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/raid1/www/Hosts/bankrupt/TCR_Public/990826.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, August 26, 1999, Vol. 3, No. 165 Headlines ATLANTIC RANCHER: First Bankruptcy Auction on Internet BRADLEES: Quarterly Performance Information Made Public CODON PHARMACEUTICALS: Seeks Extension of Exclusivity CROWN BOOKS: Committee Objects To Disclosure Statement EATON'S: Pink Slips To Thousands FEDCO: Seeks Approval of Dayton Hudson Agreement FILENE'S BASEMENT: Interim Approval For Special Credit Line FILENE'S BASEMENT: Jones Apparel and Nike Among Creditors FIRST UNION REAL ESTATE: Seeks Approval To Sell Company Property FOAMEX INTERNATIONAL: Class Action Suit Filed FORMAN PETROLEUM: Files Chapter 11 FRANKEL'S: Seeks Order Compelling Performance by Scotty's GENESIS PHYSICIANS: Seeks to Terminate Contracts HECHINGER: Committee Taps Blackstone Group H.O.L.A. Recordings: Case Summary & 20 Largest Creditors LOEWEN: Committee Taps Professionals LL KNICKERBOCKER: Involuntary Petition Filed; Stock De-Listed LLOYD'S SHOPPING: Seeks Extension of Exclusivity NEWCARE HEALTH: Bill Brandt Appointed Examiner With Broad Powers NEXTWAVE: Sprint Expresses Interest in C-Block PCS Licenses PRIMARY HEALTH: Court Approves Extra $3 Million PLANET HOLLYWOOD: Noteholders Accept Pre-packaged Plan PROGEN TECHNOLOGY: Trustee Seeks Authority For Liquidation SIZZLER: Accelerated Growth Plan Announced By Company SIZZLER: Former Employee Files $20 Million Lawsuit TV FILME: Agreement With Senior Noteholder Committee TATHAM: Subsidiaries of Tatham Offshore File Bankruptcy Petition WESTERN DIGITAL: Announces Fourth Quarter, Year End Results WESTERN DIGITAL: Expanding Product Design In Singapore Operation WESTERN DIGITAL: 2.6 Million Shares Offered at $4.4325303 XATA CORP: Changes Accounting Firms ZENITH: From Manufacturer To Marketer ********** ATLANTIC RANCHER: First Bankruptcy Auction on Internet ------------------------------------------------------ Lycos, Inc. (NASDAQ:LCOS) announced an online auction to liquidate the $ 3-million inventory of Atlantic Rancher, a luxury clothing merchant that is currently in bankruptcy. The top quality goods, including leather coats, wool sweaters, items made from its patented DryHandle waterproof fabric and hundreds of other items of outerwear and casual wear will be auctioned in a first-of-its kind online auction at www.lycos.auctions.com, starting today. Auctions will be quick, and opening bids for individual items will be as low as one dollar. "Conducting a bankruptcy liquidation sale in an online auction format is clearly history in the making," said Leslie Anne Hawes, of Stroock & Stroock & Lavan, attorney for John J. Aquino, the appointed bankruptcy trustee. "This venue allows us to disperse of goods quickly with a significantly more expansive buying audience. With large volumes of extremely high quality merchandise available at well below fair market prices, we look forward to an exciting trading place." BRADLEES: Quarterly Performance Information Made Public ------------------------------------------------------- Beginning on August 20, 1999, Bradlees, Inc. undertook distribution to its banks and other credit providers summaries of its second-quarter (13-week) and year-to-date (26-week) financial results ended July 31, 1999. Included in the summaries is a comparison to the company's summary financial plan for the fiscal year ended January 29, 2000 (fiscal 1999). Due to the company's adoption of fresh-start reporting as of January 30, 1999, the financial summaries are not comparable in certain material respects to the prior-year periods presented. Sales for the second quarter ended July 31, 1999 exceeded the Plan by $43.3 million, or 12.8%, totalling $381.9 million. The increase, according to the company, was due primarily to favorable customer response to the its merchandising and marketing initiatives and the first-quarter liquidation of one of the company's major competitors (Caldor Corp.). Net income for the second quarter exceeded the Plan by $8.5 million, resulting in a net showing of $3.2 million. Although comparison may not in all respects be comparable the second quarter of 1998 showed net sales of 322.8 million and a net loss of $2.7 million. Year-to-date total sales exceeded the Plan by $72.5 million, or 11.4%, for a total net sales figure of 706.8 million. The year- to-date net loss was $14.1 million below the Plan net loss, arriving at a net loss of $20.3 million. Whereas comparison may not be viable, the 1998 first six-month period total sales were $616.1 million and the company experienced a net loss of $27.4 million. Bradlees is distributing the quarterly and year-to-date performance against its Plan to its banks and other credit providers to facilitate their credit analyses. The company cautions that the performance information should not be relied upon for any other purpose. Factual information is contained in the company's financial statements on file with the Securities & Exchange Commission. Bradlees states that it is making public the quarterly performance information solely because it is being distributed to a large number of the company's vendors for purposes of their credit analyses. The performance information provided here was not examined, reviewed or compiled by the company's independent public accountants. The company does not feel an obligation to continue reporting this type of performance information and has indicated that it may cease making such disclosures at any time. Further, the company says that the information may be subject to future adjustments and such adjustments could materially affect the reported information. CODON PHARMACEUTICALS: Seeks Extension of Exclusivity ----------------------------------------------------- The debtors, Codon Pharmaceuticals, Inc. and Oncor, Inc. seek court approval of an extension of the debtors' exclusive periods in which to file a Chapter 11 plan and to solicit acceptances thereof. The debtors seek a short 14-day extension, from August 25, 1999 through and including September 8, 1999 of the period during which the debtor will maintain the exclusive right to file a plan resolving these cases, as well as a 14-day extension from October 25, 1999 through and including November 8, 1999 of the period during which the debtors will have the exclusive right to solicit acceptances of such a plan. The debtors have been involved in complex litigation with Johns Hopkins and RCAT Partners regarding the debtors' rights and interests in certain valuable licenses. These complex issues have detracted from the debtors' ability and efforts to focus on formulating a Chapter 11 plan. The debtors have now resolved these issues, subject to court approval. The committee agrees to the extension. CROWN BOOKS: Committee Objects To Disclosure Statement ------------------------------------------------------ The Official Committee of Unsecured Creditors objects to the debtors' proposed first amended Disclosure Statement. The Committee alleges that the Disclosure Statement is defective because: It fails to describe adequately the very substantial and strong claims the debtors' estates have against certain present and former insiders, namely the debtors' controlling stockholder Dart Group Corporation and certain former directors and officers of the debtors'; It fails to disclose that the Committee strongly believes the claims should be vigorously pursued rather than released as the debtors propose; It fails to describe the irreconcilable conflicts of interest of the debtors'; Board of Directors and Senior management, conflicts that make it impossible for the debtors to exercise any independent judgment with respect to the proposed insider releases; It fails to provide the most fundamental information about the proposed board composition of the Reorganized debtor, issues of corporate control, or even the proposed capital structure and organizational documents of the Reorganized Debtor; It fails to disclose any of the terms or conditions under which the debtors propose to award their senior management a multi- million dollar equity stake of up to 15% of the Reorganized Debtor; and It fails to provide any fiscal 1999 information, instead proposing to leave creditors to vote on the basis