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October 24,
2002
Mattress Discounters Files for Bankruptcy Protection
Mattress Discounters Corp., the largest U.S. mattress retailer, filed
for bankruptcy and said it would close more than 100 California stores,
Bloomberg News reported. The closely held company, which missed bond
payments in July, said it reached agreements with most of its
bondholders on a reorganization plan and with shareholders for a $6
million credit line to help fund operations. Sealy Corp., the world's
largest bedding maker, has agreed to $3 million of concessions under a
new supply agreement. Mattress Discounters is one of Sealy's biggest
customers. Mattress Discounters, with more than 200 stores in nine
states and the District of Columbia, filed for chapter 11 protection
yesterday in U.S. Bankruptcy Court in Greenbelt, Maryland. The company
plans to complete its reorganization by April 1. Mattress Discounters
said it has asked a federal bankruptcy judge for approval to sell its
stores in San Francisco, San Diego and Sacramento, California, and to
close more than 100 remaining stores in the state.
SLI Wins Final Approval of $35 Million DIP Financing
Agreement
SLI Inc. on Wednesday won final court approval of a $35 million
debtor-in-possession financing agreement the company will use to fund
operating expenses during its time in chapter 11 bankruptcy protection,
Dow Jones reported. As reported, Fleet National Bank has committed
roughly 36 percent of the loan. Other lenders include Cerebrus Capital
Management L.P., JP Morgan Chase Bank, B IV Capital Partners L.P., Key
Bank, Lloyds TSB and Bank of America NA. All of the lenders participated
in a pre-petition loan agreement for which SLI owed roughly $366 million
as of June 30. In return for the loan, the lenders receive
first-priority liens on all of the debtor's assets, according to court
documents. The lenders also receive 100 percent of the capital stock in
all of SLI's domestic subsidiaries and 65 percent of the capital stock
of all of the debtor's non-U.S. subsidiaries. The lenders may choose to
increase their liens on the capital stock of the non-U.S. subsidiaries
to 100 percent, if such a move wouldn't materially hurt SLI, according
to court documents. Judge Mary F. Walrath of the U.S. Bankruptcy Court
in Wilmington, Del., approved the loan after SLI and the lenders
resolved several concerns of its committee of unsecured creditors. SLI,
a lighting maker based in Canton, Mass., filed for chapter 11 bankruptcy
protection on Sept. 9. The company listed assets of $830.7 million and
debts of $721.2 million in its chapter 11 petition.
Provell Reorganization Would Pay 30 Percent of Unsecured
Claims
Provell Inc. on Monday filed a chapter 11 reorganization plan that would
pay general unsecured creditors 30 percent of their allowed claims
through prorated portions of new notes and common stock, according to
the plan's disclosure statement, Dow Jones reported. On the date the
plan potentially takes effect, general unsecured creditors would receive
prorated amounts of $10 million in new subordinated notes and 800,000
shares of the reorganized company's new common stock, the newswire
reported. The disclosure statement, however, didn't provide an estimate
of the total amount of unsecured claims that will be allowed against its
estate. Under terms of the plan, all higher priority claims would be
paid in full and in cash. The disclosure statement didn't provide
estimates of the total claims in any creditor class. All of Provell's
equity interests would be canceled on the effective date of the plan.
Equity interests in the holdings of Provell Financial Services Inc.
unit, however, would continue after the plan takes effect, Dow Jones
reported. A hearing to consider the adequacy of the proposed disclosure
statement is scheduled for Dec. 6 before the U.S. Bankruptcy Court in
Manhattan.
U.S. Bankruptcy Judge Allan L. Gropper on May 29 granted Provell
final authorization of a $21 million debtor-in-possession financing
agreement that allowed for up to $5 million in borrowing. The pact also
refinanced about $16 million in debt that was outstanding when Provell
filed for bankruptcy on May 9. A bankruptcy judge on Tuesday approved an
amendment to Provell's DIP financing with a group of pre-petition
lenders led by Foothill Capital Corp. that extends the maturity date of
the pact until Jan. 31, 2003, allowing for more than three months of
borrowing. Before it filed for chapter 11 protection on May 9, the
company signed a $20 million revolving credit agreement that was secured
by all of Provell's assets. Earlier this year, the lenders agreed to
extend the maturity date of the pre-petition financing agreement to Jan.
31, 2003.
