Best Buy Bids for Musicland
Best Buy Co. said it began a tender offer of $12.55 a share for
Musicland Stores Corp., a Minnetonka, Minn.-based home-entertainment
retailer, according to the Wall Street Journal. Best Buy, a
consumer-electronics company will assume $160 million in debt from
Musicland, which has about 32 million diluted shares outstanding as of
Sept. 30. Best Buy’s offer expires Jan. 22 unless
extended.
Bankruptcy Crashes the Barbie PC
Customers who ordered PCs decorated with Barbie decals or Hot Wheels
insignias are out of luck this holiday season as Patriot Computer, the
manufacturer, has filed for bankruptcy, according to a newswire
report. A message on Patriot's corporate phone line said that the
Toronto-based PC manufacturer voluntarily filed for bankruptcy on Dec.
7. A letter explaining the situation has been sent to customers and the
first creditors’ meeting will be on Jan. 9.
A backlog of computer orders exists and customers who paid for
computers won't get an immediate refund or a computer. “If
you are a party that remitted funds to get a computer and did not
receive one, you are an unsecured creditor by virtue of the fact that
you will not receive a computer,” said the recorded message on
Patriot's phone system.
Wahlco Engineered Products Sells
Assets
Wahlco Engineered Products Inc. (WEP) Lewiston, Maine, sold its assets
on Wednesday in the U.S. Bankruptcy Court for the Central District of
California, according to a newswire report. The court approved a
winning bid of $1.4 million and closing will occur by Jan.15. The
acquiring party, comprised of the current WEP management team, said they
would continue to operate the business as it is currently configured
without interruption.
California Moves to Protect Utilities'
Credit Standing
California regulators yesterday said that they would consider lifting a
freeze on electric rates as they pledged to protect the credit
worthiness of the state's two largest utilities amid warnings that a
power crisis is pushing the companies to the brink of bankruptcy,
according to a Reuters report. “We believe that retail rates
in California must begin to rise,” said a spokesperson for the
California Public Utilities Commission (CPUC). “It is our
intent to maintain the utilities’ access to capital on reasonable
terms.” Approving a draft decision, the CPUC said retail
rates for electricity must begin to rise and scheduled emergency
hearings for Dec. 27-28 to consider how to lift the price freeze imposed
under legislation that deregulated the state’s power markets in
1996. The commission said the hearings should enable it to take
firm steps at its meeting on Jan. 4.
Southern California Edison said the utility company
would have no alternative except bankruptcy unless federal regulators
provide relief from soaring wholesale power prices in California.
“Unless both of these actions are taken, it is uncertain whether
Edison will be able to meet its January obligations and, if it defaults,
then it will have no alternative but to seek the protection of the
bankruptcy court,” the utility company said.
Southern California Edison is the state's second-largest utility,
providing electricity to four million customers in southern California.
Southern California Edison and Pacific Gas & Electric Corp.
(PG&E Corp.), the biggest utility in the state, has seen more than
$8 billion drained away in unrecovered costs for wholesale electricity
reserves in recent weeks. PG&E said earlier this week that it
was borrowing an average of $1 million each hour to pay for power to
keep the lights on in the state.
PG&E’s senior vice president Dan Richard welcomed the
CPUC's action, saying PG&E has “exhausted its financial
capacity to continue to buy power. We will await the reaction
tomorrow of the financial community,” he said.
Duke and Long Files Chapter 11
Duke and Long Distributing Company Inc. (D&L), an operator of gas
stations and convenience stores, yesterday announced that it filed
voluntary chapter 11 petitions in the U.S. Bankruptcy Court in Delaware
on Nov. 20. The New York-based company has more than $100 million
in debt outstanding in eight franchise securitizations originated by Bay
View Franchise Mortgage Acceptance Company, Franchise Finance Company of
America and AMRESCO Commercial Finance Inc.
Court Approves Master Graphics Disclosure
Statement
Master Graphics Inc. yesterday announced that the bankruptcy court on
Monday approved its disclosure statement for its joint reorganization
plan, according to a newswire report. The court also approved the
sale of three non-core divisions valued at about $18 million. The
proceeds will be used to reduce Master Graphics' secured bank
debt. Approval of the disclosure statement will allow the Memphis,
Tenn.-based company to commence the solicitation of votes for the
plan’s approval. A hearing to confirm the plan is scheduled
for Jan. 25. The company is also negotiating an exit facility to
replace its existing credit facility and expects to have the new
facility in place by late January. The company filed its chapter
11 petitions and reorganization plan on July 7 in the U.S. Bankruptcy
Court for the District of Delaware in Wilmington.
Under the terms of the plan, the company's secured bank debt will be
refinanced and the general unsecured creditors of Premier Graphics
— the company's wholly-owned operating subsidiary — will
receive all of the common stock in the newly reorganized Master
Graphics. Existing Master Graphics' common stock will be
cancelled.
