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/raid1/www/Hosts/bankrupt/TCR_Public/990825.MBX T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, August 25, 1999, Vol. 3, No. 164 Headlines ATC GROUP: Meeting of Creditors, Disclosure Statement Hearing BEST PRODUCTS: NationsBank Signs Lease for Former HQ BMJ MEDICAL: Seeks Extension of Exclusivity BRAZOS SPORTSWEAR: Court Approves Rejection of Leases/Contracts BRAZOS SPORTSWEAR: Court Authorizes Extension of Exclusivity BRUNO'S: Examiner Seeks To Increase Fee Cap To $500,000 COHO ENERGY: Files Voluntary Chapter 11 Petition EDISON BROTHERS: CODA Acquisition Group Obtains Most CODA Stores FILENE'S BASEMENT: Paragon Capital Steps Up Second Time FPA: Humana Transfers Operations of 6 Former FPA Centers HECHINGER: Committee Seeks Authority To Hire Co-Counsel NEWMONT MINING: Hedged Millions In Gold OLD AMERICA: Home DＤor Chain Closing; Stores Unable to Recover ONE STOP WIRELESS: How do you leverage $2.7 M To Pay $6M? PHILIP SERVICES: Court Authorizes Counsel For Committee PHILIP SERVICES: Seeks Authority To Hire Ernst & Young PITTSBURGH PENGUINS: Lemieux Expected to Close Deal This Week PRIMARY HEALTH: Seeks Extension of Exclusivity PRIMARY HEALTH: Seeks Extension of Time To Assume/Reject Leases SILAS CREEK: Hearing To Consider Approval of Disclosure Statement THE COSMETIC CENTER: Seeks Extension of Exclusivity ZENITH: Case Summary & 20 Largest Unsecured Creditors ZENITH: Prepack Bankruptcy With Strong Bondholder Support ********** ATC GROUP: Meeting of Creditors, Disclosure Statement Hearing ------------------------------------------------------------- The debtors, ATC Group Services Inc., et al. filed voluntary petitions for relief under chapter 11 on July 26, 1999. A meeting of creditors will be held on September 9, 1999 at 2:30 pm in the office of the US Trustee, 80 Broad street, 2nd floor, New York, NY. A hearing will be held before the Honorable Jeffry H. Gallet, Us Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, NY Room 523, September 24, 1999 at 11:00 AM to consider the application of the debtors for entry of an order approving the Disclosure Statement as containing "adequate information" with respect to the plan and authorizing the debtors to solicit acceptances of the plan. The deadline for filing proofs of claim against the debtors is no later than 5:00 PM September 17, 1999. BEST PRODUCTS: NationsBank Signs Lease for Former HQ ---------------------------------------------------- The headquarters of Best Products, off I-95 near Richmond, Va., has been vacant since the company closed in bankruptcy proceedings in January 1998, but according to Virginia News Network, NationsBank Corp. has signed a deal to lease the 285,000-square-foot building as it expands its operations out of a nearby facility. (ABI 24-Aug-99) BMJ MEDICAL: Seeks Extension of Exclusivity ------------------------------------------- The debtors, BMJ Medical Management, Inc. et al., seek entry of an order extending for a period of 90 days the debtors' exclusive periods within which to file and solicit acceptances of a plan or plans of reorganization. The debtors seek an extension of the plan proposal period through and including November 18, 1999 and the Solicitation period through and including January 18, 2000. Both the creditors' committee and the pre-petition and post-petition Lenders support the extension. The DIP financing facility currently in place will be extended through January 18, 2000, subject to court approval. The debtors have submitted their plan of reorganization and they are currently involved in negotiations with their creditor constituents regarding proposed plan treatment, and are also involved in negotiating settlements with certain Medical Groups regarding assumption and/or rejection of the MSA's. The debtors' plan is premised upon the retention of core Medical Groups in the southeast and eastern US. The debtors continue to negotiate with certain of the remaining 29 Medical Groups and prospective buyers of the assets; the debtors anticipate that the reduction of non- core Medical Groups will reduce corporate overhead and streamline operation. The debtors have already received over $17 million in cash from the sale of five an ambulatory surgery center and the termination of management relationships and the transfer of assets and the debtors have received forgiveness of $897,727 in unsecured claims. There are 5 motions pending seeking approval of transactions with four Medical Groups and one individual doctor that will result in the termination of management relationships and the receipt of approximately $4 million in cash. Certain of the debtors have consummated an asset purchase agreement for the sale of the Warner Park Surgery Center in a transaction that resulted in the payment to BMJ of $5 million in cash. BMJ has one pending motion to sell a surgery center which will result in the transfer of assets for $5 million in cash. There are other negotiations underway and the debtors obtained a court order setting the claims bar date for July 6, 1999. The debtors state