for distributions under such a plan. The Buyers reserve the right to terminate the Agreement if the court does not approve the sale on or before January 15, 1999. CAL AMERICAN: Accountant Can Be Sued For Bad Audit -------------------------------------------------- The Journal of Commerce reports on December 31, 1998 that professional liability insurance costs could rise as a result of a California appeals court ruling against accounting firm Arthur Andersen. The three-member Second District Court of Appeals in Los Angeles unanimously ruled against the accounting firm, which had argued that it could only be sued by clients and others that may rely on its audits, but not by the state Insurance Department. The case arose from Arthur Andersen's 1991 audit of the now- defunct Cal-American Insurance Co. The accountant's audit did not show that the auto insurer was covering up its insolvency by inflating its assets and shifting liabilities to related companies. The department discovered the insurer's subterfuge in 1993, took over the company, liquidated it and subsequently filed suit against Arthur Andersen in Los Angeles County Superior Court. The Insurance Department said it routinely relies on audit opinions to monitor insurance companies. California Insurance Commissioner Chuck Quackenbush said his department would have moved on the company sooner had the Arthur Andersen audit reported the insolvency. In its ruling, the appellate court held that "the Insurance Commissioner, in his capacity as liquidator of Cal- American's estate, may recover from Arthur Andersen on behalf of the liquidation estate (for the benefit of policyholders and others having claims against the liquidation estate) for damage caused to the liquidation estate by negligent misrepresentation in Arthur Andersen's audit report." The Chicago-headquartered accounting firm's case relied on the 1992 California Supreme Court ruling in Billy vs. Arthur Young & Co. In that case, the high court limited who could sue an auditor for negligent misrepresentation to clients and others "who act in reliance upon those misrepresentations in a transaction which the auditor intended to influence." Arthur Andersen maintained that it had not intended to influence the Insurance Department. The accounting firm claimed the only people who could be expected to rely on the audit, Cal-American's officers, already were aware of the insurer's financial problems and concealed that fact from auditors. Arthur Andersen also argued that it could have had no liability for a negligent audit unless it caused damage to the value of Cal- American. The accountant said Cal-American already was insolvent when the audit was conducted, rendering it impossible to further damage the company's value. Arthur Andersen's lawyer Michael Hennigan said that an appeal is in the works, but is not optimistic about its success. "Frankly, we realize it's a long shot, given the fact that the Supreme Court refuses to hear far more cases than it actually takes on," said Mr. Hennigan, partner at Hennigan, Mercer & Bennett in Los Angeles. A Los Angeles-based insurance attorney said the importance of the case could come later if professional liability insurers decide to raise rates as a result of higher costs -- and not just for accountants. "I believe accountants and perhaps others that buy professional liability insurance could end up paying more for their coverages if courts continue to expand the roster of parties entitled to rely on a professional's advice as the appellate court has done in this case with the department of insurance," said Royal Oakes, partner at Barger & Wolen. American Insurance Association Vice President Mark Webb said that while it's difficult to predict pricing trends, "it appears that premiums could rise if the ruling in this case becomes a precursor for similar decisions in future litigation." If this trend continues, Mr. Webb warned, "then accountants could find themselves exposed to increased liability and increased insurance costs. At least in theory, this decision could affect insurance pricing and liability for a wide range of professional service providers including lawyers, architects and engineers, real estate agents, and insurance agents, not to mention accountants and actuaries." CML GROUP: Final Hearing On Sale of Smith & Hawken Shares --------------------------------------------------------- On February 1, 1999 at 2:00 the debtor, CML Group, Inc. shall hold an auction to sell the debtor's common stock of its wholly-owned subsidiary Smith & Hawken, Ltd., and the Intercompany Debt. The Auction procedures motion seeks authority to sell the shares of stock and the Intercompany Debt to the highest and best bidder at the Auction. CUSTOM TEXTILES: Plant Permanently Ceases Operations ---------------------------------------------------- After the Bessemer City, N.C.