of last year's financial statement. EATON'S: Pink Slips To Thousands -------------------------------- Retailer T. Eaton Co., now going through liquidation, said Tuesday it has laid off or given termination notices to thousands of employees. "Those employees whose services will be required during the liquidation have been advised to continue to report to work through the notice period," the company announced. "Those employees whose services will not be required have had their employment terminated effective immediately." The once-dominant department store chain, with 64 stores, has nearly 13,000 employees. It was not clear exactly how many workers were immediately laid off. The company also announced the resignation of Brent Ballantyne as chief executive and president. He will stay on as a director and chairman. Also Tuesday, trading in Eaton shares was halted by the Toronto Stock Exchange due to "failure to meet continued listing requirements." The shares -- valued at more than $15 each when the chain went public in 1998 -- had lost 31 cents to close at 40 cents in trading of more than 1.5 million shares Monday. Eaton's said after an insolvency hearing Monday that a sell-off of its inventory will now start in all its stores. "Our management team is also continuing to explore all alternatives in order to preserve as much value for its stakeholders as possible," Ballantyne said after an Ontario Superior Court judge appointed a receiver and approved the liquidation. With the chain $329 million in debt, Richter Partners of Montreal was appointed interim receiver while Gordon Brothers Retail Partners of Boston will liquidate the company's goods. "This is designed to protect the greater body of creditors and employees," Eaton's lawyer Gordon Marantz of Osler, Hoskin & Harcourt told Justice James Farley. Also Monday, the insolvent retailer's biggest recent lender unloaded a huge debt. GE Capital sold a $190-million Eaton's debt to Retail Funding, a company related to Gordon Brothers, the judge was told. FEDCO: Seeks Approval of Dayton Hudson Agreement ------------------------------------------------ The debtor, Federal Employees' Distributing Company, d/b/a FEDCO, Inc. seeks court approval of a certain Asset Purchase and Sale Agreement between the debtor and Dayton Hudson Corporation authorizing the sale of the debtor's leases, and the right to use the debtor's membership list. The debtor's financial advisor Salomon Smith Barney, Inc. and the debtor conducted an extensive auction process before the commencement of this Chapter 11 case, during which numerous potential bidders performed due diligence and had an opportunity to submit bids for the purchase of all or substantially all of the debtor's assets. A purchase price of $119,500,000 is provided plus a $4.5 million price premium if the court approves the agreement. Dayton Hudson is entitled to a $2 million break-up fee. FILENE'S BASEMENT: Interim Approval For Special Credit Line ----------------------------------------------------------- A day after filing for Chapter 11 protection, Filene's Basement Corp. has received interim approval from the U.S. Bankruptcy Court for a special credit line that should help get more merchandise into its stores. With $135 million in debtor-in-possession financing, Filene's Basement now looks to clear the first hurdle on its comeback trail -- convincing vendors to resume shipments of goods to its stores without insisting on upfront payments. Afraid they wouldn't be paid, vendors stopped shipping merchandise in the last month. That forced the Boston retail legend to file for Chapter 11 bankruptcy protection Monday. The credit line granted to the company Tuesday should ease short- term cash-flow problems. Plans call for Filene's Basement chairman Sam Gerson to visit New York in an effort to win back the support of the chain's vendors, the company's public relations firm said. In theory, the credit line that was approved for Filene's Basement Tuesday should allay vendors' concerns, but it doesn't always work out that way. "Will vendors open their credit lines? That's the first hurdle," said Stuart Hirschfield, chairman of the bankruptcy group at Dewey Ballantine LLP, the New York law firm that helped Bradlees Inc. navigate Chapter 11."You're going to know that within the first 30 to 60 days. If you can't get over that hurdle, you can really strain your cash flow." At least one vendor said it was willing to resume shipments. "We'd certainly ship to them again," said Morty Holtzman, a principal in Harve Bernard Ltd. of New York, which has supplied Filene's Basement with coats and sportswear for about 20 years. According to documents filed in U.S. Bankruptcy Court in Boston, Filene's Basement owes Harve Bernard about $470,000. Holtzman said he is impressed by Filene's Basement's new Aisle 3 chain of warehouse stores that open only on weekends, though he frets that the company may have launched Aisle 3 too late. "Our gut feeling is that Aisle 3 is a home run," he said. Filene's Basement operates four Aisle 3 stores, and another four are set to open shortly. Besides its famous flagship store at Downtown Crossing in Boston, the company operates 50 stores under the Filene's Basement name. It's likely that the company will close some stores, but it's too early to predict which ones and how many. (Boston Globe 25-Aug-99) FILENE'S BASEMENT: Jones Apparel and Nike Among Creditors --------------------------------------------------------- Jones Apparel, Saks Fifth Avenue and Nike are Among Filene's Basement Creditors. Filene's Basement Inc., Wellesley, Mass., reported assets of slightly more than $200 million and liabilities of $148.7 million, the company said it filed for bankruptcy protection because it was unable to keep its stores stocked with inventory because suppliers had cut off shipments. The largest creditors is JDA Software Inc., which has an $867,790 disputed claim, according to court documents. Saks Inc.'s Saks Fifth Avenue line is owed $577,853, Liz Claiborne is owed $401,251, Warnaco Group Inc. is owed $383,442. Jones, which sells clothes under the Jones New York label, is owed $798,584, while Nike has a claim for $648,787. (ABI 25-Aug-99) FIRST UNION REAL ESTATE: Seeks Approval To Sell Company Property ---------------------------------------------------------------- First Union Real Estate Equity and Mortgage Investments, a trust organized in Ohio, will hold a special meeting of beneficiaries, at 10:00 a.m., date and place yet to be announced. The purpose of the meeting will be to gain consent to the sale of certain properties of the company contained in a Purchase and Sale Agreement, dated July 14, 1999, and amended by a letter agreement, dated August 11, 1999, between Southwest Shopping Centers Co. II, L.L.C., a Delaware limited liability company and an indirect wholly-owned subsidiary of the company, and WXI/Z Southwest Malls Real Estate Limited Partnership, a Delaware limited partnership. The agreed upon purchase price is $191.5 million. Further, beneficiaries will be asked to approve amendments to the company's Amended Declaration of Trust relating to the company's ability to engage in certain activities in connection with the investment and financing of company assets and to effectuate a reverse or forward split of shares of beneficial interest, of the company. Consent to the Purchase and Sale Agreement requires the affirmative vote of holders of a majority of the outstanding shares. The Board of Trustees of the company is seeking beneficiary consent to the asset sale in accordance with the company's Amended Declaration of Trust, which provides that no sale of more than 50% of the company's property may be made without the consent of holders of at least a majority of the outstanding shares. The asset sale, together with prior asset sales that were part of a sales program initiated by the company in June 1998, would, in the aggregate, constitute a sale by the company of more than 50% of the company's property. Concurrently with the execution of the Purchase and Sale Agreement, beneficiaries who own, in the aggregate, approximately 20.11% of the outstanding shares, agreed to consent to the sale of the properties under the Purchase and Sale Agreement. Approval of each of the amendments requires the