TCR_Public/010206.MBX          T R O U B L E D   C O M P A N Y   R E P O R T E R

             Tuesday, February 6, 2001, Vol. 5, No. 26

                            Headlines

ACCESSAIR, INC.: Debtor & Ruan Withdraw 2nd Amended Joint Plan
ALGOMA STEEL: Reports Q4 2000 Financial Results -- More Losses
AMERICAN SPORTS: Hires Marcum & Kliegman As New Accountant
ATHEY PRODUCTS: Obtains Court Approval To Use Cash Collateral
AUDIOHIGHWAY.COM: March 9 Hearing Before Nasdaq Listing Panel Set

BAPTIST FOUNDATION: Liquidating Plan Declared Effective Jan. 22
BPC REORGANIZATION: Looks to Extend Exclusive Period to Apr. 23
BRIDGE INFORMATION: Plans to File Prepackaged Chapter 11 Plan
CAVION TECHNOLOGIES: Liberty To Complete Asset Deal Today
CRITICAL PATH: NASDAQ Halts Trading & Lawsuits Roll In

CRITICAL PATH: PwC & Wilson Sonsini Lead Accounting Investigation
GC COMPANIES: Anticipates Plan Confirmation This Year
GENESIS HEALTH: Seeks Court's Nod To Reject Connecticut Lease
GRAND UNION: FTC Gives Go Ahead for C&S Asset Sale Transaction
GRAND UNION: Ahold USA Acquires 56 Supermarkets & 8 Sites

IMPERIAL SUGAR: Will Pay Trade Creditors Who Extend New Credit
INTEGRATED HEALTH: Proposes Severance Program For Employees
LEGEND AIRLINES: Judge Refuses Triton Financing
LODESTAR HOLDINGS: May Sell Assets To Improve Cash Flow
LONDON FOG: Has Until April 19 to Assume or Reject Leases

LTV CORPORATION: Trustee Appoints Unsecured Creditors' Committee
MAINTENANCE DEPOT: Management Commits to Meeting Cash Needs
MARINE POST-ACUTE: $100MM DIP Financing Extended To August 31
MIDLAND FOOD: Committee Taps Otterbourg Steindler as Lead Counsel
MIDLAND FOOD: Walsh Monzack Serving Committee as Local Counsel

OWENS CORNING: Agrees To Give AFCO Adequate Protection Payments
PETSEC ENERGY: First Amended Plan Declared Effective Jan. 16
PLAYDIUM ENTERTAINMENT: Covenant Defaults with Secured Lenders
RELIANCE GROUP: Icahn Offer Extended Again, to 5:00 p.m. Today
SABRATEK CORP: Has Until Feb. 15 to Assume or Reject Leases

SABRATEK CORP: Exclusive Period Extended to March 30
STROUDS INC.: Seeks Approval For $38MM Asset Sale To iHome, Inc.
SUN HEALTHCARE: Moves To Divest 21 Underperforming Facilities
TEU HOLDINGS: Committee Sues Congress Financial for $11 Million
THERMALTEC INTERNATIONAL: Future Looks Bleak As Losses Continue

THOMPSON'S NUTRITIONAL: Midwest Grain Wins Bid for Assets
UNIVERSAL BROADBAND: Committee Taps Irell & Manella As Counsel
VENCOR INC.: Court Okays Extension Of DIP Financing To March 31
WEHRENBERG INC.: Case Summary & 20 Largest Unsecured Creditors
XEROX: Gives Details About Mexico Accounting Problems

                            *********

ACCESSAIR, INC.: Debtor & Ruan Withdraw 2nd Amended Joint Plan
--------------------------------------------------------------
After careful analysis of the market and the results of scheduled
flight operations conducted over the past 2-1/2 months,
AccessAir, Inc., and Ruan Financial Corporation have concluded
that important modifications to the business plan are necessary
to ensure AccessAir's success as an Iowa-based air carrier.

In particular, Benjamin W. Hopkins, Esq., at Faegre & Benson LLP
(representing AccessAir) and Donald F. Nieman, Esq., at Bradshaw,
Fowler, Proctor & Fairgrave, P.C. (representing Ruan), tell the
Bankruptcy Court in Des Moines, AccessAir and Ruan believe, based
upon passenger loads and costs, that the Company's existing and
contemplated routes will be more efficiently served by aircraft
smaller than the Boeing 737s presently in AccessAir's fleet. The
lawyers relate that AccessAir and Ruan have initiated discussions
for acquisition of smaller, more efficient "regional jets" which
hold 30-70 passengers.

AccessAir and Ruan filed a Second Amended Joint Plan on August
25, 2000. A Disclosure Statement in support of that plan was
approved and transmitted to creditors for voting. A confirmation
hearing is scheduled for February 20, 2001. The business changes
will make it impossible to implement the Second Amended Plan if
it were to be confirmed.

AccessAir and Ruan currently project that necessary talks with
aircraft sellers and lessors, the Federal Aviation
Administration, the Department of Transportation, and their
Official Committee of Unsecured Creditors will be concluded
swiftly and that a new plan of reorganization can be confirmed in
June.


ALGOMA STEEL: Reports Q4 2000 Financial Results -- More Losses
--------------------------------------------------------------
Algoma Steel, in announcing its financial results for the quarter
ended December 31, 2000, stated that the significant market
disruption caused by a flood of unfairly traded flat rolled
imports from offshore suppliers is continuing. This was the main
reason for lower production and shipment levels and a decline in
selling prices which culminated in a fourth quarter loss for
Algoma.

A net loss of $33.1 million or $0.62 per share was incurred in
the fourth quarter. This compares to a third quarter net loss of
$19.3 million or $0.36 per share and a net loss of $7.9 million
or$0.15 per share in the fourth quarter of 1999.

                Financial and Operating Results

Loss from operations in the quarter was $10.7 million versus an
income of $4.1 million in the third quarter. Lower order intake
resulted in a reduction in steel shipments to 437,000 tons versus
488,000 tons in the third quarter. The reduced order intake
caused production from the Direct Strip Production Complex (DSPC)
to decline to 284,000 tons versus 303,000 tons in the third
quarter.