-based Custom Textiles plant had already stopped production, the company filed chapter 11 on Dec. 15, The Charlotte Observer reported. Custom Textiles will permanently shut down, and the company believes that selling all of its equipment will provide enough money to pay its creditors, including approximately $170,000 in utility service owed to Bessemer City. The company's financial problems are blamed on a 1997 fire that forced the company to change the location of its operations, and the company remains in litigation over claims that it received no fire insurance money.(ABI 31- Dec-98) DOW CORNING: Nevada Court Lowers Award -------------------------------------- The Nevada Supreme Court reduced a woman's $14.2 million award in a breast-implant case to $4.2 million Thursday, saying there was no evidence Dow Chemical tried to conceal defects. However, the court affirmed the jury's decision that the silicone implants made the woman sick. Charlotte Mahlum of Las Vegas, who claimed her leaking implants caused a host of health problems, was awarded $10 million in punitive damages and $4.2 million in compensatory damages in 1995. But the court ruled 4-1 she was not entitled to punitive damages, which require proof of fraudulent concealment. In a 3-2 vote, it kept intact the compensatory damages pertaining to pain and suffering, with two justices claiming Mahlum and her husband, Marvin, deserved nothing. "This decision of the Nevada high court, which affirms the jury's verdict that silicone gel can cause disease in women, will resound across the nation," he said. Dow Chemical spokesman John Musser said the company was "extremely disappointed that the court has decided to allow a verdict to stand that was so heavily influenced by emotion rather than facts or medical evidence." Earlier this year, a scientific panel appointed by a federal judge to review conflicting scientific claims about implants found that no definite links existed between implants and disease. Mahlum claims the implants, which she had removed, caused brain lesions, nerve damage, blotchy skin, aching, memory problems and seizures. Justice Bob Rose said the recent scientific findings did not matter. "The Mahlums' complaint was not tried in the court of scientific opinion, but before a jury of her peers who ... concluded that Dow Corning silicone gel breast implants caused her injuries," he said. Nonetheless, Musser said he was glad the court eliminated the punitive damages saying there was "no evidence anyone at Dow Chemical ever suspected, much less believed, breast implants were likely to injure anyone." The maker of the implants, Dow Corning Inc., went into bankruptcy over the thousands of legal claims made against it regarding the implants. Dow Chemical owns 50 percent of Dow Corning, once the biggest maker of siliconegel breast implants. It recently offered to pay $3.2 billion to an estimated 170,000 women to settle the lawsuits. GRIFFIN TRADING: Files Chapter 7 -------------------------------- Futures World reports on 12/31/98 that Griffin Trading, a former clearing member of the Chicago Board of Trade (CBT), has filed for Chapter 7 bankruptcy after a trader exceeded his authorized trading limit, according to a story published in the Financial Times today. The story said independent trader John Park, who cleared his trades through Griffin, was trading bonds when he exceeded the authorized trading limit and did not have enough funds to cover the open positions once the market turned against him. Chapter 7 allows a trustee to be appointed to run the firm and "had become the `only viable option,'" according to the Financial Times. They added Griffin was "out of compliance with various regulatory agencies" in both the United States and Europe with no chance to add the needed funds to cover the European losses. Another firm has taken over Griffin's business at both the CBT and the Chicago Mercantile Exchange. HOOTERS: Manhattan Location Files Chapter 11 -------------------------------------------- After being open a little more than a year, the Manhattan "Hooters" has filed Chapter 11 bankruptcy according to The New York Times. The restaurant, known for its waitresses who wear push- up bras and very short orange skirts, is losing 30-thousand dollars a month. Some think Manhattan's high rent, regulations, loads of competitive restaurants and the access to more scantily clad woman is doing Hooters in. The restaurant chain says it has more than 200 successful locations elsewhere. But Hooters didn't make it in Buffalo, either. (UPI; 01/02/99) JOTAN INC: Committee Taps Miller, Canfield ------------------------------------------- The Official Unsecured Creditors' Committees of the debtors, Jotan Inc. and Southland Container Packaging Corp. apply for entry of an order authorizing the employ of Miller, Canfield, Paddock and Stone, PLC as their counsel. The debtors are both in the business of distributing packaging and shipping supplies through service and distribution centers located throughout the US. Their primary businesses are located in Jacksonville, Florida. The Committees consist of the same