affirmative vote of holders of a majority of the outstanding Shares. Full text of the agreement and amendments can be accessed at http://www.sec.gov/cgi-bin/srch-edgar?0000895345-99-000463,free of charge, on the Internet. FOAMEX INTERNATIONAL: Class Action Suit Filed --------------------------------------------- On August 13, 1999 a purported class action complaint, the "Watchung Complaint", was filed in the Court of Chancery for the State of Delaware, Newcastle County by shareholders Watchung Road Associates, L.P. and Pyramid Trading Limited Partnership naming Foamex International Inc., a Delaware corporation, Mr. Marshall Cogan, Mr. Etienne Davignon, Mr. John Gutfreund, Mr. Robert Hay, Dr. Stuart Hershon, Mr. John Johnson, and Mr. John Tunney as defendants. The Watchung Complaint alleges that the individual defendants breached their fiduciary duties when they agreed to the buy-out of the company by Sorgenti Chemical Industries, Inc., LLC, a Delaware limited liability company, and Liberty Partners, L.P., a Delaware limited partnership. The Watchung Complaint alleges that the price of $11.50 per outstanding share offered by Sorgenti and Liberty is inadequate and fails to take into consideration claims the company is alleged to have as a result of purportedly wrongful diversions of company assets in a variety of transactions between the company or its affiliates and Trace International Holdings, Inc., a Delaware corporation, Mr. Marshall Cogan, or their affiliates. The Watchung Complaint also alleges that the individual defendants breached their fiduciary duties in agreeing to a buy-out by Sorgenti and Liberty without making an effort to obtain the best offer possible for the shareholders. Foamex International Inc. and the individual defendants deny that they have committed any breaches of duty to the Watchung Plaintiffs or to the purported class, and intend to vigorously defend the suit. FORMAN PETROLEUM: Files Chapter 11 ---------------------------------- The Oil Daily reports on August 10, 1999 that after months of negotiations with creditors, Forman Petroleum Corp. filed Friday for relief under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed in New Orleans in the Bankruptcy Court of the Eastern District of Louisiana. The company said it expects to file within five days a joint plan of reorganization that will cancel all currently issued and outstanding common stock and convert 13.5% senior secured notes and Series A preferred stock into new shares of common stock. FRANKEL'S: Seeks Order Compelling Performance by Scotty's --------------------------------------------------------- A hearing will be held on September 16, 1999 on the debtor's motion for an order compelling the performance by Scotty's Inc. of a certain Asset Purchase Agreement. The debtor, Frankel's Home Furnishings, Inc. is a wholly-owned subsidiary of IDL Holding Corp. The debtor and Scotty's agree that the debtor is due an additional $282,950 from Scotty's toward the purchase price under the Asset Purchase Agreement. Scotty's has asserted a claim in the amount of $325,000 allegedly arising from the termination of the prior License Agreements, as a set-off against the purchase price. This alleged set-off supposedly represents possible increased advertising costs which Scotty's may incur in the future as a result of Frankel's going out of business. Without a specific agreement, the debtors argue that Scotty's has unilaterally attempted to elevate an alleged pre-petition, unliquidated claim for breach of the License Agreements to the status of a post-petition administrative claim, and then to set its alleged claim off against the balance of the purchase price admittedly owing to the debtor under the Asset Purchase Agreement. The debtor complains that Scotty's attempt to charge the debtor's estate for hypothetical future advertising expenses is not authorized by the terms of the Asset Purchase Agreement. GENESIS PHYSICIANS: Seeks to Terminate Contracts ------------------------------------------------ Genesis Physicians Practice Association, a Dallas-based physicians' group which filed for bankruptcy late last month, will seek the bankruptcy court's approval next week to terminate its contracts with Prudential HealthCare and PacifiCare of Texas, The Dallas Morning News reported today. Insurance officials are angered that some doctors in the group are already turning away new patients and asking current patients to delay routine medical visits. Prudential's North Texas Division Vice President Carl King said "HMOs have long advocated preventive care and annual physicals, so delay flies in the face of everything that we stand for." Prudential has received some 15 to 20 complaints from patients about the lack of access to care. Dr. Allen Pearlman, an internist, has asked patients to postpone annual physicals until payment arrangements are resolved with insurers. He said, "Everybody has an obligation to continue care under the bankruptcy, but there's a limit. We've lost thousands and thousands of dollars that we will never see again. You're trying not to add to that. We've had no problems from our patients. They understand things completely." Genesis' liabilities exceeded assets by at least $7 million, and since its filing, it has attempted to quantify its exact losses and restructure contracts with local health maintenance organizations. (ABI 25-Aug-99) HECHINGER: Committee Taps Blackstone Group ------------------------------------------ The Official Committee of Unsecured Creditors seek court approval authorizing the employment and retention of the Blackstone Group LP effective as of August 2, 1999 as investment bankers and financial advisors to the committee. Among other things, the firm will be responsible: To review the business of the company with emphasis on the near and long-term business plan and related financial projections prepared by the debtors; Analyze, on a limited basis, the financial liquidity of the debtors; Evaluate potential reorganization alternatives considering the debtors' operating prospects and financial liquidity; Contact third parties to solicit interest in acquiring the debtors, or all or substantially all of the assets of the debtors; Contact third parties to solicit interest in providing debt and/or equity capital to the debtors in connection with or outside of a plan of reorganization; Explore alternative strategies for a stand-alone business; Review and analyze any transaction or plan of reorganization; Assist and advise the committee in negotiations concerning the terms, conditions and impact of any proposed plan of reorganization; Attend and assist at meetings with the committee, counsel, the debtors and other parties in interest; Valuation of the debtors and of any securities to be issued as part of any proposed plan of reorganization; As consideration for its services, Blackstone has requested a monthly fee of $100,000. Blackstone requests that the debtors' estates indemnify and hold harmless Blackstone from and against any losses, claims, damages, expenses, and liabilities arising out of or in connection with the engagement except to the extent that a court determines that such losses etc. primarily resulted from the gross negligence or willful misconduct of Blackstone. H.O.L.A. Recordings: Case Summary & 20 Largest Creditors -------------------------------------------------------- Debtor: H.O.L.A. Recordings LLC 235 Park Avenue South, 10th Floor New York NY 10003 Debtor's Counsel: Ira L. Herman Herzfeld & Rubin, P.C. 40 Wall Street New York, NY 10005 (212) 344-5500 Date Filed: 08/17/99 Chapter 11 Case Number: 99-45100 Court: Southern District of New York Type of Business: Record company - Produces recordings by artists, and marketing, licensing and promoting such recordings. Assets: $2,412,641 Liabilities: $6,6113,406 Fixed Liquidated Secured Debt $2,875,809 - 3 holders Fixed Liquidated Unsecured Debt $2,420,837 - 200 holders Unliquidated Unsecured Debt $1.35 million - 1 holder Disputed Unsecured Claims - $20,760 - 1 holder Creditors Holding 20 Largest Unsecured Claims: Name Nature Amount ---- ------ ------ ADW Communications Trade Debt 20,760 Abbrcadabra Advertising Trade Debt 19,168 Absolute Audio, Inc. Trade Debt 13,271 American Express Trade Debt 10,802 BPI Communications Trade Debt 