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/raid1/www/Hosts/bankrupt/TCR_Public/990618.MBX T R O U B L E D C O M P A N Y R E P O R T E R Friday, June 18, 1999, Vol. 3, No. 116 Headlines ADVANCED MEDICAL: Amendment to Plan ADVANCED RADIO: Tough Times Ahead For Survival/Losses Mount AMERICAN GAMING: Reports Year End '98 and 1st Quarter '99 Results CARSON INC: Sales Increase/Foreign Sales Predominant CARVER CORP: Schedule of Assets and Liabilities COSMETIC CENTER: Seeks To Assume D&O Financing Agreement DAC: Gets Bankruptcy Court Approval FOAMEX INTERNATIONAL: Debt Acceleration Looms In Event of Default FORCENERGY: Claims Bar Date FULCRUM DIRECT: Seeks Extension of Post-Petition Financing GARDEN BOTANIKA: Reports First Quarter Financial Results GENEVA STEEL: Liquidity Problems Plague Company HARNISCHFEGER: Organizational Meeting on Tuesday, June 22 HOME HEALTH: Seeks Approval of Compromise With US IRIDIUM: 13% Senior Noteholders File Class Action LIBERTY HOUSE: IRS Files Proof of Claim LIVENT (US): Seeks Approval of Incentive Retention Plan LOEWEN: First Meeting of Creditors MCA FINANCIAL: Sterling Bank Seeks To Foreclose Mortgages MERRY GO ROUND: Landlords May Get Admin. Claim For Future Rent NEUROMEDICAL SYSTEMS: Stipulations And Orders For Relief NU-KOTE: Objections To Disclosure Statement PAL: Bank Opposes Plan PARAGON TRADE: Seeks Approval of Fees Pursuant to Plan Outline PHONE-TEL: Announces Support for Pre-packaged Plan PITTSBURGH PENGUINS: Unsecured Creditors Support Lemieux PLUMA INC: Seeks To Retain Robinson-Humphrey Company PRIMARY HEALTH: Seeks Authority To Enter Into Radiology Agreement PRIMARY HEALTH: Seeks To Reject Contract With Champion QUALITECH STEEL: Order Modifies Final Financing Order RENAISSANCE COSMETICS: Taps Development Specialists, Inc. RENAISSANCE COSMETICS: Taps The Ozer Group ROOM PLUS: Court Enters Fourth Interim Order For DIP SERVICE MERCHANDISE: Court Approves Deloitte & Touche TELEGROUP INC: Order Extends Use of Cash Collateral TELEGROUP INC: Seeks To Extend Employ of Alvarez & Marsal BOND PRICING FOR WEEK OF JUNE 14 ********** ADVANCED MEDICAL: Amendment to Plan ----------------------------------- The plan of reorganization of Advanced Medical Products, Inc. is amended to include a Class 13: Pre-petition unsecured priority claims of government entities(excluding the State of Florida). The claims of the Class 13 creditors are entitled priority. The unencumbered funds of the estate realized from the liquidation of its assets will be paid, first, to allowed administrative priority claims under Class 4 and when they are paid in full, next to the creditors in Class 13. $18,000 of the refunds will be paid to Class 9, independent of the payment of Class 13 claims. No payments will be made to unsecured creditors or shareholders under Classes 10.11 and 12 of the plan unless and until all allowed Class 13 claims have been paid in full. This class is impaired. A special agent shall be appointed for the benefit of the unsecured creditors to review AMP's transactions with related parties. ADVANCED RADIO: Tough Times Ahead For Survival/Losses Mount ----------------------------------------------------------- Advanced Radio Telecom Corp. (collectively with its subsidiaries, "ART") provides wireless broadband telecommunications services in the 38 GHz band of the radio spectrum. The company's initial business was selling connectivity to various telecommunications companies as a wholesale carriers' carrier, which the company commenced in the fourth quarter of 1996. Following the establishment of a new core management team, the company altered its strategy in the first quarter of 1998 and focused on selling a variety of broadband Internet services to end-user customers and deploying a broadband data network. During the year ended December 31, 1998, ART began offering its Internet services in the Seattle, Washington, Portland, Oregon and Phoenix, Arizona areas and, as such, revenues to date have been limited. Advanced Radio will require significant additional capital to fully fund its operations and long-term broadband data network buildout and business plan. The company currently estimates that it will require in excess of $1 billion over the next several years to fund capital expenditures, working capital and operations. During 1998, Advanced Radio and Lucent Technologies Inc. entered into a credit facility for Lucent to provide the company with up to $25 million of unsecured revolving loans for working capital purposes, due June 30, 1999 unless extended by Lucent. During 1998, the company and Lucent also entered into a purchase money credit facility setting forth the terms and conditions under which Lucent will provide purchase money financing of up to $200 million, to be used to finance the purchase of the company's broadband data networks from Lucent. Lucent has made available $10 million in initial purchase money loans and the availability of the balance is subject to other conditions, including the company's ability to raise at least $50 million of certain debt or equity capital. Advanced Radio has stated that there can be no assurance that the funding will become available to it. The company has limited financial resources, has incurred recurring losses from operations since inception and does not expect to generate significant operating revenues in the near term. Advanced Radio's ability to continue as a going concern at least through December 31, 1999, which includes funding of its operations and business plan, the repayment of the $25 million working capital facility and funding of its contractual commitments, is dependent upon its ability to raise additional financing. The company has engaged investment bankers to assist it in obtaining financing and is in negotiations with potential investors to provide equity financing. However, there is no assurance that Advanced Radio will be successful in its efforts to obtain such financing, or, if available, that it will be able to obtain it on acceptable terms. These conditions raise substantial doubt about the company's ability to continue as a going concern. During the first quarter of 1999, Lucent waived compliance by the company with certain operational covenants in the working capital facility and the purchase money facility. At December 31, 1998, the company had utilized the entire $10 million of initial purchase money loans made available by Lucent. Revenue for the three months ended March 31, 1999, was $225,962 compared to $236,557 for the same period in 1998. Net loss in the first quarter 1999 was $23,531,385 compared to the net loss of $9,100,795 during the first three months of 1998. AMERICAN GAMING: Reports Year