three members: Stone Container Corporation, Jefferson Smurfit Corporation and Gaylord Container Corporation. Miller, Canfield's proposed services will include: Investigation of the validity, perfection and priority of the Banks' asserted secured claims and possible objection thereto; investigation of causes of action that the debtor and the estate may have against third parties under Chapter 5 of the code; participation in the formulation of a plan; requesting the appointment of a trustee or examiner, or request of conversion to a Chapter 7; objection to claims; and representation of the Committees in Court. A $20,000 carve-out was agreed to by the banks for fees and expenses of counsel for the committee in the Jotan case. JUMBOSPORTS: Still Open After Filing Chapter 11 Petition -------------------------------------------------------- Tucson's JumboSports store remains open after the sporting goods facility's parent company filed Chapter 11 bankruptcy late Sunday. "Presently business will continue as is, with no impact on daily operations," said Rachel Nelson, director of communications for JumboSports Inc. based in Tampa, Fla. She said the firm's 52,000-square-foot store at 7255 E. Broadway employs 45 full- and part-time employees. The facility opened in early 1995, she said. Nelson said JumboSports plans to file a reorganization plan with Bankruptcy Court in Tampa in the next few weeks. "It is too early to know which if any stores will be affected by the reorganization plan," she said. "The company has closed stores in the past, and it is a possibility." She said two Phoenix-area stores were shuttered earlier this year. The Tucson facility is the firm's only remaining Arizona presence, she said. Nelson said JumboSports grew dramatically in the early and mid- 1990s and now includes 59 stores in 23 states, primarily in the Southeast. She said the reorganization was prompted by strong competition among retailers in quality, name brand athletic equipment, apparel and footwear. Jack Bush, JumboSports' chairman and CEO, said in writing: "This allows us to call a `time out' with our creditors while we work to develop a plan or reorganization that puts the company back on the right track with a reduced debt burden and improved profitability." Calls made yesterday to the Tucson store to discuss the reorganization were referred to corporate headquarters in Tampa. Trading of JumboSports stock was halted on the New York Stock Exchange yesterday after the restructuring announcement. The firm's stock had been traded under the JSI ticker symbol, she said. It last sold at 1/8. Arizona Daily Star - 12/29/98 LACLEDE STEEL: $85M DIP Credit Pact Has Final Okay -------------------------------------------------- The U.S. Bankruptcy Court in St. Louis has given final approval to Laclede Steel Co.'s $85 million debtor-in- possession credit agreement with BankAmerica Business Credit Inc. as agent. When the steelmaker filed for Chapter 11 on Nov. 30, about $71.6 million, plus accrued interest and fees, was outstanding under a $95 million prepetition facility from BankAmerica, BNY Financial Corp., and NationsBank N.A. The DIP facility provides immediate additional availability of $5.1 million, and that amount could top $13 million as the collateral that comprises the borrowing base increases, Laclede said. The company will reduce the prepetition debt to the negotiated amount of $37.3 million, "which shall remain frozen as a pre-petition secured claim, subject to reduction upon the disposition of fixed assets of the Debtors." The DIP agreement calls for monthly adequate protection payments of $355,000 to the lenders in respect of the $37.3 million prepetition claim. The DIP agreement, which runs through Dec. 31, 1999, requires Laclede to pay the lenders a $210,000 funding fee, a collateral management fee of $10,000 per month, and a facility fee of 0.5 percent on the unused portion. The Daily Bankruptcy Review and ABI Copyright c December 31, 1998. MERCURY FINANCE: Reports Amended Plan ------------------------------------- In a Form 8K filed with the SEC on December 29, 1998, Mercury Finance Co. reports two press releases issued on December 22, 1998, as follows: TO BUSINESS EDITOR: Mercury Finance Announces Amended Reorganization Plan CHICAGO, Dec. 22 /PRNewswire/-- Mercury Finance Company (OTC Bulletin Board: MFNNQ) today announced that the Company and the committees representing the creditors, the class action security claimants, and the shareholders in its chapter 11 case have reached an agreement to amend the reorganization plan earlier filed with the court. It is expected that the amended plan will be presented to the court in an amended disclosure statement on December 28, 1998. Assuming court approval of the amended statement, the reorganization plan is expected to be ready for court confirmation hearings in February, 1999. "We are pleased that the parties have reached this amended agreement so that the necessary financial restructuring process can