January 11, 2000
Creditors File Involuntary Petition Against American Pad
& Paper
Creditors of Dallas-based American Pad & Paper Co.
yesterday filed an involuntary chapter 11 case against the company in
the District of Delaware, according to Reuters. Last month American Pad
& Paper announced that it was in the process of negotiating with
lenders and a committee of bondholders about defaults in interest
payments. The company sells its products in the United States and Canada
and its brands include Hammermill and Strathmore. Details of the filing
are not yet available, but six affiliates were included in the
filing.
PennCorp Financial to File for Bankruptcy and Sell Units
PennCorp Financial Group Inc., New York, announced yesterday
that it had agreed to sell two insurance units, Southwestern Life
Insurance Co. and Security Life & Trust Insurance Co., to Swiss
Reinsurance Co. for $260 million in cash and that it would file for
chapter 11 protection to facilitate the sale agreement, according to
Reuters. The sale is subject to the court's approval. The filing will
affect only the holding company PennCorp Financial Group Inc. and
certain non-insurance affiliates; no insurance subsidiaries will be
involved in the filing. PennCorp also announced that its subsidiary,
American-Amicable Holdings Corp. had entered into a definitive agreement
to sell its Waco, Texas-based insurance operations for $102 million in
cash, subject to buyer's receipt of financing commitments. Both deals
are expected to close by the end of the first quarter. The proceeds from
the sales are expected to provide enough cash for PennCorp to pay about
$165 million in bank debt and about $115 million of subordinated debt.
Following PennCorp's announcement, the New York Stock Exchange suspended
trading in PennCorp.
Analysis of Largest Non-profit Health Care Failure
Published
Health Affairs, a peer-reviewed health policy journal,
and Medscape.com yesterday simultaneously published a 35-page
comprehensive analysis of the 1998 bankruptcy of Allegheny Health,
Education and Research Foundation (AHERF), according to a newswire
report. The report cites an overly aggressive strategy and lack of
oversight as primary reasons for AHERF's problems. 'The Fall of the
House of AHERF: The Allegheny Bankruptcy' reports that 'the system
embarked on an ambitious strategy of horizontal and vertical integration
just as reimbursement from major payers dramatically contracted, leaving
AHERF overly exposed.' The report also said that 'Hospital and physician
acquisitions increased the system's debt and competed for capital, which
sapped the stronger institutions and led to massive internal cash
transfers. Management failed to exercise due diligence in many of these
acquisitions.' Among the lessons learned, according to the report's
authors are that 1) 'Growth at any cost does not appear to be the answer
for America's hospitals...'; 2) 'AHERF expanded using commons
strategies...with which other hospitals are having problems;' 3)
'Changing market conditions can affect the collapse of a hospital
change. The rapid changes in managed care and competition overwhelmed
the hospital strategies of consolidation and integration.' 4) 'The AHERF
case suggests that the use of insurance and reinsurance vehicles allows
financial and market risk to diffuse throughout the health care system
and into the future.' The full report is online at
href='http://www.medscape.com/Allegheny'
target='_parent'>http://www.medscape.com/Allegheny.
wp='BR1'>
Fitch IBCA Sounds Alarm Bell on Credit Card Indices
Fitch IBCA's latest Credit Card Performance Index shows
significant delinquencies extending their upward trends and charge-offs
moving higher during the final months of 1999, according to a newswire
report. Michael Dean, senior director and author of Fitch IBCA's monthly
Credit Card Movers and Shakers report stated that these developments
could prove to be the first evidence of issuers loosening credit
standards in an effort to spur growth with the expectation of further
economic expansion. Rising delinquencies will continue to mean higher
charge-offs in the coming months, but the full impact may be partially
eased by the declining bankruptcy trend. Otherwise, key performance
variables remain strong. So, Dean said, card-backed securities investors
are well protected from a credit standpoint, even if delinquencies and
charge-offs trend upward. The report is online at
href='http://www.fitchibca.com/'
target='_parent'>http://www.fitchibca.com.
Public Bankruptcies at Highest Level in Seven Years
BankruptcyData.com
target='_parent'>(http://www.bankruptcydata.com)
reported that 144 publicly traded companies with total assets of $58.6
billion filed for bankruptcy protection in 1999, according to a newswire
report. This is the most public companies entering chapter 11 in any
year since 1986, when there were 149 public bankruptcies, and the
greatest asset total in any year since 1992, when $64.2 billion of
assets went into chapter 11.
Tultex Ends Manufacturing in Virginia, Announces Additional
Job Cuts
Tultex Corp. announced today that it has permanently ended
production at its plant in Martinsville, Va., and that about 285 persons
were laid off as a result, according to a newswire report. In addition,
the company announced that about 160 administrative support and
distribution positions related to local manufacturing and to the
operations of the company will be eliminated over the next few weeks.
The announcements are in addition to cutbacks announced in early
December with the company's chapter 11 filing. Tultex's remaining
businesses will be its distributors, California Shirt Sales and T-Shirt
City, and its Discus Athletic Business. Tultex also announced that on
Jan. 5, the Bankruptcy Court for the Western District of Virginia
approved its request for the use of a $150 million debtor-in-possession
facility provided by a bank group led by Bank of America. Founded in
1937, Tultex has been a leading manufacturer, marketer and distributor
of active wear and licensed sports apparel.
Fruit of the Loom to Sell Some Assets
Fruit of the Loom bankruptcy attorney Mark
Thomas of Katten Muchin Zavis, Chicago, told about 50 creditor
attorneys and professionals at a meeting yesterday in Wilmington, Del.,
that the company plans to sell off some of its businesses, according to
a newswire report. The company had planned to do this before filing
chapter 11 on Dec. 29, but it did not have the liquidity to do so.
Financial advisors from Lazard Freres & Co. LLC and Jay Alix &
Associates attended the meeting as well, and said that it's 'premature'
to say which assets will be sold. An attorney representing HSBC Bank USA
Corp. Trust, which holds $250 million in unsecured notes, asked whether
the company would be able to shed its guaranty to repay a $65 million
personal loan made to former Chairman William Farley in March while he
was still CEO. Thomas said that a number of investors had a 'keen
interest' in this subject, but that the loan guaranty was unchanged and
that he was not aware of whether Farley had sought to refinance the loan
privately. Fruit of the Loom's Delaware attorney, Norman L.
Pernick of Saul, Ewing, Remick & Saul LLP, said there will
be a hearing on Jan. 20 before Bankruptcy Judge Peter Walsh on whether
to grant final approval to Bank of America NA's $625 million
debtor-in-possession financing. Last month he gave interim approval,
allowing Fruit of the Loom to use $275 million of the package. Pernick
also said that the company's financial schedules, listing in detail the
assets, liabilities and all creditors, will be filed by March 1. Fruit
of the Loom also announced yesterday that Sir Brian Wolfson has been
named chairman to replace Farley, who left in August after the company
warned of lower-than-expected earnings, Reuters reported. Wolfson is
chairman of the executive committee of the board and has been a board
member since 1992.
Singer's Lenders Balk at Investment Banker's Hire Terms
Singer Co.'s (SEW) lenders have objected to the proposed terms governing
the company's retention of investment banking firm Blackstone Group LP,
charging they are 'unacceptable, overbroad and financially onerous.' The
bank group, led by Bank of Nova Scotia, also asserted in the Jan. 6
objection that Blackstone's services overlap those of restructuring
adviser Arthur Andersen LLP, which was hired in September.
Courtesy of
href='http://www.fedfil.com/bankruptcy/developments.htm'>The
Daily Bankruptcy Review Copyright ©
January 11, 2000..
