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/raid1/www/Hosts/bankrupt/TCR_Public/990115.MBXT R O U B L E D C O M P A N Y R E P O R T E R Friday, January 15, 1999, Vol. 3, No. 10 Headlines ABL: Phoenix Tops List of ABL Creditors AMERICAN RICE: Seeks Nod For Sixth DIP Amendment BROTHERS GOURMET: Seeks Approval of Bidding Procedures CALDOR CORP: Close To Liquidation - Sells Leases HAYES CORP: Panel Will Seek Chapter 11 Trustee - Under Seal LEVITZ FURNITURE: Seeks To Enter Into Agency Agreement LIBERTY HOUSE: Stipulation Regarding Consulting Agreement LIVENT INC: Former Officers Indicted LIVENT INC: Statement of Garth Drabinsky LYNX GOLF: Seeks Time To Assume/Reject Leases MCCULLOCH: Strategic Distribution Comments On Bankruptcy NEWTWAVE: Seeks To Pay Search Firm $300,000 To Find New CEO PETSEC ENERGY: To Raise $68.5M With Sale of Interests RINCON ISLAND: Committee Taps Oil and Gas Advisor RINCON ISLAND: Committee Taps Baker & McKenzie SCOOP INC: Debtor Taps Latham & Watkins SOUTHMARK CORP: Fee Disgorgement Bars Malpractice Suit THE SCORE BOARD: Hearing on Disclosure statement Set UNISON HEALTHCARE: Opposition to Filkoski's Objection VENTURE: Notice of Effective Date VOICE IT: Court Denies Employ of Special Counsel DLS CAPITAL: Bond Pricing For Week of January 11 ********* ABL: Phoenix Tops List of ABL Creditors --------------------------------------- Phoenix Home Life Mutual Insurance Co., perhaps the American Basketball League's biggest corporate fan, is now its biggest creditor, on the hook for a $6 million bank loan it may never recover. Hartford-based Phoenix, which guaranteed payment of a loan from Fleet Bank, is taking by far the biggest hit among more than 1,000 creditors who will lose money as a result of the ABL's bankruptcy. But a day after state Attorney General Richard Blumenthal announced an investigation into possible antitrust violations by the rival WNBA women's basketball league, a bankruptcy lawyer for the ABL said the league plans its own antitrust lawsuit, a move that might provide more money for season-ticket holders and others hurt by the league's demise. The lawyer, Michael B. Lubic of Los Angeles, said he could offer no details of the league's legal plans and would not even identify the defendant, although it is almost certainly the NBA and WNBA. But Lubic did confirm that when the ABL files a detailed list of assets with the bankruptcy court, the league intends to list the proceeds of an as-yet unfiled antitrust lawsuit as a potential source of money -- money that would go directly to the league's creditors. In the company's New Year's Eve filing, the ABL claimed assets of less than $500,000 and debts of more than $10 million. Players and some season-ticket holders will be at the top of the list when the league's assets are liquidated. But with $2.8 million owed to ticket holders and an additional $750,000 in unpaid wages, even those "priority" creditors may see only pennies on the dollar. Unsecured creditors -- a long list of businesses from Fleet to CBS Sports to Reebok -- may see nothing at all. The ABL's second-largest creditor is Larry Hunt, a Georgia man who was partners in business -- and crime -- with ABL co-founder Bobby Johnson. Hunt and Johnson pleaded guilty last month to federal charges that they plotted a $9.5 million Medicaid fraud scheme. Hunt owned stock in the ABL and, after a dispute, the league agreed to buy back the stock, although Hunt had not collected all the money by the time the league went under. His debt with the ABL is listed at $1.9 million, but it's unlikely Hunt will collect anything. As part of his plea agreement, Hunt was sentenced to three years in prison and agreed to forfeit all of his assets. In fact, the U.S. Marshals Service in Altanta, which seized Hunt's assets, is also listed as a creditor. There are more than 1,000 other creditors, including advertising and media companies, sporting-goods manufacturers, players, ticket holders and game arenas. Only nine are owed $100,000 or more. The city and county of Denver are out more than $43,000 for the eight games already played by the league, and that doesn't take into account money lost on games that weren't played, said Bobbi McFarland, business manager for the county's theaters and arenas. The 20 biggest unsecured creditors listed by the American Basketball League Inc. in its bankruptcy filing: Fleet Bank $6.08 million Loan guaranteed by Hartford Phoenix Home Mutual Larry Hunt $1.9 million Stock repurchased by ABL Lithonia, Ga. Nat'l Sports Partnership $320,000.00 Television Los Angeles Fox Sports Bay Area $281,000.00 Television Woodbury, N.Y. Near North Ins. Brokerage $279,379.00 Insurance Chicago U.S. Marshals Service $270,000.00 Seized assets of Larry Hunt Atlanta (portion of repurchased stock) Gish, Sheerwood & Friends $222,737.88 Advertising Nashville Cavalli & Cribbs $200,277.56 Advertising Palo Alto, Calif. CBS Sports $100,000.00 Media exposure New York Gear For Sports $97,164.97 Apparel Chicago ANC Sports Enterprises $88,850.00 Signs Purchase, N.Y. Baden & Co. $83,324.75 Advertising King of Prussia, Pa. PMTV $79,903.00 TV production King of Prussia, Pa. Stuart Leeb $67,309.00 Landlord Palo Alto, Calif. Venture Law Group $66,601 Legal services Menlo Park, Calif. Emerald City Media Services $52,843.17 TV production New York Associated Travel $49,264. Travel agent Ontario, Calif. Jarrad-Ingram $45,249.99 Public relations Nashville Reebok $43,712.85 Equipment Atlanta City & County of Denver $43,176.58 Landlord Denver, Colo. (Copyright@ The Hartford Courant 13-Jan-99) AMERICAN RICE: Seeks Nod For Sixth DIP Amendment ------------------------------------------------ American Rice Inc. is seeking an emergency order approving the sixth amendment to its debtor-in-possession financing agreement. The DIP financing is necessary to prevent the rice processor's business from grinding to a halt. "Specifically, Debtor would be forced to terminate business operations immediately if it could not continue to use cash collateral, and borrow additional funds from the Working Capital Lenders," according to the Jan. 4 memorandum. Noting that the agreement's fifth amendment expired on Dec. 31, American Rice anticipated that, by Jan. 4, its working capital lenders would agree to continue to provide financing through May 31, at the latest, in accordance with a budget. American Rice received interim approval on Sept. 11 to borrow up to $8 million over four months from its bank group, led by First Union National Bank (FTU). At that point, the company had been seeking a facility with less availability than its original $85 million DIP agreement.(The Daily Bankruptcy Review and ABI Copyright c January 14, 1999) BROTHERS GOURMET: Seeks Approval of Bidding Procedures ------------------------------------------------------ The debtors, Brothers Gourmet Coffees, Inc., et al, seek an order approving proposed bidding procedures with respect to the sale of the debtors' business and approving certain terms of stock purchase agreement. Brothers executed a Stock Purchase Agreement with BGC Acquisition Corp. pursuant tot he contract the Proposed Buyer has agreed to purchase 1-00% of the equity of Brothers, a s reorganize under a plan of reorganization, for consideration consisting of approximately $20.75 million in cash and the assumption of certain specified obligations. PricewaterhouseCoopers LLP has valued the total consideration under the contract at approximately $23.81 million. In agreeing to permit its proposal to be subject to the receipt of higher and better offers, the Proposed Buyer has conditioned its offer on Brothers being authorized to pay the Proposed Buyer a due diligence fee of $100,000 to defray the Proposed Buyer's reasonable expenses incurred in connection with its efforts to purchase the debtor's business, which fee would be deposited into escrow upon entry of an order granting this motion. Brothers also agrees to pay the proposed buyer a break up fee of $450,000 under certain specified circumstances. The auction is set for March 3, 1999 among bidders having submitted a qualified bid. The deadline to submit an offer to purchase the debtor's business is 5:00 PM EST on February 22, 1999. Higher bids must increase the proposed sale transaction by at least $750,000. CALDOR: Close To Liquidation - Sells Leases ------------------------------------------- Reportedly Close to Liquidation Caldor Corp. has sold 62 of its store leases to three major discount chains, according to the Bergen Record, and it is rumored that the discount retailer may begin liquidating as early as next week. Last week the company stopped paying suppliers, and lenders have been applying pressure for Caldor to cease business and liquidate. Caldor, which has been under chapter 11 protection since 1995 and was to emerge from bankruptcy this spring, has been losing money continuously. Creditors of the Norwalk, Conn., chain have pushed the company to liquidate to stem their losses. According to an unnamed source, Caldor sold 34 prime leases to Kohl's Corp., 18 to Kmart and 12 to Target. Caldor has not discussed its plans or the reported sales of the leases and said only that negotiations are confidential. (ABI 14-Jan-99) HAYES CORP: Panel Will Seek Chapter 11 Trustee - Under Seal ----------------------------------------------------------- Hayes