that the case is enormous and enormously complex. The debtors claim that the evaluation of the 34 MSAs and the operations of the 34 Medical Groups to select those "core" groups was a gargantuan task. BRAZOS SPORTSWEAR: Court Approves Rejection of Leases/Contracts --------------------------------------------------------------- The US Bankruptcy Court for the District of Delaware entered an order authorizing the debtors to reject executory contracts with Lucent Technologies and AT&T and four unexpired leases . BRAZOS SPORTSWEAR: Court Authorizes Extension of Exclusivity ------------------------------------------------------------ By order dated August 10, 1999, the US Bankruptcy Court for the District of Delaware entered an order extending the exclusive periods during which the debtors may file a plan or plans of liquidation and solicit acceptances for such plan. The plan proposal period is extended through and including September 29, 1999. The solicitation period is extended through and including November 29, 1999. BRUNO'S: Examiner Seeks To Increase Fee Cap To $500,000 -------------------------------------------------------- The cost of the Leveraged Recapitalization Investigation is, essentially, being paid for by the parties who have the economic interests in these chapter 11 cases, the Debtors observe. If they consent to a 150% increase in the fee cap, so be it, the Debtors conclude. The Debtors suggest, however, that any increase in the fee cap this time around should be the last. Chapter 11 is not the optimal environment for the Debtors to operate a competitive grocery store operation. The Debtors would like to leave the Court sooner rather than later, and don't want to see delays in the presentation of the Examiner's Report as the cause for further delay in confirming a plan and emerging from chapter 11. If the Examiner cannot conclude his investigation in 12 weeks for under a half-million dollars, now's the time to say something . . . not on the eve of his September 15 deadline. W.R. Huff tells Judge Robinson that the important issue isn't how much money the Examiner will spend or the timing of his report. Rather, Huff suggests, Judge Robinson should be looking past the September 15 deadline and seeing that regardless of what the Examiner concludes one side will be disappointed. That disappointment will generate further discovery, litigation, and, quite likely, a hotly contested confirmation process. Rather than having the participants sit back and wait until September 15, now is the time, Huff recommends, for the Court to open the investigation process (meaning the Examiner should conduct formal depositions rather than informal interviews and should open his document room to each of the core parties in interest) for participation by all of the players. An open process, Huff believes, will foster negotiation and settlement talks; a closed process will only fuel further litigation. Hold on a second, the Debtors urge in a Reply to Huff's suggestion that Judge Robinson implement some type of "discovery protocol" in connection with the Examiner's investigation. Any elaborate protocol should have been discussed some time ago and will only serve to delay these chapter 11 cases. Mr. Goldin is an experienced and capable Examiner, the Debtors argue. Let him do the work he thinks he needs to do how he knows to do it best. The Debtors view Huff's motives for this eleventh-hour request for a discovery protocol with a high level of suspicion. The Debtors suspect that Huff's real motive is to delay and impede the Leveraged Recapitalization Investigation and the Debtors' emergence from chapter 11 because Huff fears that the Examiner won't concur with Huff's conclusions. An elaborate discovery protocol, the Debtors suggest, may give Huff the ability to manipulate the Investigation and intimidate the Examiner. Just let the Examiner do his job, the Debtors urge, without a mid-course correction in the process. (Bruno's Bankruptcy News Issue 25; Bankruptcy Creditors' Service, Inc.) COHO ENERGY: Files Voluntary Chapter 11 Petition ------------------------------------------------ Coho Energy Inc. (OTC BB:COHO) announced that this morning in Federal Bankruptcy Court, Dallas, the Company filed a petition for Chapter 11 bankruptcy protection. The decision to seek protection was taken by Coho and certain subsidiaries because the Company now believes that the resolution of a restructuring cannot be completed without the protection and assistance of the bankruptcy court. Timing of the bankruptcy filing was imposed by several factors including the acceleration of the Company's $ 240 million indebtness by its bank creditors on Aug. 19, the inability of the banks and the bondholders (the two large creditor groups) to reach a satisfactory agreement with each other, and the potential for one of the bondholder's being granted a summary judgment in its lawsuit against the Company for full payment of principal and past due interest. The lack of liquidity during the restructuring period has made the process of working through this problem more