MCM Capital Group Secures New Credit
Facility
San Diego-based MCM Capital Group Inc. (MCM) yesterday announced that a
newly formed bankruptcy remote subsidiary entered into a $75 million
credit facility with an institutional lender in order to acquire charged
off consumer debt that meets the lender's criteria, according to a
newswire report. The funds are available immediately to purchase
debt and can be continuously drawn upon during the four-year term of the
agreement.
“This is another important milestone in MCM's progress,”
said Carl C. Gregory III, president and chief executive officer.
“We plan to be an active purchaser during 2001 and fundings under
this facility will enable us to buy those high quality pools of assets
that our proprietary purchase techniques identify as being most suitable
for our business.”
Xerox Warns of Softer Earnings
Xerox Corp., struggling with slow sales of its copiers and a
deflated stock price, yesterday warned that it expects a decline in its
fourth-quarter earnings, according to the Associated Press. The
office equipment maker did not say how steep the decline would be, only
that a softer fourth-quarter performance is likely. The Stamford,
Conn.-based company also said it has drawn down the remaining balance of
its $7 billion revolving credit agreement, but said its liquidity has
improved with the completion of its previously announced $550 million
sale of its China operations to Fuji Xerox Co. Ltd. Xerox said a portion
of the credit line was used to repay maturing debt.
Including proceeds from the China sale, the company's current cash
balance is about $1.4 billion, up from $154 million on Sept. 30.
Some analysts have been speculating about a possible bankruptcy
protection filing by Xerox. A Xerox spokesperson would not comment
on the speculation, but cited the company's $1.4 billion in cash on hand
as a sign that the company is stabilizing.
Biz2Net Closes Down As Deal Falls Through
Biz2Net, the financially strapped CD-ROM replicator and e-commerce
provider, has shut down after a deal to sell the company fell apart,
according a newswire report. Biz2Net's major secured lender, Coast
Business Credit, wanted to sell the company to GlobalWare Solutions of
Haverhill for $1.8 million. Coast Business Credit had been
advancing money for payroll purposes in recent weeks, but when the deal
with GlobalWare fell apart, a decision was made to close the
business.
The deal turned sour after some equipment owners said they were
unwilling to sell their property at the price offered by
GlobalWare. In a hearing Monday before Bankruptcy Judge Henry
J. Boroff, a lawyer for GlobalWare said that if it couldn't get all
the equipment for $1.2 million, the company would walk away from the
deal.
Biz2Net emerged from the ashes of Omni Multimedia Group Inc., which
filed for bankruptcy in November 1997. Omnet Technology Corp.
purchased most of its assets in 1998. Biz2Net filed bankruptcy
last month when a group of unsecured creditors filed an involuntary
bankruptcy petition.
EC Cubed Files For Bankruptcy
EC Cubed Inc., an e-commerce software company that helped companies sell
products online, filed a chapter 11 petition on Wednesday in the U.S.
Bankruptcy Court in Worcester, Mass., according to the Telegram &
Gazette. EC Cubed Inc. said the total company assets were $7.2
million while total debts equaled $7.5 million. The
company’s attorney, Bruce Smith, said he expects the estimated
assets to drop between $3.5 million and $4 million after a more thorough
review of finances.
The Worchester, Mass.-based company ceased operations last week,
having used up $53 million in venture funding since it was founded in
1996. When the company closed, about 270 people were laid
off. The company's web site has been shut down and most of the
corporate officers have resigned. EC Cubed plans to liquidate its
software supply by selling it to another company. “The most
likely outcome is that the assets will be sold off and the company won't
be resurrected,” Smith said. The company's major secured
creditor is Silicon Valley Bank of California, which has a secured
interest of about $2.5 million.
Reliance Agrees to Restructuring
Plan
Property-casualty insurer Reliance Group Holdings Inc. yesterday agreed
with some of its debt holders to a pre-packaged restructuring plan that
would send it to bankruptcy court, according to a Reuters report.
Pennsylvania insurance regulators have been sent the agreement for
review and the company would like their approval, although it isn't
required.
Even with a regulatory nod, the plan could face a roadblock in the
form of financier Carl Icahn, who holds a significant amount of the New
York-based firm's debt. Icahn is against one of what sources say
is one of the key parts of the plan, hiring two Aon Corp. units to wind
up the remainder of Reliance's insurance operations. On Monday,
Icahn offered to buy about $61 million of Reliance's bonds but Reliance
has urged bondholders to reject the offer.
Rockefeller Center Sold
Rockefeller Center was sold to two minority shareholders for $1.85
billion, according to the Associated Press. The pending deal would
transfer full control of the complex to Jerry I. Speyer and Lester
Crown, who currently own 5 percent of the complex. The sale price
comes in well under that which the owners reportedly had sought.
Rockefeller Center Properties Inc. Trust, which paid $1.2 billion four
years ago, had asked for as much as $2.5 billion after putting the
center up for sale in May. The deal comes after a four-year
refurbishment and a real estate boom that followed the property’s
bankruptcy in the early 1990s.