12,842 Benton-NYCE Trade Debt 9,221 Davis & Gilbert Trade Debt 17,719 Ernst & Young LLP Trade Debt 28,525 Frankford/Wayne Mastering Labs Trade Debt 13,340 Grubman Indursky Schindler Trade Debt 80,703 Impressions Trade Debt 10,000 John Vargas Trade Debt 13,220 Mirror Image Recorders Trade Debt 48,861 Newmark Communications Trade Debt 102,470 Red Ant Trade Debt 1,350,000 SOL Concepts Trade Debt 13,401 Sal Soul Trade Debt 10,255 Stone Jam Music Inc. Trade Debt 30,000 The Gavin Report Trade Debt 10,665 WWW Association Trade Debt 40,534 LOEWEN: Committee Taps Professionals ------------------------------------ The Official Committee of Unsecured Creditors seeks the Court's authority to employ the Wilmington-based law firm of Young, Conaway, Stargatt & Taylor as local bankruptcy counsel. (a) provide legal advice with respect to the Committee's powers and duties; (b) assist the Committee in evaluating the legal basis for, and effect of, the various pleadings that will be filed by the Debtor and other parties in interest in this case; (c) investigate the acts, conduct, assets, liabilities, and financial condition of the Debtor; (d) assist the Committee in evaluating the Debtor's plan of reorganization and any associated disclosure statement; (e) consult with the Debtor concerning administration of the case; (f) commence and prosecute any and all necessary and appropriate actions and/or proceedings on behalf of the Committee in this case; (g) appear in Court to protect the interests of the Committee; and (h) perform all other legal services for the Committee which may be necessary and proper in this chapter 11 case. YCS&T proposes to charge the Debtors' estates $95 to $365 per hour for work performed by its attorneys and paraprofessionals. The attorneys and paralegals presently designated to represent the Committee and their current standard hourly rates are: (a) Laura D. Jones $365 per hour (b) Maureen D. Luke $260 per hour (c) Kathe Finlayson $105 per hour The Committee also proposed to Employ PricewaterhouseCoopers LLP as Committee accountants to: (a) advise and assist the Committee in its examination, analysis and monitoring of the Debtors' historical, current and projected financial affairs; (b) advise and assist the Committee in its review of the Debtors' existing and proposed systems and controls, including but not limited to organizational structure, cash management and management information and reporting systems; (c) advise and assist the Committee in developing and negotiating any plan of reorganization scenarios including, as necessary, certain information to be included in the disclosure statement; (d) advise and assist the Committee in preparing or reviewing strategic options, business plans and financial projections; (e) advise and assist the Committee in reviewing executory contracts and provide recommendations to assume or reject; (f) Advise and assist the committee in its assessment of the management team, including a review of the bonus, incentive and retention plans; (g) advise and assist the Committee to review and evaluate the claims process; (h) advise and assist the Committee regarding various reorganization tax issues, including calculating net operating loss carryforwards, and the tax consequences of any proposed plans of reorganization; (i) attend Committee meetings and court hearings as may be required in their role as accountants to the Committee; (j) render expert testimony and litigation support services, as requested from time to time by the Committee and its counsel, regarding valuations, appraisals and/or the feasibility of a plan of reorganization and other matters; (k) advise and assist the Committee in identifying or reviewing debtor-in-possession financing; (l) advise and assist the Committee in identifying and/or reviewing preference payments, fraudulent conveyances and other causes of action; (m) advise and assist the Committee in reviewing any proposed sales of assets or business units; and (n) assist with such other accounting and financial advisory services as may be requested by the Committee and its counsel. Prior to the Petition Date, on or about May 21, 1999, PwC was retained as accountants by Hebb & Gitlin in their capacity as counsel to the Ad Hoc Committee of Senior Secured Debtholders, holding, as of the Petition Date, more than $1.3 billion of Loewen's approximately $1.7 billion of public and private debt securities. Teachers Insurance and Annuity Association of America, Magten Asset Management Corporation, Allied Capital, CalPERS, and State Street Bank & Trust Company are five of the Ad Hoc Committee members who are presently members of the Creditors' Committee. In connection with its work for the Ad Hoc Committee, PwC received a $75,000 retainer from the Debtors. PwC applied the Retainer against $68,665 in fees and expenses incurred for the period through and including May 31, 1999. Accordingly, as of the Petition Date, PwC holds the balance of the retainer in trust for the Debtors. PwC will not apply any portion of the Retainer to fees and expenses incurred from and after the Petition Date unless and until authorized to do so by a further order of this Court. PwC proposes to charge its customary hourly rates for services provided to the Committee: Partner US$ 490-540 Cdn$ 400-475 Director/VP US$ 450 Cdn$ 275-325 Manager US$ 360-380 Cdn$ 225 Senior Associate US$ 270-285 Cdn$ 175-200 Associate US$ 195 Cdn$ 125-150 Analyst US$ 90-140 N/A Support US$ 85 Cdn$ 90 Without objection, Judge Walsh Approved PwC's retention, nunc pro tunc to the date on which the United States Trustee appointed the Committee. (Loewen Bankruptcy News Issue 9; Bankruptcy Creditors' Service Inc.) LL KNICKERBOCKER: Involuntary Petition Filed; Stock De-Listed -------------------------------------------------------------- The L. L. Knickerbocker Co., Inc. (Nasdaq: KNIC) announced today that the Company has received notification from the Nasdaq Listing Qualifications Panel that the Company's common stock has been delisted from the Nasdaq National Market effective with the close of business on August 24, 1999. The Nasdaq Listing and Hearing Review Council may, on its own motion, determine to review the Panel's decision within 45 calendar days after the issuance of the decision. If the Review Council determines to review the Panel's decision, it may affirm, modify, reverse, dismiss or remand the decision to the Panel. Within 15 days of the Panel's decision, the Company also may request that the Review Council review the Panel's decision. The Review Council's review of the Panel's decision will not operate as a stay of the decision. Although the Company's common stock will be delisted from the Nasdaq National Market, to the extent market makers in the Company's stock continue to enter bids, the Company's common stock will be quoted in the OTC Bulletin Board or, in the alternative, in the National Quotation Bureau's Pink Sheets. However, there is no assurance that this will occur. The Company also reported that it has been informed that an involuntary petition in bankruptcy has been filed against the Company by three of its Asian creditors. The Company currently is evaluating its options in responding to the petition, which include opposing the petition. The Company has been and will continue to attempt to restructure its obligations out of court. The L. L. Knickerbocker Co., Inc. sells collectible gifts and toy-related merchandise, primarily porcelain and vinyl dolls and teddy bears. The Company also designs, manufactures and markets fashion jewelry and accessories, in addition to offering an extensive line of fine jewelry products and supplying other jewelry manufacturers with loose cut stones. The Company's products are sold through diverse international distribution channels, including its own web sites, television shopping outlets, direct response sales and wholesale sales to retailers. The Company also holds a substantial equity interest in Pure Energy Corporation, a privately held company, and in Ontro, Inc., a publicly held company. For more information, visit the Company's website at www.knickerbocker.com. LLOYD'S SHOPPING: Seeks Extension of Exclusivity ------------------------------------------------ The debtor, Lloyd's Shopping Centers, Inc. seeks an extension of sixty