The new ladle steel treatment facility (LMF) was integrated into
the operation during the quarter and is performing to
expectations. Full benefits from the LMF should be realized when
market conditions improve to support higher production levels.
Cash flow from operations before changes in working capital in
thequarter was a negative $13.9 million, compared to a positive
$7.1 million in the third quarter. The decline was caused mainly
by lower prices, but lower shipments and the resulting higher
operating costs associated with the corresponding lower
productionlevels were contributing factors.

Unused availability from the banking facility was $74 million at
December 31 compared to $90 million at September 30.

Negotiations with respect to the sale of the Company's scrap
inventory and scrap preparation operations are continuing with
Essex Trading Company.

As a result of concerns related to arsenic concentrations in the
soil in Wawa, a human exposure study of actual arsenic levels in
Wawa residents commenced in August, 2000 and was completed and
released in early January. The study found that arsenic levels
inWawa residents were in the normal range for the Canadian
population. No facts have been established to support a class
action lawsuit initiated against the Company by the Township of
Michipicoten in April, 2000.

                               Trade

Based on a complaint by Algoma, strongly supported by the other
Canadian steel producers, the Canada Customs and Revenue Agency
has initiated an investigation into the dumping and
countervailable subsidization of hot rolled sheet brought into
Canada from thirteen countries. A preliminary determination is
expected early in the second quarter with final determination
expected in the summer. This complaint is the third in a series
of complaints filed by Canadian steel producers against unfairly
traded imports which have saturated the Canadian market.

                              Outlook

Weak markets are continuing into the first quarter and this will
result in suppressed shipment levels and lower prices. Recent
production cuts by the automobile industry are contributing to
the current weakness, although lower demand is also being
experienced in other market sectors. However, with both import
volumes and North American steel production having fallen
significantly, the supply side of the market has been materially
reduced over the past several months. Price increases for sheet
products were announced this week by Algoma and a number of other
North American steel companies.


AMERICAN SPORTS: Hires Marcum & Kliegman As New Accountant
----------------------------------------------------------
American Sports History Inc.'s auditors from December 31, 1998
through January 24, 2001, were Hays & Company, of New York, New
York. By mutual agreement, the company and Hays & Company
terminated their professional relationship in January 2001.

The reports of Hays & Company included a statement that the
company was a developmental stage company, with no revenues, that
has sustained losses from operations since inception. Hays &
Company stated that there was substantial doubt about the ability
of the company to continue as a going concern. American Sports
History Inc. did not disagree with such statement, however, the
decision to change accountants was approved by the Board of
Directors of American Sports History Inc.

In January 2001, the company engaged Marcum & Kliegman LLP to act
as its independent accountant. Marcum & Kliegman LLP will audit
the company's financial statements for the fiscal year ended
December 31, 2000.


ATHEY PRODUCTS: Obtains Court Approval To Use Cash Collateral
-------------------------------------------------------------
Athey Products Corporation (Nasdaq: ATPCQ), a manufacturer of
street sweeping and material handling equipment, filed a
voluntary petition for relief pursuant to Chapter 11 of the
Bankruptcy code with the U.S. Bankruptcy Court for the Eastern
District, Raleigh Division, on December 8, 2000. The Court heard
and approved the Company's motion to continue use of cash
collateral on January 31, 2001, and set the motion for further
hearing on February 28,2001.

This approval will enable the Company to continue production of
its products pending further proceedings. The Company is
considering the sale of some or all of its assets, and if it is
able to negotiate sales (subject to approval of its Board), will
file motions with the Court for hearing and approval of such
sales on an expedited basis.


AUDIOHIGHWAY.COM: March 9 Hearing Before Nasdaq Listing Panel Set
-----------------------------------------------------------------
On November 7, 2000 audiohighway.com received a Nasdaq staff
determination letter indicating that audiohighway.com has failed
to comply with Nasdaq's minimum bid price requirement as set
forth in Marketplace Rule 4310(c)(4), and that audiohighway.com's
securities are, therefore, subject to delisting from The Nasdaq
SmallCap Market, if the Company did not demonstrate compliance on
or before January 29, 2001.

Since that initial letter, audiohighway.com has also received
inquiries from Nasdaq regarding compliance issues with respect to
net tangible assets, market value of the public float, and
shareholder meeting and filing requirements as set forth in
Marketplace Rules 4310(c)(2)(B), 4310(c)(4), 4350(e), and
4350(g), as well as audiohighway.com's recent filing for
protection under Chapter 11 of the U.S. bankruptcy laws.

audiohighway.com has been granted a hearing before the Nasdaq
listing qualifications panel to review the staff determination
and all compliance matters. The hearing will be held Friday,
March 9, 2001. There can be no assurance that the Panel will
grant audiohighway.com's request for continued listing.
audiohighway.com is actively seeking to structure a transaction
that will enable it to satisfy Nasdaq's continued listing
requirements and expects to have a going forward plan in place
prior to the hearing date.

Additionally, Nasdaq has requested certain information in
connection with audiohighway.com's January 11, 2001 filing for
protection under Chapter 11 of the U.S. bankruptcy laws. Nasdaq
has halted trading of audiohighway.com shares until it receives
and reviews such information. audiohighway.com has provided a
portion of the requested information to Nasdaq and anticipates
presenting the balance of the requested information at the
hearing.

audiohighway.com (Nasdaq: AHWYQ) is a leading online media
destination, offering one of the Internet's largest and most
diverse libraries of free audio content. Visitors can access
thousands of hours of music, audio books, news, entertainment,
education and information from audiohighway.com in a number of
formats (including MP3, RealPlayer(TM) and Windows(R) Media
Player(TM)), through a variety of audio channels.

audiohighway.com offers free audio and video content, which can
be streamed directly to PCs or downloaded for future playback.


BAPTIST FOUNDATION: Liquidating Plan Declared Effective Jan. 22
---------------------------------------------------------------
The first Amended Joint Liquidating Plan of Reorganization of
Baptist Foundation of Arizona, et al. dated September 25, 2000,
which was confirmed by an order of the court dated December 22,
2000, went effective on January 22, 2001. Attorneys for Baptist
Foundation of Arizona and certain of its subsidiaries and
affiliates are Craig D. Hansen, Thomas J. Salerno and Larry
L. Watson of Squire, Sanders & Dempsey LLP, Phoenix, Arizona.