Near-Record Corporate Debt Default Rate to Continue, S&P
Says
The near-record rate of corporate debt defaults will continue for at
least six months and could continue longer if the possibility of a war
with Iraq or heightened terrorism reduce consumer confidence, Bloomberg
News reported. The rate of default on corporate debt was 3.02 percent in
the first nine months of this year, down slightly from the record annual
rate of 3.48 percent in 2001, and close to the previous record of 3.06
set in 1991. 'The default rate will remain high for a quarter or two,
then we do expect some decline,'' Clifford Griep, S&P's chief credit
officer, said in an interview. 'Obviously we're in a period of economic
uncertainty so there are some events that could derail that.'
HMG Worldwide Ends Extension Request, Plans to Liquidate
HMG Worldwide Corp. has withdrawn its request to extend its exclusive
periods to file a reorganization plan and solicit approval from
creditors, Dow Jones reported. Ira L. Herman, an attorney at Bryan Cave
LLP in New York who represents HMG Worldwide, told Dow Jones Newswires
Wednesday that the company is the only party that can file a
reorganization plan and that it's in the process of liquidating. When
Herman retracted the request, it prompted the U.S. Bankruptcy Court in
Manhattan to issue an order denying exclusivity, because HMG Worldwide
and its units 'have determined not to pursue the request for relief set
forth in the motion,' court papers said. The last exclusivity extension
request to appear on the court docket was filed on June 19 and said that
the company was trying to add value to its estate. HMG Worldwide, a
holding company that operates through its subsidiaries, listed total
assets of about $34.5 million and total liabilities of roughly $61.9
million in its chapter 11 petition. The filing said its reported assets
reflect a restructuring charge of about $30 million the company was to
record for its third quarter ended Sept. 30, 2001.
Former Polaroid Wants More Time for Reorganization Plan
Former Polaroid Corp. is seeking approval from a bankruptcy court to
extend its right to file a plan and solicit acceptances from creditors,
Dow Jones reported. Court papers said recently that the company wants
until Dec. 20 to file a plan and until Feb. 18, 2003, to lobby for
creditor approval. A hearing on the issue is scheduled for Nov. 19 in
the U.S. Bankruptcy Court in Wilmington, Del. If the court were to turn
down former Polaroid's request, one of the company's exclusive periods
would have ended as of Oct. 15, while the other would end Dec. 16. On
July 31, all of Polaroid's assets, including its trademark name, were
sold to OEP Imaging Corp. for $255 million in cash and $200 million in
liabilities.
At the conclusion of the sale, OEP Imaging changed its name to Polaroid
Corp., while the original Polaroid Corp. was renamed as Primary PDC Inc.
Although the bankruptcy court still uses Polaroid on the caption of
court documents, Primary PDC is the entity under chapter 11 protection,
the newswire reported. Former Polaroid already has filed a plan with the
court, which contemplates the sale of the company's remaining assets and
the distribution of the proceeds to its creditors. The plan hasn't been
confirmed by the court and is still subject to revisions by the company
and its unsecured creditors. The company and 20 affiliates filed for
chapter 11 protection on Oct. 12, 2001, listing consolidated assets of
$1.81 billion and $948 million in liabilities as of July 1, 2001.
Wisconsin Pension Fund Plans to Hold ScanSoft Stake
The State of Wisconsin Investment Board (SWIB), one of ScanSoft Inc.'s
largest shareholders, said on Wednesday it intends to hold onto its
stake in the small software company, Dow Jones reported. Peabody,
Mass.-based ScanSoft filed late on Monday to register 9 million of its
shares for potential sale, including 3.5 million owned by the SWIB. The
shares are subject to a 90-day lockup period. On Sept. 20, the pension
fund issued a statement on ScanSoft that stated: 'We continue to believe
in the investment merits of this company and have no current intention
to sell that position.' ScanSoft, which was spun out of Xerox, was a
little known vendor of document-imaging software until November 2001
when it acquired the voice-recognition software business of Lernout
& Hauspie Speech Products NV in a bankruptcy auction.
EDS Amends Motion to Force WorldCom to Comply with Pact
Electronic Data Systems Corp. amended its request to force WorldCom Inc.
to comply with an agreement between the two firms and specified a set of
post-petition invoices for WorldCom to pay to local phone companies, Dow
Jones reported. According to a supplemental motion filed late on
Tuesday, Electronic Data Systems also withdrew its appeal for WorldCom
to pay some disputed pre-petition invoices and instead decided to pay
them itself to avoid service disruption, the newswire reported. 'At this
point, WorldCom does not even have a superficial basis to refuse to pay'
the specified post-petition invoices, the filing said. Electronic Data
Systems' request 'from the outset' has been based on WorldCom's refusal
to pay nearly $15 million to local exchange carriers, or LECs, under a
global network outsourcing agreement signed in 1999, the filing added.