days of the periods during which the debtor shall have the exclusive right to file a plan of reorganization and solicit acceptances thereof. The extended Exclusivity Period and the Acceptance Period will continue through and including November 12, 1999 and January 14, 2000 respectively. On July 30, 1999, the Trustee appointed a new committee comprised of three members, none of whom had been on the first committee which was disbanded. The Committee is planning its organizational meeting during the last week of August. In view of the fact that the Exclusivity Period will expire on September 10, 1999, the debtor claims that there clearly will not be sufficient time for the debtor and the Committee to negotiate a consensual plan before then. For all of the reasons advanced, the debtor submits that a 60-day extension of the Exclusivity Period and the Acceptance Period is warranted and reasonable. NEWCARE HEALTH: Bill Brandt Appointed Examiner With Broad Powers ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Massachusetts last Friday entered a stipulated order directing the U.S. Trustee to appoint a chapter 11 Examiner in the case of Newcare Health Corp. The court's order came in response to motions by the U.S. Trustee and Newcare's official committee of unsecured creditors. Pursuant to the court's order, the U.S. Trustee appointed William Brandt of Development Specialists Inc. as examiner with expanded powers to oversee the jointly administered chapter 11 cases. (The Daily Bankruptcy Review and ABI August 25, 1999) NEXTWAVE: Sprint Expresses Interest in C-Block PCS Licenses ----------------------------------------------------------- Spring PCS is interested in acquiring C-Block PCSlicenses from bankrupt NextWave Communications, if the Federal Communications Commission (FCC) changes its rules, as suggested by its agreement with Nextel, according to Washington Telecom Newswire. Sprint said that if the FCC is changing the very specific rules, then it should do so for all larger wireless customers. The company will work to ensure that its interests are protected and that it has the opportunity to acquire additional spectrum if it becomes available to large carriers. Last week Nextel announced an agreement with the FCC and the Department of Justice to acquire the NextWave licenses for $2.1 billion. Meanwhile, BFD Holdings, a major creditor in the bankruptcy case, reaffirmed its support for the company's reorganization plan and called Nextel's deal with the FCC "misleading" and an effort to "stall the bankruptcy." BFD said the plan pending in court is fair and reasonable, but that it is concerned that the purpose of the FCC-DOJ-Nextel agreement may be to stall or derail NextWave's plan. NextWave said this week that it has agreed with Nextel to extend until Sept. 9 a temporary restraining order barring Nextel from discussing the deal. NextWave bid $4.7 billion at an FCC auction for the licenses, but it has been unable to finance its build out and filed for bankruptcy protection. (ABI 25-Aug- 99) PRIMARY HEALTH: Court Approves Extra $3 Million ----------------------------------------------- Crain's Cleveland Business reports on August 2, 1999 that the owner of four greater Cleveland hospitals were facing a critical cash shortage, and received $ 3.2 million in additional financing last week. The extra money for Primary Health Systems Inc. was approved on July 28 by the U.S. Bankruptcy Court in Wilmington, Del. PHS has been operating under Chapter 11 bankruptcy protection since March 17. It owns PHS Mt. Sinai Medical Center, PHS Saint Michael Hospital, PHS Deaconess Hospital, all in Cleveland; and PHS Mt. Sinai East Hospital in Richmond Heights. Had PHS not received the additional money, it would have had to liquidate its operations "putting the lives of the parties in the debtors' hospitals in jeopardy," according to a motion filed by PHS on July 21. The filing also noted that the PHS hospitals have "achieved substantial success in implementing their business plan, stabilizing their business operations, maintaining critical business relationships and gathering public support for their reorganization." Despite those optimistic words, PHS lost $ 12.2 million on revenues of $42.26 million between March 17, the date it filed for Chapter 11, and May 31, according to PHS financial records filed with the court last month. It had an operating loss of $ 4.67 million in that period. In the first five months of 1999, PHS had an operating loss of $12.36 million, compared with an operating loss of $ 9 million in the like period of 1998, according to the financial records. The additional financing provided by First Union National Bank of Charlotte, N.C., and Key Corporate Capital Inc., a division of KeyCorp, brings the total amount of loans extended to PHS by the two lenders to $ 26.5 million. When it filed for Chapter 11, the Wayne, Pa.-based company listed assets of $157 million and liabilities of $ 237 million. Despite the additional financing, PHS isn't done negotiating with its bankers. Its present debt deal expires Aug. 24. Kevin Barrett, an attorney with Gibson, Dunn & Crutcher, a New York law firm representing PHS, said he expects a new debt deal will be worked out. Mr. Barrett said the reorganization of PHS "is moving along on course." However, PHS has no timetable to propose a reorganization plan that would detail how it intends to pay its creditors, he said. PHS asked the court for permission to borrow the additional money because of a cash squeeze caused by delayed payments from insurance companies and an earlier-than-expected assessment by the Ohio Care Assurance Program, according to its filing. The Care Assurance program collects a tax from Ohio hospitals and redistributes the money to hospitals based on the amount of indigent care they provide. Typically, hospitals have been assessed their first quarterly contribution in mid-August, but this year the date was moved up to July 30. PHS was to pay its first installment of $ 2.2 million by last Friday, July 30. Because PHS provides so much care to the poor, it is expected to receive $5.5 million from the Care Assurance program. But that payment isn't expected until Aug. 20, according to the filing. PHS also had cash flow problems because of computer problems experienced by a billing service PHS subcontracted with to send bills to insurance companies. "While the debtors and the subcontractor are in the process of rectifying this problem, it has caused a serious disruption in the (PHS) cash flow," according to the July 21 filing. PLANET HOLLYWOOD: Noteholders Accept Pre-packaged Plan ------------------------------------------------------ A subcommittee of certain noteholders for Planet Hollywood International Inc. has accepted the company's plan of reorganization, according to Reuters. The Orlando, Fla.-based restaurant chain last week announced that it will file a pre-packaged chapter 11 and that it was soliciting support from the holders of more than $160 million of its $250 million senior subordinate notes due in 2005. Last week the company announced that it had secured $30 million in working capital and was negotiating with lenders about its planned chapter 11 fling. (ABI 25-Aug-99) PROGEN TECHNOLOGY: Trustee Seeks Authority For Liquidation ---------------------------------------------------------- Chapter 7 Trustee, John M. Wolfe seeks court authority to employ and pay compensation of the proposed Liquidation Agent to market all personal property assets and real property lease for the debtor's business premises, for private sale for a period of thirty days. If an over is not received, the Liquidation Agent may then conduct an auction sale of the personal property assets. The assets to be liquidated consist of the leased Santa Fe Property, the debtor's inventory and the debtor's FF&E. BestLink Systems, Inc. has asserted a blanket lien security interest in all of the debtor's assets, including the inventory, FF&E, the debtor's cash on hand, accounts receivable and other intangible assets, including a tax refund. The debtor listed the amount owing to BestLink at approximately $5.6 million. Pioneer standard Electronics, Inc. asserted a purchase money security interest with respect to certain of the debtor's assets, including cash on hand and the