April 12, 2000
Sen. Lott Looks to S. 761 to Free H.R. 833 from Impasse
Senate Majority Leader Trent Lott (R-Miss.) said on Tuesday that S.
761, legislation regarding digital signatures, could provide the vehicle
to release the bankruptcy reform act (S. 625/H.R. 833) from political
impasse, the CQ Daily Monitor reported. Although Lott
acknowledged that S. 761 (a technology bill designed to establish
electronic signatures—such as uniquely identifiable imprints or
encripted codes transmitted electronically—as having the same
legal validity as written signatures) is not related to the bankruptcy
overhaul, once key House and Senate lawmakers agree on a compromise
version of the bankruptcy bill, Lott said he would insert the compromise
into S. 761, ensuring the compromise's easy passage. However, the House
Rules Committee would have to approve a waiver protecting the measure
from a point of order. The digital signatures measure has its own
controversial elements, with Democrats at the White House demanding
greater consumer protections. The bankruptcy bill has been snagged since
the Senate added a minimum wage hike and business tax breaks to its
version of the bill.
Judiciary Committee Members Criticize FCC Actions in
NextWave Case
A bipartisan group of members of the House Judiciary Committee
Subcommittee on Commercial and Administrative Law used an oversight
hearing yesterday to sharply criticize the Federal Communication
Commission’s (FCC) actions to recover and reauction “C
block” wireless licenses from bankrupt NextWave Personal
Communications Inc. The hearing addressed the scope of §362(b)(4)
and the question of when a government agency like the FCC is acting in
the furtherance of legitimate police and regulatory powers and is thus
entitled to be exempt from the automatic stay—or when it acts as a
mere creditor owed a money judgment, entitled to no such protection.
Both NextWave and the FCC had sought relief from Congress in the wake of
NextWave’s filing and protracted litigation. A bankruptcy court in
New York voided part of NextWave’s obligation to pay for licenses
won at auction while permitting the debtor to retain the licenses so
that the company could reorganize under chapter 11. On appeal, the
Second Circuit held the bankruptcy court lacked the authority to
interfere with the FCC’s exclusive jurisdiction to regulate and
allocate spectrum rights. But Reps. Jarrold Nadler (D-N.Y.), John
Conyers (D-Mich.) and Lindsay Graham (R-S.C.) found the FCC’s
position indistinguishable from any other creditor owed money in a
bankruptcy case.
Nadler criticized the FCC’s actions as punitive in the face of
NextWave’s pending offer to pay some $4.3 billion for the spectrum
licenses as part of its bankruptcy case. He questioned whether any
broadcast licensee could ever successfully reorganize if the licenses
are not property of the estate. The FCC’s position is that full
and timely payment of any winning bid is a regulatory condition for
retaining the license. The Second Circuit agreed. Graham warned of a
chilling effect on lenders, if the FCC can revoke a license for mere
non-payment, without there also being a threat to public health or
safety—the traditional means to invoke §362(b)(4). He
suggested that the FCC is no different than agencies such as the Small
Business Administration (SBA) and Housing and Urban Development (HUD),
which act as both lenders and regulators. These agencies are stayed by
the bankruptcy filing when they assert simply that the debtor
hasn’t paid on a loan obligation. Conyers criticized the FCC for
attempting to end-run the jurisdiction of the Judiciary Committee by
seeking relief from the Senate Appropriations Committee. FCC Chairman
William Kennard testified in support of a legislative fix favoring the
FCC during a March 21 hearing before the committee.
The hearing comes as House and Senate staff continue to talk about an
agreement on the bankruptcy reform act (S. 625/H.R. 833). No
official conference has begun and no conferees have been named. But the
Congressional leadership continues to search for a vehicle to attach an
agreed-upon bankruptcy compromise. It is doubtful that adding another
controversial provision to the mix—either broadening or limiting
the scope of §362(b)(4)—would help the chances of overall
bankruptcy reform.
