Heilig-Meyers
Files Chapter 11
Home furnishings
retailer Heilig-Meyers Co. filed chapter 11 yesterday
with the U.S. Bankruptcy Court for the Eastern
District of Virginia and said it will close 302
furniture stores, or about one-third of its units,
nationwide, according to a newswire report. The
Richmond, Va.-based retailer said it plans to
continue operations while implementing a restructuring
plan. The bankruptcy petition listed assets of
$1.35 billion and liabilities of $868 million.
The company reported a net loss of $15 million
for the quarter ended May 31. The company said
it received a commitment from a lending group,
led by Fleet Retail Finance Inc., for $215 million
in debtor-in-possession financing. The loan, subject
to court approval, is expected to provide the
company with the funds to continue operations,
including "employee obligations." Heilig-Meyers
said it intends to initiate a plan to improve
its performance, including outsourcing its credit
program, closing underperforming stores and lowering
operating costs. The company also said it will
seek court approval to conduct inventory liquidation
sales at the stores that are closing.
American
MetroCom Files for Bankruptcy
American MetroComm Corp. and 11 affiliates filed
chapter 11 yesterday in the U.S. Bankruptcy Court
in Delaware, according to a newswire report. AMC
has obtained a commitment for debtor-in-possession
financing from its secured lender, which will
allow the company to continue its operations.
In court papers, the New Orleans-based company
listed assets of $126.7 million and liabilities
of $112.1 million. American MetroComm is a digitally
based competitive local exchange carrier providing
voice and data services in the southeastern United
States, including local and long-distance service.
Sale
to Put First Union out of Credit Card Business
American credit card issuer MBNA Corp.
yesterday announced it would purchase First Union
Corp.'s $5.5 billion credit card portfolio, according
to The Wall
Street Journal. The value of the deal has
yet to be disclosed, but First Union is expected
to make a $1 billion profit on the sale, which
observers believe will be completed in the third-quarter
of the year. First Union's decision to sell comes
as part of a restructuring program under which
it is closing its subprime lending unit and concentrating
on investment and retail banking and asset management.
Showscan
Entertainment Inc. Announces Voluntary Petition
to Reorganize
Showscan Entertainment yesterday announced
that it has filed chapter 11 the U.S. Bankruptcy
Court for the Central District of California,
according to a newswire report. The Los Angeles-based
company said it will continue to operate its businesses
under court protection while working out a reorganization
plan. The company's single largest creditor, a
Swiss financial institution, has formally agreed
to work cooperatively with Showscan's management
to assist in future operations. Showscan is an
international leader in production, distribution
and exhibition of movie-based attractions shown
in large format theatres worldwide. Showscan's
simulation attractions and special venue theatres
are open or under construction in 24 countries.
Second
Chances Hard to Come By for Dot-Coms
Reports of layoffs at struggling dot-com companies
appear daily, and there are enough failed dot-coms
that one Web site has memorialized all of them
in a virtual dot-com graveyard, according to a
Reuters report. But chapter 11 bankruptcy protection
has for the most part eluded the dot-com industry.
Bankruptcy lawyers say the organized procedures
for restructuring a troubled business that have
served many brick-and-mortar giants, like Macy's,
so well over the years seem to have little to
offer Internet businesses. It is not just that
these virtual companies have few tangible assets
to sell or little secured debt to repay, since
they are often not even mature enough to be borrowing
from banks. It is that many of the dot-coms that
run into trouble find themselves hard-pressed
to convince a court that they will benefit from
a second chance.
"Dot-coms have a couple
of unique things that the Bankruptcy Code
doesn't deal with so well," said David Fidler,
a lawyer with Klee, Tuchin, Bogdanoff & Stern,
the Los Angeles firm that is representing Frederick's
of Hollywood in its bankruptcy proceedings. "The
major problem is that they don't really own many
assets. Their valuations are usually based on
things that haven't occurred yet. They are based
on their expectations that they will be able to
make money sometime down the road. I suspect it
will be a real challenge for them to reorganize
under chapter 11." The combination of few
physical assets and speculative valuations makes
reorganizing particularly difficult. When a brick-and-mortar
retailer files for chapter 11, it may propose
a turnaround strategy in which it sells off underperforming
stores and uses the money to pay off its creditors,
hire better management or beef up its remaining
assets. Dot-coms have fewer options to raise cash.
They may argue passionately about the value of
virtual assets like their brands, their URL addresses
or other intellectual property, but such things
can be hard to dispose of on the auction block.
"What we're seeing right now is more than
one or two players in the same space," said
Jillian
Aylward, a bankruptcy lawyer with Curran Coffee
& Moran in Boston. "It's a question of
which one is going to survive. Everyone can't
survive."
American
Pad & Paper Says It'll Have No Remaining Operations
American Pad & Paper Co. (AMPPQ) says that once
the pending sales of its four operating divisions
are completed, there will be no operations remaining
to further assist in reducing the company's debt.
The paper-based office products manufacturer and
supplier made the disclosure in a Form 8-K interim
report filed Tuesday with the Securities and Exchange
Commission. AmPad added that while it isn't possible
now to predict the final outcome of the company's
Chapter 11 bankruptcy, 'it is unlikely that its
current equity holders will receive any value
from the final disposition of the bankruptcy cases.'
style='COLOR: black'>Courtesy of
style='COLOR: black'>
href='http://www.fedfil.com/bankruptcy/developments.htm'>The Daily Bankruptcy
Review
style='COLOR: black'>Copyright © August 17, 2000
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