Time, Ticketmaster Under Fire for Selling Free Magazine
Subscriptions to Ticket Buyers
A successful marketing partnership between Time Inc. and Ticketmaster
Corp. turned sour this week when the two companies were accused in a
Florida class-action suit of making unauthorized credit card charges and
sharing confidential financial information, according to a newswire
report. The Florida attorney general's office is investigating the
magazine publisher's business and marketing practices. The state's
investigation includes Time's relationships with Ticketmaster and other
marketing partners, including several credit card companies. In 1998,
Florida's attorney general, on the heels of a similar federal suit,
hammered American Family Enterprises for deceptive sweepstakes
subscription drives. American Family Enterprises is a subsidiary
of American Family Publishers (AFP) and is half-owned by Time Inc. AFP
filed chapter 11 after legal skirmishes and consumer backlash.
Bio-Friendly Corp. Might File Involuntary
Bankruptcy Petition Against ATG
American Technologies Group Inc. (ATG) failed to meet the Dec. 14
deadline imposed by a judge to post a $50,000 bond with a preliminary
injunction to keep Bio-Friendly Corp. from using its trade name
Migh-Tron, according to a newswire report. ATG had been attempting
to obtain a temporary restraining order against Bio-Friendly Corp. to
prevent the Monrovia, Calif.-based company from using the trade
name. But since ATG could not come up with the bond, there are no
restrictions on Bio-Friendly.
“Bio-Friendly Corp. has now begun counter-claims against ATG
for its frivolous lawsuit,” said Bio-Friendly Corp.'s corporate
counsel, Michael Stoller. “Certain creditors and other
claimants are considering legal action against ATG, including filing for
a petition for involuntary bankruptcy.”
Sterling, Ill.-Based Steel Manufacturer Files Bankruptcy
Cash-strapped Northwestern Steel & Wire Co. yesterday filed for
chapter 11 bankruptcy protection, according to a newswire report.
The Sterling, Ill.-based steel maker had been struggling to piece
together a recapitalization plan with which it hoped to fund a
modernization program. But the company has been unable to locate a
lender willing to loan it the $170 million it needs — even though
the federal government had agreed to guarantee 85 percent of the
loan.
“I think we're the eighth steel company to file for bankruptcy
in the past two years,” said Andrew Moore, vice president of human
resources for the company. “Imports have driven prices down
and hurt all our sales volumes so much that banks and financial
institutions aren't investing in steel producers, even with the
government guarantee.”
Northwestern disclosed that it had been unable to come up with a $5.5
million junk-bond interest payment due Dec. 15. If it didn't make
good on that payment within 30 days, bondholders would have been able to
demand repayment of the entire $115 million in bonds. The
bankruptcy filing gives the company time to restructure its finances
without the fear of having to honor such a demand from
bondholders. Northwestern said it would continue operations while
it reorganizes under the oversight of the U.S. Bankruptcy Court in
Rockford, Ill. The company said it hopes to emerge from chapter 11
as early as mid-2001.
BroadcastAmerica to Argue Against Chapter 7
A federal bankruptcy judge has ordered BroadcastAmerica.com to show
why the company should not be forced into chapter 7, a move that would
likely mean the end of the once-promising Internet startup, according to
the Portland Press Herald. U.S. Bankruptcy Court Judge
James B. Haines Jr. has scheduled a Dec. 27 hearing at which lawyers
for BroadcastAmerica would argue against the transfer of the company's
case to chapter 7 status. Portland-based BroadcastAmerica, which
stopped paying its workers last week, has more than $4 million in debts
and is in chapter 11 proceedings.
Roger A. Clement Jr., the lawyer representing BroadcastAmerica in the
bankruptcy, said the company remains hopeful of striking a deal that
would call for the company to be sold to a new owner. Alex
Lauchlan, the chief executive officer of the company, is scheduled to be
in Miami today to meet with a prospective buyer. Meanwhile, John Brier,
the president, will be in Las Vegas to speak with another possible
buyer.
Court Grants Legend More Time to Locate Investors
Legend Airlines, a Dallas Love Field start-up carrier that is in
bankruptcy, persuaded a court and its creditors to give it at least
another week and a half to find a savior for the company, according to a
newswire report. Legend's bank, Texas Capital Bank, the airline's
principal creditors and the U.S. Bankruptcy Court in Dallas on Wednesday
approved an extension of the company's ability to use cash in its bank
accounts for certain purposes through the end of the year.
The approval, sought by the airline's management, effectively gives
Legend Chairman T. Allan McArtor 10 more days to locate a new investor
or investors willing to pour enough cash into the grounded carrier to
get its flight operations relaunched. McArtor and other Legend
officials have declined to say how much the carrier needs to get its
service re-started with a realistic chance of succeeding. The airline
shut down Dec. 2 and filed for bankruptcy Dec. 3.
Analysts have suggested that Legend needs at least $40 million in new
capital or a bridge loan of $10 million to $20 million to get its planes
back in the air while it continues searching for permanent
financing. If Legend cannot find new investors, or even if it does
but cannot close on such a deal before year's end, the company would
have to seek another extension from the court, its bank, and its
creditors. It could also seek another extension even if it fails
to locate a new investor or investors by year's end.
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