Corp.'s official committee of unsecured creditors is seeking permission to file under seal its emergency motion requesting the appointment of a Chapter 11 Trustee or, in the alternative, the conversion of the cases to Chapter 7. Remarking that "the Debtor's efforts at reorganization have failed," the panel said it has lost confidence in the ability of Hayes' board to manage the announced liquidation. Moreover, the filing notes that the only parties with a continuous stake in the outcome of the case are debtor-in-possession lender NationsCredit Commercial Corp. and prepetition unsecured and other creditors. The filing requests that only the court, Hayes, NationsCredit, and the U.S. Trustee have access to the emergency motion. (Federal Filings Inc. 14-Jan-99) LEVITZ FURNITURE: Seeks To Enter Into Agency Agreement ------------------------------------------------------ The debtor, Levitz Furniture incorporated, et al., seeks an order authorizing the debtors to enter into an agreement with a joint venture among Hilco Trading Co., Inc., Garcel, Inc. d/b/a great American Asset Management, the Nassi Group, LLC and Gene Rosenberg Associates to act as the debtors' agent for conducting certain store closing sales at 27 stores on the terms and conditions set forth in the Agency Agreement. The store closing sales shall commence no later than February 1, 1999 and shall run until April 30, 1999, unless otherwise consented to by the merchant. The agent has agreed to pay the debtors the sum of 80% of the aggregate cost value of the merchandise and for first quality optional sets and first quality stand alone pieces of additional Levitz inventory and shall be 50% of cost value for less than optimal items. In addition to the Guaranteed Amount, the agent agrees to pay 1% of the proceeds received form the sale of the augmented inventory. The agreement is subject to higher and better offers, and a termination fee of l$270,000 is provided. LIBERTY HOUSE: Stipulation Regarding Consulting Agreement --------------------------------------------------------- Liberty House, Inc., debtor and the Official Committee of Usnecured Creditors enter into a Stipulation with reference to a consulting agreement with Kurt Salmon Associates.("KSA") KSA will assist the debtor by developing and managing the debtor's master project plan. Once implemented the plan will be used to manage all of the information technology projects that are currently active or scheduled for implementation at Liberty House. Specifically, the plan will monitor, track and report the status of all information technology projects as they relate to Year 2000 compliance. KSA will develop the plan system procedures and guidelines; implement an "issues tracking" database program on the Liberty House network for plan project leaders in order to track all project issues; implement a "bug tracking" database program; report plan finding through a weekly summary report; compile budgets, forecasts and cash flow data; and compile weekly project status reports. KSA will also educate and train Liberty House personnel to use the plan system. The fee to be paid to KSA under the agreement is estimated not to exceed $69,560. LIVENT INC: Former Officers Indicted ------------------------------------ Two former top officers of the troubled theatrical group Livent Inc., were indicted Wednesday for masterminding a scheme to inflate the company's financial records and defraud investors. The indictment filed in U.S. federal court* in Manhattan names Garth Drabinsky, 48, Livent's former chairman, and Myron Gottlieb, 55, former president. The two were also named in a related civil suit filed by the Securities and Exchange Commission. Toronto-based Livent, whose Broadway productions have won 18 Tony awards, including Best Musical for "Kiss of the Spider Woman," filed for Chapter 11 bankruptcy protection on Nov. 18, 1998. The filing came four months after it restated more than two years of financial results due to accounting irregularities. The company restated the results dating back to 1996 to reflect a reduction in net income of C$85.1 million over that period. The Nov. 18 restatement included a C$45.8 million loss in the theater company's second quarter. Livent suspended Drabinsky and Gottlieb on Aug. 10. Its stock was suspended in Toronto and New York the same day and now trades on Canada's over-the-counter market. According to the U.S. Attorney's office in Manhattan, two other former officers, Maria Messina, chief financial officer, and Gordon Eckstein, senior vice president of finance and administration, have pleaded guilty in the criminal case. Authorities