difficult. Coho is continuing to discuss a solution to its capital needs with the banks, the bondholders and other potential investors. The Company expects to file a plan of reorganization with the bankruptcy court in the near future. Coho Energy Inc. is a Dallas-based independent oil and gas producer focusing on exploitation of underdeveloped oil properties in Oklahoma and Mississippi. EDISON BROTHERS: CODA Acquisition Group Obtains Most CODA Stores ---------------------------------------------------------------- The CODA Acquisition Group announced today that it has acquired the national chain of CODA, JW/Jeans West and J Riggings stores from Edison Brothers, Inc. to be developed into a chain of stores under the CODA umbrella. The stores will feature high- profile brands catering to the contemporary (urban) fashion market. James Khezrie, owner and operator of Jimmy Jazz stores, a successful tri-state retail chain, will head the new venture along with Stuart Feldman, principal of Chelsea Capital, and a management team consisting of key individuals from the original CODA Company. Willam B. Wachtel, of the law firm Wachtel & Masyr, assisted in the transaction. "I see this as a great opportunity to expand upon our Jimmy Jazz concept nationally, sharing with CODA the principles that have guided our success to date," said Mr. Khezrie. "We will continue to assume that the customer is as smart as we are, offer the best selection and availability of the hottest styles, and make sure that the presentation is top-notch." The chain will consist of 155 stores and information regarding the rollout will be announced shortly. No financial terms were discussed. (Edison Brothers Bankruptcy News Issue 35; Bankruptcy Creditors' Service Inc.) FILENE'S BASEMENT: Paragon Capital Steps Up Second Time ------------------------------------------------------- As Filene's Basement files for Chapter 11 Bankruptcy protection today, Paragon Capital LLC announced that, along with General Electric Capital Corporation, it will provide an expanded $ 135 million in debtor-in-possession financing. This arrangement is $ 10 million higher and provides greater availability than the line of credit Filene's Basement secured from Paragon and GE just last month. Nearing the final holiday shopping season of the century, the Basement looked to Paragon Capital LLC, of Needham, Mass., and General Electric Capital Corporation, of Stamford, Ct., in July for a $ 125 million revolving line of credit that would replace and provide considerably more availability than the company's previous line of credit with a different lender. The financing was intended to help drive the expansion of the Basement's new Aisle 3 stores and support the continued repositioning of its core business. Since then, despite having the necessary liquidity, the Basement has encountered a lack of trade support and had difficulty obtaining enough inventory. Filene's Basement and its lenders agree that Chapter 11 will give the company an opportunity to receive the needed inventory for a critical time of year and facilitate its restructuring and expansion. "We stand committed to ensuring that all our resources are available to assist the Basement at this very important time," said Paragon CEO Stewart Cohen, and President Andrew Moser. "We are confident that this company, with its capable management, long-standing reputation and rich history, will demonstrate and capitalize on its full potential. The Basement now has a platform from which the vendors can fully support its efforts." Paragon Capital is an asset-based lender whose management is comprised of experienced former retailers and lenders. The company has been defining a new, specialized retail lending niche since it was founded in 1997. Paragon has experienced dramatic growth, completing almost $ 300 million in new financing with retailers like: Learningsmith, Crown Books, The Big Party, Weathervane, Golf America, Pacific Eyes & T's, Harvey Electronics and Bikes USA. One of the main reasons for Paragon's success is that, as retailers and merchants with lending expertise, the management team applies a true merchant's perspective in lending to retailers. Paragon Capital is a partnership between one of America's premier "boutique" asset valuation firms, The Ozer Group LLC of Needham, Mass., and a leader in the asset-based lending industry, Foothill Capital Corporation of Los Angeles. Foothill is a subsidiary of Wells Fargo & Company, a $ 202 billion financial services company. With the backing of Wells Fargo and Foothill, Paragon functions autonomously as an entrepreneurial company that provides financing solutions to North American retail and consumer products companies. FPA: Humana Transfers Operations of 6 Former FPA Centers -------------------------------------------------------- Humana Inc. (NYSE: HUM) has entered into partnerships with three medical organizations to operate six South Florida medical centers formerly operated by FPA Medical Management Inc. The agreements are effective September 1, 1999. Terms were not disclosed. Humana assumed