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/raid1/www/Hosts/bankrupt/TCR_Public/991116.MBX T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, November 16, 1999, Vol. 3, No. 222 Headlines BROTHERS GOURMET: Creditors to Get $12 Million in New Stock COHO ENERGY: Financial and Operating Results CROWN BOOKS: Emerges From Chapter 11 FILENE'S: New Business Strategy FILENE'S: Proposes Store Closings in Reorganization Plan GOSS HOLDINGS: Bankruptcy Court Approves Plan Of Reorganization GREATER SOUTHEAST: Judge Teel Approves Sale HURRICANE HYDROCARBONS: CCAA Extension Granted ICO GLOBAL: Financing led by McCaw, Teledesic & Eagle River LL KNICKERBOCKER: Reports Third Quarter And Nine Months Results LOT$OFF: Files Petition for Writ of Certiorari NATIONAL ENERGY: Bankruptcy Court Enters Orders NATIONAL ENERGY: Reports Third Quarter Results NEXTWAVE: Battle For PCL Licenses Being Watched Closely OMEGA HEALTHCARE: Announces Approval of Sun Property Agreement OPTEL: Announces Unaudited Financial Results For Fourth Quarter PAGENET: Records Weakened Quarter PHILIP SERVICES: Turnaround Firm Finds CEO SUN HEALTHCARE: Court Approves Property Agreement With Omega WASTEMASTERS: Negotiating To Sell Controlling Interest Meetings, Conferences and Seminars ********* BROTHERS GOURMET: Creditors to Get $12 Million in New Stock ----------------------------------------------------------- Brothers Gourmet Coffees Inc. estimated that unsecured claim holders will recover about 53% of their claims through a distribution of new common stock, estimated to have a value of $12 million, under its proposed first amended plan of reorganization. Citing the "inherent uncertainty and risk" posed by the plan transactions, including the need to attract additional private-label business, the coffee wholesaler said that its plan gives unsecured claim holders, who prefer not to take an equity interest in the reorganized company, the opportunity to receive cash payments calculated on the basis of its liquidation value, which is estimated at about $8 million. Creditors opting for the cash-out election are estimated to recover about 36 percent of their claims. (The Daily Bankruptcy Review and ABI November 15, 1999) COHO ENERGY: Financial and Operating Results -------------------------------------------- Coho Energy, Inc. (OTC BB:COHO) reported financial and operating results for the period ended Sept. 30, 1999. Operating results for the three month and nine month periods ended Sept. 30, 1999, when compared with the same periods in 1998 were impacted by a lack of capital for reinvestment and the sale of the Monroe gas field in December 1998. Capital expenditures year to date 1999 are $5 million as compared with total expenditures in the same period of 1998 of $62.5 million. During the third quarter of 1999, the Company was contractually required to participate in the drilling of a well on its Tunisia permit. This well, which preserved the Company's interests in the permit was drilled under a turnkey contract, tested oil and water and was deemed by the Company to be non commercial. Anadarko, a partner in the permit, is assuming operatorship and plans to continue the exploration of the permit; however, accounting treatment on a country by country basis requires the Company to writedown its carrying cost. Accordingly, the Company's income statement for the three and nine months ended Sept. 30, 1999, reflects a charge of $5.4 million to writedown all but the geological and geophysical costs previously incurred associated with continued exploration of the permit. On Aug. 23, 1999, the Company and certain of its subsidiaries filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The Company is currently operating as a debtor in possession subject to the bankruptcy court's supervision and orders. Under applicable United States bankruptcy rules, the Company is required to reflect in its financial statements liabilities subject to compromise of $422.7 million, the accrual of interest at the default rate on the Company's secured debt (which includes the Company's bank revolving credit facility) and the non accrual of interest on the Company's unsecured debt (which includes the Company's 8 7/8% Senior Note due 2007) from the date of filing of the Company's bankruptcy petition. The defaulted financial obligations together with a lack of liquidity have had an adverse effect on the financial results of the Company. For the three months ended Sept. 30, 1999, Coho reported a loss of $10.7 million ($.41 per share) as compared with a loss of $7.2 million ($.28 per share) in the same period in 1998. Coho Energy, Inc., is a Dallas-based oil and gas producer focusing on exploitation of underdeveloped oil properties in Oklahoma and Mississippi. CROWN BOOKS: Emerges From Chapter 11 ------------------------------------ Crown Books Corporation announced today that the Company has emerged from bankruptcy protection after 16 months in reorganization. Under the terms of the plan of reorganization, all of the old common stock of Crown (previously traded as OTC BB: CRWNE) has been cancelled, and 100% of the new common stock of Crown will be distributed to holders of Crown's unsecured claims in full satisfaction of such claims. An affiliate of Shenkman Capital Management, Inc., a New York based money management firm with $2.5 billion under management, will be the largest shareholder of the reorganized Company with approximately 33% of the new common stock. Crown emerges from Chapter 11 debt-free except for a $35 million working capital line of credit, which is being provided by Paragon Capital, LLC. Crown Books intends to file a Form 10 with the Securities and Exchange Commission and make an application to list its new common stock on a national securities exchange. CEO Steve Panagos said, "Year-to-date, the Company has achieved a 14% improvement in comparable store sales without any significant increase in promotional activity, demonstrating the viability of our discount strategy and the fact that the traditional bookstore experience is valued by consumers." The Company intends to position its traditional bookstore business for growth, and further intends to develop a significant Internet presence. Crown is a discount retailer of general trade books, book-related products and non-book products. The Company has 92 stores located in five major metropolitan areas: Washington, DC, Chicago, San Francisco, Los Angeles and San Diego. Crown is known for its ability to sell books at the lowest price of