BPC REORGANIZATION: Looks to Extend Exclusive Period to Apr. 23
---------------------------------------------------------------
BPC Reorganization Corp. seeks an extension of its exclusive
periods to file a plan of reorganization and solicit acceptances
thereto.

A hearing on the motion will be held before the Honorable Gregory
M. Sleet, US Bankruptcy Court for the District of Delaware, at
the convenience of the court. On August 8, 2000, the court
approved the comprehensive asset acquisition proposal submitted
by a joint venture formed by iParty Retail Store Corp., Hilco
Trading Co., Inc. and The Ozer Group, LLC. Since the closing of
the Transaction, a variety of post-closing disputes have arisen
between the debtor, iParty and Hilco/Ozer. The debtor believes
that the requisite building blocks exist for plan discussions
with the Committee. The debtor firmly believes that given the
current posture of the case, an extension of the debtor's
exclusive period and acceptance period to an including April 23,
2001 and June 22, 2001, respectively, is both highly appropriate
and fully justified.


BRIDGE INFORMATION: Plans to File Prepackaged Chapter 11 Plan
-------------------------------------------------------------
Bridge Information Systems Inc. (BRIDGE(R)) announced that it has
reached an agreement in principle with the majority of the
steering committee of the holders of its senior debt, and its
largest shareholder, Welsh, Carson, Anderson & Stowe, on a
recapitalization that will reduce indebtedness by over $700
million and inject $150 million of cash into the company.

BRIDGE said that the company would implement the recapitalization
by filing a Prepackaged Plan of Reorganization under Chapter 11
of the United States Bankruptcy Code.  Filing of a Prepackaged
Plan would moot the previously reported involuntary petition
filed against the company by Highland Capital Management.  Welsh
Carson would also provide temporary financing for the company
during the reorganization process.

Under the Plan, BRIDGE senior financial creditors would convert
$340 million of outstanding debt owed by the company into equity.
The remaining $400 million of senior debt is expected to be
further reduced over time through sales of non-core assets.
Consummation of the Plan would also result in the elimination of
all of the company's $400 million of subordinated debt.

The company said that it expects the filing to have little or no
impact on its day-to-day operations. BRIDGE will continue to
provide the full range of services to clients throughout the
reorganization proceeding and to pay employees' wages, salaries
and benefits without interruption. Under the Plan all suppliers
of services to the company will be paid in full.

David Roscoe, BRIDGE President, said, "We are very pleased to
have reached an understanding that we anticipate will place
BRIDGE on solid financial footing as it moves forward. We have a
very strong position in the marketplace, and we have taken
aggressive steps to improve our operating efficiency. The
approach agreed upon today will ensure that BRIDGE has the
appropriate capital structure and liquidity to support its
business plan. We are hopeful that we can conclude the
reorganization process by mid-to-late March."

                          About BRIDGE

BRIDGE, together with its principal operating units, Bridge
Information Systems, Telerate(R), Inc., eBRIDGE(SM), Bridge
Trading, and BridgeNews(SM), is the largest provider of financial
information and related services in North America and one of the
fastest growing in the world.

BRIDGE information products include a wide range of workstations,
market data feeds and web-browser-based applications, combined
with comprehensive market data, in-depth news, powerful analytic
tools and trading room integration systems. BRIDGE, with over a
quarter of a million users in over 65 countries, is headquartered
in New York City with the BRIDGE Trading and Technology center in
St. Louis, and major regional centers in Europe, the Middle East,
Africa, and the Pacific Rim. For more information visit the
BRIDGE web site at http://www.bridge.com


CAVION TECHNOLOGIES: Liberty To Complete Asset Deal Today
---------------------------------------------------------
Liberty Enterprises has received a significant number of signed
new contracts from Cavion Technologies credit union customers,
and says it will decide today whether to take the next steps to
acquire the Denver-based credit union technology provider.

The Liberty team, led by Executive Vice President for Internet
Applications Michael Provenzano, has received 65 signed contracts
and 20 oral commitments from credit unions.

As soon as the necessary number of credit unions, operating
income and cash flow can be identified, Liberty must then take
final steps to complete the deal, including:

      -- Reaching signed agreements with secured creditors to
         allow Liberty to acquire the assets of Cavion; and

      -- Receiving approval from the U.S. Bankruptcy Court in
         Denver. (Cavion filed for Chapter 11 bankruptcy
         protection on Dec. 21, 2000.)

According to Anderson, these steps is expected to be completed
with signed preliminary agreements with secured creditors
necessary within today (Feb 6) or they are not going to be able
to complete the acquisition.

"It would be ironic if we secured customer support only to be
faced with unrealistic creditors or delays in the bankruptcy
process. We'll need resolution on all issues on Tuesday (today)."

                          About Liberty

Liberty partners with 5,000 credit unions in all 50 states, Guam
and Puerto Rico. Liberty's core product is the check, still
consumers' leading financial transaction vehicle. The company is
the credit union movement's leading provider of payment systems
(checks, card services, financial supplies), marketing services
(database marketing, creative services, outsource marketing,
market research) and technology solutions (data processing, Web-
site development and hosting, Internet banking). Liberty is
headquartered in Mounds View, Minn., a suburb of Minneapolis-St.
Paul. The company has also established marketing centers in Los
Angeles, St. Louis, Minneapolis and Hartford, Conn.

                           About Cavion

Cavion Technologies offers products and services for secure
business-to-business communications and secure Internet financial
products and services designed specifically for the needs of
credit unions. The company's Internet software products include
secure Internet access, online transactional banking, cellular
access, online bill payment, and online loan decision products,
along with enabling software for kiosks.

Cavion created a secure, private communications network called
CUiNET (Credit Union interactive Network) exclusively for the
credit union industry. CUiNET provides a secure, high-speed
communications platform for the delivery of services,
transactions and information to and from credit unions and
related organizations, such as trade organizations, corporate
credit unions and credit union vendors. The company's
headquarters are located at 6466 South Kenton Street, Englewood,
Colo. 80111. Its telephone number is 720-875-1900.