End '98 and 1st Quarter '99 Results ----------------------------------------------------------------- American Gaming & Entertainment, Ltd. reported in its Form 10-KSB that net loss for common stockholders for the year ended December 31, 1998 was approximately $6,720,000 or ($0.54) per share as compared to $9,039,000 or ($0.72) per share for the year ended December 31, 1997, based upon a weighted average number of 12,532,102 common shares outstanding for each period. The primary components of such decrease in net loss for common stockholders are discussed below. Revenues for the year ended December 31, 1998 amounted to approximately $445,000, a decrease of approximately $188,000 or approximately 30% compared to the year ended December 31, 1997. For the years ended December 31, 1998 and December 31, 1997, the Company recorded revenues of approximately $445,000 and $623,000, respectively, attributable to a 4.9% equity interest in a riverboat gaming and entertainment complex in Rising Sun, Indiana (the "Rising Sun Interest"). Selling, general and administrative expenses were approximately $1,633,000 for the year ended December 31, 1998, representing a decrease of approximately $13,000 or approximately 1% when compared to the year ended December 31, 1997. However, selling, general and administrative expenses for the year ended December 31, 1997 included the reversal of a previously recorded consulting expense in the amount of approximately $195,000 due to a consulting firm advising the Company that such firm was not seeking payment of such unpaid amount and a reversal of previously recorded state taxes in the amount of approximately $188,000 due to a tax refund. Exclusive of such reversals, selling, general and administrative expenses decreased approximately $396,000 for the year ended December 31, 1998 as compared to the year ended December 31, 1997. Such decrease was primarily due to decreases in compensation, rent, insurance, consulting expense and expenses related to real property in Alabama and the Harolds Club in Nevada. For the year ended December 31, 1998, the Company recorded a reversal of net liabilities for subsidiaries in bankruptcy of $781,000 based upon the anticipated distributions under a proposed plan of liquidation for the Company's two Mississippi subsidiaries. No such amounts were recorded for the year ended December 31, 1997. Net interest expense for the year ended December 31, 1998 was approximately $2,937,000, a decrease of approximately $2,556,000 or approximately 47% compared to the year ended December 31, 1997. Interest expense decreased approximately $2,542,000 while interest income increased approximately $14,000 during the year ended December 31, 1998 compared to the year ended December 31, 1997. Interest expense for the year ended December 31, 1998 included the reversal of previously recorded interest expense in the amount of approximately $2,342,000, primarily attributable to reclassifying as deferred charter revenues amounts that were previously recorded as debt. For the year ended December 31, 1998, the Company wrote down the value of a note receivable by approximately $165,000, to reflect the agreement by the Company to accept the payment of $300,000 in 1999 in full satisfaction of such note. No writedowns were recorded for the year ended December 31, 1997. Net gain on sale of investments for the year ended December 31, 1997 was substantially due to a net gain of approximately $625,000 on the sale of 12,500 shares of Multimedia Games, Inc. preferred stock. No such gains were recorded for the year ended December 31, 1998. The Company reported in its Form 10-QSB for the period ended March 31, 1999 that net loss for common stockholders for the three months ended March 31, 1999 was approximately $2,330,000 or ($0.19) per share as compared to $2,378,000 or ($0.19) per share for the three months ended March 31, 1998, based upon a weighted average number of 12,532,102 common shares outstanding for each period. The primary components of such decrease in net loss for common stockholders are discussed below. For the three months ended March 31, 1998, the Company recorded revenues of approximately $189,000 attributable to the Rising Sun Interest. The Company has not received any financial statement information relating to the Rising Sun Interest for the three months ended March 31, 1999 and therefore has not recorded any revenues attributable to the RSR Interest for the three months ended March 31, 1999. Selling, general and administrative expenses were approximately $443,000 for the three months ended March 31, 1999, representing an increase of approximately $42,000 or approximately 10% when compared to the three months ended March 31, 1998. Such increase is primarily due to an increase of approximately $51,000 in legal fees relating to litigation in the bankruptcy proceedings of the Company's two Mississippi subsidiaries and a $35,000 judgment against the Company for unpaid insurance premiums, partially offset by a decrease of approximately $32,000 in insurance expense. Net interest expense for the three months ended March 31, 1999 was approximately $1,133,000, a decrease of approximately $230,000 or approximately 17% compared to the three months ended March 31, 1998. Interest expense decreased approximately $233,000 while interest income decreased approximately $3,000 during the three months ended March 31, 1999 compared to the three months ended March 31, 1998. Interest expense for the three months ended March 31, 1998 includes interest on debt that was reclassified as deferred charter revenue as of December 31, 1998. The Company recorded a net gain of approximately $48,000 for the three months ended March 31, 1999 related to the sale of real property in Alabama. No such gain was recorded for the three months ended March 31, 1998. The Company's Common Stock is traded on the OTC Bulletin Board under the symbol "AGEL". CARSON INC: Sales Increase/Foreign Sales Predominant ---------------------------------------------------- Carson Inc. believes that it is the number one manufacturer and marketer of hair care and shaving products for people of color. The majority of the company's net sales are derived from five categories of the ethnic health and beauty aids market: hair relaxers and texturizers, hair color, men's depilatory products, hair care maintenance products and combout/oil sheens. In the quarters ended March 31, 1999 and 1998, 29.5% and 35.1%, respectively, of the net sales of Carson were to customers outside the United States. Consolidated net sales for the quarter ended March 31, 1999 were $41.7 million, an increase of $9.9 million, or 31.0%, over net sales for the