any traditional or Internet bookseller in the market today. Crown has 1,700 employees and has annual sales of approximately $190 million. FILENE'S: New Business Strategy ------------------------------- In a bold move to return Filene's Basement to profitability, the senior management of the company, in consultation with its secured and unsecured creditors, designed a new business strategy that has the Basement returning to its roots. After a two week intensive process, management and the new team of outside professionals approved by the court created a dramatic plan and will be seeking court approval as it rebuilds and reenergizes its core stores. This is an important step in Filene's Basement's efforts to successfully emerge from Chapter 11 bankruptcy. The strategy, if approved, will leave Filene's Basement a company born in Massachusetts, with key stores in New York, Chicago and Massachusetts, including the famous Boston store. Although the list has not been finalized stores in other states will be closed. The remaining core retail outlets will not only provide Filene's Basement with a profitable base, but will offer the opportunity for the company to return to the merchandizing approach that made it successful. This strategic change will allow Filene's Basement to stay in business and preserve approximately 3,000 jobs. Unfortunately, approximately 900 employees who are not in key urban markets will be laid off. Those affected will receive good severance packages based on their seniority with the company and a small percentage will be offered other jobs. Counseling will also be provided for employees if they need support. Most of the layoffs will take place at the end of the year. The business strategy returns Filene's Basement to its roots by focusing on the best brand names at everyday low prices. A wide variety of quality merchandise with new stock continually arriving will make Filene's Basement the ultimate bargain hunter's shopping experience. Aisle 3, Filene's Basement weekend-only stores now open in New York, New Jersey, Illinois and Maryland, are unaffected by the current plan. FILENE'S: Proposes Store Closings in Reorganization Plan -------------------------------------------------------- Pending bankruptcy court approval of the reorganization plan it filed on Friday, Filene's Basement Corp. will close almost half of its stores and cut about 900 jobs of its 3,900 positions to emerge from chapter 11 protection as a smaller company, according to a newswire report. Filene's Basement, a discount retailer, would close 18 stores and keep 22 open in New York, Chicago and Massachusetts, including its flagship Boston store. The Wellesley, Mass.-based retailer filed for chapter 11 protection in August and filed its plan on Friday. Chairman and CEO Sam Gerson said in a statement, "Our plan will allow us, when we emerge from bankruptcy, to be a smaller yet stronger organization." GOSS HOLDINGS: Bankruptcy Court Approves Plan Of Reorganization --------------------------------------------------------------- Goss Holdings Inc. proposes to issue, as part of its Second Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty, LLC dated September 7, 1999, its 12.25% Senior Subordinated Notes due 2005. Under the Plan of Reorganization (a) GGS Holdings, Inc. will merge into the company, and the company will become the successor to GGS Holdings; and (b) the holders of the 12% Senior Subordinated Notes due 2006 issued by Goss under the Indenture, dated October 15, 1996, between Goss and HSBC Bank USA, as successor trustee will be issued the Subordinated Notes and an aggregate of 3,136,250 shares of Class B common stock of the company in exchange for their old notes. On September 9, 1999, the debtor companies filed with the United States Bankruptcy Court for the District of Delaware a Second Amended Disclosure Statement which was distributed to holders of claims against or interests in the debtors for the purpose of soliciting their votes for the acceptance or rejection of the Plan of Reorganization. At hearings held on October 19, 1999 and November 2, 1999, the Bankruptcy Court approved the Plan of Reorganization. A copy of the Disclosure Statement, with the Plan of Reorganization may be viewed at http://www.sec.gov/cgi- bin/srch/edgar?0000912057-99-003698 on the Internet, free of charge. The company's Subordinated Notes are to be issued under an indenture between the company and HSBC Bank USA, as trustee. Upon the Plan of Reorganization becoming effective the relationships among the company and all of its affiliates will be as follows: The voting securities of the company will be held as to 65.14% by Stonington Partners, Inc. (Delaware) and as to 3.5% by Rockwell International Corporation (Delaware). The balance of the voting securities of the company, 31.26%, will comprise the Class B common stock of the company and will be held by the holders of the old notes. The company will hold 100% of the voting securities of Goss Graphic Systems, Inc. (Delaware). Goss Graphic Systems, Inc. (Delaware) will hold 100% of the voting securities of each of: (a) Goss Graphic Systems Australasia Pty. Ltd (Australia); (b) Goss Graphic Systems Japan Corporation (Japan); (c) Goss Systems Graphiques Nantes S. A. (France); (d) Goss Graphic Systems Ltd (UK); and (e) Goss Realty LLC (Delaware). Goss Graphic Systems, Inc. (Delaware) will hold 60% of the voting securities in a joint venture company, Shanghai Goss Graphic Systems Co., Ltd. (China). GREATER SOUTHEAST: Judge Teel Approves Sale ------------------------------------------- After days of intensive negotiations, Bankruptcy Judge S. Martin Teel Jr. Saturday approved the sale of Greater Southeast Community Hospital in Washington to Doctors Community Healthcare Corp. of Scottsdale, Ariz., for $22.5 million, according to a newswire report. Doctors Community will also make available $3.5 million in operating capital to help run the hospital until the transaction is completed late next month. The hospital, with $70 million in debt to creditors, filed for bankruptcy protection early this year; Judge Teel had given hospital officials a deadline to find a buyer or he would order the hospital be liquidated. (ABI 15-Nov-99) HURRICANE HYDROCARBONS: CCAA Extension Granted ---------------------------------------------- Hurricane Hydrocarbons Ltd. announces on November 10, 1999 that upon the application of Hurricane and its subsidiary, Hurricane Overseas Services Inc., the Alberta Court of Queen's Bench today has