CRITICAL PATH: NASDAQ Halts Trading & Lawsuits Roll In
------------------------------------------------------
The Nasdaq Stock Market(SM) announced that trading was halted in
Critical Path, Inc. (Nasdaq: CPTH), on Friday at 9:09 a.m.,
Eastern Time, for "additional information requested" from the
company at a last price of 10 1/16. Trading will remain halted
until Critical Path, Inc. has fully satisfied Nasdaq's request
for additional information.

Within hours, shareholder class action suits began to roll in.

Milberg Weiss Bershad Hynes & Lerach LLP filed suit in the United
States District Court for the Northern District of California on
behalf of purchasers CPTH shares between November 2, 2000 and
February 1, 2001.  The complaint -- a copy of which is available
at http://www.milberg.com/critical/complaint.pdf-- charges
Critical Path and certain of its officers and directors with
violations of the Securities Exchange Act of 1934. Critical Path
provides e-mail hosting services to a variety of organizations,
including Internet service providers, Web hosting companies, Web
portals, and corporations. The complaint alleges that many of
these types of companies were new and were suffering from a
downturn in Internet-related funding which began in the spring of
2000. By September 2000 at the latest, the problems many of these
companies were having raising money had reached crisis levels.
Defendants had also known for months that new accounting
regulations would negate the Company's ability to continue to
recognize up front license fees in Q4 2000. Defendants knew this
would severely impair Critical Path's future revenue growth and
impair their ability to make future stock sales and extract
future bonuses which were tied to the Company's performance.
Thus, defendants continued to make positive but false statements
about Critical Path's business and future revenues during Q4
2000. As a result, Critical Path's stock traded as high as $48.
On January 18, 2001 after the market closed, Critical Path
announced that in the fourth quarter 2000 it would report a
multi-million dollar loss.

This was directly contrary to what Critical Path's CEO had told
shareholders and analysts just weeks before. Then, on February 2,
2001, Critical Path announced that the Company's results reported
on January 18, 2001, were materially misstated. This disclosure
shocked the market, causing Critical Path's stock to decline to
less than $4 per share in pre-market trading.

Lawyers at Shalov Stone & Bonner; Kirby McInerney & Squire, LLP;
Weiss & Yourman; Girard & Green, LLP; Cauley Geller Bowman &
Coates, LLP; Wolf Haldenstein Adler Freeman & Herz LLP (also
naming PricewaterhouseCoopers as a defendant); Faruqi & Faruqi,
LLP; Berman DeValerio & Pease; Law Offices Of Charles J. Piven,
P.A.; and Pomerantz Haudek Block Grossman & Gross LLP, filed
separate lawsuits too.


CRITICAL PATH: PwC & Wilson Sonsini Lead Accounting Investigation
-----------------------------------------------------------------
Critical Path, Inc. (Nasdaq: CPTH) announced today that the Board
of Directors has formed a special committee of the Board to
conduct an investigation into the Company's revenue recognition
practices. The Company has discovered a number of transactions
that put into question the Company's financial results.

On January 18, 2001, the Company announced Fourth Quarter revenue
of $52 million in revenue and net loss, excluding special
charges, of $11.5 million. The Company now believes that these
results may be materially misstated. The Company cautioned that
the investigation has just begun.

Effective immediately, the Board of Directors has placed on
administrative leave David Thatcher, the Company's president, and
William Rinehart, the vice president of worldwide sales.

The special committee and the Company are working with its
independent auditors, PricewaterhouseCoopers, and outside
counsel, Wilson Sonsini Goodrich & Rosati.

Wall Street took a dim view of the Internet messaging company's
news. Geoffrey Stricker, an analyst for Lehman Brothers, believes
the stock's risks outweigh the rewards. Critical Path has debt of
$1.20 per share, which, when coupled with possible restatements
and likely lower guidance, provides the possibility of further
downside, Mr. Stricker said. Raj Seth at SG Cowen and analysts at
Dain Rauscher, J.P. Morgan, CIBC, Merrill Lynch and Goldman Sachs
share that sentiment.


GC COMPANIES: Anticipates Plan Confirmation This Year
-----------------------------------------------------
As previously reported, GC Companies Inc. incurred a significant
loss in 2000 and filed for bankruptcy protection.  For fiscal
year 2000, the company incurred a loss of $135,552,000 on
revenues of $358,042,000 as compared to a loss of $2,293,000 on
revenues of $386,150,000 for fiscal 1999.

The company's ability to continue as a going concern is dependent
upon its ability to maintain compliance with debt covenants under
the debtor-in-possession facility, the confirmation of a plan of
reorganization by the Bankruptcy Court and the successful
refinancing of certain financial obligations.

As a result of the bankruptcy proceedings, substantially all of
the company's pre-petition indebtedness, obligations and
guarantees are stayed from collection or action by creditors. No
payments have been made to date with respect to pre-petition
claims, with the exception of the payment of pre-petition
obligations to film distributors as approved by the Bankruptcy
Court. The company is operating its domestic theatre business in
the ordinary course and is paying all post-petition debts and
liabilities on normal terms as they become due. Pre-petition
claims will be funded in accordance with the company's plan of
reorganization.

Management's stated objective is to have a plan of reorganization
confirmed prior to the expiration of the DIP Facility on October
13, 2001 and believes that this timing is reasonably likely.
Management believes that cash from operations along with exit
financing, or asset sales proceeds, if required, will be
available to provide sufficient liquidity to allow the company to
continue as a going concern. However, there can be no assurance
of this. The company is currently preparing a plan of
reorganization for presentation to its creditors. Until such a
plan of reorganization is confirmed by the Bankruptcy Court,
there can be no assurance that the company will emerge from these
reorganization proceedings, and the effect of the terms and
conditions of such a plan of reorganization on the company's
business cannot be determined.


GENESIS HEALTH: Seeks Court's Nod To Reject Connecticut Lease
-------------------------------------------------------------
Genesis Health Ventures, Inc. & The Multicare Companies, Inc.
requested the Court for authorization, pursuant to section 365 of
the Bankruptcy Code, to reject one lease of nonresidential real
property used as premises for Norwalk Nursing & Rehabilitation
Center located at 73 Strawberry Hill Avenue, Norwalk,
Connecticut.