move forward," said William A. Brandt, Jr., president and chief executive officer of Mercury. "The amended disclosure statement and the plan of reorganization, if approved by the court, will relieve the Company of the burdens of its present debt structure and will allow current shareholders to get some limited recovery on their investment. A successful restructuring will also provide the Company with a sound financial platform from which to operate the business and seek to return to profitability." Under the new agreement, senior lenders would receive 95 percent of the equity of the reorganized company and notes equal to 75 percent of the amounts owed to them. Shareholders would receive five percent of the equity and warrants to purchase additional stock at certain specified prices. Securities claimants would receive cash and the rights from certain litigation claims against third parties made by the Company. Mercury has continued its business operations throughout the chapter 11 case. The Company continues to do business from its branch offices nationally and to pay all trade obligations and dealer contracts in the ordinary course without interruption. Summary of Terms Subject to the approval by the bankruptcy court, the main provisions of the amended disclosure statement and the plan of reorganization include the following terms: -- The Company's senior lenders receive 95 percent of the initial equity in the reorganized company and new secured notes equal to 75 percent of the face value of their claims. -- The current shareholders receive five percent of the shares of the new common stock and warrants to purchase an additional 17.4 percent of the stock. The exercise prices of the warrants, valid for three, four and five years, are expected to be significantly in excess of the initial market price of the new stock. -- The class action securities claimants receive $5 million in cash and the right to certain litigation claims against third parties made by the Company. This general summary of terms is not meant to be complete. The full text of the Amended Disclosure Statement and Plan of Reorganization will be filed with the U.S. Bankruptcy Court for the Northern District of Illinois. (SAFE HARBOR STATEMENT) TO BUSINESS EDITOR: Mercury Finance Issues Clarification of Earlier Announcement CHICAGO, Dec. 22/PRNewswire/ -- Mercury Finance Company (OTC Bulletin Board: MFNNQ) issued the following clarification of its announcement released earlier today under the headline, "Mercury Finance Announces Amended Reorganization Plan." Within the section of the earlier release that was entitled "Summary of Terms," the first item is amended and clarified by the addition of the words within single quotes: "- - The Company's senior lenders receive 95 percent of the initial equity in the reorganized company, 'a certain amount of surplus available cash,' and new secured notes equal to 75 percent of the face value of their claims 'after the payment of the available cash.'" MESA AIR: Notification Of Late Filing ------------------------------------- Mesa Air Group, Inc. reports to the SEC that additional time will be needed for the company's management and accountants to complete the preparation and review of the Registrant's Report on Form 10-K for the period ended September 30, 1998. The additional time required to prepare and review the Registrant's Report on Form 10-K is due, in part, to the fact that certain members of the Registrant's management team responsible for preparing portions of the Report on Form 10-K have, only recently, become employees of the company. ONCOR: President and CEO Resigns ------------------------ Oncor Inc. said that Cecil Kost, the company's president and chief operating officer, will resign effective December 31, 1998. Kost joined Oncor in 1996. In March of this year, the company ousted founder and Chief Executive Officer Stephen Turner after reporting that it might not have enough cash to continue operations more than a few months, and began selling some revenue-producing divisions to raise cash to pay creditors. Oncor has sold all its technology assets -- including a cancer test it had hoped would salvage the company -- and laid off all but about 15 employees. Jose Coronas, chairman of the Gaithersburg firm, said a management consultant has been hired by Oncor to oversee operations, and the company is looking for someone to replace Kost. PERFORMANCE CAPITAL: Judge Agrees To Appoint Trustee ---------------------------------------------------- After an emergency appeal by the California Department of Corporations, U.S. Bankruptcy Judge Robert Alberts agreed Tuesday to appoint a trustee to oversee last week's chapter 11 filing of Newport Beach-based Performance Capital Management, according to The Orange County Register. Performance's leaders who were accused of fraud were removed by Judge Alberts, who said the trustee appointment would best protect Performance's more than 2,000 investors, whose funds total nearly $58 million. The company, which specializes in buying delinquent debt and selling it to investors, may require several trustees to handle the conflicts of interest among Performance and its affiliates, nine of which also filed chapter 11. (ABI 31-Dec-98) PHILIPPINE AIRLINES: Future Appears Dim --------------------------------------- DEC 30, 1998, M2 Communications - Philippine president Joseph Estrada is hoping to tap into Japan's US$30bn fund for ailing Asian economies as a last resort to save Philippine Airlines from folding, and on December 28 formally requested that the Japanese government make a loan of US$150m under the Miyazawa Fund through the Japan Export-Import Bank. However Finance Secretary Edgardo Espiruto said it is unlikely that the government will be able to bail the airline out and he believes it more than likely that the airline will be forced to close. The President is hoping that talks between Cathay Pacific and PAL will recommence and save the airline. Talks with Cathay and Northwest Airlines are currently continuing in private. Apparently some other businesses are also interested in the bailout plans. One of these is the state pension fund, Social Security System, which claims it is willing to invest up to US$25.7m in PAL if the airline can clean up its balance sheet. In further news, a petition has been put in by the Sycip, Salazar and Hernandez and Gatmaitan Law Offices on behalf of their clients to gain an extension until January 24 to submit their comments about the PAL remediation plan. Other creditors have already submitted comments. The Airline Pilots Association of the Philippines has also submitted comments and has rejected the PAL plan. In a five-page document to the Securities and Exchange Commission, the Union declared itself unhappy with the plan's dependence on securing a strategic partner, the lack of an employee plan, and the unjustified reduction of the fleet. AIRLINE INDUSTRY INFORMATION-(C) 1997-8 M2 COMMUNICATIONS LTD M2Airline-12/30/98 PHYSICIANS RESOURCE: Developments Regarding Company Debt -------------------------------------------------------- Physicians Resource Group, Inc. (NYSE: PRG) today announced that NationsBank has agreed not to take any action prior to January 11, 1999 with respect to its $9.5 million loan to the Company due December 31, 1998. The Company continues to work with NationsBank and the individual guarantors of the NationsBank loan to obtain an acceptable arrangement to permit the Company to pursue its restructuring. As a result of the continued default on the NationsBank loan, the Company is restricted under applicable subordination provisions from paying interest due on December 1, 1998 on its outstanding $125 million 6% Convertible Subordinated Debentures due 2001. The maturity of the Debentures could be accelerated by the Debenture Trustee or holders of 25% aggregate principal amount of the Debentures after today as a result of such non-payment. PRG is a provider of physician practice management services to eye care practices and the company operates ambulatory surgery centers. PITTSBURGH PENGUINS: Players' Group May Take Control ---------------------------------------------------- The Pittsburgh Penguins, which filed for chapter 11, may be taken over by a group of investors for one of its players, the Pittsburgh Port Gazette reported. Penguin Mario Lemieux's group hopes to gain control of the Penguins without paying anything to the team's current owners, a move that would enable the group to pay off or refinance the team's secured debts. Although the Penguins have exclusive rights to file their reorganization plan until Feb. 10, the team can extend the deadline if the proposal is not complete, but Lemieux's group hopes to gain control of the franchise before it is no longer under bankruptcy protection. Penguins co-owner Howard Baldwin, who supports Lemieux's move, said, "Having local ownership is nothing but a positive. My personal opinion is, the situation cries out for local investors." (ABI 31-Dec-98) PITTSBURGH PENGUINS: Ticketmaster Pact Still In Doubt ----------------------------------------------------- A judge yesterday refused to exempt the Penguins' long-term contract with a ticket agency from the murky uncertainty of its bankruptcy proceedings. The team had asked U.S. Bankruptcy Judge Bernard Markovitz to guarantee continuation of a contract with Ticketmaster- Pittsburgh Inc. that was scheduled to run through October 2004. But Markovitz, for the time being, has sided with Penguins creditors who wanted to leave the team's options open. Philip Uher, attorney for the team's unsecured creditors, said he didn't think that a long-term agreement with Ticketmaster was appropriate before the team came up with a financial reorganization plan. "Ticketmaster may not be the only option," he said. When the Penguins filed for bankruptcy protection in October, all of its contracts were put in a sort of legal limbo, to be continued or dissolved based on court