extended the protection of its original Companies' Creditors Arrangement Act order to December 20, 1999. All other applications submitted to the Court were adjourned to the same date. The Court further instructed Deloitte & Touche Inc., the Court appointed monitor, to continue acting in its role as facilitator in discussions between Hurricane and its stakeholders. Hurricane's shares are traded on the Alberta and Toronto Stock Exchanges under the symbol HHL.A and on the National Quotation Bulletin (NQB) under the symbol HHLFQ. The company's website can be accessed at www.hurricane-hhl.com. ICO GLOBAL: Financing led by McCaw, Teledesic & Eagle River ----------------------------------------------------------- ICO Global Communications, the global mobile communications company, announced that the US Bankruptcy Court in Wilmington, Delaware, together with courts in Bermuda and the Cayman Islands, approved $150 million in interim debtor-in-possession financing led by Craig O. McCaw and his affiliated companies Teledesic LLC and Eagle River Investments LLC. ICO filed for Chapter 11 bankruptcy protection on August 27, 1999, together with seeking protection in Bermuda and the Cayman Islands. The court granted interim approval of the debtor-in-possession financing after also hearing a competing bid that was submitted late last week. Mr. McCaw, Teledesic and Eagle River had agreed with ICO on October 31 to lead a group of international investors to provide up to $1.2 billion in new financing to ICO, subject to, among other things, confirmation and consummation of a reorganization plan. The company will seek final approval from the court on December 3, 1999, for the balance of the first tranche of $225 million, together with the second tranche of $275 million. ICO Chief Executive Officer Richard Greco expressed his satisfaction at the progress towards completion of ICO's financing needs. "Approval by the court of $150 million in financing represents a very important step forward for us. I am very pleased that we have been able to maintain our momentum in the efforts to restructure the company and press forward towards commercial implementation." The funds will be used to continue the buildout of ICO's integrated space and ground network. ICO Global Communications (Nasdaq: ICOFQ) was established in January 1995 as a private company to provide global mobile personal communications services by satellite, including digital voice, data, facsimile, high-penetration notification, and messaging services. ICO Global Communications was listed on Nasdaq in July 1998. The stock was suspended from trading when the company filed for Chapter 11 protection on August 27, 1999. Craig McCaw is chairman of Teledesic LLC, which is building a global broadband Internet-in-the-Sky satellite communications network. Mr. McCaw and Microsoft founder Bill Gates are the company's two primary founding investors. Strategic investors also include Motorola, Saudi Prince Alwaleed Bin Talal and The Boeing Company. Teledesic (pronounced "tel-eh-DEH-sic") is a private company based in Bellevue, Washington, a suburb of Seattle. LL KNICKERBOCKER: Reports Third Quarter And Nine Months Results --------------------------------------------------------------- The L. L. Knickerbocker Co., Inc. (OTC Bulletin Board: KNIC) announced results of operations for the third quarter and nine months ended September 30, 1999. Revenues for the third quarter of fiscal 1999 decreased to $9,344,000, as compared to $15,769,000 for the corresponding quarter in 1998. Net loss for the quarter was $1,191,000 ($ .03 per diluted share), as compared to $1,690,000 ($.09 per diluted share) in 1998. Revenues for the first nine months of fiscal 1999 were $32,196,000, with a net loss of $4,556,000 ($.15 per diluted share), as compared to revenues of $40,685,000, with a net loss of $6,946,000 ($.36 per diluted share), for the corresponding nine months in 1998. The L. L. Knickerbocker Co., Inc. sells collectible gifts and toy-related merchandise, primarily porcelain and vinyl dolls and teddy bears. LOT$OFF: Files Petition for Writ of Certiorari ---------------------------------------------- LOT$OFF Corp., San Antonio, Texas, announced Friday that it has filed a petition requesting that a writ of certiorari be issued by the Supreme Court of the United States to review the opinion of the U.S. Court of Appeals for the Fifth Circuit issued on July 1, 1999 in its case involving Chase Manhattan Bank, according to a newswire report. The Fifth Circuit upheld and vacated in part the awards previously obtained by the company after a five-week jury trial in district court. The jury awarded LOT$OFF actual and punitive damages against Chase. While the Fifth Circuit affirmed the award of $12,975,000 for actual damages, it vacated the jury's punitive damaged award of $138 million, stating that while Chase had converted the company's stock, the evidence was legally insufficient to support the jury's finding of malice or recklessness. LOT$OFF argues in its petition that the jury award cannot be reviewed for sufficiency because Chase did not, before submission to the jury, ask the trial court to grant judgement based on sufficiency of the evidence to support an award of punitive damages as required by Federal Rule of Civil Procedure 50(a) and the Seventh Amendment to the U.S. Constitution. LOT$OFF announced on Jan. 21 that it was in the best interests of stockholders and creditors to sell the retail assets. LOT$OFF said it will file under chapter 7 to have a trustee liquidate the company if the petition for the writ of certiorari is denied. (ABI 15-Nov-99) NATIONAL ENERGY: Bankruptcy Court Enters Orders ----------------------------------------------- On August 4, 1999, the Bankruptcy Court entered an order that provided that if the Court approves the sale of National Energy Group's assets or if the creditors committee proposes a plan of reorganization following such a sale, then the Arnos credit facility shall be paid in full, from the sales proceeds, the amount outstanding under the secured loan, including any unpaid interest. If no sale of the company's assets is approved and an internal reorganization of the company's debt structure is approved, the creditors committee may propose any treatment of the Arnos credit facility allowed by law, and Arnos shall retain its right to oppose any such treatment. The order also provided for the immediate payment to Arnos for all monthly interest on its secured claim at the contractual non-default