The lease is between Debtor Health Resources of Norwalk, Inc. (as
tenant)and Lea Manor Health Care Center, Inc. (as landlord) for
the term January 1, 1995 through July 31, 2021 at base rent of
$50,000 per year for the period January 1, 1995 through December
31, 2005 with increments of $5,000 year for every subsequent 5-
year period.

The facility operated on the premises is projected to generate
negative earnings in the year 2000 and beyond. The Debtors do not
anticipate that the financial condition of this facility will
materially improve after the year 2000.

The Debtors submit that the determination to reject the lease is
a prudent exercise of their business judgment, and is in the best
interests of their estates and creditors because:

      (1) The facility imposes an economic hardship; by closing it
          the Debtors anticipate significant savings;

      (2) Rejection of the lease may release the Debtors from the
          obligation under the Bankruptcy Code to pay
          administrative rent and may permit the Debtors to pay
          for the ongoing use and occupancy as determined by the
          Court, so long as that use and occupancy continues
          during the transition period;

      (3) The property is of no other use to the Debtors

      (4) There is no reasonable likelihood for subletting or
          assignment of the leasehold on advantageous terms

Because the facility provides essential services to elderly and
infirm residents and operates under various state and federal
regulations, the Debtors also seek authority, in their sole
discretion and without creating any obligation on the part of the
Debtors, to assist the landlord or its designee, to the extent
necessary to protect the health and welfare of the resident
patients with a transition or wind-down of operations in
coordination with proper federal and state authorities and in
accordance with applicable law. (Genesis/Multicare Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)


GRAND UNION: FTC Gives Go Ahead for C&S Asset Sale Transaction
--------------------------------------------------------------
The Grand Union Company (OTC BB; GUCO), announced that the
Federal Trade Commission (FTC) will permit the company to
complete the planned sale of assets to GU Markets, LLC, an
affiliate of C&S Wholesale Grocers, Inc. of Brattleboro, Vermont.
The completion of the transaction is expected to occur on or
around February 16, 2001.

This decision clears the way for the final sale of approximately
185 Grand Union Stores and other assets, to GU Markets, LLC. GU
Markets, LLC has previously announced its intention to re-sell
most of these stores to various third party purchasers including
several food and non-food retailers.

Jeffrey Freimark, President and Chief Executive Officer of Grand
Union said: "The FTC decision paves the way for the orderly
transition of Grand Union to C&S/GU Markets LLC or one of its
third party purchasers. Most importantly, such a transition will
mean that many of Grand Union's store level associates will
remain employed by one of the new companies. I appreciate the
diligent efforts of all Grand Union employees throughout the
Company during the past few months. This was a complicated
transaction and they should be pleased at this outcome."

Grand Union filed a voluntary chapter 11 petition in the U.S.
Bankruptcy Court in Newark, New Jersey on October 3, 2000, to
facilitate the planned sale of the Company and provide for
additional funding during the sale process.

Grand Union operates 185 retail food stores in Connecticut, New
Jersey, New York, Pennsylvania and Vermont.


GRAND UNION: Ahold USA Acquires 56 Supermarkets & 8 Sites
---------------------------------------------------------
Royal Ahold (NYSE: AHO), the international food provider,
announced it has obtained the green light from the U.S. Federal
Trade Commission (FTC) to acquire 56 supermarkets and eight sites
from Grand Union. The stores and sites will be integrated into
two of its U.S. operating companies, Stop & Shop and Tops.

Stop & Shop, Ahold's prominent supermarket chain in
Massachusetts, Connecticut, the greater New York metropolitan
area and Rhode Island will integrate 36 stores into its operation
as well as eight sites for future store development. Sister
company Tops, based in New York state, will merge the other 20
stores into its portfolio.

Grand Union recently filed for bankruptcy and C&S Wholesalers led
a consortium of retailers, including Ahold, to bid for the assets
of the company. Final regulatory approval was granted today.
Ahold will take a one-time charge for the current year of about
USD 50 million to reflect the cost of converting the stores to
the Stop & Shop and Tops banner. The total transaction amounts to
approximately USD 178 million. The acquisition will positively
impact operating earnings as of 2002.

Remarks by Bill Grize, President & CEO Ahold USA-Retail
"We feel the acquisition of these 56 stores and eight sites
provides an excellent opportunity to extend our superior shopping
proposition to more consumers in our trade areas," said Bill
Grize, President & CEO of Ahold USA-Retail. "The transaction
enables us to do what we feel we do best - make good stores
better and service our customers in the best possible way. It
will boost our regional position and enhance our ability to serve
a growing customer base in this market."

Stop & Shop is among the largest supermarket chains along the
eastern seaboard and operates superstores and supermarkets in
five states: Massachusetts, Connecticut, Rhode Island, New York
and New Jersey. The company is headquartered in Quincy,
Massachusetts and generates annualized sales exceeding USD 7
billion.

Tops operates stores in three states: New York, Ohio and
Pennsylvania, in addition to the Sugar Creek merchandise and fuel
outlets along interstate highways. Tops generates annualized
sales in excess of USD 3.2 billion.

Ahold operates five prominent retail operating companies along
the U.S. eastern seaboard with combined sales of more than USD 22
billion. In addition, Ahold will generate projected sales from
its U.S. foodservice activities approaching USD 12 billion this
year, boosting sales from its U.S. operations to close to USD 34
billion through its multi-channel activities of food retail and
foodservice. Ahold also has a majority stake in Peapod, the
leading U.S. internet grocer.

Royal Ahold operates approximately 8,500 supermarkets,
hypermarkets and other store formats in the United States,
Europe, Latin America and Asia with consolidated 2000 sales of
close to USD 50 billion (Euro 52.2 billion). The company also has
a significant presence in the foodservice sector and is swiftly
developing its position in internet-based home delivery. Ahold
employs almost 420,000 associates and serves the food needs of
over 35 million customers and more than 200,000 foodservice
accounts in 25 countries every week. Ahold's website can be found
at www.ahold.com.