rulings and the team's financial reorganization plan. The Penguins sought to preserve the Ticketmaster deal, they said, because they are making money from it. Team attorney Robert G. Sable said it made sense to affirm the deal. Markovitz didn't see it that way. "I'm missing the "making sense" part," the judge said. Sable said the team gets $75,000 a month from Ticketmaster. The team's contract with the ticket agency runs through Oct. 31 and then for another five years if the team does not pull out of it. Ticketmaster gets $3.50 for each ticket sold at a Ticketmaster outlet and $3.75 for each ticket sold over the phone. The agency also provides a computer program that keeps track of ticket sales. "This is our inventory control. Anybody who would come in would need this software," Sable said. "I can't imagine anyone would not want to assume this contract." Ticketmaster was not represented at the hearing. When the judge asked about the company, Sable said the company's lawyer was on vacation and not available. Uher asked the judge to wait to decide on the matter and the judge agreed that he would. He said the company was protected because it is taking its money off the top from ticket sales, so there was no threat of the company not getting paid. In the fall, when the team was struggling to meet its payrolls, the team had asked the judge to keep the Ticketmaster contract, and had asked for permission to pay the agency an advance deposit, Sable said after the hearing. Back then, he said, it made sense to protect Ticketmaster because of the threat of canceling games if the team couldn't pay its players. That is no longer a threat because the team has a $20 million loan to see it through the season. Sable said he wanted the judge to look at the issue again in February, when the team starts selling tickets for next season. Pittsburgh Post Gazette -12/30/98 QUADRAX CORPORATION: Current Report Filed With SEC --------------------------------------------------- In a current report filed with the SEC Quadrax Corporation (the "Company") as a debtor under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Rhode Island reports that it has begun an ongoing process of the disposition of certain of its assets. The Company began the first phase of this process in an auction of a portion of its Portsmouth, Rhode Island plant equipment held on December 10, 1998. A second auction of equipment from the Company's Vista, California plant was held on December 16, 1998. Equipment sold includes some of its tape lines used in the manufacturing of raw materials and office equipment and supplies used by the Company for the development of thermoplastic sports products and golf shafts. The assets were sold to the public for an approximate gross consideration of $400,000. The Company anticipates the process to continue with ongoing sales of the remaining equipment to occur in the first quarter of 1999. The Company is retaining core equipment that is required to manufacture its primary thermoplastic material. On December 28, 1998, the Company sold its capital stock in its wholly owned subsidiary, Victel, Inc. ("Victel") to E.B. Acquisition LLC ("EB"). The consideration for the sale of all right, title and interest of the Company in and to the Victel stock to EB was $1,000,000. In addition, on December 28, 1998, EB deposited $500,000 in an escrow account with the Company's outside bankruptcy counsel. The terms and conditions of the sale and of the escrow arrangement are of public record in the United States Bankruptcy Court for the District of Rhode Island. RUTHERFORD MORAN: Reports Merger Agreement ------------------------------------------ On December 23, 1998, Rutherford-Moran Oil Corporation ("Rutherford-Moran")publicly announced that it has entered into a definitive merger agreement with Chevron Corporation ("Chevron") pursuant to which Chevron will acquire all the outstanding shares of Rutherford-Moran for approximately $91 million in Chevron common stock. A complete text copy of the Agreement and Plan of Merger dated as of December 23, 1998 by and among Chevron Corporation, Chevron Thailand Inc. and Rutherford-Moran Oil Corporation is available via the Internet at http://www.sec.gov/Archives/edgar/data/0000950129-98- 005223.txt SCHWEITZER MOUNTAIN: Harbor Resorts Reports Acquisition ------------------------------------------------------- Harbor Mountain L.L.C., a partnership between Harbor Properties and Keith McCaw, completed its purchase of Schweitzer Mountain Resort near Sandpoint, Idaho, from U.S. Bank today. The price was undisclosed, but the appraised value has been reported as $18 million. Harbor originally tried to buy the resort from the Brown family of Sandpoint in November 1997, but the family placed the resort and other properties in Chapter 11 bankruptcy in an attempt to block any sale. U.S. Bank bought the resort in early December 1998. "Schweitzer fits Harbor well, leveraging our existing ski operations and real estate expertise. In addition, Harbor