rate, retroactive to December 4, 1998. Pursuant to this order, the company paid approximately $1.4 million in interest to Arnos on August 10, 1999 and has paid monthly interest due subsequent to August 10, 1999. On August 4, 1999, the company and the Committee appeared before the Bankruptcy Court and announced agreement on the process for marketing the company and/or its assets. The Court entered an order which provided that the company and the Committee would employ CIBC to solicit bids for sale of the company and/or its assets. The company is to assist CIBC in assembling a data room for potential bidders to view information regarding the company's assets. CIBC will market the company's assets in accord with procedures approved by the company, the Committee and the Court. The marketing process was to culminate in an auction to be conducted by the Bankruptcy Court on November 1, 1999. The Committee was to have the sole right to select the highest and best bid and only the Committee's selected bid will be presented to the Court for approval. Alternatively, the Committee, at its discretion, may reject all bids. The Court also extended the company's period of exclusivity (the statutory period during which only the company may file a plan of reorganization) through the marketing process and auction of the company's assets. During this period of exclusivity, the company has agreed not to file a plan of reorganization. If a proposal to purchase the company's assets is selected by the Committee and approved by the Court, then either the Committee or the company may propose a plan of reorganization. If the Committee rejects all bids, or if the Court does not approve a sale of the company's assets, then the company may file a plan or reorganization and the Committee may seek to terminate exclusivity and file a plan of reorganization. However, if the Committee requests a hearing to terminate exclusivity, the company has agreed not to file a plan of reorganization prior to the Court's ruling on the Committee's motion. In addition, the Court approved the retention of Netherland, Sewell & Associates, Inc. to (i) complete its reserve evaluation of the company's oil and natural gas properties as of December 31, 1998, (ii) update the reserve evaluation as of July 1, 1999 and (iii) provide assistance to the company, CIBC and prospective buyers during the marketing process. On July 9, 1999, the Court approved Neligan & Averch, L.L.P., as bankruptcy counsel for the company. Pursuant to an agreed order between the company and the Committee, the Court entered an order on September 7, 1999 approving a severance program for the company's employees which provides for certain payments in the event of a closing of the sale of substantially all the company's assets or confirmation of a plan of reorganization; provided such employee is not terminated for cause or does not voluntarily resign prior to such event. The order also provides that Mr. Alexander, CEO, and Mr. Devlin, Vice President and General Counsel, shall not be entitled to any such payments until the earlier of (i) confirmation of a plan of reorganization, (ii) conversion to a Chapter 7 proceeding, or (iii) termination by a trustee. Payments under this program could be approximately $2 million if both the stay bonus and severance portions are paid in full. NATIONAL ENERGY: Reports Third Quarter Results ---------------------------------------------- National Energy Group, Inc. (OTC Bulletin Board: NEGXQ) today announces results for the third quarter ended September 30, 1999. For the Three Months Ended September 30, 1999, revenues for the three months ended September 30, 1999 were $11.2 million, up 30% from $8.6 million in 1998, due principally to the increase in oil prices from 1998. The decline in gas production is primarily due to natural decline as well as flush production during the third quarter of 1998 at the Company's East Texas and Arkoma properties since the Company had limited activities in these areas during 1999. The Company reported net income for the three months ended September 30, 1999 of $3.2 million, or $.08 per share compared with a net loss of $43.6 million, or $1.08 per share for 1998. The results for the third quarter of 1999 include net reorganization costs of approximately $.5 million related to the Chapter 11 proceeding. The loss for 1998 includes a noncash write-down of the Company's oil and natural gas properties of $38.7 million in accordance with the full cost method of accounting. This write-down resulted primarily from the decline in commodity prices and reserve revisions. Excluding these items, the Company would have reported net income of $3.7 million ($.09 per share) for the third quarter of 1999 compared with a net loss of $4.9 million ($.12 per share) for 1998. The Company's cash flow from operations before changes in working capital for the three months ended September 30, 1999 increased to $7.2 million, compared to $0.0 million from the same period in 1998. Cash flow per share for the three months ended September 30, 1999 was $.15 per share, compared to $.00 per share in 1998. For the Nine Months Ended September 30, 1999, revenues for the nine months ended September 30, 1999 totaled $27.8 million, a decrease of 6% from $29.6 million in 1998. The Company reported net income for the nine months ended September 30, 1999 of $3.3 million, ($.08 per share), compared with a net loss of $101.6 million ($2.52 per share) for 1998. The results for 1999 include net reorganization costs of $1.4 million related to the Chapter 11 proceeding. The loss for 1998 includes noncash write-downs of the Company's oil and natural gas properties aggregating $90.0 million in accordance with the full cost method of accounting. These write-downs resulted primarily from reserve revisions and the decline in commodity prices during 1998. The results for 1998 also include a non-recurring charge of approximately $.9 million for severance and related costs resulting from the Company's restructuring of its management team. Excluding these items, the Company would have reported net income of $4.7 million ($.12 per share) for the nine months ended September 30, 1999 compared to a net loss of $10.8 million ($.27 per share) for the same period in 1998. The Company's cash flow from operations before changes in working capital for the nine months ended September 30, 1999 increased to $15.9 million from $ 5.5 million from the same period in 1998. Cash flow per share for the period was $.32 per