IMPERIAL SUGAR: Will Pay Trade Creditors Who Extend New Credit
--------------------------------------------------------------
As of the Petition Date, Imperial Sugar Company owed trade
accounts payable to a variety of creditors who provide goods and
services in the ordinary course of business.  The Debtors
estimate that, as of the Petition Date, such trade creditors were
owed a total of approximately $25 million.  While the absolute
amount owed any one creditor or type of creditor varies daily,
the principle categories of creditors having the largest balances
owed as of the petition date are:

      (a) Raw Sugar Suppliers

          Suppliers who provide the Debtors with raw sugar, which
          is the fundamental raw material used at the three cane
          refineries;

      (b) Freight Carriers

          Rail and truck lines which provide inbound freight for
          raw materials and supplies and outbound freight for
          products to customers. Obviously, if these creditors
          decline to continue to provide services, production
          could be brought to a halt and the Debtors could find
          themselves in breach of their contracts with their
          customers;

      (c) Maintenance, Repair and Operating-Supplies Vendors

          Vendors which supply maintenance parts and services to
          the production facilities as well as operating supplies
          and chemicals necessary to assure continuous production;

      (d) Packaging Materials Suppliers

          Vendors providing packaging materials for the sugar and
          foodservices division. In many cases these are the sole
          source of supply for a given product and many of the
          items are custom products or labels;

      (e) Energy Suppliers

          Vendors supplying natural gas, electricity, coal or fuel
          oil to the production facilities;

      (f) Non-Sugar Ingredient Vendors and Co-Packers

          Suppliers of raw materials such as salt, pepper,
          aspartame, plastic cutlery, for the foodservice division
          as well as contract packagers; and

      (g) Contract Labor Providers

          A number of the productions facilities utilize long-term
          contract labor in the month-to-month operation. The
          Company has contracts with a number of employee leasing
          type companies to provide this labor.

Not paying these trade creditors immediately could cause them to
refuse to provide additional goods or services which would have
the effect of severely disrupting the Debtors' business
operations.

By this Motion, the Debtors do not seek an order requiring the
payment to all pre-petition vendors. Instead, the Debtors seek
the authority to exercise their business judgment to decide which
trade vendors are truly critical and must in fact be paid to
prevent disruption of the Debtors' business operations.

For those trade vendors whose claims are equal to or less than
$10,000, the Debtors seek authority to either (a) simply pay the
outstanding bill or (b) require as a condition to payment that
the trade creditors sign a written agreement under which the
trade creditor agrees to continue to extend credit and supply
goods and/or services to the Company on a normal and customary
terms in accordance with industry standards.

For those critical trade creditors whose bills equal or exceed
$10,000, the debtors will require, as a condition to payment,
that the trade creditor sign a written agreement under which the
trade creditor agrees to continue to extend credit and supply
goods and/or services to the company on normal and customary
terms in accordance with industry standards, or on terms
acceptable to the agent for the Debtors' pre-petition secured
lenders.

By limiting payments to those creditors who are willing to
provide trade credit to the Debtors on a post-petition basis in
accordance with ordinary credit terms, the Debtors believe that
they can maintain sufficient supplies and services to maintain
normal business operations and in addition will receive the
benefit that the provision of trade credit will provide.

For these reasons, the Debtors sought and obtained Judge
Robinson's authority to pay the above-described claims in
accordance with the contracts or other arrangements that were in
place prior to the Petition Date. The Debtors also request that
the Court order that any payments made to trade vendors hereunder
who subsequently breach their agreement to extend credit on
customary terms shall be deemed judicially established
unauthorized postpetition transfers, recoverable by the Debtors.
(Imperial Sugar Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)


INTEGRATED HEALTH: Proposes Severance Program For Employees
-----------------------------------------------------------
Integrated Health Services, Inc. sought authority under sections
105(a) and 363(b)(1) of the Bankruptcy Code to establish a
Severance Plan for non-senior management employees of the
corporate and long term care division located at the Sparks
Campus and regional employees of the Long Term Care division who
are terminated without cause.

The Debtors indicate that by separate motions to be filed
shortly, they will be seeking to establish a severance plan for
senior management employees, and, if necessary, to extend the
Severance Plan to include additional employees of the Debtors.

               The Need for the Severance Plan
               Before the Program of Integration

The Debtors strongly believe that the Severance Plan must be
fully in place prior to the announcement of the program that will
be utilized to integrate the functions currently performed by the
Corporate group to the various divisions. The integration is
expected to result in a reduction in workforce at the Sparks
Campus. The Debtors foresee that employee cooperation is
essential to identification of tasks performed and process
improvement. In this context, the Severance Plan will provide
employees assurance that they will be treated equitably, in the
event that they are terminated without cause.

In managing the business affairs of the Debtors over the previous
few months since his appointment as Chief Restructuring Officer,
Joseph Bondi has reached the conclusion that the establishment of
a Severance Plan is essential to the successful reorganization of
the IHS cases, the Debtors told the Court.

The Creditors' Committee has concurred and supports the Debtors'
request for the establishment of a Severance Plan.

                 The Severance Plan

The Debtors relate that the company has had a long established
practice of paying severance to employees it terminates without
cause in order to retain the services of employees who possess
knowledge, experience and skills necessary to support the
Debtors' business operations. The Debtors advise that prior to
the adoption of the proposed Severance Plan, compensation for
termination has been based on the current salary level and the
years of service performed. For non-officers, the severance
compensation was equal to two weeks pay for every year of
service; minimum six months for vice presidents and a minimum of
one year for senior vice presidents and executive vice
presidents.

In light of the filing of the chapter 11 cases, the Company
proposes to formalize the Severance Plan in anticipation of
further reductions in its workforce, to set guidelines and clear
limits on employee entitlements, and to halt declining morale and
unwanted resignations caused by anxiety concerning equitable
severance treatment.

Under the proposed Severance Plan, approximately 669 employees at
the Sparks Campus may be eligible to receive compensation in the
event of a termination without cause due to a reduction in work
force, job elimination or otherwise. The actual reduction in
force at the Sparks Campus has not yet been determined.