quarter ended March 31, 1998 of $31.8 million. Net income for the first quarter of 1999 was $720,000 as compared to a net loss in the first three months of 1998 which amounted to $183,000. The company has a secured term loan outstanding, which bears interest at an annual rate of 13% and matures on December 8, 2003. Interest is payable monthly. The company may, at its option, defer the monthly interest payment a maximum of twelve times until December 8, 2000. This option provides the company flexibility in meeting its cash needs in the near term. In the event of deferral, interest will be accrued at an annual rate of 16% for the month deferred and will be added to the outstanding principal amount of the loan. The capital stock and assets of Carson Products Company (including stock in Carson South Africa representing a 52.6% majority stake) the capital stock and assets of Johnson Products and the capital stock and intellectual property of Dermablend are pledged as collateral for the secured term loan. The loan contains covenants with respect to, among other things, restrictions on the incurrence of additional liens or indebtedness and restrictions on the payment of any cash dividends by the company of any subsidiary. CARVER CORP: Schedule of Assets and Liabilities ----------------------------------------------- The debtor, Carver Corporation filed its schedules of assets and liabilities and a statement of its financial affairs. The debtor listed total assets of $834,572 and total liabilities of $2,970,296. COSMETIC CENTER: Seeks To Assume D&O Financing Agreement -------------------------------------------------------- The debtor, The Cosmetic Center, Inc. seeks court authority to assume the D&O Financing Agreement. The agreement enables the debtor to maintain the D&O policies, which will, in turn, enable the debtor to retain senior management, to keep them focused on maximizing the value of the debtor's assets through the consummation of this case, and to prevent the debtor's estate and creditors from incurring future liability resulting from such lawsuits. The policy premiums total less than $150,000. DAC: Gets Bankruptcy Court Approval -------------------------------------------------------------- The Downtown Athletic Club in lower Manhattan has won a U.S. Bankruptcy Court's approval to sell the hotel portion of its 35-story Art Deco building, allowing it to remain the home of the Heisman Trophy. The club, where the nation's outstanding collegiate football player is named each year, had been in financial jeopardy until April, when the U.S. District Court referred the club's reorganization plan to the Bankruptcy Court. The following week, a $9.85 million payment was made by Cheslock Bakker Associates of Stamford, Conn., to mortgage holder 18 West, effectively ending the club's 14-month bankruptcy battle. Final approval was announced Wednesday. Cheslock Bakker is buying the hotel facilities for $8 million and providing up to $11.5 million to satisfy the Athletic Club's remaining creditors and improve its facilities. Renovation is set to begin in January. The terms of the agreement call for DAC to retain floors two through 13, including the historic Heisman Room. Cheslock Bakker will control floors 14-35; and the two entities will share the lobby, where the Heisman is displayed. Past winners of the Heisman Trophy have included O.J. Simpson, Roger Staubach and Archie Griffin. "We've fought a long, tough battle and now we can get on with restoring the DAC to its position as the preeminent athletic club in New York City," DAC President William Dockery said in a statement Wednesday. FOAMEX INTERNATIONAL: Debt Acceleration Looms In Event of Default ----------------------------------------------------------------- Despite increased revenues and net income in the first quarter of 1999 over that of the same period in 1998 Foamex International Inc. faces some potentially serious problems. The company did see net income of $322,863 in first quarter 1999, and $312,290 in first quarter 1998. Net income respectively was $6,013 in the 1999 period and $3,109 in 1998 first three months. Foamex operates in the flexible polyurethane and advanced polymer foam products industry. As of March 31, 1999, the company's operations were conducted through its wholly owned subsidiaries, Foamex L.P. and Foamex Carpet Cushion, Inc., and consisted of these operating segments: (i) foam products, (ii) carpet cushion products, (iii) automotive products, (iv) technical products and (v) other, which primarily consisted of certain foreign manufacturing operations. Trace International Holdings, Inc. is a privately held company which owned approximately 46.1% of the company's outstanding stock as of April 1, 1999 and whose Chairman also serves as the Chairman of Foamex. In 1998, Trace informed Foamex that Trace had substantial debt obligations that were due at the end of December 1998 and did not have the financial resources to pay those obligations. Subsequently, Trace informed the company that waivers and/or modifications of such indebtedness had been obtained for at least the near future; however, there can be no assurance that such waivers and/or modifications will remain in effect prior to obtaining a permanent resolution. The company's common stock owned by Trace is pledged as collateral against certain of Trace's obligations. If Trace were to default on such indebtedness collateralized by the company's common stock or other Trace creditors were to take steps constituting a default under such indebtedness (such as filing an involuntary bankruptcy petition), and if the holders of such indebtedness were to foreclose on the company's common stock owned by Trace, such event could trigger the "change of control" provisions and correspondingly the acceleration and put rights contained in certain of the company's subsidiaries' debt agreements. This could result in the acceleration of all of the Foamex' subsidiaries' debt. Although the management of Foamex believes that the company's subsidiaries' debt obligations could be refinanced under such circumstances, there can be no assurance that the company or its subsidiaries would be able to do so. Certain credit agreements and promissory notes of Foamex L.P. and Foamex Carpet representiing approximately $503.2 million of debt, as of March 31, 1999, contain provisions that would result in the acceleration of such indebtedness if Trace were to cease to own at least 30% of the outstanding common stock of Foamex. Similarly, certain indentures of Foamex L.P. and Foamex Capital Corporation relating to approximately $248.0 million of senior subordinated notes contain provisions that provide the holders