operational responsibility for 50 former FPA centers nationwide June 1 as part of an agreement with FPA, approved by the federal bankruptcy court overseeing FPA's Chapter 11 reorganization. Since then, as a result of this and similar transactions over the past several weeks, Humana no longer operates 21 of the 50 centers. The transactions are consistent with Humana's intention to transfer operation of all the former FPA centers to other provider groups, enabling Humana to focus exclusively on its core business of health insurance. Humana assumed operational responsibility for the 50 centers to ensure continuity of care for 121,000 Humana health plan members in South Florida, Kansas City, San Antonio, Orlando, Tampa and Jacksonville. The six South Florida centers serve 9,500 Humana members. The three South Florida provider groups that have entered into partnerships with Humana are Primary Care Associates, Dr. Olivia Graves and South Florida Medical Centers, Inc. "Humana's number one priority is the health of our members," said Tom Wyss, executive director for Humana's South Florida market. "The new partners have agreed to maintain five of the existing medical center locations for the members' convenience and continuity of care, as well as assume the physicians and staff and Humana's disease management programs. Members of the sixth center have been transferred to an adjoining medical practice." In explaining Humana's decision to assume operational authority for the 50 former FPA centers in June, Senior Vice President Mike McCallister said, "Humana wanted to solidify and stabilize the relationship between physicians and members and therefore eliminate the uncertainty related to the FPA bankruptcy process. Now that we've done so, we are successfully transferring operational responsibility for the centers to provider groups with a proven ability to offer our members high-quality care." Humana provides health insurance products and services to 1.3 million Floridians. Humana Inc., headquartered in Louisville, Ky., is one of the nation's largest publicly traded managed health care companies with approximately 6.1 million medical members located primarily in 15 states and Puerto Rico. Humana offers coordinated health care through a variety of plans -- health maintenance organizations, preferred provider organizations, point of service plans and administrative service products -- to employer groups, government- sponsored plans and individuals. HECHINGER: Committee Seeks Authority To Hire Co-Counsel ------------------------------------------------------- At the request of the US Bankruptcy Court for the District of Delaware, counsel for the firm Pepper Hamilton LLP submitted a proposed order authorizing the employment and retention of Pepper Hamilton LLP nunc pro tunc to June 24, 1999 as co-counsel for the official committee of unsecured creditors. NEWMONT MINING: Hedged Millions In Gold --------------------------------------- Newmont Mining Corp., the world's second-largest gold producer, said it acquired put-option contracts giving it the right to sell 2.85 million ounces of gold at $ 270 an ounce. The contracts cover a two-year period between this month and July 2001, the company said in its quarterly filing with the Securities and Exchange Commission. Newmont produced 4.07 million ounces of gold in 1998. Denver-based Newmont said last month that it would hedge its production for the first time in seven years. Gold, which has fallen 11 percent this year, is still trading near 20-year lows. OLD AMERICA: Home DＤor Chain Closing; Stores Unable to Recover --------------------------------------------------------------- Two area home decor stores are in the process of closing after their parent company, Old America Stores, was unable to recover from a Chapter 11 bankruptcy filing in August 1997. The two local subsidiaries affected are in Martinez and North Augusta. A company official said the company is liquidating its remaining 59 stores. Old America, which sells home decor merchandise, will keep its stores open until mid-October. Both stores have discounted their merchandise by 20 percent. Old America, which is headquartered in Dallas, still is in the process of reorganizing and will make additional announcements as changes occur, Mr. Hunt said. Old America, which was an arts and crafts store chain, closed 14 of its unprofitable stores and eliminated 20 percent of its corporate staff. In January 1998, bankruptcy court approved the sale of Old America to Robert E. Kirkland. Four days later the stock price dropped to zero. After ownership changed hands, the company's remaining stores switched over to selling home decor merchandise. ONE STOP WIRELESS: How do you leverage $2.7 M To Pay $6M? --------------------------------------------------------- BCD News and Comment reports on August 18, 1999 that the debtors, who include One Stop Wireless of America, Inc. and two other jointly administered and substantively consolidated cases, used to sell prepaid cellular phone cards nationwide. While they initially managed to raise 53 million