Eligible Employees include the categories of:

      (1) Management, inclusive of vice president(s), regional
          vice president(s) and director(s);

      (2) Supervising Professionals, inclusive of manager(s),
          regional controller(s), senior analyst(s), and senior
          accountant(s);

      (3) All Others, inclusive of accountant(s), analysts(s),
          coordinator(s), and exempt status employee(s).

The Severance Plan proposes to set the severance amount based on:
(i)length of service and, (ii) level of current compensation with
certain minimum and maximum ranges of accrual rates, where
applicable. The amounts are set at:

      * Management         1 month for each complete service year;
                           6 months salary minimum;
                           1 year maximum accrued;

      * Supervising Professional    2 weeks per year of service
                                    rounded to the nearest full
                                    week;
                                    3 months salary minimum;
                                    6 months maximum accrued;

      * All Others                  2 weeks per year of service
                                    rounded to the nearest full
                                    week;
                                    1 month salary minimum;
                                    3 months maximum accrued.

The Debtors explained that the factors used in the proposed Plan
to calculate severance are commonly used to estimate the amount
of time the average employee in a similar job bracket requires to
find a comparable replacement job. Based on that consideration,
the Severance Plan is designed to be attractive enough to
convince an employee, who would otherwise leave, to remain with
the Company for as long as the Company requires the services of
the individual. The average severance term, the Debtors advise,
is 7.0 months for Management, 3.2 months for Supervising
Professionals and 1.5 months for All Other employees.

The Debtors told Judge Walrath that they have compared the
proposed Severance Program to other programs adopted by similarly
situated debtors, and determined that the proposal is, although
on a smaller scale at this time, comparable to those other plans
as In re Sun Healthcare Group. Inc. et al., Case No. 99-3657 and
In re Mariner Post-Acute Network. Inc., Case No. 00-00113 (Bankr.
D. Del.).

The Debtors made it clear that at this time, there is no plan to
terminate a set number of employees. the covered employees. For
the purpose of illustration and not intended to represent what
might actually occur, the Debtors note that in the event of a 10%
Reduction in Force (RIF) across the board, 6 employees would be
affected with an annual wage savings to the Debtors of
approximately $3,379,000 and a severance cost of $1,054,000. A
20% RIF across the board would affect 134 employees and generate
an annual wage savings to the Debtors of approximately $6,757,000
with a severance cost of $2,108,000.

The Debtors have determined that the costs associated with the
Severance Plan are more than justified by the benefits that are
expected to be realized by boosting morale and discouraging
resignations among Company employees. Accordingly, the Debtors
submit that the Severance Plan is essential to preserve and
maximize the value of their assets through the reorganization
process. (Integrated Health Bankruptcy News, Issue No. 13;
Bankruptcy Creditors' Service, Inc., 609/392-0900)


LEGEND AIRLINES: Judge Refuses Triton Financing
-----------------------------------------------
A federal judge on Wednesday denied Legend Airlines' request to
borrow $800,000 from a creditor to keep it afloat as a charter
operation, a setback that moved the bankrupt carrier one step
closer to liquidation, according to the Associated Press.

Legend asked Judge Robert McGuire to allow it to borrow the money
from Triton Aviation Services, an aircraft leasing company, and
keep flying with two planes. Other creditors, however, were
expected to oppose the plan, and the judge rejected the proposal.

Legend chief executive T. Allan McArtor called the Triton
proposal "plan B" and said the carrier was now back to relying on
a group of New York-based investors who pledged $20 million in
late December. McArtor said he was not confident in the group's
ability to fund the loan.  "We have been hearing for three and a
half weeks that the check's in the mail," McArtor said. Dallas-
based Legend flew 56-passenger jets from Dallas to four other
cities. It shut down in early December and filed for chapter 11.
However, Legend said it could be forced into filing chapter 7.
Legend had about 400 employees before shutting down Dec. 2. Under
the Triton Aviation offer, it hoped to rehire about 35 employees
and continue operating charter service with two of its seven
planes. Dennis Olson, a Dallas attorney representing Legend's
unsecured creditors, said before Wednesday's hearing that the
terms of the Triton offer were unworkable. He said after paying
insurance and back wages for the 35 necessary employees, Legend
would run out of money again in April before it could start
turning a profit. (ABI World, February 2, 2001)


LODESTAR HOLDINGS: May Sell Assets To Improve Cash Flow
-------------------------------------------------------
Lodestar Holdings Inc. has suffered recurring losses from
operations and has negative cash flows, a net capital deficiency
and negative working capital as of October 31, 2000 that raise
substantial doubt about its ability to continue as a going
concern.

The company has suffered recurring losses since it commenced
operations, and had negative cash flows, net capital deficiency
and negative working capital during fiscal 2000, 1999, and 1998.
The amount of the company's losses has been impacted, by
generally unfavorable factors affecting the coal industry in the
Eastern United States, as well as operational problems. Beginning
in 1999, it began a concentrated effort to upgrade its low-sulfur
reserve base in order to address one of its primary operational
problems. During this effort, the company has expended
$15,284,000 in cash, assumed $7,851,000 in debt payments and
assumed short and long-term obligations of $14,249,000 in an
effort to improve its low-sulfur reserve base. The return on
these invested funds has not materialized as expected due to
adverse market conditions, significant increases in fuel and
transportation costs, and unanticipated operational problems
affecting the underground operations in Utah.

The company has substantial leverage and significant debt service
obligations. As of October 31, 2000, it had outstanding
indebtedness of $192.6 million. The significant leverage of the
company combined with the accumulated losses and the lack of
liquidity has resulted in significant ongoing problems in all
areas of the company's business.

As a result of these liquidity issues, the company did not make
its scheduled November 15, 2000 interest payment on the Notes
resulting in an event of default which remains unremedied as of
January 29, 2001. The company is attempting to negotiate a
restructuring of the Notes with the Noteholders.

The company's continued financial viability is dependent upon its
ability to successfully complete the integration of its newly
acquired properties with existing operations in a manner which
improves operational results, as well as, its ability to sustain
operations until operations attain profitability. In order to
improve the liquidity of the company, management is investigating
the sale of certain of the company's assets and possible sources
of additional capital. A solution is dependent upon remediation
of the defaults under the Notes and the Senior Credit Facility
and access to new sources of financing which would enable the
company to maintain appropriate levels of liquidity until the
necessary operational improvements can be attained.