of such senior subordinated notes with the right to require the issuers of the notes to repurchase such senior subordinated notes at a price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if Trace falls below certain specified ownership levels of common stock and other persons or group owns a greater percentage of common stock than Trace. On March 31, 1999, sold its corporate airplane for $16.3 million in gross proceeds of which $8.9 million was used to repay debt associated with the airplane. As specified by the terms of the aircraft sale, lease and operating agreement, pursuant to which the company purchased the airplane, Trace agreed to reimburse the company to the extent the net proceeds from the sale of the airplane were less than a specified amount, and the company was obligated to share the net proceeds in excess of such specified amount with Trace. Under the terms of the agreement, Foamex was obligated to pay Trace approximately $0.6 million or approximately 50% of the "Excess Proceeds", which was offset against Trace's obligation on two promissory notes in favor of the company. Foamex recorded a net gain resulting from the sale of the airplane of approximately $4.2 million. FORCENERGY: Claims Bar Date --------------------------------- The debtors, Forcenergy Inc. and Forcenergy Resources Inc. announce that the U.S. Bankruptcy Court for the Eastern District of Louisiana set a claims Bar Date of July 30, 1999. All creditors who have unpaid claims must file an official proof of claim on or before July 30, 1999. FULCRUM DIRECT: Seeks Extension of Post-Petition Financing ---------------------------------------------------------- The debtors, Fulcrum Direct, Inc., Fulcrum West LCC and Equipment Bond Purchaser, Inc. seek authorization for an extension of post- petition financing. An interim hearing will be held before the Honorable Mary F. Walrath, US Bankruptcy Court for the District of Delaware, 6th Floor, Marine Midland Plaza, 824 Market Street, Wilmington, Delaware 19801 on June 21, 1999 at 10:30 AM. Fulcrum seeks authority to further extend the term, and increase the aggregate amount of the post petition loan facility with IBJ Schroder Business Credit Corporation. The debtor seeks to extend the loan facility through June 30, 1999 and increasing the aggregate amount to $3,681,000. Fulcrum has sold substantially all of its assets. Fulcrum requires additional time to finalize the review and analysis of potential claims and, to the extent warranted, to institute actions against third parties for the benefit of its estates and creditors. GARDEN BOTANIKA: Reports First Quarter Financial Results -------------------------------------------------------- REDMOND, Wash June 16, 1999--Garden Botanika, Inc. (OTC BB:GBOT) reported financial results for its fiscal 1999 first quarter ended May 1. Garden Botanika reported a net loss of $10.5 million, or $1.48 per share, for the first quarter of fiscal 1999, compared to a net loss of $5.0 million, or $0.71 per share, for the first quarter of fiscal 1998. Included in the net loss for the most recent quarter was a net charge of $5.5 million to cover the estimated additional costs for store closures and lease termination expenses for 95 store locations having leases that the Company intends to reject, under authorization of the U.S. Bankruptcy Court, as part of its reorganization efforts. Comparable store sales decreased 12% from sales in the first quarter of 1998 for the 149 continuing stores open at least one complete fiscal year. The decrease in comparable store sales for the quarter was driven by decreases of 16% in February, 7% in March and 14% in April. Net sales for the first quarter of fiscal 1999 were $17.9 million, compared to net sales of $21.7 million for the comparable prior period, a decrease of 17%. Store net sales decreased $4.0 million, or 20%, during the quarter primarily due to a decrease in the number of stores, combined with the decrease in comparable store sales. Partially offsetting the decreases, the Company recognized revenue of $786,000 from sales of annual memberships in the Company's discount-based "Garden Club" customer loyalty program. Combined mail order and Internet sales increased $13,000, or 2% versus the comparable prior period. There were neither Internet sales nor a Garden Club program in the first quarter of fiscal 1998. Following the completion of its liquidation efforts at 95 of its most poorly performing stores, the Company intends to continue operations with a reduced store base of 150 stores, compared to 280 stores at May 2, 1998. Chief Executive Officer Arlee Jensen commented, "With the closing of our most unprofitable stores, we can now look forward to making improvements in operations and mechandising. With the protections of Chapter 11 of the Bankruptcy Code and a smaller store base, we believe we are positioned to maintain a fresh new supply of inventory at normal levels, and thus better meet our customers' expectations." (a) Garden Botanika markets botanically based cosmetic and personal care products through its 150 stores across the U.S., through its catalog and on the Internet. The Company's headquarters are located at 8624 154th Avenue NE, Redmond, Washington 98052, its website address is www.gardenbotanika.com and its telephone number is 425/881-9603. GENEVA STEEL: Liquidity Problems Plague Company ----------------------------------------------- On February 1, 1999, Geneva Steel Company filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Utah, Central Division. The company said the filing was made necessary by a lack of sufficient liquidity. Prior to the bankruptcy filing, the company did not make the $9 million interest payment due January 15, 1999 under the terms of the company's 9 1/2% Senior Notes due 2004. The Bankruptcy Code generally prohibits the company from making payments on unsecured, pre-petition debt, including the 9 1/2% Senior Notes due 2004 and the 11 1/8% Senior Notes due 2001, except as provided in a confirmed plan of reorganization. The company is continuing operations in Chapter 11 and has procured a $125 million debtor-in-possession credit facility. On February 19, 1999, the U.S. District Court for the District of Utah granted the Geneva's motion to approve a new $125 million debtor-in-possession credit facility with Congress Financial Corporation. The credit facility expires on the earlier of the consummation of a plan of reorganization or February 19, 2001. The credit facility replaced the company's previous revolving credit facility with a syndicate of banks led by Citicorp USA, Inc. as agent, and, by including the property, plant and equipment in the collateral base, is