share as compared to $.11 per share for the same period in 1998. At September 30, 1999, the Company was in violation of certain covenants under its secured credit facility. In addition, due to the non-payment of interest due December 2, 1998, the Company's Senior Notes were also in default at September 30, 1999. On December 4, 1998, certain of the holders of the Senior Notes of National Energy Group, Inc. (the "Company") filed an Involuntary Petition for an Order for Relief under Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, due to non-payment of interest due December 2, 1998, after expiration of a 30-day grace period. The Bankruptcy Court denied the Company's Motion to Dismiss the Involuntary Petition and entered an Order for Relief on February 11, 1999. The Order for Relief placed the Company in bankruptcy under the protection of the Court. As a result of the Chapter 11 proceeding, the Company discontinued the accrual of interest on the unsecured Senior Notes and discontinued the accrual of dividends on the unsecured preferred stock. Approximately $13.3 million additional interest expense would have been recognized by the Company for the first nine months of 1999 if not for the discontinuation of the interest accrual on the Senior Notes. Pursuant to negotiations between the Company and the Official Creditors Committee ("Committee"), a process for marketing the Company and/or its assets was established. Pursuant to bid procedures established by an Order dated October 18, 1999, an auction was conducted by CIBC in the Bankruptcy Court on November 1, 1999. As a result, substantially all of the Company's oil and gas assets were sold to Arnos Corporation for $96.25 million. Excluded from the sale were certain of the Company's properties located at Mustang Island, Texas and St. Martin Parish, Louisiana, which are expected to be retained by the Company and sold or otherwise liquidated at a later date. The Company previously reported that Arnos Corporation, an affiliate of High River Limited Partnership which is the record owner of the Company's Series D Preferred Stock, had acquired the Company's $25 million in secured debt from Bank One Texas N.A. in December 1998. The sale is subject to the execution and delivery of a definitive Purchase and Sale Agreement and certain orders of the Bankruptcy Court pursuant to Sections 363(f) and 356 of the United States Bankruptcy Code. National Energy Group, Inc. is a Dallas, Texas based independent oil and gas exploration and production company. The Company's principal properties are located onshore in Texas, Louisiana, Oklahoma, and offshore in the Gulf of Mexico. NEXTWAVE: Battle For PCL Licenses Being Watched Closely ------------------------------------------------------- The High Yield Report states on November 15, 1999 that high yield investors are keeping close tabs on the battle for PCS licenses between Nextel Communications and NextWave Personal Communications. Not only might the outcome parlay into billions of dollars of future financing, but it also could change the way the high yield market looks at wireless licenses as collateral, according to one telecom analyst. A decision is several weeks away, but at stake is a block of PCS licenses auctioned off by the Federal Communications Commission representing 110 million subscribers. "Who owns them is the issue currently in contention," said one source familiar with the situation. "The FCC believes they, or rather the people, own the spectrum, and they're just licensing it. Everyone has a hand in it." PCS and cellular, the two primary wireless communications systems, require government licenses for companies to operate in specific markets. In the event of bankruptcy, spectrum licenses are sometimes viewed as valuable assets that can potentially be used as collateral. Gary Jacobi, telecom analyst at Deutsche Banc Alex. Brown, said the Nextel-NextWave dispute raises the question of what those licenses are worth and whether the bankruptcy courts can place a new value on them. In May 1996, NextWave won the right to apply for those licenses by bidding $ 4.7 billion. About a year after winning the bid, after NextWave had already paid out nearly half a billion dollars to hold the licenses, the market for radio spectrum collapsed. Eight of the bidders at the C-block auction filed for bankruptcy. NextWave Personal Communications filed for Chapter 11 bankruptcy in June 1998, and its parent, NextWave Telecom, followed suit six months later. NextWave argued that it should pay only the fair market value at the time, instead of the previous year's value - before the market plummeted. The court agreed to value the spectrum at slightly over $1 billion. Armed with $700 million in new equity from investors, NextWave said it could soon emerge from bankruptcy with an improved business plan, and reclaim the spectrum at the price set by the court. (Though the spectrum wasn't worth as much, NextWave felt it still had value.) The announcement drew fire from the FCC, which claimed the courts had no right to set new values for assets the FCC had auctioned off. The FCC then appealed the court's decision and attempted to get legislation passed through Congress to reclaim the licenses. Meanwhile, Nextel has reportedly offered up to $6 billion for the spectrum. Other sources report Nextel has offered only $2.1 billion for the licenses. Nextel has raised $9.8 billion of capital this month, including a $2 billion high yield offering two weeks ago. While the debt is to be used primarily for refinancing, the remaining cash is to be used for capital expenditures on the domestic and international front, as well as for potential acquisitions. One company source suggested Nextel was over-funded rather dramatically and, consequently, has the latitude for various projects, although the source would not elaborate. OMEGA HEALTHCARE: Announces Approval of Sun Property Agreement -------------------------------------------------------------- Omega Healthcare Investors Inc. announced Friday that the Bankruptcy Court for the District of Delaware has approved the comprehensive property agreement between it and Sun Healthcare Group, which was previously announced on Oct. 14, according to a newswire report. Per the agreement, Sun will affirm the leases of 50 facilities representing an investment of $219 million, and Omega will take back four facilities. Omega COO F. Scott Kellman said, "The entry of the bankruptcy court's order at this early state of Sun's bankruptcy proceeding