Orthodontic Centers, Apple Orthodontics Enter Into Asset Purchase
Agreement
Orthodontic Centers of America Inc. (OCA), Ponte Vedra Beach, Fla.,
announced yesterday that it has entered into a definitive agreement with
Apple Orthodontix Inc., which has agreements with 58 orthodontic
practices in the United States and Canada, to acquire up to 47 of
Apple's service agreements and related practice assets, according to a
newswire report. On Feb. 22, OCA announced that it had entered into
discussions with Apple to affiliate with up to 47 selected orthodontic
practices presently affiliated with Apple. The transaction is subject to
review and approval by the U.S. Bankruptcy Court for the District of
Delaware, acceptance by Apple's senior secured creditors and consent by
the orthodontists whose service agreements are being acquired. Apple
filed for chapter 11 on Jan. 27.
N.C. Governor Makes Plea for Farmers
Seven months after the devastation of Hurricane Floyd, North
Carolina Governor Jim Hunt said yesterday after a White House meeting
that farmers are on the verge of bankruptcy and cannot wait any longer
for Congress to send emergency money, according to the Associated Press.
'The need is urgent, and we need for Congress to act now' on a special
budget package for farmers and people flooded out of their homes, Hunt
said. Hunt was in Washington for another in his series of lobbying trips
on behalf of victims of the hurricane that leveled towns and farms in
eastern North Carolina last fall. The House already approved about $2
billion for Hurricane Floyd relief this year, and a Senate spending
panel recommended $1 billion, but Hunt wants Congress to approve the
money before lawmakers go home for a spring break, and said he is
worried that Congress may drag its feet until next fall. Hunt had sent a
letter to Senate Majority Leader Trent Lott (R-Miss.) urging him to act
quickly for the relief of the flood victims; Lott and other leaders
decided earlier this month to indefinitely delay a $4.5 billion package
for hurricane relief as well as U.S. efforts in Colombia and Kosovo.
Lott said the measure was too expensive and would slow the Senate's work
on other legislation, indicating that he wants parts of it added to
fiscal 2001 spending legislation, which could begin moving through
Congress in several weeks.
Philip Services Sets Date For Share Distribution
Metals recovery and industrial services company Philip Services
Corp., Hamilton, Ont., said the Toronto Stock Exchange has set a record
date of April 19 to determine the shareholders eligible to receive
shares in the restructured company. In a news release, Philip, which
recently completed its financial reorganization and has emerged from
chapter 11 in the U.S. and Canada, said the shares of the restructured
company will begin trading on April 20 under the symbol PSC. Under the
company's reorganization plan, Philip will issue 24 million shares to
its secured lenders, (91 percent), unsecured creditors (5 percent),
existing shareholders (2 percent), class-action claimants (1.5 percent)
and other equity claimants (0.5 percent).
Planet Hollywood May Liquidate
Financially troubled restaurant chain Planet Hollywood International
Inc., based in Orlando, Fla., said Tuesday its reorganization plan has
yet to become effective, something that could ultimately result in the
company's liquidation, according to a Dow Jones report. In a filing with
the Securities and Exchange Commission, the company, whose celebrity
stockholders included Arnold Schwarzenegger, Sylvester Stallone and
Bruce Willis, said there can be no assurance that the plan, approved by
a bankruptcy court judge Jan. 21, will become effective or when that
could happen. However, Planet Hollywood did say it is negotiating
several required agreements and that the plan would go into effect soon.
But the theme-restaurant company said the delays in the plan's
implementation or required modifications to the plan might impact the
company's ability to successfully reorganize. On Feb. 28, Planet
Hollywood said negotiations ahead of the reorganization plan's
implementation would be completed within two weeks, allowing for the
plan to become effective 'shortly.' According to the plan, a new group
of investors would invest $30 million in the reorganized company to
acquire about seven million of the 10 million shares of the company's
new common stock. Planet Hollywood claimed a net loss of $194.5 million
in the fiscal year ended Dec. 27, compared with a $200.7 million net
loss in 1998.