debtor's inventory. In its bankruptcy schedules, the debtor listed the amount owing to Pioneer at approximately $8 million. Pioneer has not asserted a security interest in the FF&E. The Liquidation Agent has advised the Trustee that the liquidation of the debtor's inventory and certain shelving may generate gross proceeds of approximately $857,000 to $1.5 million. The Trustee proposes to employ Credit Managers Association of California, Asset Liquidation Division, and Dove Brothers LLC as his liquidation agent to market the lease for the Santa Fe property, inventory and FF&E for 30 days. SIZZLER: Accelerated Growth Plan Announced By Company ----------------------------------------------------- Sizzler International announced at its annual meeting of shareholders a multi-part, company-wide plan that management believes will accelerate financial growth. The short-term strategy was presented by a new management team headed by Charles L. Boppell, who took over as President and Chief Executive Officer of Sizzler after growing such restaurant systems as La Salsa, Hudson's Grill and Taco Bell. Boppell said the plan is based on what he called "a more strategic use of our assets." He said, "Sizzler is an excellent platform for growth because we have a proven, profitable operating infrastructure and the ability to get a much higher return from our existing assets. Add to that at least one successful new restaurant concept that we will look to acquire and you have an exceptional growth opportunity. What we are announcing today is a plan to capture this opportunity through a more strategic use of our assets." The plan will be funded in part by more than $40 million raised from the sale and leaseback of company real estate in Australia, primarily the restaurants housing the corporation's KFC franchises in Queensland, Australia. Current cash flow and other financing resources will also be used to fund these growth opportunities, according to Boppell. This real estate transaction should be substantially implemented within the next three months. "Raising cash by reallocating assets from foreign real estate to domestic investments are not the only ways to make our resources work harder. We have great unused capacity in many existing domestic and international restaurants; we have the leading market position in many locations that we can use to introduce other sources of revenue; and we have a great body of expertise to select and roll out new concepts. We expect all of these to make a more powerful contribution in the future," Boppell said. The new Sizzler plan reorganizes the company into four areas, each of which is expected by the company to produce financial growth. The company has begun investigating a number of promising restaurant concepts and will be examining others as part of an active new restaurant concept acquisition program. The objective is to acquire and then begin expanding one new restaurant concept in the near future. To help accomplish this goal Sizzler has retained the J. H. Chapman Company, which has been involved in the identification and acquisition of new restaurant concepts for 17 years and specializes in transactions in the $10 to $250 million range. The company presently owns 66 Sizzler restaurants and franchisees operate another 200 in the United States. This system is currently profitable and enjoyed a same store sales increase of 4.9% for the 12 months ended July 25, 1999. Nevertheless, the average Sizzler restaurant in the United States still has considerable capacity for growth. The plan calls for moving Sizzler toward a quality grill concept with an excellent salad bar and away from the buffet court arena. The plan also calls for remodeling and repositioning domestic Sizzler restaurants and for beginning to add new franchise restaurants in the U.S. The company presently owns 30 Sizzler restaurants and 101 KFC franchises in Australia. The Sizzler restaurants in Australia are profitable but also still have substantial unused capacity. The KFC franchises are among the most financially productive restaurants in the entire KFC system. The company seeks to accelerate growth from the KFC restaurants by exploring the addition of new brands to the existing KFC sites where customer traffic is already very high and yet additional kitchen capacity is available. Growth in Sizzler restaurants is being stimulated by a remodeling and positioning program similar to that in the United States. Sizzler franchisees operate 51 restaurants in Asia, 23 of which are in Japan. Over the past two years economic weakness in these markets reduced the contributions from these restaurants and limited the ability to refresh them at the same time as the U.S. restaurants. With the improving economic conditions, the Asian market has the capacity to substantially increase its current contribution to Sizzler earnings. The company expects stronger future contributions from these restaurants as they undergo renovation and repositioning similar to the U.S., but tailored to Asian markets. A key to optimizing this growth strategy is Sizzler's recent establishment of an Asian management team focusing on Japan. Boppell told shareholders that while the leveraging of foreign assets has begun, it would not be finalized until later this year. As this happens, he plans to consider other capital strategies, such as a share buyback program, and other asset divestitures. He said further details in these areas would be discussed if and when they are finalized. Boppell concluded his comments with, "Just as the world approaches the start of a new millennium with new opportunities, Sizzler too starts afresh with a new management team, from the Chairman of the Board through senior management, and with a new approach, driven by a new strategy for growth". SIZZLER: Former Employee Files $20 Million Lawsuit -------------------------------------------------- Sizzler International, last week, reported that a lawsuit has been filed by a former employee seeking in excess of $20 million in damages against the company, according to Sizzler General Counsel, Michael B. Green. The company said it believes the lawsuit to be without merit and that no further comment on the litigation would be made. Sizzler also said that it expects the suit to have no financial impact on the company. TV FILME: Agreement With Senior Noteholder Committee ---------------------------------------------------- TV Filme, Inc. has reached an agreement in principle with a committee representing holders of the company's outstanding 12- 7/8% senior notes due 2004. TV Filme, Inc. expects that this agreement will significantly reduce its existing long-term debt, and enable the company to continue the build-out of its recently acquired multipoint, multi-channel distribution systems licenses. The agreement in principle is subject to execution of definitive documentation, and is to be effected in accord with a pre-arranged plan, which will require court approval under Chapter 11 of the U.S. Bankruptcy Code. Hermano Studart Lins de Albuquerque, Chief Executive Officer of TV Filme, Inc. said, "We are extremely pleased to announce this agreement in principle with the bondholder committee. Implementation of this agreement will significantly reduce the company's long-term debt, and allow the company to capitalize on the many opportunities present in the Brazilian telecommunications market. The restructuring will leave our operations in Brazil on a stronger financial footing to grow." Mr. Albuquerque emphasized that all of the company's subsidiaries will be excluded from the pre-arranged plan and there will be no interruption in their operations, and no impact on their ability to fulfill commitments to vendors, customers and government agencies. "During the restructuring period, our daily operations will continue as usual and we will continue to provide our customers with the highest quality of programming, service, and reliability." Under the terms of the restructuring agreement, the senior noteholders will receive a $25 million cash payment and their existing notes will be converted into New Senior Secured Notes in the aggregate principal amount of $35 million, with a five year maturity and interest of 12% per annum interest payable-in-kind at the option of the reorganized