without objection underscores the importance of the company's [Omega's] facilities to a successful reorganization of Sun..." (ABI 15-Nov-99) OPTEL: Announces Unaudited Financial Results For Fourth Quarter --------------------------------------------------------------- OpTel, Inc ("OpTel")announced its unaudited financial results for the fourth quarter and the twelve months of the fiscal year ended August 31, 1999 ("fiscal 1999"). Results are subject to potential audit adjustments, including those that may arise as a result of the recent voluntary Chapter 11 filing by the company. Total revenues for the twelve months ended August 31, 1999 rose to $86 million; a 32% growth over the comparable twelve-month period of fiscal 1998. Total revenues for the fourth quarter climbed to $22.8 million, a 14% growth over fourth quarter of fiscal 1998. Telephony fourth quarter revenues increased by 132% over the fourth quarter of fiscal 1998, and full year revenues of $8 million more than doubled those of fiscal 1998. Cable television fourth quarter revenues increased 6% year over year, and full fiscal year revenues increased 28% over fiscal 1998. On October 28, 1999 OpTel, and certain of its affiliates and subsidiaries, filed for protection under Chapter 11 of the US bankruptcy laws. The filing allows the Company to operate its businesses in the normal fashion under court protection while it continues discussions with representatives of certain major creditors and others on a restructuring plan. OpTel is a leading network based provider of integrated communications services, including local and long distance telephone, cable television and high speed Internet access services in the United States. The Company currently provides cable television and telecommunications services in a number of metropolitan areas including Los Angeles, San Diego, San Francisco, Phoenix, Denver, Houston, Dallas-Fort Worth, Chicago, Indianapolis, Atlanta, Miami-Ft. Lauderdale and Orlando-Tampa. OpTel is majority owned by Le Groupe Videotron Ltee, owner of the second largest cable television operator in Canada. Total revenues. Total revenues for the fourth quarter of fiscal 1999 increased by $2.8 million, or 14%, to $22.8 million compared to revenues of $20 million for the fourth quarter of fiscal 1998. Total revenues for the fiscal year 1999 increased by $20.9 million, or 32%, to $86 million from $65 million in 1998. The Company's EBITDA (earnings before interest, income taxes, and depreciation and amortization) for the fourth quarter of fiscal 1999 was negative $4.1 million compared to positive $0.6 million for the fourth quarter of fiscal 1998. EBITDA for fiscal 1999 was a negative $12.6 million as opposed to a positive $0.3 million in 1998. EBITDA is not intended to represent cash flow from operations or an alternative to net loss, each as defined by generally accepted accounting principles. Depreciation and Amortization. Depreciation and amortization of $10 million for the fourth quarter of fiscal 1999 remained essentially flat with fiscal 1998. Interest expense (net of amounts capitalized) was $12 million for the fourth quarter of fiscal 1999, a $2 million increase from interest expense of $10 million for the fourth quarter of fiscal 1998. This increase is attributable to higher debt levels and higher interest rates on the 11 1/2% Senior Notes than the bank facility they replaced. During fiscal 1999, the Company incurred $113 million in capital expenditures compared to $129 million for fiscal 1998 (including intangible assets and acquisition of businesses). PAGENET: Records Weakened Quarter --------------------------------- The Dallas Morning News reports on November 10, 1999 that Addison-based Paging Network Inc. reported weakened third-quarter results in almost every financial and operating category Tuesday, one day after it announced a $ 1.4 billion deal to merge into Arch Communications Group. PageNet, the nation's largest paging company, lost 462,000 subscribers, reducing its total count to just over 9 million. The company said two-thirds of the loss stemmed from weakness in its reseller distribution channel, partly because a major reseller went bankrupt. PageNet said it expects to lose subscribers again in the fourth quarter. Revenue declined to $ 231 million from $ 246.8 million a year ago. The company's net loss widened to $ 49.5 million (48 cents a share) from $ 16.4 million (16 cents). PageNet said it is in compliance with its debt agreements, though it reaches compliance by using accounting methods that investment analysts say are unusual. The company had $ 50 million in cash as of Friday, and it says that is sufficient to meet its needs into the first quarter. But the company may need to file a reorganization plan in Chapter 11 bankruptcy court to complete its merger with Westborough, Mass.-based Arch. Nearly all of the investors who hold $ 1.2 billion in bonds must agree to convert their debt into equity in the merged company to conclude the transaction outside bankruptcy. PageNet shares fell 22 cents to 81 cents. Arch shares fell 19 cents to $ 6. PHILIP SERVICES: Turnaround Firm Finds CEO ------------------------------------------ The Houston Chronicle reports on November 11, 1999 that the executive search firm Russell Reynolds Associates was hired to find a new chief executive officer for Phillip Services of Hamilton, Ontario. Phillip has two businesses, environmental services and scrap metal recycling. Neither is glamorous. The environmental services means cleaning up the worst kind of gunk generated by companies like Exxon's refineries and Chrysler's auto paint facilities. And while it's a large scrap metal recycler, that business is hostage to day-to-day prices in the metals business that fluctuate -- sometimes wildly. Phillip also was in dire financial straits. Its debt securities had been purchased by three investment funds at a substantial discount. These groups -- aptly nicknamed vulture funds -- had forced it into bankruptcy in June. Most of the board of directors and the CEO were gone. The vulture funds were gambling they could turn around the company. If they did, they could then operate it -- or more likely sell it -- whole or piecemeal, or take it public and make a substantial profit. But Phillip's growth strategy of buying companies in the environmental services business -- like two Houston ones, Allwaste and Serv-Tech -- added to the financial troubles. That consolidation strategy made business sense. Many of their customers were