intended to provide additional liquidity. The credit facility is secured by, among other things, accounts receivable; inventory; and property, plant and equipment. Actual borrowing availability is subject to a borrowing base calculation and the right of the lender to establish various reserves, which it has done. The amount available to the company under the credit facility is approximately 60%, in the aggregate, of eligible inventories, plus 85% of eligible accounts receivable, plus 80% of the orderly liquidation value of eligible equipment up to a maximum of $40 million, less reserves on the various collateral established by the lender. Borrowing availability under the credit facility is also subject to other covenants. As of May 10, 1999, the company's eligible inventories, accounts receivable and eligible equipment supported access to $65.6 million under the credit facility. As of May 10, 1999, the company had $9.4 million available under the credit facility, with $56.2 million in borrowings. During May 1999, the company expected to attain additional borrowing availability through the reduction of certain reserves. There was no assurance as to the amount of additional availability that would be provided or that the lender will not take additional reserves in the future. Losses mounted in the first three months of 1999 to $42,279 on revenues of $59,345. In the comparable period of 1998 Geneva Steel realized a net income of $3,392 on revenues of 192,405. HARNISCHFEGER: Organizational Meeting on Tuesday, June 22 --------------------------------------------------------- The United States Trustee for Region III has scheduled an organizational meeting for the purpose of forming one or more official committees of the Debtors'creditors. That meeting will be held in Wilmington at the Hotel DuPont located at 11th and Market Streets, at 2:30 p.m., on Tuesday, June 22, 1999. John "Jack" McLaughlin, Esq., is the attorney for the U.S. Trustee in charge of Harnischfeger's chapter 11 cases. Contact the Office of the U.S. Trustee at 215-597-4411 for additional details. (Harnischfeger Bankruptcy News Issue 2; Bankruptcy Creditors' Service Inc.) HOME HEALTH: Seeks Approval of Compromise With US ------------------------------------------------- The debtors, Home Health Corporation of America, Inc. et. al., seek entry of an order approving the Compromise of a controversy with the U.S. Department of Health and Human Services. Pursuant to the settlement agreement the debtors have agreed to assume their provider agreements with the Secretary of the Department of Health and Human Services. The aggregate overpayments (approximately $5 million) will be repaid over a 2-year period, without interest. The debtors assert that they have done extensive research into the issues and they had substantial litigation risk with respect to various and significant portions of the relief sought by the Secretary. The existing Settlement Agreement assures the debtors of being able to count on a particular repayment schedule and to be able to project their cash needs, knowing that this significant center of their cash flow has been addressed satisfactorily. IRIDIUM: 13% Senior Noteholders File Class Action ------------------------------------------------- A class action lawsuit has been commenced today on behalf of investors who purchased Iridium LLC and Iridium Capital Corporation (collectively "Iridium") 13% Senior Notes due 2005, Series A/EN between September 9, 1998 and May 13, 1999 (the "Class Period"). The lawsuit was commenced in U.S. District Court for the District of Columbia against Iridium (Nasdaq: IRID), Motorola (NYSE: MOT) and certain Iridium officers for violations of federal securities laws. The Complaint alleges, among other things, that defendants engaged in a scheme to inflate the price of Iridium's Notes by continually misrepresenting the commercial viability of Iridium's global telecommunications system throughout the Class Period. When investors discovered that Iridium's system was not commercially functional, that the Company missed the minimum subscriber and revenue targets required under its bank covenants by a wide margin, and that Iridium was in technical default of approximately $800 million of debt, the price of Iridium's Notes precipitously declined to $21.13 per $100 face value and the Notes' yield climbed to more than 67% as the threat of bankruptcy loomed. If you purchased Iridium 13% Senior Notes due 2005, Series A/EN during the Class Period, you may, no later than June 21, 1999 seek to participate in this action as a lead plaintiff on behalf of the Noteholder Class. In order to serve as a lead plaintiff, however, you must meet certain legal requirements. LIBERTY HOUSE: IRS Files Proof of Claim --------------------------------------- In the case of Liberty House, Inc., the United states of America asserts that the consolidated groups' tax due is over $103 million and interest to the petition date is $34.9 million. The US states that it has a proper claim against the debtor since it is severally liable for the taxes while it was part of the consolidated group of Northbrook Corporation. LIVENT (US): Seeks Approval of Incentive Retention Plan ------------------------------------------------------- The debtors, Livwnt (U.S.) Inc., et al. seek an order authorizing and approving an incentive retention plan for rank and file employees. The proposed asset sale to SFX Entertainment contemplates a closing of the transaction as late as September 30, 1999 and an adjustment to the consideration received in the event that there is an erosion of the debtors' asset value through closing. Employees of the debtor have already resigned, and the debtors feel that an appropriate financial incentive is necessary to keep those employees who are essential to closing the asset sale and preserving the asset value. Under the plan, 115 employee will be eligible to receive a predetermined retention bonus. The maximum total cost of the Incentive Plan is approximately $850,000. LOEWEN: First Meeting of Creditors ---------------------------------- The United States Trustee for Region III has called for a meeting of the Debtor's Creditors pursuant to 11 U.S.C. Sec. 341(a) to be held on July 20, 1999 at 2:00 p.m. in Room 2313 of the U.S. Courthouse at 844 King Street in Wilmington. All creditors are invited, but not required, to attend. This Official Meeting of Creditors offers the one opportunity in a bankruptcy proceeding to question a responsible office of the Debtor under oath. (Loewen Bankruptcy News Issue 3; Bankruptcy Creditors' Service Inc.) MCA FINANCIAL: Sterling Bank Seeks To Foreclose Mortgages --------------------------------------------------------- Sterling