will continue to pursue other ski and recreation opportunities," stated Robert Holmes, President and CEO of Harbor Properties. SERVICE MERCHANDISE: Poor Sales Results --------------------------------------- The Commercial Appeal Memphis TN reports on December 31, 1998 that Nashville-based Service Merchandise released fourth-quarter sales results Wednesday that did little to shore up the retailer's weak financial position. Same store sales, hard-line sales and the company's gross margin were all down in the low double digits, while jewelry sales were up in the mid-single digits. The company did not release specific figures. Earlier this month, slumping sales forced the company to delay making a $13.5 million interest payment due Dec. 15 on a $900 million refinanced debt. It has until Jan. 15 to make the payment. Service Merchandise's credit rating has been on the decline since 1997, reflecting concerns as to whether the company's efforts to reinvent itself will work. Its drooping shares closed Wednesday at 28 cents on the New York Stock Exchange, having reached a 52-week high of just $2.56 and a low of 25 cents. Service Merchandise, founded in 1934 as a five-and-dime store, recently underwent a $175 million transformation that changed its stores from the traditional catalog showroom format to one that allows consumers to pick merchandise off the shelf and make purchases. Under the old format, items were displayed with pull tickets. Shoppers would take a ticket to a cashier, pay for the merchandise, and then wait for it to be brought from the back room. The lower than expected fourth-quarter sales results are "a very onerous sign," said Gary Dennis, retail analyst for J. C. Bradford in Nashville. If the company is unable to make the loan payment in mid-January, it may have to seek protection from creditors in bankruptcy court. In a statement released Wednesday, the company said: "The interest payment due December 15, 1998, remains unpaid and the Company continues to evaluate available alternatives. The company will not comment on current business trends beyond its press releases during the period between Thanksgiving and the reporting of fourth-quarter results in mid-February." SOUTHLAND CONTAINER: Committee Taps Miller, Canfield ---------------------------------------------------- The Official Unsecured Creditors' Committees of the debtors, Jotan Inc. and Southland Container Packaging Corp. apply for entry of an order authorizing the employ of Miller, Canfield, Paddock and Stone, PLC as their counsel. The debtors are both in the business of distributing packaging and shipping supplies through service and distribution centers located throughout the US. Their primary businesses are located in Jacksonville, Florida. The Committees consist of the same three members: Stone Container Corporation, Jefferson Smurfit Corporation and Gaylord Container Corporation. Miller, Canfield's proposed services will include: Investigation of the validity, perfection and priority of the Banks' asserted secured claims and possible objection thereto; investigation of causes of action that the debtor and the estate may have against third parties under Chapter 5 of the code; participation in the formulation of a plan; requesting the appointment of a trustee or examiner, or request of conversion to a Chapter 7; objection to claims; and representation of the Committees in Court. A $20,000 carve-out was agreed to by the banks for fees and expenses of counsel for the committee in the Jotan case. STAR NEWCO: Seeks To Extend Exclusivity --------------------------------------- The debtor, Star Newco, Inc. is seeking an extension of its exclusive period in which to file a plan of reorganization and an extension of its period to solicit acceptances thereto. A hearing will be held on January 26, 1999 at 2:00 PM at the US Bankruptcy Court, 824 Market Street, Wilmington, Delaware 19801. The debtor manufactures expandable wall fasteners. The debtor requests the entry of an order enlarging the exclusive filing period by 120 days through and including May 4, 1999, and to June 5, 1999 for solicitation of acceptances. According to the debtor, extending the exclusive period will enable the debtor, in consultation with the Creditors' Committee and other creditor constituencies to continue to seek potential offers for the debtor's core business, to develop a plan of reorganization with maximum creditor support, conclude plan negotiations, and confirm a plan of reorganization in a stable and well- defined environment without "disruption, uncertainty and chaos." The debtor claims that its case is complex, and that the initial 120 days was not enough time to propose a reorganization plan due to the sale of the company's noncore business and other nonessential equipment and inventory. In addition, the debtor is still analyzing how many claims there are against the company, whether the claims are valid and the amount of the claims. TECHNIMAR INDUSTRIES: Response to