large, multinational corporations. An environmental services company able to handle most or all of their business had a leg up on getting a contract. The downside was Phillip had purchased many of those companies with its stock. The people who had sold these operations, many of whom were still running them, were obviously unhappy about seeing that stock's value largely disappearing in the bankruptcy. And it doesn't take a lot of money to get into the environmental services. So the new CEO had to placate them while getting Phillip back in fighting trim. Still Phillip's problems weren't in the field, but at headquarters where they had failed to successfully integrate acquisitions. And one other thing. Phillip needed its new chief executive as soon as possible. There simply was no time for casting a wide net. And whoever was hired needed a great deal of charisma to keep restive employees aboard and committed to working out their problems, Newton added. On Aug. 26, Phillip hired Anthony G. Fernandes as their new CEO, with a middle-six-figure salary and a substantial equity position. Fernandes was an executive vice president and member of the board of directors of Atlantic Richfield Co. in Los Angeles and ran their refining and marketing, chemical, coal, pipeline, power and aluminum operations. But Arco was being bought by BP Amoco. Fernandes had already announced he was leaving. SUN HEALTHCARE: Court Approves Property Agreement With Omega -------------------------------------------------------------- Omega Healthcare Investors Inc. (the "Company") announced that the federal Bankruptcy Court in Wilmington, Del., has entered an order approving the comprehensive property agreement between the Company and Sun Healthcare Group Inc. ("Sun") previously announced by the Company on Oct. 14, 1999. Pursuant to the comprehensive property agreement, Sun will affirm the leases of 50 facilities representing an investment of $219 million and annual rental revenues of $23.2 million, and the Company will take back four facilities. Of those four facilities, one is the subject of a letter of intent for lease of the facility by a new operator on substantially the same economic terms as the Sun lease of that facility. The Company is in active negotiations with other operators for the remaining three facilities, the rental income from which is less than 1.5 percent of total revenues. F. Scott Kellman, chief operating officer, stated: "The entry of the Bankruptcy Court's order at this early stage of Sun's bankruptcy proceeding without objection underscores the importance of the Company's facilities to a successful reorganization of Sun and validates the Company's decision to seek an expedited resolution of its issues with Sun." Essel W. Bailey Jr., president, commented: "We believe that entry of the order brings closure to the process with Sun and permits Sun to focus on taking care of the frail elderly in the nursing homes that we own. We believe that Sun will be able to continue to do that profitably as a result of their restructuring. Our decision to seek and expedite a confirmation of these master leases will free up senior managers to take advantage of other opportunities and to deal with challenges in the industry." Omega is a Real Estate Investment Trust investing in and providing financing to the long-term care industry. As of Sept. 30, 1999, its investments include 259 healthcare and assisted living facilities with more than 27,000 beds located in 30 states and operated by 29 independent healthcare operating companies. WASTEMASTERS: Negotiating To Sell Controlling Interest ------------------------------------------------------ Wastemasters Inc. presently indicates that it's objective is to grow by expanding its services in markets where it can operate profitably as a solid waste services company. Consequently, the company might experience periods of rapid growth. Such growth, if it were to occur, could place a significant strain on thecompany's management and on its operational, financial and other resources. Any failure to expand its operational and financial systems and controls or to recruit appropriate personnel in an efficient manner at a pace consistent with such growth would have a material adverse effect on the company's business, financial condition and results of operations. Wastemasters, under prior management, historically was not able to manage properly the companies it acquired, resulting in significant losses from operations. The company says it's strategy now envisions that a substantial part of its future growth will come from acquiring and integrating independent solid waste collection, transfer and disposal operations. There is no assurance that the company will be able to identify suitable acquisition candidates and, once identified, to negotiate successfully their acquisition at a price or on terms and conditions favorable to the company, or to integrate the operations of such acquired businesses with the company. In addition, the company competes for acquisition candidates with other entities which have greater financial resources than Wastemasters. Failure by the company to implement successfully its acquisition strategy would limit the company's growth potential. The consolidation and integration activity in the solid waste industry in recent years, as well as the difficulties, uncertainties and expenses relating to the development and permitting of solid waste landfills and transfer stations, has increased competition for the acquisition of existing solid waste collection, transfer and disposal operations. Increased competition for acquisition candidates may result in fewer acquisition opportunities being made available to Wastemasters as well as less advantageous acquisition terms, including increased purchase prices. The company also believes that a significant factor in its ability to consummate acquisitions will be the relative attractiveness of shares of the company's common stock as consideration for potential acquisition candidates. This attractiveness may, in large part, be dependent upon the relative market price and capital appreciation prospects of the company's common stock compared to the equity securities of the company's competitors. If the market price of Wastemasters' common stock were to decline, the company's acquisition program could be materially adversely affected. Wastemasters anticipates that any future business acquisitions will be financed through cash from operations, borrowings, the issuance of