Bank and Trust, FSB seeks relief from the automatic stay in order to foreclose its mortgages from Eastside Limited Partnership and states that Eastside is one of the debtors. Property Corporation of America (PCA) is one of the debtors, and the general partner of Eastside. Sterling Bank asserts that PCA has no equity in the Mortgaged Properties. In addition to the amount of Sterling's mortgages, taxes have not been paid since 1994 or 1995 and there are at least two additional mortgages on each mortgaged property in the face amount of $16,800. Sterling says that since PCA has no equity in the properties, the properties cannot contribute to the reorganization of PCA even if PCA was reorganizing. Sterling's interest is not adequately protected, and therefore Sterling asserts its right to relief from the automatic stay. Sterling states that interest on the notes from Eastside continues to accrue, some of the properties need repairs, therefore a foreclosure is necessary. The loans cover 27 properties, with a principal balance of loan as of January 1, 1999 of $161,744. MERRY GO ROUND: Landlords May Get Admin. Claim For Future Rent -------------------------------------------------------------- The U.S. Court of Appeals for the Fourth Circuit has ruled that landlords of a debtor may be granted an administrative claim for future rent against the bankrupt lessee. The appellate court concluded that the issue as to whether future rent for a specific lease is entitled to administrative priority should be determined on a case-by-case basis, just like any other administrative claim. The court's ruling came in the Merry-Go-Round Enterprises Inc. v. Simon DeBartolo Group L.P. case. The court's order notes that "in an effort to salvage its failing business," Merry-Go-Round entered into 10 post-petition leases with the shopping mall operator, including a 10-year lease for a store in DeBartolo's Cutler Ridge Mall in Miami. However, Merry-Go-Round's failing business did not improve and the company decided to liquidate. DeBartolo filed a Chapter 7 administrative claim for damages including future rent from the breach of its leases with the court. The trustee was able to negotiate a settlement of claims in connection with nine of the 10 leases, but damages stemming from the Miami lease were unresolved. The bankruptcy court instead issued DeBartolo a chapter 11 administrative claim and DeBartolo filed on the June 8, 1996, claims bar date a $16,014 proof of claim for damages arising from past use of the Miami property and a $1,322,265 proof of claim for future rent as well as a cross-appeal. The trustee objected to the proofs of claim, but the bankruptcy court validated Debartolo's claims. The U.S. District Court upheld the lower court's ruling that Debartolo was entitled to a chapter 11 administrative claim, which the trustee appealed to the Fourth Circuit. (The Daily Bankruptcy Review and ABI Copyright c June 17, 1999) NEUROMEDICAL SYSTEMS: Stipulations And Orders For Relief --------------------------------------------------------- The US Bankruptcy Court for the District of Delaware entered two separate orders approving the stipulations of Neuromedical with Citibank. The debtor, Neuromedical Systems, Inc. entered into a security agreement with Transamerica Business Credit Corporation to secure financing in an amount not to exceed $5 million. Citibank issued an irrevocable standby letter of credit to Transamerica on behalf of Neuromedical in an amount not to exceed $3.18 million. The debtor is in default under security agreement, and Transamerica intends to draw down on the letter of credit as soon as possible. The amount due to Transamerica is disputed. The debtor claims that $2,281,597 is due, and Transamerica believes that $2,501,044 is due. The parties agree to relief from the automatic stay as to Citibank. The debtor also entered into a Master Lease with the predecessor of Finova Technology Finance Inc. Citibank issued an irrevocable letter of credit for $811,868 to Finova on behalf of Neuromedical. Finova drew down on the Letter of Credit in the amount of $811,993. The parties agree to implement or enforce the provisions of the agreement as to Citibank. NU-KOTE: Objections To Disclosure Statement ------------------------------------------- Seiko Epson Corporation and Epson America Inc. object tot he Disclosure Statement of the debtors, Nu-Kote Holding, Inc. and its affiliates. Epson states that "the defects in the debtors' Disclosure Statement are so pervasive that it appears that it was not proposed with the expectation that it could or would be approved." Epson complains that the Disclosure Statement fails to adequately deal with the administrative claims. The debtors do not address what will occur if the total for administrative expenses exceeds $1 million. The debtors' Disclosure Statement is impermissibly defective in describing the OEM litigation and the HP litigation, and does not mention its patent infringements and the worsening of its position in antitrust counterclaims. The creditors also object to the failure to address the reorganized debtors' future operations. It is silent as to its proposed "ink-jet" subsidiary, and it is silent regarding the debtors' post-sale supply source. The creditors also suggest substantial potential claims against the debtors' management and professionals, and the creditors assert that it is virtually impossible to ascertain what creditors will receive under the plan. For the many inadequacies that they describe, the creditors maintain that the plan is not confirmable. PAL: Bank Opposes Plan ---------------------- The U.S. Export-Import Bank asked Manila's Securities and Exchange Commission on Thursday to reverse its approval of Philippine Airlines' rehabilitation plan. The plan for the ailing carrier was approved by the SEC on May 17 and upheld on June 7 after airline chairman Lucio Tan successfully raised $200 million in fresh capital for the airline a key condition of the plan. The airline owes the Ex-Im Bank $350 million, or 16 percent of the airline's total debt of more than $2.2 billion, making the U.S. financial institution its second biggest creditor. The Ex- Im Bank has been a critic of the rehabilitation plan and of PAL's present management, led by Tan, one of the Philippines' richest men. The Ex-Im Bank initiated moves in May to try to recover four Boeing 747-400s it helped finance for the airline. In its motion Thursday, it said the SEC has not shown proof that it secured the approval of a majority of the airline's creditors for the recovery plan. It also questioned the legal procedures adopted by the SEC in handling the carrier's