Motion to Dismiss --------------------------------------------------- Technimar Acquisition Group, LLC ("TAG") responds to the motion to convert or dismiss filed by the US Trustee. TAG supports the motion to convert the case to a Chapter 7. TAG is a post-petition secured creditor of the debtor pursuant to a post-petition loan agreement. TAG has a claim against the debtor and the estate with priority over all administrative expenses. The debtor defaulted on the loan agreement and was unable to cure the defaults. TAG believes that a Chapter 7 trustee should be appointed to investigate whether the estate has any avoidance actions arising out of pre-petition transfers, and to investigate the financial affairs of the debtor. UNARCO COMMERCIAL: Files Chapter 11 ----------------------------------- Unarco Commercial Products, the Oklahoma company that has been credited with manufacturing the first shopping cart, filed chapter 11 on Dec. 23 in the Eastern District of Oklahoma, according to Tulsa World. The world's largest shopping cart manufacturer, Unarco owed $43 million with assets of $38 million, as of Nov. 30. UNISON HEALTHCARE: Files Quarterly Report ----------------------------------------- Unison Healthcare Corporation and its subsidiaries filed with the SEC a quarterly report for the quarter ended June 30, 1998. In the second quarter of 1998, Unison recorded a net loss of $5.0 million, or $0.78 per share, compared to a net loss of $2.9 million, or $0.46 per share, in the prior year quarter. Loss before income taxes amounted to $5.0 million inthe 1998 second quarter compared to $4.3 million in the same period in 1997. Total revenues decreased $9.2 million, or 16.1%, to $48.1 million in the 1998 second quarter from $57.4 million in the comparable 1997 quarter. For the six months ended June 30, 1998, Unison recorded a net loss of $9.8 million, or $1.53 per share, compared to a net loss of $7.0 million, or $1.11 per share, for the 1997 period. Total revenues decreased $10.3 million, or 9.1%, to $102.8 million in the 1998 period from $113.1 million in 1997. At June 30, 1998, Unison had cash and equivalents amounting to $4.3 million compared to $5.3 million at December 31, 1997. WILLIAMS BAY TRADING: Bank One Ordered To pay $2M ------------------------------------------------- The Milwaukee Sentinel & Journal reports on December 29, 1998 that Bank One Milwaukee has been ordered to pay $2 million in damages to a Waterford-based clothing distributor for breach of contract. Milwaukee County Circuit Judge Michael Malmstadt last week ordered the bank to make the payment to the Williams Bay Trading Co. Williams Bay Trading claimed that actions by the bank forced the firm into bankruptcy. Malmstadt also found that Bank One's handling of the Williams Bay account constituted bad faith. "The court ruled against us, and we are considering an appeal," said John Russell, chief communication officer for Bank One Corp. in Columbus, Ohio. Stan Lata, a Bank One spokesman in Chicago, said the ruling will have no effect on Bank One's earnings or its Milwaukee operations. The now defunct Williams Bay Trading Co. imported flannel shirts and gloves to sell to Kohl's Department Stores, Mills Fleet Farm stores and truck stops nationwide. The distributor entered into a relationship with Bank One in 1994. In 1995, Williams Bay Trading had problems with one of its vendors, causing the company to report a loss, said Michael Schutte, former owner of Williams Bay Trading. "We lost about $50,000 that year . . . (but) Bank One renewed our loans (later that year)," Schutte said. Bank One's line of credit to Williams Bay Trading was for $4 million. The bank refused to issue a line of credit to the distributor in 1996, Schutte said. "In our minds there was no reason to refuse (Williams Bay Trading) credit," said Cynthia M. Mack, an attorney with Lichtsinn & Haensel in Milwaukee. "Williams Bay had not committed default." The timing of Bank One's decision made it virtually impossible for the distributor to find another financial institution to issue a line of credit, Mack said. "They made their decision weeks before (Williams Bay Trading) needed to get its inventory," Mack said. Many foreign vendors only deal with companies that have established lines of credit with a bank, she said. "Bank One's decision wiped Williams Bay out," Mack said. Williams Bay Trading filed for Chapter 11 reorganization and liquidated its assets. The company sold some of its assets to a Racine clothing distributor. "We gave them our customer list and vendors and about $3 million in purchase orders," Schutte said. Schutte said he was pleased with the judge's ruling but was still upset with the way Bank One treated him. ********* A listing of Meetings, Conferences and Seminars appears in each Tuesday's edition of the TCR. Bond pricing, appearing in each Friday edition of the TCR, is provided 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. 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