through 53 separate limited liability partnerships, the estate is now worth only 2.7 million or thereabouts. How do you leverage 2.7 million in order to satisfy investors with about 53 million in claims, trade creditors with 5 million to 6 million in claims, and claims by class action plaintiffs, the executive committee, employees and a large judgment creditor? The attorneys who took over this case - James Bastian, Richard Marshack and Mark Bradshaw of Marshack Shulman & Hodges LLP in Irvine, Calif. - did satisfy most creditors, to the extent that is possible, with a plan that is quite ingenious. Originally, the plan was to do business in Canada, but the debtors couldn't reach agreement with the major carriers so they switched their focus to the U.S. and made plans to expand to "everything under the wireless umbrella." To distribute their products, the debtors opened or were opening stores in Salt Lake City, Seattle, San Francisco, Albuquerque, N.M., Boston, Dallas, Houston and San Antonio. To operate the business, the debtors bought telephone switching equipment from Cellexis International. The equipment was specially programmed to transfer prepaid calls. But there were many problems with the systems. After the companies filed Chapter 11, the debtors would take Cellexis to arbitration saying they should be excused from performance because the technology wasn't up to the standards of the contract. But the arbitrator would rule that the debtors had licensed technology and hadn't paid the licensing fees and that the contracts weren't terminated. Therefore, Cellexis was awarded more than 2 million. As part of the arbitration, Cellexis also wanted a 750,000 unpaid airtime charge paid, but the arbitrator said that wasn't part of the hearing. This is how Cellexis would end up with an unsecured claim in the bankruptcy for almost 3 million. However, at this point, the companies were continuing their downward slide into bankruptcy. In desperation, management wasted 1.5 million buying satellite-based phones in what reportedly turned out to be a total scam. The investors, equally desperate, formed an executive committee of five to insure their interests were protected. The committee filed a class action suit alleging everything from securities fraud to mismanagement, retained Deloitte & Touche to do an audit, and hired an outside consulting firm, C/Net: Solutions Inc. of Irvine, Calif. to whom it gave management authority. The consultants were attempting to work out deals with vendors and others in January 1998, when Cellexis brought injunctive proceedings in state court in Denver to freeze the debtor's remaining assets. With the money frozen, the consulting firm couldn't implement its plan and the company was forced to file bankruptcy on Feb. 13, 1998 in the District of Delaware. To beef up the estate, Marshack Shulman went after management. Two members of the management team paid the estate a lump sum of 750,000 to settle claims against them. Unsecured creditors divvied up 250,000 on day one, with the possibility of more depending on the outcome of litigation against those officers and directors who didn't settle. Cellexis' equipment was returned to them, but the company had other assets including office computers and equipment. The debtors managed to raise 200,000 by selling this equipment. The debtors arranged deals with PhoneXchange and Freedom Wireless. Litigation against directors and officers and other parties continues in Denver. Investors have agreed to subordinate up to 750,000 of their recovery from litigation proceeds to unsecured trade creditors, whose allowed claims are expected to range between 1 million and 2 million. Judge Alberts reportedly said, 'This could be a great deal [for investors] or it could be pie in the sky.'" PHILIP SERVICES: Court Authorizes Counsel For Committee ------------------------------------------------------- The Official Committee of Unsecured Creditors of Philip Services (Delaware) Inc. et al. is authorized by the US Bankruptcy Court for the District of Delaware to employ the firm of Blank, Rome Comisky & McCauley LLP nunc pro tunc to July 12, 1999 as counsel in these cases. PHILIP SERVICES: Seeks Authority To Hire Ernst & Young ------------------------------------------------------ The debtors, Philip Services (Delaware) Inc., et. al. and certain of their affiliates seek authority to hire Ernst & Young Inc. as restructuring accountants and financial advisors to the debtors. Effective as of July 15, 1999, E&Y Inc., the Canadian arm of Ernst & Young would serve as financial advisors to the debtors as wellas the Monitor in the Canadian cases. There will be no cap or other limitation on damages arising from any misconduct by E&Y Inc. E&Y Inc.'s engagement will contain no provisions of alternative dispute resolution or arbitration. E&Y Inc. will file fee applications in the US Bankruptcy Court. The professionals of the firm will charge between $495 per hour for partners and principals to $150 per hour for senior sand staff. The firm will be responsible for advising and assisting the debtor