company through the first 24 months), and 80% of the new common equity of the reorganized company. Current management will receive 15% of the new common equity, and existing common stockholders of TV Filme, Inc. will receive 5% of the common equity of the reorganized company in exchange for their current stake. Headquartered in Brasilia, Brazil, TV Filme, Inc. is a leading provider of subscription television, data and internet services in mid-sized markets in Brazil. The company has established wireless cable operating systems in Brasilia, Goiania, Belem and Campina Grande, which together comprise over 1.4 million households. Also, the company holds wireless cable licenses in the cities of Bauru, Caruaru, Franca, Porto Velho, Presidente Prudente and Uberaba, which together comprise nearly 0.4 million households. TATHAM: Subsidiaries of Tatham Offshore File Bankruptcy Petition ---------------------------------------------------------------- Subsidiaries of Tatham Offshore have filed for Chapter 11 bankruptcy protection, and one of the companies involved is suing affiliates of Schlumberger for $51 million in a dispute involving the management of two offshore rigs. Last Monday, Rigco North America, FPS VI, FPS III and FPS V - which collectively own all of the assets of Tatham, a drilling rig company - filed for Chapter 11 relief in U.S. Bankruptcy Court in Corpus Christi, Texas. Rigco and FPS VI own two semi- submersible drilling rigs, the Bill Shoemaker and the Laffit Pincay, and related assets. Last month, Rigco filed a suit in District Court in Houston against Schlumberger Technology and Schlumberger Canada, following a dispute over Schlumberger affiliate Sedco Forex's operation of the Shoemaker and Pincay rigs. The suit alleges gross negligence, breach of contract, fraud, negligent misrepresentation and negligence, seeking $51 million in actual damages and unspecified exemplary damages. A Schlumberger official said attorneys for the company are reviewing a copy of the suit in order to prepare a response. "From what we know of the allegations we strongly believe they are without merit," he said. Rigco and FPS VI charge in the bankruptcy proceedings that the Schlumberger's makeover and management contracts for the two rigs caused the debtors' financial difficulties and forced them to default on their debt obligations. Low oil prices have delivered hard times for a number of drilling rig companies over the last 18 months, causing producers to cut back drastically on drilling programs. But Jim Wicklund, an analyst with Dain Rauscher in Dallas, said Tatham Offshore's problems go deeper than just the usual trouble in the oil patch. "This is something that's been going on for a while," he said. "A lot of people thought that because oil prices were going up, that all the companies that were in trouble would automatically get out of trouble." The Tatham affiliates probably will emerge from bankruptcy by entering into an agreement to swap debt for equity, he said: "In a favorable environment like we have now, the equity shareholders will take a haircut and the debt holders will become equity holders." (Gas Markets Week 16-August-99) WESTERN DIGITAL: Announces Fourth Quarter, Year End Results ----------------------------------------------------------- Western Digital Corporation reports revenue of $709.3 million and a net loss of $101.5 million for its fourth quarter ended July 3, 1999. The net loss includes a restructuring charge of approximately $20 million for the sale of the company's media business to Komag, Inc. Excluding this charge, net loss would have been $81.5 million. In the year-earlier period, Western Digital reported revenue of $650.5 million and a net loss of $162.7 million. The results for the fourth quarter of 1998 included approximately $22 million related principally to the start of the technology licensing and component supply agreement with IBM Corporation. For fiscal 1999, the company reported revenue of $2.8 billion and a net loss of $492.7 million, compared with a net loss of $290.2 million, on revenue of $3.5 billion in fiscal 1998. Both fiscal 1998 and 1999 results included previously announced restructuring and special charges. Chuck Haggerty, chairman, president and chief executive officer of Western Digital, said: "The fourth quarter results reflect the brutal competitive pricing in the desktop hard drive industry. Nevertheless, our strategy to compete at the major PC OEMs on the basis of performance, quality and time to market of our hard drives--and our customer service--produced a sequential increase in total unit shipments to 5.7 million in the fourth quarter, compared with 5.1 million units in the March quarter. Notably, we saw improved performance in our Enterprise product line, as units, revenue and gross margin were at their highest levels in three quarters. Continued improvement and solid new product execution in this area are key to Western Digital's recovery." "Our focus will remain on crisp execution of new product plans in both the desktop and enterprise product lines. Our roadmaps align very well with our major OEM PC and server customers, so the opportunity is there to grow the business. In addition, our efforts to diversify the business model with contributions from the AV consumer and networked attached storage spaces are on target for initial revenue by the end of calendar 1999." Haggerty also noted the company's strong asset management in the fourth quarter: "Cash for the quarter finished at expected levels of about $226 million. Our days-sales-outstanding were at 38 days, a record low level for the company, mostly due to a refined supply/demand process. Total inventory turns were 19--about four turns better than the March quarter--and our best performance since Q3 in fiscal 1997." Western Digital Corporation is a leader in information storage products and services. The company designs and manufactures hard drives for personal and enterprise-wide computing, and markets them to leading systems manufacturers and selected resellers under the Western Digital brand name. The company was founded in 1970 and has long been noted for its storage and end-market systems-level design knowledge. WESTERN DIGITAL: Expanding Product Design In Singapore Operation ---------------------------------------------------------------- Dateline: Chai Chee, Singapore - Western Digital Corporation announced a plan to further develop its Chai Chee, Singapore facility as a regional technical and manufacturing support center, focusing its resources on value-added engineering rather than production volume. The company also indicated it was accelerating the consolidation of its high-volume desktop hard drive production in its Kuala Lumpur, Malaysian facility to improve manufacturing efficiencies and costs, while focusing its Singapore production resources on desktop hard drive development and component qualification and on production of high end WD Enterprise hard drives. Arif Shakeel, Western Digital's senior vice president of operations, stated: "The plan announced ..... reflects a significant move up the value chain for WD Singapore, applying the accumulated experience of more than 10 years of hard drive manufacturing to the design, development and production deployment process. The engineering organization in Chai Chee has delivered the core controller designs for WD's MR and GMR desktop product families and is currently working on the next two generations of products for both the PC and home entertainment marketplaces. We are expanding the existing electronics design center and plan to double the existing staff to accommodate this growth." Western Digital indicated it is in discussion with the EDB to add a mechanical product design group in Chai Chee and to enlarge its existing tooling and process design and development groups. These advances in Singapore's engineering role are designed to improve linkage with Western Digital's predominantly Asian-based supply partners, and speed the development of new products. The evolution of the engineering role in the Singapore facility will complement the previously announced consolidation of worldwide materials planning and procurement responsibility in Singapore. The realignment of hard drive manufacturing will result in a reduction