Electronic Data Systems is now asking the court to order WorldCom to pay
post-petition invoices in compliance with its obligation under a pact
'it has neither assumed nor rejected but continues to perform.' A
hearing on the matter is scheduled for next Tuesday before the U.S.
Bankruptcy Court in Manhattan.
Fleming Had Third Quarter Loss; Hurt by Retail Operations
Fleming Cos. recorded a loss in its third quarter, dragged down by its
money-losing retail operations, Dow Jones reported. The
wholesale-grocery distributor and retailer on Wednesday reported a net
loss of $20.9 million, or 39 cents a share, for the period ended Oct. 5,
compared with net income of $19.1 million, or 40 cents a share, a year
earlier. The latest and year-earlier results included results from the
company's retail price-impact grocery stores, which Fleming plans to
sell. Excluding those results, the loss from continuing operations came
to $1.5 million, or three cents a share, compared with year-earlier
earnings of $16.5 million, or 35 cents a share. Fleming said it is
moving forward with its plan to sell its price-impact retail operations.
The company said ongoing talks with potential buyers 'continue to
encourage us that proceeds from the retail store divestitures will be in
excess of $450 million, net of taxes.'
Pillowtex May Need to Add Money to Pension
Pillowtex Corp., the maker of Cannon and Fieldcrest towels, said on
Wednesday it may need to add about $19 million to its pension plan in
2003 because slumping U.S. equity markets reduced the value of pension
assets, Reuters reported. The company, which emerged from chapter 11
bankruptcy in May, said it may have to add about $22 million to the
pension plan in January 2004, and possibly even more over the rest of
the year unless there is a 'significant recovery' in equity markets.
Teleglobe Communications Wins 60-Day Extension of
Exclusivity
Teleglobe Communications Corp. on Wednesday won a 60-day extension of
its exclusive periods to file a reorganization plan and solicit plan
acceptances, Dow Jones Newswires reported. The debtor company will use
the extension to continue marketing non-core assets and form a
reorganization plan, according to its motion, the newswire reported.
Teleglobe has the sole right to file a reorganization plan through Nov.
25 and the exclusive right to obtain votes for a plan through Jan. 26,
2003.
Judge Mary F. Walrath of the U.S. Bankruptcy Court in Wilmington
approved the extension after Teleglobe Communications reduced the relief
sought to resolve an objection filed by a group of noteholders known as
the Teleglobe Marine noteholders. These noteholders include John Hancock
Life Insurance Co., Sun Life Assurance Co. of Canada, the Penn Mutual
Life Insurance Co., National Life Insurance Co. and Pan-American Life
Insurance Co. The company filed for chapter 11 bankruptcy protection on
May 28, listing more than $100 million in both assets and debts in its
bankruptcy petition.
US Airways Seeks to Reject Pact With WorldCom Subsidiary
US Airways Group Inc. is seeking relief from the bankruptcy stay in
WorldCom Inc.'s chapter 11 case so the airline can reject an agreement
with a WorldCom subsidiary, according to a motion filed on Wednesday,
Dow Jones reported. WorldCom subsidiary MCI WorldCom Communications Inc.
and US Airways signed an agreement in 1997 under which MCI WorldCom
Communications agreed to buy Dividend Miles, other travel and frequency
based awards and some marketing services from the airline. In exchange,
US Airways agreed to enroll members of the joint program as members of
the US Airways Dividend Miles Program, the newswire reported. On July
12, US Airways exercised its right to establish a termination date-Jan.
12, 2003-by providing written notice to MCI WorldCom Communications, in
accordance with an August 2000 amendment to their agreement. US Airways
said the letter cited a 'termination for cause' because MCI WorldCom
Communications defaulted on $1.6 million owed to the airline under the
agreement. WorldCom and many of its subsidiaries, including MCI WorldCom
Communications, filed for chapter 11 bankruptcy on July 21. US Airways
and seven affiliates filed for bankruptcy protection from creditors on
Aug. 11.
Under the amended agreement, US Airways would continue to award
applicable Dividend Miles to members of the MCI WorldCom/US Airways
Program for 12 months after the termination or expiration of the program
as long as they remain MCI WorldCom Communications customers during that
yearlong wind-down period. MCI WorldCom would also continue to pay for
the awarded miles during that period, according to the motion. The pact
includes an exclusivity agreement that wouldn't allow the airline to
sign a similar agreement with any other telecommunications firm before
the termination date. Wednesday's filing argued the wind-down period and
the exclusivity pact 'are severely hindering its ability to enter into a
new agreement with another telecommunications entity on the most
favorable terms to US Airways' bankruptcy estate. The U.S. Bankruptcy
Court in Manhattan will consider the airline's motion at a hearing on
Nov. 12.