alleged the defendants were involved in an eight-year fraudulent accounting scheme orchestrated by Drabinsky and Gottlieb. Former senior management of Livent allegedly inflated earnings, revenues and fixed assets reported by the company in financial statements filed with the SEC and disseminated publicly since 1995, according to the charges. As a result of the filings, Livent overstated results of its operations and financial conditions. The scheme allegedly affected at least 17 filings made by Livent during its first three fiscal years as a publicly traded company in the United States starting in 1995 and continued through the first quarter of fiscal 1998. "At the end of each fiscal quarter, Drabinsky, Gottlieb and others directed the accounting staff to simply erase from Livent's general ledger millions of dollars of direct operating expenses and general and administrative expenses that had been incurred and recorded by Livent's controllers," the indictment charges. >From 1990 through 1994, even before Livent became a U.S. public company, Drabinsky and Gottlieb allegedly engaged in a kickback conspiracy to siphon off about $C7 million for themselves through inflated invoices paid to vendors. Drabinsky and Gottlieb allegedly directed Eckstein to capitalize the majority of this amount into preproduction cost accounts. As a result Livent overstated pre-tax earnings in its fiscal years 1991 and 1992 financial statements that were included in the company's registration statement in May 1995 to register 12 million shares of common stock in the United States. That registration statement also overstated the company's preproduction costs in fiscal 1994 by $C4 million. Authorities also alleged that, beginning in 1994, Drabinsky and Gottlieb directed elaborate manipulations of books, record and accounts. These manipulations were allegedly designed to understate expenses in order to inflate earnings, portray unsuccessful theatrical products as profitable and to meet quarterly and annual projections provided to Wall Street analysts. One manipulation, for example, involved the improper shifting between accounting periods of show preproduction costs, like advertising, to fixed assets, such as the construction of theaters in Chicago and New York. ($1=$1.53 Canadian) (Reuters:Financial-01/13/99) LIVENT INC: Statement of Garth Drabinsky ---------------------------------------- STATEMENT FROM GARTH H. DRABINSKY AT TORONTO PRESS CONFERENCE: Thank you ladies and gentlemen for attending. Let me assure you at the outset that the charges brought against me today in the U.S. are baseless. I would never have knowingly permitted the release of false financial statements about Livent. I can say that I never instructed Livent's accounting staff to engage in illegal or improper accounting practices, nor did I know of any illegal or improper accounting practices. So how did we get to this point - a criminal indictment and the bankruptcy protection of the company? This is the legacy of the company's new management. On August 10th, 1998, new management issued a press release advising that it had uncovered accounting irregularities in the books and records of Livent. For reasons still unknown to me they announced, in a highly public fashion, that Mr. Gottlieb and myself were suspended - a decision made prior to any independent investigation of the allegations. Clearly, and for reasons best known to them, new management wanted me out. This precipitous and deliberate action has caused incalculable pain to me and was deliberately designed to damage my reputation and to inflict a heavy toll on my personal resources. It also set in motion the calamitous events that were to follow both individually and corporately. Rather than run the company, new management has focussed a preponderance of its attention on bringing a civil law suit against Mr. Gottlieb and me, and on motivating American and Canadian authorities to take quick, ill-conceived action against us. In the process they have abandoned the company's shareholders, squandered the company's franchise and caused the company to seek bankruptcy protection. In due course, the truth will emerge. Typical of the reckless allegations launched at us by new management, is Livent's Statement of Claim filed against Myron and me. That Statement contained, by way of glaring example, an insidious allegation that Mr. Gottlieb and I were net sellers of Livent shares, suggesting that we were jumping ship because we had inside information that Livent might be in financial trouble. Nothing could be further from the truth. In fact, in the twelve month period culminating in the April 13, 