shares of the company's common stock and/or seller financing. If acquisition candidates are unwilling to accept, or the company is unwilling to issue, shares of the company's common stock as part of the consideration for such acquisitions, the company would be required to utilize more of its available cash resources or potential borrowings in order to effect such acquisitions. To the extent that cash from operations or borrowings is insufficient to fund such requirements, the company will require additional equity and/or debt financing in order to provide the cash to effect such acquisitions. Additionally, growth through the development or acquisition of new landfills, transfer stations or other facilities, as well as the ongoing maintenance of such landfills, transfer stations or other facilities, will require substantial capital expenditures. There can be no assurance that Wastemasters will have sufficient existing capital resources or will be able to raise sufficient additional capital resources on terms satisfactory to the company, if at all, in order to meet any or all of the foregoing capital requirements. In order to satisfy the liquidity needs of the company for the following twelve months, the company will be primarily dependent upon proceeds from the sale of the company's capital stock. Historically, revenues from the existing operations have not been adequate to fund the operations of the company. If the company is unable to obtain adequate funds from the sale of its stock in public offerings, private placements or alternative financing arrangements, it may be necessary to postpone any additional acquisitions and continue to consolidate the operations of the acquisitions already completed and use cash flow for internal growth. According to the company due to potential political, legal, bureaucratic, and other factors, there can be no assurance that it will be able to accomplish any of its goals within a reasonable period. Revenues for the three months ended June 30, 1999 were $59,315 as compared to $3,960,635 for the three months ended June 30, 1998. The dramatic decrease in revenue is the result of the sale of five subsidiaries and a landfill to Global on March 30, 1998, many of which were operated during the second quarter of 1998, the cessation of operations in Florida in the first quarter of 1999, and the cessation of operations at Sales Equipment Co., Inc. in the second quarter of 1999. Cost of revenues decreased from $4,125,998 to $850 as a result of a significantly lower level of operations due to the aforementioned dispositions. Selling, general and administrative expenses decreased during the second quarter of 1999 as compared to the second quarter of 1998 from $1,119,002 to $1,114,858 as a result of lower overhead expenses incurred in connection with the significantly lower level of operations during the period, which was offset somewhat by additional expenses incurred as a result of the settlement of litigation claims against the company through the issuance of common stock. The company's net loss decreased during the second quarter of 1999 as compared to the second quarter of 1998 from $2,404,431 to $1,105,900 as a result of the aforementioned factors. Because Wastemasters lacks active operations, the company does not have any cash to satisfy routine administrative obligations. Consequently, it is currently dependent on the issuance of its common stock for managerial and legal services, and depends on short term loans from third parties, including its officers and directors, for the funds to satisfy miscellaneous expenses. For the foreseeable future, the company expects that it will be required to acquire necessary administrative services and satisfy its indebtedness by issuing shares of its common stock. However, the company has identified a number of operating entities which it believes it can acquire in the event it is able to reduce its litigation claims to an immaterial amount. In addition, the company is in negotiations to sell a controlling interest in the company for equity capital. Any such agreement will be subject to the negotiation and execution of a definitive agreement, the completion of due diligence by the investor, and the company's reaching agreements to settle substantially all of the litigation claims against the company at a substantial discount to the amount claimed. Meetings, Conferences and Seminars ---------------------------------- November 17-20, 1999 AMERICAN BAR ASSOCIATION'S LATIN AMERICAN LAW SUBCOMMITTEE & THE ASSOCIATION OF COMMERCIAL BANKS OF THE DOMINICAN REPUBLIC Educational Exchange Case De Campo Resort, LaRomana, Dominican Republic Contact: 1-703-739-0800 November 29-30, 1999 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. Distressed Investing '99 The Plaza Hotel, New York, New York Contact: 1-903-592-5169 or ram@ballistic.com December 2-4, 1999 AMERICAN BANRKUTPCY INSTITUTE Winter Leadership Conference La Quinta Resort & Club, La Quinta, California Contact: 1-703-739-0800 December 9-11, 1999 STETSON COLLEGE OF LAW 24th Annual Seminal on Bankruptcy Law & Practice Sheraton Sand Key Resort Clearwater Beach, Florida Contact: 1-727-562-7830 or cle@law.stetson.edu January 10-15, 2000 LAW EDUCATION INSTITUTE, INC. Bankruptcy Law C.L.E. Program Marriott Vail Mountain Resort, Vail, Colorago Contact: 1-414-228-5810 February 27-March 1, 2000 NORTON INSTITUTES ON BANKRUPTCY LAW Norton Bankruptcy Litigation Institute I Olympic Park Hotel, Park City, Utah Contact: 1-770-535-7722 March 23-25, 2000 SOUTHEASTERN BANKRUPTCY LAW INSTITUTE, INC. 26th Annual Southeastern Bankruptcy Law Institute Marriott Marquis Hotel, Atlanta, Georgia Contact: 1-770-451-4448 March 30-April 2, 2000 NORTON INSTITUTES ON BANKRUPTCY LAW Norton Bankruptcy Litigation Institute II Flamingo Hilton Hotel, Las Vegas, Nevada Contact: 1-770-535-7722 May 4-5, 2000 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. Bankruptcy Sales & Acquisitions The Renaissance Stanford Court Hotel San Francisco, California Contact: 1-903-592-5169 or ram@ballistic.com June 29-July 2, 2000 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains Bankruptcy Law Institute Jackson Lake Lodge, Jackson Hole, Wyoming Contact: 1-770-535-7722 September 21-22, 2000 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. 3rd Annual Conference on Corporate Reorganizations The Regal Knickerbocker Hotel, Chicago, Illinois Contact: 1-903-592-5169 or ram@ballistic.com ********* 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 * * *