United Airlines Resubmits Loan-Support Application
In a renewed bid for a federal loan guarantee, UAL Corp. submitted a
revised business plan that reflects the industry's gloomy outlook and
calls for 12 percent less capacity in 2003 than it projected four months
ago in its first application to the government panel, the Wall Street
Journal reported. The United Airlines parent, seeking $1.8 billion
in government backing so it can raise $2 billion in urgently needed
cash, hopes the revised plan -- and its potential and real cost savings
-- will persuade the Air Transportation Stabilization Board to grant the
aid. Without it, UAL fears it will run out of money and be forced to
file for bankruptcy-court protection. UAL is moving with urgency because
it is spending more than $7 million a day more on operations than it is
collecting in revenue, and it has accumulated $3.8 billion in losses in
the past seven quarters. The company faces nearly $1 billion in debt and
interest-payment obligations before the end of the year, and it fears it
can't meet them without filing for protection under chapter 11 of the
U.S. Bankruptcy Code.
Discounter Declares Chapter 11
Phone-service discounter Supra Telecommunications sought chapter 11
bankruptcy protection on Wednesday to keep from having its customers'
service cut off by BellSouth Corp. over a payment dispute, the
Associated Press reported. Supra management accused BellSouth of trying
to force it out of business by overbilling and by calling Supra
customers this week to tell them they need to find another phone company
within two weeks or lose their service. Supra leases local phone
connection lines from BellSouth, the dominant phone carrier in the
region, and serves about 300,000 customers in Florida. BellSouth
contends Supra hasn't paid about $18 million in fees dating back to
August and another $100 million from a previous contract period.
BellSouth said it has no other choice but to pursue disconnecting
Supra's customers until it gets paid. BellSouth obtained permission from
state regulators Monday to contact Supra customers. Supra is counting on
Chapter 11 status to buy time for commercial arbitrators to sort out
what money is owed to whom.
Portland General Electric Bid Explored by 25 Parties
Twenty-five parties accessed confidential financial data last week to
explore their possible interest in bidding for Enron Corp utility
Portland General Electric, Dow Jones reported. Executives with the
bankrupt energy firm met publicly with Oregon commissioners on Wednesday
to brief them on efforts to sell the utility as well as other assets.
The executives did not identify who had signed confidentiality
agreements in order to access the financial data as part of the first
round of due diligence on the utility's sale, said Enron spokesman Mark
Palmer. Enron will now make presentations to interested parties and aims
to accept final bids by late November or early December. The company
expects multiple bidders for each asset. There are no floors or minimum
thresholds on bids, Palmer said. The company will decide in late
December or early January whether to sell its assets or retain them
under reorganization, Palmer said. It will then bring its plan before
the official creditors committee and bankruptcy court for approval, the
newswire reported.
Amerco in Talks with Lenders on Consensual Reorganization
Amerco said on Wednesday it is in discussions with bondholders and
lenders over a reorganization of the company's balance sheet, Dow Jones
reported. Amerco, a holding company whose principal interest is
Phoenix-based U-Haul International Inc., said on Oct 15 that it hired
Crossroads LLC to assist in the assessment of its financial
alternatives. While it recapitalizes its balance sheet, Amerco will
continue to make interest payments to its banks, the company said on
Wednesday. Last week, Standard & Poor's lowered Amerco's corporate
credit rating because of a missed $100 million principal debt payment.
The company dismissed suggestions that it might consider filing for
chapter 11 bankruptcy protection.
Vanguard Airlines Says It Will Likely Liquidate Assets
Vanguard Airlines Inc. will probably be sold off in pieces rather than
fly again in the hands of an investor, the Associated Press reported.
Talks are still under way with one unidentified investor, said Vanguard
chief financial officer David A. Rescino. But those talks are uncertain
enough that the Kansas City-based discount airline can no longer delay
selling its assets. The absence of a buyer for its federal operating
certificate reduces Vanguard to a collection of spare airplane parts,
ground equipment and office furniture. Vanguard's assets have been
valued at more than $4 million. The company flew leased jets. Flanigan
said the company believes it will be able to pay off its secured
creditors, and make at least partial payments to unsecured creditors,
including employees and passengers. Vanguard hasn't flown since July 31
when it filed for chapter 11 bankruptcy protection, laid off more than
1,000 employees and stranded about 6,500 customers.
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