1998 Investment Agreement with Mr. Ovitz, Mr. Gottlieb and I had invested an additional $3.5 million in the company; we have sold no shares since a reported private transaction in February 1995. When Mr. Gottlieb and I selected the Ovitz/Furman investment for Livent, we were not compelled to do so. At that time, there were a number of other viable corporate or financing alternatives. However, we accepted the compelling representations of our then investment banker, Roy Furman, who argued that this transaction would best enable Livent to grow and maximize value to shareholders. We clearly appreciated that prior to any such investment, the books and records of Livent would and should be closely scrutinized and its management and accounting staff would be, and were, closely questioned in a rigorous ``due diligence'' process by KPMG, Ovitz and Furman. Ours were not the actions of men trying to hide alleged illegal accounting practices. We knew of no alleged illegal accounting practices. I am, first and foremost, a theatrical producer. My personal role at Livent was heavily focussed on the creative aspect of the company. Without hit shows, Livent could not exist. The simple reality is that managing and developing as many as 15 to 20 contemporaneous productions, overseeing the worldwide marketing of those productions and developing new theatre venues left me little time for anything else. While this is a personal tragedy, the implications of this concerted and false personal attack go well beyond one individual. As I have said, Livent has been placed in bankruptcy protection. Its share price has been devastated. Its remaining employees, particularly in Canada, are left in a state of uncertainty. The toll on the artistic community of Canada and its impact on tourism and related economic activity in Toronto and Vancouver has yet to be measured. It is important for you to know that, although I was not obliged by law to do so, I have co-operated with the U.S. Department of Justice. I voluntarily travelled to the United States to be interviewed. There was no question which the prosecutor asked that I did not answer fully and directly. Unfortunately, it was clear that the decision to file charges against me was set in stone in advance of that meeting. The RCMP, who are conducting a separate investigation, have publicly stated that their investigation may take some considerable time. Obviously, I am distressed that the U.S. Department of Justice has felt the need to make such a hasty decision to file charges after only a few months. It has always been my intention to have the facts surrounding these allegations fully explored by the civil Courts in Canada and this U.S. indictment changes nothing. I will press ahead with the civil case. I would like to remind members of the public, and particularly those who have been kind enough to express their continuing support for me amidst a sea of troubles, that it is the function of the Courts to distinguish between mere accusations and the truth. This is undoubtedly a difficult moment for me. The financial resources of the U.S. government are arrayed against me. However, I shall fight on until the truth has been established and my reputation has been restored. I am innocent and have committed no criminal wrongdoing. The final act of this tragedy has yet to be played out and, when it is, Myron Gottlieb and I have complete confidence that we will be vindicated. LYNX GOLF: Seeks Time To Assume/Reject Leases --------------------------------------------- LGI Liquidating Corp., f/k/a Lynx Golf, Inc. seeks an extension of the time period by which LGI must assume or reject unexpired leases of nonresidential real property, including the lease of its headquarters through June 1, 1999. LGI's recently appointed president, P.A. Novelly and the Official Committee of Unsecured Creditors are currently negotiating the terms of a plan of reorganization for LGI, which may involve the assumption of the lease of its headquarters located in Carlsbad, California. LGI requires a reasonable opportunity to investigate the potential value of the lease to the estate as a component of its reorganization. LGI is current on its postpetition obligations. A hearing on the motion is scheduled on January 19, 1999 at 2:00 PM before Judge Peter W. Bowie, U.S. Bankruptcy Court, Southern District of California. This relief is necessary in order to allow LGI to complete the auction on January 20, if the auction proceeds, and to wrap-up related activities on site. On October 21, 1998, the court entered an order approving the sale of substantially all of LGI's operating assets to Folfsmith International, Inc. LGI