Casmyn Corp. Announces Common Stock Reverse Split Pursuant to
Reorganization
Casmyn Corp., a Colorado-based corporation, announced that effective
yesterday, the effective date for the company's seconded amended
reorganization plan confirmed by the U.S. Bankruptcy Court for the
Central District of California on March 31, the company has effected a
1-for-500 reverse split of its 243,578,142 shares of common stock
outstanding and a conversion of each of the company's 523,784 shares of
preferred stock outstanding and related claims thereto into 5.27 shares
of the Company's common stock, according to a newswire report.
Shareholders owning less the 50,000 shares of common stock as of
yesterday will receive a cash payment of $1 per share after adjusting
for the 1-for-500 reverse stock split. Shareholders who hold their
shares directly may send their share certificates to the company's
transfer agent, American Securities Transfer & Trust Inc., 12039
West Alameda Parkway, Suite Z-2, Lakewood, CO 80228, (303) 984-4127; fax
(303) 984-4110), to receive their new securities. Shareholders who hold
their shares through brokerage accounts should contact their brokers
with regard to having their shares sent to the company's transfer agent
for exchange into the new securities. It is estimated that a total of
approximately 3,500,000 shares of common stock will be issued and
outstanding once the plan is fully implemented.
Hedstrom Holdings Files Chapter 11
Hedstrom Holdings Inc., Mount Prospect, Ill., and seven affiliates
attributed yesterday's chapter 11 filing to liquidity problems resulting
from poor sales in a Montreal unit, according to Reuters. In papers
filed in the U.S. Bankruptcy Court in Delaware, the manufacturer of
children's leisure products listed assets of $399 million and debts of
$377 million, and cited 'a liquidity crisis primarily driven by its AMAV
(Industries Inc.) division in Montreal which is experiencing operational
difficulties and sales levels below those anticipated,' said a
spokesman. A group of banks led by Credit Suisse First Boston has
agreed, pending court approval, to provide $50 million in
debtor-in-possession financing, the spokesman added.
Globalstar, Qualcomm to Deliver Mobile Net Access
In the wake of the financial failures of Iridium and ICO Global
Communications, Globalstar, the last remaining major independent
satellite phone provider not to have sought bankruptcy protection, plans
to work with wireless chipmaker Qualcomm to deliver Internet services,
giving the satellite phone service provider a new source of revenue and
armament against cellular carriers and other wireless Net access
providers, CNET News.com reported yesterday. The companies plan to offer
limited Internet services commercially this summer with a wider range of
options planned for the second half of the year. While falling prices
for mobile voice communications have hurt satellite phone services such
as Globalstar, Iridium and ICO Global Communications, cellular carriers
are beginning to embrace wireless Internet services, providing consumers
with more incentive to use traditional wireless providers over satellite
phone operators. Globalstar offers commercial mobile voice services in
10 countries in Latin America.
Rite Aid Stock Rises on Pact
Drugstore operator Rite Aid Corp.'s shares soared nearly 29 percent
yesterday after it announced it had a new financing pact that its chief
executive said will be key to rebuilding the financially troubled
company, according to the Associated Press. The nation's third-largest
drugstore chain, based in Camp Hill, Pa., said it had received a
commitment for $1 billion in secured credit from Citibank, and that J.P.
Morgan agreed to convert $200 million of existing bank debt into Rite
Aid common stock at a price of $5.50 each. Upon completion of the
transactions, Rite Aid predicted it will have virtually no debt maturing
prior to August 2002. The new financing commitment and debt
modifications 'are a cornerstone of our turnaround plan,' said Robert
Miller, who was named Rite Aid's chairman and chief executive last
December. The $1 billion credit facility will be secured with inventory,
accounts receivable and certain other assets owned by Rite Aid units PCS
Health Systems and drugstore.com. The company had been looking to sell
PCS to help pay off $1.3 billion in debt due Nov. 1. '…Rite Aid
wasn't able to sell PCS at the right price, and banks, when forced with
the choice of forcing Rite Aid into chapter 11 bankruptcy or
refinancing, it went for the financing structure,' said Mark Husson, an
analyst with Merrill Lynch in New York. 'If you're a Rite Aid
shareholder, (the financial pact) is better than bad news. It looks like
Rite Aid will survive. It now has a good shot, an opportunity to turn
itself around.'