rehabilitation program. Last month, Philippine National Bank also asked the SEC to dismiss its approval of PAL's rehabilitation plan, arguing that foreign investors were treated more favorably than their local counterparts in terms of loan repayments. PNB, one of the country's largest banks, has the biggest exposure of any of the airline's domestic creditors. Except for some token payments, PAL has been unable to service its debt since June 1998, when a pilots' strike and the debilitating effects of Asia's financial crisis crippled its operations. PARAGON TRADE: Seeks Approval of Fees Pursuant to Plan Outline -------------------------------------------------------------- The debtor, Paragon Trade Brands, inc.l seeks approval of certain expense reimbursement, termination fee and overbid procedure provisions of a plan outline between Paragon and Wellspring Capital Management LLC. The plan outline provides for $100 million equity investment in the debtor by Wellspring pursuant to a plan of reorganization in return for 84.1% of the common stock of Paragon as reorganized subject to dilution and diminution as a result of an equity rights offering; the issuance by Reorganized Paragon of approximately $200 million in notes, and the raising of new working capital financing in the amount of $50 million, which investment and financing would form the basis of a proposed plan of reorganization for Paragon. Under the Wellspring plan, it is anticipated that there will be approximately $318.9 million in value to be distributed to holder of allowed general unsecured claims, and they would have the opportunity to participate in an equity rights offering to acquire up to 24.1% of addition equity in Reorganized Paragon at the same price as Wellspring. Wellspring would contribute $100 million in cash and would cause Reorganized Paragon to issue approximately $200 million in notes to fund a plan of reorganization. Overbids that provide for consideration of at least $10 million greater than the consideration set forth in the plan outline will be considered by Paragon. A termination fee of $2 million is proposed in the overbid procedures. At this point, the Creditors' Committee does not support the Wellspring Plan, but it does approve of the Overbid Procedures and intends to engage in discussions with P&G< K-C and the Equity Committee to attempt to obtain their support of the procedures. The Plan Outline and Wellspring Investment are premised on a $325 million confirmation date enterprise valuation for Paragon and a $118.9 million purchase price valuation for 100% of the New Common Stock. Each holder of an allowed general unsecured claim shall have the opportunity to indicate on its ballot its desire to participate in the Rights Offering at the Wellspring Investment Price. A majority of the Board of directors of Reorganized Paragon will be designated by Wellspring. PHONE-TEL: Announces Support for Pre-packaged Plan -------------------------------------------------- PhoneTel Technologies Announces Support for Pre-packaged Plan PhoneTel Technologies Inc., Cleveland, announced yesterday that the requisite acceptances of its pre-packaged reorganization plan have been obtained from holders of its 12 percent senior notes due 2006 and its 14 percent cumulative redeemable convertible preferred stock, according to a newswire report. The company said that more than 99 percent of the holders of the senior notes responding and 100 percent of the preferred stock holders cast ballots accepting the plan. In May, PhoneTel announced that it had begun solicitation of the pre-packaged plan in anticipation of filing chapter 11 to implement a restructuring through conversion of the senior notes into equity of the reorganized company. PITTSBURGH PENGUINS: Unsecured Creditors Support Lemieux -------------------------------------------------------- The Official Committee of the Unsecured Creditors in the Pittsburgh Penguins' chapter 11 bankruptcy case announced today that it will support a "modified" Plan of Reorganization which will be filed by Mario Lemieux early next week. Attorney Joel Walker of the law firm Doepken Keevican & Weiss, counsel for the Creditors Committee, stated, "We have negotiated a deal with the Lemieux Group which clearly maximizes recovery to the unsecured creditors and allows the team to remain in Pittsburgh." Those terms include the following: an initial cash payment of $2 million; annual payments of $850,000 per year for ten years; additional payments if the reorganized company achieves certain savings in its operations; and the assignment of certain lawsuits, including causes of action against Howard Baldwin and Morris Belzberg. "Our analysis shows that general unsecured creditors will receive significantly better treatment under the modified Lemieux Plan than they would receive under either the SMG/Fox or NHL Plans," said John Kosko, chairman of the Creditors Committee. All three plans are scheduled to be considered by the Bankruptcy Court next Thursday, June 24. PLUMA INC: Seeks To Retain Robinson-Humphrey Company ---------------------------------------------------- The debtor, Pluma Inc. seeks to retain The Robinson-Humphrey Company, LLC for the purpose of identifying opportunities for the sale of Stardust Corporation, advising the debtor concerning opportunities for such sale and participating on the debtor's behalf in negotiations concerning such sale. The firm will provide general business and financial advice; assist in the preparation of a descriptive offering memorandum; contact the parties concerning the sale as approved by Pluma; and participate in negotiations on behalf of Pluma. The firm will receive a retainer of $30,000 and a fee equal to 2.5% of the consideration up to $14 million and 5% of the consideration in excess of l$14 million or $300,000, whichever is greater. If the sale is to a party previously identified, 2% of the consideration up to l$14 million and 5% of the consideration in excess of $14 million or $250,000, whichever is greater. PRIMARY HEALTH: Seeks Authority To Enter Into Radiology Agreement ----------------------------------------------------------------- The debtors, Primary Health Systems, Inc. seek court authority to enter into a Radiology Agreement with Drs. Hill & Thomas Co. The Radiology Group will bill patients and third-party payors directly for the professional component of any radiology services rendered and the debtors will bill patients and third-party payors for the technical component of such services. In addition, the debtors will pay $125 per hour for any administrative services. The agreement will expire on May 31, 2004, unless terminated earlier, and may be renewed