was authorized to employ McCormack Auction Company as its auctioneer to conduct an auction at LGI's headquarters. The debtor's disclosure statement hearing is set for January 19, 1999 and LGI's motion to extend the exclusivity period is also set for that date. MCCULLOCH: Strategic Distribution Comments On Bankruptcy -------------------------------------------------------- Strategic Distribution, Inc. (Nasdaq/NM: STRD) reported today that it incurred an estimated pre-tax loss of up to $1.1 million in connection with the bankruptcy of McCulloch Corporation. McCulloch, an international manufacturer of gasoline-powered and electric portable outdoor equipment, filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code. The bankruptcy proceeding was announced on January 12, 1999, and therefore it is not yet possible for the Company to predict the recovery on amounts owed to it by McCulloch. Unpaid invoices as well as the value of inventory specially held and for which McCulloch is obligated to pay, total approximately $1.1 million. Therefore, the Company views this as the maximum loss that it may incur in connection with McCulloch. The Company will recognize some or all of the estimated pre-tax losses related to the bankruptcy in its financial statements for the fourth quarter of 1998. Strategic Distribution, Inc. is a provider of industrial supply services to commercial and industrial customers. The Company provides proprietary services that reduce costs and inefficiencies in the procurement and management of maintenance, repair and operating ("MRO") materials. For large industrial facilities, the Company's In-Plant Store(tm) program offers a comprehensive MRO outsourcing solution through which the company manages all aspects of industrial supply and logistics. The Company also offers proprietary MRO cataloguing services developed by INTERMAT? to a wide range of industrial clients, including customers of the In-Plant Store program. NEWTWAVE: Seeks To Pay Search Firm $300,000 To Find New CEO ----------------------------------------------------------- NextWave Telecom Inc. is requesting court approval to pay an executive search firm up to $300,000 to locate a new president and chief executive for the company. "To optimize both speed and success in attracting such a candidate, the Debtors believe that the expertise and resources of an international executive search firm, specializing in filling such challenging high-level positions, are required," asserts the Jan. 8 motion. The CEO likely will assume responsibility for attracting additional financial resources, leading negotiations with strategic partners and seeking to create corporate alliances. (Federal Filings Inc. 14-Jan-99) PETSEC ENERGY: To Raise $68.5M With Sale of Interests ----------------------------------------------------- On December 22, 1998, Petsec Energy Ltd issued a press release announcing the execution of a letter agreement by its wholly owned subsidiary, Petsec Energy Inc. ("PEI"), with Apache Corporation whereby PEI agreed to sell 50% of its working interests in certain oil and gas properties in the Gulf of Mexico for US$68.5 million in cash to Apache. The transaction is subject to due diligence and the execution by the parties of definitive agreements. The effective date is January 1, 1999 with closing anticipated on or before February 1, 1999 at which time Apache will assume operatorship of the leases. Press Release dated December 22, 1998 of Petsec Energy Ltd with respect to letter agreement between Petsec Energy Inc. and Apache Corporation: 22 December 1998 PETSEC ENERGY TO RAISE US$68.5 MILLION WITH CASH SALE OF CERTAIN U.S.A. OIL AND GAS INTERESTS Sydney, Australia - Petsec Energy Ltd (ASX: PSA and NYSE: PSJ), today announced that its wholly owned subsidiary, Petsec Energy Inc. had signed a letter agreement with Apache Corporation to sell 50% of its working interest in certain oil and gas properties in the Gulf of Mexico for US$68.5 million (A$110 million) in cash. Upon completion of the transaction, Petsec will hold a 100% working interest in 21 leases in addition to a 50% working interest in 23 joint venture leases. All of these leases are situated in the shallow waters of the Gulf of Mexico. The company intends to use the proceeds from the sale to repay a significant proportion of its senior bank debt, for capital expenditures and to provide working capital. Petsec Energy Ltd Managing Director Terry Fern said, "The joint venture with Apache broadens our scope. Jointly we will explore and develop the remaining reserve potential on those leases, while our management and technical team will direct their efforts