in organizing their resources and activities to manage the Chapter 11 process. It will advise and assist with the preparation of all financial information including exit financing; and will advise and assist the debtor with regard to every aspect of formulating a business plan and plan of reorganization. The firm will also advise and assist the debtors in connection with reorganization tax issues and potential tax consequences. PITTSBURGH PENGUINS: Lemieux Expected to Close Deal This Week -------------------------------------------------------------- Mario Lemieux is expected to close his deal to buy the bankrupt Pittsburgh Penguins team this week, according to court documents and parties involved in the case, The Pittsburgh Post-Gazette reported today. Team attorney Robert G. Sable of Sable, Makaroff & Gusky filed a five-page motion, which indicated that the closing was likely to begin yesterday and conclude tomorrow. The closing did not begin yesterday, but Bankruptcy Judge Bernard Markovitz moved up hearings on settlements of lawsuits related to the case to today, in order to help Lemieux and his group of investors finalize their purchase of the Penguins. Lemieux has agreed to invest $25 million and said he has obtained commitments for more than $50 million from other investors. (ABI 24-Aug-99) PRIMARY HEALTH: Seeks Extension of Exclusivity ---------------------------------------------- The debtors, Primary Health Systems, Inc. and its affiliates seek extension of the exclusive periods during which the debtors may file a plan of reorganization and solicit acceptances thereof. A hearing to consider the motion will be held on August 25, 1999. Since obtaining a short 45-day extension of their exclusive periods, the debtors have not yet had an opportunity to compete negotiations with the bank lenders. Because of the complexity of the issues underlying a chapter 11 plan in this case, including a planned conversion of the debtors to not-for-profit status, the debtors have not yet begun negotiations with the banks and the creditors' committee. The debtors request extensions of each of the Exclusive periods, through and including December 10, 1999 and February 8, 2000, respectively. The termination date of the debtors' proposed amended DIP financing is December 10, 1999. PRIMARY HEALTH: Seeks Extension of Time To Assume/Reject Leases --------------------------------------------------------------- The debtors, Primary Health Systems, Inc. and its affiliates seek extension of time to assume or reject unexpired leases of nonresidential real property for 120 days, through and including January 11, 2000. The debtors assert that it is particularly important to evaluate their remaining leases carefully, since as a health care services company, the debtors have an intimate relationship with the public and must maintain the public's confidence in their continued ability to provide quality health care. SILAS CREEK: Hearing To Consider Approval of Disclosure Statement ----------------------------------------------------------------- A hearing to consider the approval of the Disclosure Statement of Silas Creek Retail, Inc. and Silas Creek Retail, LP is scheduled for September 16, 1999 before the honorable Mary Fl. Walrath, 6th Floor, 824 Market Street, Wilmington, delaware at 10:30 AM. THE COSMETIC CENTER: Seeks Extension of Exclusivity --------------------------------------------------- The Cosmetic Center, Inc., debtor, seeks extension for a period of approximately 90 days of the debtor's exclusive periods in which it may file a plan of reorganization and solicit acceptances thereof. In an effort to stem its significant operating losses, Cosmetics entered into an agreement with Hilco/Great American Group to assist in conducting store closing sales at approximately 116 unprofitable stores. The store closings were completed in mid-July. Given the deteriorating financial condition of its business, Cosmetics decided to liquidate the inventory and related assets at its remaining stores and the inventory at its warehouse. The Liquidation Sales will be completed on or before November 15, 1999. The debtor requests the entry of an order extending the plan proposal period for approximately ninety days, through and including November 15, 1999 and extending the solicitation period for approximately 90 days, through and including January 10, 2000. The debtor submits that that the requested extension will allow the debtor to complete the liquidation and wind-down of its business thereby maximizing the value of its estate to the direct benefit of the creditors. The debtor asserts that the size and complexity of the case justify an extension of the exclusive periods. ZENITH: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------- Debtor: Zenith Electronics Corporation 1000 Milwaukee Avenue Glenview, Illinois 60025-2493 Court Filing: Chapter 11; District of Delaware; August 23, 1999 Type of Business: Development, engineering, manufacturing, marketing, distribution and sales of consumer electronics. Debtor's Counsel: James H.M. Sprayregen and