among the production-related Chai Chee work force. In addition, due to the ongoing improvement in WD hard drive quality and reliability in the field, the customer repair center in Chai Chee will also be reduced in size. The plan announced will be implemented on a phased basis through December, 1999. It will result in a reduction of approximately 2,000 direct and 500 indirect workers at Chai Chee. Following these reductions, the WD Chai Chee workforce will include approximately 1,200 direct and 500 indirect workers. The first phase is already effective and affects about 300 direct and 25 indirect workers, primarily in the customer service center. The company has made arrangements, together with the appropriate Singaporean government agencies, to provide retraining and placement support to those people leaving Western Digital. WESTERN DIGITAL: 2.6 Million Shares Offered at $4.4325303 --------------------------------------------------------- Western Digital Corporation is offering 2,611,809 shares of its common stock to an institutional investor, details of which can be found in its prospectus supplement. The common stock will be purchased at a negotiated purchase price of $4.4325305 per share. This price reflects the average of recent trading prices of the company's common stock on the New York Stock Exchange, net of a 2.75% discount. No commissions or other compensation will be paid in connection with this sale. The net proceeds to Western Digital from the offering will be $11,576,923, and the company indicates it plans to use the net proceeds for general corporate purposes, including working capital. Pending use of the net proceeds for any of these purposes, the company says it may invest in short-term investment grade instruments, interest-bearing bank accounts, certificates of deposit, money market securities, U.S. government securities or mortgage-backed securities guaranteed by federal agencies. On August 18, 1999, the last reported sales price of Western Digital's common stock on the New York Stock Exchange was $5 11/16 per share. The common stock to be sold will be listed on the New York Stock Exchange. As of July 31, 1999 and before the issuance of these shares there was 93,224,991 shares of common stock in the company outstanding. The company advises that a person should rely only on the information provided or incorporated by reference in its prospectus supplement and the prospectus as it has not authorized anyone else to provide additional or different information. Interested persons may find the prospectus supplement at http://www.sec.gov/cgi-bin/srch-edgar?0000892569-99-002309 on the Internet, without cost. XATA CORP: Changes Accounting Firms ----------------------------------- On August 13, 1999, XATA Corporation's Board of Directors determined that it would be in the best interests of the company to cease the relationship with its independent accounting and audit firm, McGladrey & Pullen, LLP. McGladrey acted as independent accountant and auditors with respect to the company's financial statements for the previous two fiscal years ended September 30, 1998. McGladrey's reports on the financial statements of the company for its fiscal years ended September 30, 1998 and 1997, did not contain any adverse opinion or disclaimer of opinion. The report of McGladrey on the financial statements for the fiscal year ended September 30, 1998, did include an explanatory paragraph regarding the uncertainty of the company's ability to continue as a going concern. However, the company states that the decision to replace McGladrey was not the result of any disagreement between the company and McGladrey on any matter of accounting principal or practice, financial statement disclosure or audit procedure nor any dispute with respect to the company's ability to continue as a "going concern." On August 13, 1999, Grant Thornton LLP was selected by the company's Board of Directors, upon the recommendation of its audit committee, as the company's new independent accountant and audit firm. Grant will audit the company's financial statements for the fiscal year ending September 30, 1999. The company intends to have Grant continue to serve as its independent accounting and audit firm for the fiscal year ending September 30, 2000. ZENITH: From Manufacturer To Marketer ------------------------------------- On August 24, 1999, the San Jose Mercury News reports that Zenith Electronics Corp., once an icon of American technology leadership, took the last major step to regain a shred of its former glory by reinventing itself as a worldwide marketer -- but not manufacturer -- of consumer electronics. But the metamorphosis will come with the taint of bankruptcy. On Monday, the company filed its long-awaited Chapter 11 bankruptcy reorganization plan. The Glenview, Ill.-based company hopes to emerge in a matter of months as global sales and marketing organization without a single manufacturing facility. If it succeeds, it will surrender any claim to being an American company, as it will become a wholly owned subsidiary of its majority shareholder, LG Electronics of South Korea. Zenith said 97 percent of voting bondholders agreed to the Prepackaged plan, under which they will exchange their debt for new debentures. Zenith shareholders will be left with nothing, except for LG Electronics, which owns 55 percent of the company today. The current common stock will be canceled, and LG Electronics will get 100 percent of new equity issued in exchange for canceling $200 million of its claims against Zenith. Shareholders should not be surprised by news their stock will be worthless, said Zenith spokesman John Taylor. Zenith shares, which had been hammered by quarter after quarter of disappointing performance, nose dived on the New York Stock Exchange when the company announced its intent to restructure in April 1998. After years of shedding assets to cut costs in the face of cheaper foreign products, Zenith essentially conceded defeat and said it would virtually halt manufacturing and instead reinvent itself as a sales and marketing company. A month later, when the company said that restructuring would have to take the form of a Chapter 11 bankruptcy reorganization, the stock was delisted by the exchange. It has traded only thinly since, on Nasdaq's over-the-counter bulletin board, where it closed Monday unchanged at 19 cents. Originally, Zenith said it wanted to file a prepackaged plan by the end of 1998. But snags, mostly in getting through the Securities and Exchange Commission review process, held things up, Taylor said. "The good news is that, unlike a traditional kind of Chapter 11, which can take years, once we've gotten to this point, a prepackaged plan can be wrapped up in just a matter of months," he said. The current management team, led by Chief Executive Jeffrey P. Gannon, a veteran General Electric Co. executive, is expected to remain in place after the company emerges from Chapter 11, Taylor said. Just as the Chapter 11 filing culminates the restructuring began in 1998, that itself represented the end of a decade of cost- cutting. In the late 1980s, citing "cutthroat foreign competition," Zenith began cutting jobs and playing hardball in union negotiations. That process was accelerated in April 1998 as the company launched its last-ditch reorganization. Zenith closed or sold all of its manufacturing facilities except for a TV assembly plant in Reynosa, Mexico. Last December, Zenith shuttered its last U.S. manufacturing site -- a picture tube plant in Melrose Park, Ill. -- wiping out another 2,000 jobs. As part of the Chapter 11 plan, LG Electronics will assume ownership of that plant, removing more than 2,000 jobs from Zenith's payroll. In less than a decade, Zenith went from a worldwide payroll of more than 25,000 in 1992 to about 5,000 today. The company seemed a likely candidate to disappear altogether. But on Monday, Gannon said the success in getting creditors to agree to a prepackaged Chapter 11 plan indicates that the worst days are over. "Our operational restructuring -- transforming Zenith into a sales, marketing and technology company -- is proceeding on schedule," he said. ********** 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, 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 * * *