towards the exploration and development of the company's remaining 100% owned portfolio of exploration properties. The company is preparing for the upcoming Federal Lease Sale in March 1999 as well as seeking additional opportunities through joint ventures with similarly focused Gulf of Mexico operators." "This transaction represents the end of our review of strategic alternatives. Reducing bank debt in this period of depressed commodity prices will enable us to significantly improve the financial strength and flexibility of the company. Significant reductions in general and administrative expense will also be achieved. The company's profile will be different from that when it entered the strategic process, in answer to the changing dynamics of the industry. I'm confident our management and technical team will grow Petsec in this difficult market", Mr. Fern said. The company is selling 50% of its working interest in producing leases at Main Pass 6, 7, 84, 91 and 104, Grand Isle 45, South Marsh Island 7, Ship Shoal 193, 194 and West Cameron 237, 543 and 544. Petsec is also selling 50% of its working interest in non-producing leases at Main Pass 90, 91E, 93 and 105, Ship Shoal 192 and West Cameron 542 and 653. The company currently owns a 100% working interest in all of the above mentioned leases. The transaction is subject to due diligence in regard to title, environmental and mechanical condition of the surface facilities and also to the execution by the parties of a mutually acceptable purchase and sale agreement and joint operating agreement. The effective date is January 1, 1999 with closing anticipated on or before February 1, 1999 at which time Apache will assume operatorship of the leases. RINCON ISLAND: Committee Taps Oil and Gas Advisor ------------------------------------------------- The Official Committee of Unsecured Creditors of the debtor, Rincon Island Limited Partnership applies to retain and employ Randall & Dewey, Inc. as oil and gas advisor for the Committee. The Committee desires to retain Randall & Dewey to assist in analyzing and evaluating the market values for the oil and gas mineral interests and related properties owned by Rincon Island Limited Partnership and Windsor Energy US Corporation. RINCON ISLAND: Committee Taps Baker & McKenzie ---------------------------------------------- The Committee of Unsecured Creditors are seeking an order authorizing the Committee to employ Baker & McKenzie as General Counsel. The Committee believest that the services of Baker & McKenzie are equired to enable the Committee to be adequately advised and to fully perform its duties under the Bankruptcy Code in representing the interests of all unsecured creditors. SCOOP INC: Debtor Taps Latham & Watkins --------------------------------------- The debtor, Scoop Inc. f/k/a Karlsson-Del Rey Communications, Inc. and NewsMakers Information Services Inc. filed a notice that it will file its application for authority to employ Latham & Watkins as Special Corporate Counsel. The firm will render the following types of professional services: a) To advise and represent the debtor in connection with a proposed transaction in which the debtor will be combined with another entity; b)To advise and represent the debtor in all matters related to compliance with federal and state securities laws; and c)To take such other action and perform such other services as the debtor may require of the firm in connection with the proposed transaction. The debtor requests that the court approve the employment of the firm effective as of November 6, 1998. The firm has accrued fees and expenses in the aggregate amount of approximately $5,146 since that date. The firm did not receive a prepetition retainer. The firm does hold a prepetition claim against the debtor's estate in the amount of $208,523. SOUTHMARK CORP: Fee Disgorgement Bars Malpractice Suit ------------------------------------------------------ The U.S. Court of Appeals for the Fifth Circuit has found that claims for professional misconduct are bankruptcy court core proceedings. In the case, Southmark Corp. v. Coopers & Lybrand, the Appellate Court also ruled that prior bankruptcy court-ordered professional fee disgorgements preclude malpractice lawsuits that are based on infractions that caused the fee disgorgement. The dispute began after Southmark hired Coopers & Lybrand to investigate and analyze potential litigation against third parties, including Coopers & Lybrand client Drexel Burnham Lambert Inc. Coopers, which went on to form financial advisory giant PricewaterhouseCoopers LLP, told the court at the time of its retention that "it did some accounting