Matthew N. Kleiman Kirkland & Ellis 200 E. Randolph Drive, Chicago, IL 60601 Laura Davis Jones Young Conaway Stargatt Taylor, LLP 11th Floor, Rodney Square North Wilmington, Delaware Total Assets: $310,900,000 Total debts: $732,000,000 Subordinated debt securities $108,900,000 - 259 holders Shares of common stock: 67,525,447 - 11,500 holders 20 Largest Unsecured Creditors: State Street Bank and Trust Company bondholder $29,292,000 Boston Safe Deposit and Trust Company bondholder $5,202,000 The Northern Trust Company bondholder $5,106,000 Salomon Smith Barney, Inc. bondholder $5,064,500 Thompson Consumer Electronics trade debt $4,972,446 Prudential Securities Incorporated bondholder $4,667,000 Daewoo Electronics Corporation trade debt $4,385,654 Citibank NA bondholder $4,099,000 Toshiba America Incorporated trade debt $4,020,867 Merrill, Lynch, Pierce Fenner & Smith Safekeeping bondholder $3,325,000 Bankers Trust Company bondholder $3,242,000 Charles Schwab & Co., Inc. bondholder $2,728,995 Bear Stearns Securities Corporation bondholder $2,605,000 The Bank of New York bondholder $2,594,000 National Investor Services Corporation bondholder $2,517,334 Chase Manhattan Bank bondholder $2,304,000 National Financial Services corporation bondholder $2,074,000 Phillips Display Components trade debt $1,992,803 A.G. Edwards & Sons, Inc. bondholder $1,945,666 Howe Barnes Investments, inc. bondholder $1,650,000 ZENITH: Prepack Bankruptcy With Strong Bondholder Support --------------------------------------------------------- Zenith Electronics Corporation (OTC Bulletin Board: ZETHQ) commenced its prepackaged plan of reorganization with the overwhelming support of its creditors by filing a Chapter 11 petition in the U.S. Bankruptcy Court in Wilmington, Delaware. With bondholder approval and financing in place, today's filing represents one of the final steps in Zenith's restructuring. The company said that, of the creditors who voted in its prepetition solicitation of consents, 97 percent of voting bondholders voted in favor of the plan of reorganization. Pursuant to the plan, current holders of the $103.5 million in principal amount of the 6-1/4 percent Convertible Subordinated Debentures will receive $50 million of new 8.19 percent senior debentures maturing in November 2009. As announced in April, Zenith has entered into a binding agreement with Citicorp North America Inc. to provide a $150 million debtor-in-possession financing facility to cover the period during the prepackaged court proceeding and a new three- year, $150 million credit facility to cover the period following the completion of the company's restructuring. Under the plan, trade creditors and vendors will not be impaired and will continue to be paid in the ordinary course of business. The company also expects to continue to pay employees' pre- petition and post-petition wages, salaries and benefits without interruption, and to fulfill obligations to customers throughout the reorganization. Under the plan, all outstanding common stock, including that for which LG Electronics (LGE) paid $380 million, will be canceled and no stockholders, including LGE, will receive any distribution for their shares. As part of the restructuring, the company's largest creditor, LGE, has agreed to exchange $200 million of its claims for 100 percent of the newly issued equity of the reorganized Zenith. In exchange for other claims, LGE will receive certain operating assets and LGE New Restructured Senior Notes. Following the restructuring, Zenith will be a wholly owned subsidiary of LGE. "After emerging from the reorganization, Zenith will have access to LGE's considerable research and manufacturing resources, enhancing Zenith's strength and ability to compete in the rapidly evolving television industry," Gannon said. Major elements of Zenith's operational restructuring -- establishing new sourcing agreements with world-class manufacturers and de-emphasizing Zenith's own manufacturing -- have been completed. Zenith has closed or sold all of its manufacturing operations except the Reynosa, Mexico, TV assembly plant, which will be transferred to LGE as part of the restructuring. John Koo, vice chairman and chief executive officer of LG Electronics, said, "LGE considers Zenith a very important part of our North American business strategy. While from a financial perspective, LGE's investment in Zenith has yielded disappointing results, we are committed to participating in this restructuring because we believe that a restructured, refocused Zenith can be an effective competitor in the North American television industry." Zenith, based in Glenview, Ill., is a long-time leader in electronic entertainment products. Zenith's largest stockholder is LGE, a global leader in consumer electronics with operations in 180 countries and annual sales of more than $9 billion. LGE, which owns 55 percent of the company's outstanding shares, acquired its majority interest in November 1995. ********** The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. 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