for successive two-year periods. Radiology Group shall charge and bill patients and third party payors separately from PHS for the professional component of any Diagnostic Imaging Services. PRIMARY HEALTH: Seeks To Reject Contract With Champion ------------------------------------------------------ The debtors, Primary Health Systems, Inc. and its affiliates seek court approval to reject an executory contract with Champion Natural Gas Company. Champion provides debtors with natural gas. The contract expires October 31, 1999. The debtors have determined that it is in the best interests of the estate to reject the Champion contract, and instead have contracted with FirstEnergy Natural Gas at a lower rate. QUALITECH STEEL: Order Modifies Final Financing Order ----------------------------------------------------- On June 3, 1999, the US Bankruptcy Court for the Southern District of Indiana Indianapolis Division, entered an order in the case of Qualitech Steel Holdings Corp. and its wholly-owned subsidiary, Qualitech Steel Corporation modifying the final order authorizing postpetition financing. The order increases the availability of the financing from $16.1 million to $30 million in connection with a modified operating budget. RENAISSANCE COSMETICS: Taps Development Specialists, Inc. --------------------------------------------------------- The debtors, Renaissance Cosmetics, Inc., et al. filed an application to retain Development Specialists, Inc. as interim management for the debtors. The firm will provide interim management for the debtors in order to maintain and increase, if possible, the value of the debtors' businesses. The firm will pursue a quick and efficient sale of substantially all of the debtors' assets in order to maximize the recovery of the debtors' creditors and parties in interest; and perform such other services as are necessary to allow the debtors to meet their obligations as debtors. The debtors have paid DSI a retainer of $500,000. Approximately $350,000 of that retainer remains. RENAISSANCE COSMETICS: Taps The Ozer Group ------------------------------------------ The debtors, Renaissance Cosmetics, Inc., et al. seek to retain The Ozer Group, LLC as asset disposition consultants. The firm will specifically provide assistance with the sale of all or a portion of Renaissance's assets, including inventory furniture, fixtures, equipment and leaseholds. Or if it can not be sold, Ozer will assist with orderly liquidation. The firm may assist in the preparation of information packages relating to the assets being sold; develop a process for liquidation of various assets, negotiate with prospective liquidation purchasers of one or more transactions. The debtors propose to pay a $20,000 retainer to the firm. ROOM PLUS: Court Enters Fourth Interim Order For DIP ----------------------------------------------------- David A. Belford has a valid and enforceable secured claim against the debtor as of the petition date of approximately $1.5 million. The debtor stipulates that the Belford Loan is not subject to defense, offset or counterclaim. The debtor is seeking additional financing above he Cash Collateral in an amount not to exceed $1 million, which Belford is will to provide. The court approved the Interim Financing, and the debtor is authorized to borrow up to an additional $300,000 as dictated by the Budget. The Dip Facility shall provide funding to the debtor in $200,000 increments and is conditioned on the debtor meeting its sale milestones. SERVICE MERCHANDISE: Court Approves Deloitte & Touche ----------------------------------------------------- The Debtors sought and obtained Judge Paine's authority to employ Deloitte & Touche as limited financial advisors to the Debtors in connection with the sale of B.A. Pargh. The Debtors engaged D&T, prior to filing their Petition, in connection with the sale of B.A. Pargh, a Service Merchandise subsidiary selling office supplies and equipment to businesses. Thus, say the Debtors, D&T is "thoroughly familiar with the Debtors, their business, and in particular B.A. Pargh." By retaining B.A. Pargh, the Debtors seek to maximize the value of B.A. Pargh and its assets to better enable the Debtors to reorganize successsfully, as a whole. D&T will provide the Debtors with the following corporate finance advisory services in connection with the marketing and sale of B.A. Pargh: 1. updating the previously prepared detailed selling memorandum 2. assisting in identifying and contacting potential stratgic and financial buyers on a worldwide basis. 3. assisting in fielding inquiries and questions from potential candidates 4. assisting in negotiating and structuring various aspects of the proposed transaction. D&T will charge the following hourly rates: Partners and Principals $450 to $575 Senior Managers $220 to $450 Managers $200 to $400 Seniors Accountants $140 to $360 Assistant Staff $ 80 to 330 Administrative $ 30 to 80 (Service Merchandise Bankruptcy News Issue 7; Bankruptcy Creditors' Service Inc.) TELEGROUP INC: Order Extends Use of Cash Collateral --------------------------------------------------- The US Bankruptcy Court for the District of New Jersey entered an order authorizing the debtor, Telegroup, Inc. to use Foothill's cash collateral in accordance with the Budget up to and including June 30, 1999. TELEGROUP INC: Seeks To Extend Employ of Alvarez & Marsal --------------------------------------------------------- The debtor, Telegroup, Inc. requests that the court enter an order approving the Fourth Interim Order for retention of Alvarez & Marsal as its crisis and restructuring consultants. BOND PRICING FOR WEEK OF JUNE 14 ================================ DLS Capital Partners, Inc. Following are indicated prices for selected issues: Acme Metal 10 7/8 '07 10 - 12 (f) Amer Pad & Paper 13 '05 62 - 64 Asia Pulp & Paper 11 3/4 '05 79 - 80 Boston Chicken 7 3/4 '05 3 - 5 (f) Cityscape 12 3/4 '05 9 - 11 (f) E & S Holdings 10 3/8 '06 49 - 52 Geneva Steel 11 1/2 '01 20 - 22 (f) Globalstar 11 1/4 '04 63 - 64 Hechinger 9.45 '12 9 - 12 (f) Iridium 14 '05 18 - 19 Jitney-Jungle 12 '06 46 - 48 Loewen 7.20 '03 63 - 64 (f) Penn Traffic 8 5/8 '03 39 - 41 (f) Planet Hollywood 12 '05 20 - 23 (f) Samsonite 10 3/4 '08 81 - 83 Service Merchandise 9 '04 20 - 21 (f) Sun Healthcare 9 1/2 '07 18 - 22 (f) Sunbeam 0 '18 16 - 17 TWA 11 3/8 '06 53 - 54 Vencor 9 7/8 ' 05 25 - 28 (f) Zenith 6 1/4 '11 26 - 28 (f) ********** The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. Bond pricing, appearing 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, Yvonne L. Metzler and Lexy Mueller, Editors. Copyright 1999. 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 * * *