work for Drexel," but failed to disclose its "substantial auditing" duties for the underwriter. Coopers & Lybrand subsequently advised Southmark -- wrongly -- that it had no causes of action against Drexel, according to Southmark. (Federal Filings Inc. 14-Jan-99) THE SCORE BOARD: Hearing on Disclosure statement Set ---------------------------------------------------- A Disclosure statement and plan were filed by The Score Board, Inc. and The Score Board Holding Corp. on December 31, 1998. The court shall conduct a hearing as to the adequacy of such statement before Honorable Gloria M. Burns on February 10, 1999, 10:00 AM, 3rd Floor Courtroom, U.S. Courthouse 15 N. 7th St., Camden, NJ. UNISON HEALTHCARE: Opposition to Filkoski's Objection ----------------------------------------------------- On December 24, 1998, the court approved the settlement of a number of class actions presently pending against Unison Healthcare Corporation and its former officers and directors, including Jerry M. Walker, former president of Unison. the claims asserted by the plaintiffs in the class actions approximated $38 million , but are being settled for a total of $4.25 million, plus $1 million in pre-bankruptcy shares of Unison common stock. The only objection to the settlement came from John Filkoski, who has filed a separate lawsuit in Colorado against Unison and its former officers and directors. Filkoski and members of his family have alleged that their damages total approximately $3 million. After considering Filkoski's arguments, the court overruled his objection. The proposed settlement is being funded by AESIC Insurance Company, which issued a D&O policy in the amount o f$5 million to Unison and its former officers and directors. Filkoski argues that if the proceeds of the AESIC policy are used to settle the class claims, and if he opts out of the class, there may not be any additional insurance coverage available to pay the claims asserted by him and his family in the Colorado litigation. Filkoski claims that Unison's attorneys falsely represented to the court that there was another layer of coverage available that would pay the Filkoskis' claim. Jerry M. Walker, in this memorandum in opposition to Filkoski's motion to reconsider states that the Filkoski family's share of the approved settlement is approximately $200,000. Walker states that at most, Filkoskis can recover only their pro rata share of the settlement proceeds. If the court affirms its prior order, entering the settlement, the Filkoskis will have to either accept their pro rata share or opt out of the class and take their chances in separate litigation. The chance that they take is that other insurance proceeds will be available to cover their claims if they are successful in their assertion of them. Walker states that it is in the best interests of the debtor and its former officers and directors that the court affirm its previous order approving the settlement. The settlement will eliminate a huge potential liability that could consume other assets of the bankruptcy estates. VENTURE: Notice of Effective Date --------------------------------- The Venture Stores, Inc. modified first amended plan of liquidation under Chapter 11 of the Bankruptcy Code confirmed by order of the U.S. District Court for the District of Delaware on November 23, 1998 has become effective on December 29, 1998. VOICE IT: Court Denies Employ of Special Counsel ------------------------------------------------ On January 4, 1999, Honorable Roland J. Brumbaugh, U.S. Bankruptcy Judge entered an order in the case of Voice It Worldwide, Inc. denying the application for authority to employ Special Counsel. DLS CAPITAL: Bond Pricing For Week of January 11 ------------------------------------------------ Following are indicated prices for selected issues: Acme Metal 10 7/8 '07 11 - 13 (f) Amer Pad & Paper 13 '05 58 - 60 Amresco 9 7/8 '05 82 - 84 Atel 0/14 1/2 '04 13 - 16 Asia Pulp & Paper 11 3/4 '05 62 - 64 Boston Chicken 7 3/4 '05 4 - 5 (f) Brazos 10 1/2 '07 7 - 10 (f) Brunos 10 1/2 '05 11 - 14 (f) Cityscape 12 3/4 '04 12 - 14 (f) E & S Holdings 10 3/8 '06 43 - 46 Globalstar 11 1/4 '04 77 - 79 Geneva Steel 11 1/2 '01 17 - 20 (f) Goss Graphic 12 '06 65 - 68 Hechinger 9.45 '12 68 - 72 Hills 12 1/2 '02 93 - 95 Mobilemedia 9 3/8 '07 11 - 13 (f) Penn Traffic 8 5/8 '03 46 - 49 Planet Hollywood 12 '05 35 - 39 Royal Oak 12 3/4 '06 40 - 45 (f) Samsonite 10 3/4 '08 83 - 88 Service Merchandise 9 '04 34 - 36 (f) Sunbeam 0 '18 12 - 13 Trism 10 3/4 '00 49 - 53 Trump Castle 11 3/4 '05 79 - 81 Zenith 6 1/4 '11 16 - 18 (f) ********* 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 * * *