There is no assurance that the company's business will generate
adequate cash flow from operations, that anticipated growth and
operating improvements will be realized or that future borrowings
will be available under the Senior Credit Facility or from any
other source in an amount sufficient to enable the company to
service its indebtedness, including the Notes due 2005, to fund
its other liquidity needs or obtain surety for its bonding
requirements. The company is seeking to improve its productivity
and lower its costs, while exploring the possible sale of assets
and negotiating for a restructure of its debt, as well as,
seeking an infusion of new capital.

There is also no assurance that the company will be successful in
these efforts.


LONDON FOG: Has Until April 19 to Assume or Reject Leases
---------------------------------------------------------
The Honorable Peter J. Walsh, US Bankruptcy Court, District of
Delaware, entered an order on January 19, 2001 extending the
period within which the debtors may assume or reject unexpired
leases of non-residential real property to the earlier of April
19, 2001 or the Effective Date of the debtors' Joint Plan of
Reorganization dated December 28, 200.


LTV CORPORATION: Trustee Appoints Unsecured Creditors' Committee
-----------------------------------------------------------------
Donald M. Robiner, United States Trustee, represented by Amy L.
Good, Assistant United States Trustee, appointed the following
creditors of The LTV Corporation, being among those holding the
largest unsecured claims who are willing to serve, as members of
the Official Committee of Unsecured Creditors in these Chapter 11
cases:

      United Steel Workers of America
      c/o David Jury
      5 Gateway Center
      Pittsburgh, PA 15222
      (412) 562-2545

      Citizens Gas & Coke Utility
      c/o Stephen F. Shay
      2020 North meridian Street
      Indianapolis, IN 46202
      (317) 264-8802

      Roll Coater, Inc.
      c/o A. R. Sales
      8440 Woodfield Crossing
      Building 2, Suite 400
      Indianapolis, IN 46240
      (317) 467-6470

      Omnisource Corporation
      c/o Julie Schultz
      1610 North Clinton Street
      Fort Wayne, IN 46808
      (219) 423-8542

      Shiloh Industries, Inc.
      c/o Mark S. Wayman
      5389 West 130th Street
      Cleveland, Ohio 44130
      (216) 898-4295

      Cleveland-Cliffs, Inc.
      c/o William R. Calfee
      1100 Superior Avenue
      Cleveland, Ohio 44114-2589
      (216) 694-5547

      Pension Benefit Guaranty Corporation
      c/o Ajit Gadre
      1200 K Street NW
      Washington, DC 20005-4026
      (202) 326-4070, ext. 3655

      Koppers Industries
      c/o Donald Davis
      436 Seventh Avenue
      Pittsburgh, PA 15219
      (412) 227-2577

      Marblehead Lime, Inc.
      c/o Suzanna E. Ritzler
      390 East Joe Orr Road
      Chicago Heights, Illinois 60411
      (708) 757-1240

      Bearing Service Company of Pennsylvania
      c/o William Banks
      RIDC Industrial Park
      630 Alpha Drive
      Pittsburgh, Pennsylvania 15238
      (412) 963-7710

      The Interlake Steamship Company
      c/o John B. Hopkins
      4199 Kinross Lakes Parkway
      Richfield, Ohio 44286
      (330) 659-1402

      Firstenergy
      c/o Rick C. Giannantonio
      Legal Department
      76 South Main Street
      18th Floor
      Akron, Ohio 44308
      (303) 384-5893

      Wabash Alloys LLC
      A Division of Connell L.P.
      c/o Kathleen Murphy
      One International Place
      Fort Hill Square
      Boston, Massachusetts 02110
      (617) 737-2700

(LTV Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-00900)


MAINTENANCE DEPOT: Management Commits to Meeting Cash Needs
-----------------------------------------------------------
Maintenance Depot, Inc., a Florida corporation organized in
August 1990, commenced operations in 1992 as a Master Distributor
of janitorial supplies, paper and equipment. A "Master
Distributor" is a company which inventories other manufacturers
lines of products for sale to distributors. Operating out of a
central warehouse in West Palm Beach, Florida, MDI has, since
1993, manufactured its own line of cleaning products and
chemicals which it sells to distributors in addition to the
products of other manufacturers. The company's customer base is
mainly composed of food service, industrial, janitorial, safety
and export distributors located principally in the Southeastern
United States. The company has grown from gross sales of
approximately $2,000,000 in 1995 to over $7,000,000 in 1999. For
the year ended December 31, 1999, the company incurred a net loss
of $384,508; for the six months ended June 30th, 2000, the
company incurred a net loss of $42,466.

The company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business.  However, as
presented for the year ended December 31, 1999 the company did
not have significant cash or other material assets, nor have
revenues been sufficient to cover its operating costs and to
allow it to continue as a going concern. It is the belief of the
management of the company that upon the completion of the private
placement of 1,005,590 shares at a price of $1.79, together with
the growth in revenues, the company will be able to continue as a
going concern.  In the interim, management is committed to
meeting the operational cash flow needs of the company.


MARINE POST-ACUTE: $100MM DIP Financing Extended To August 31
-------------------------------------------------------------
Pursuant to sections 105, 363 and 364 of the Bankruptcy Code,
Marine Post-Acute Network, Inc., sought and obtained the Court's
approval for:

      (a) an extension of the maturity of the DIP Agreement from
January 19,2001 to August 31, 2001, pursuant to the Third
Amendment to Revolving Credit and Guaranty Agreement; and

      (b) the consensual use of the cash collateral of the
Prepetition Senior Secured Lenders, also through August 31, 2001.

The Debtors told Judge Walrath that the DIP Agreement must be
extended in order for MPAN to continue to receive the substantial
benefits of the DIP Facility. The continued use of cash
collateral by MPAN, the Debtors assert, is absolutely critical to
their daily operations and their ability to reorganize
successfully.

The Debtors observed that although they have not been required to
borrow under the DIP Facility, the existence of the facility has
been critical for:

      (1) obtaining letters of credit, including those necessary
to maintain insurance;

      (2) encouraging the provision of trade credit by hundreds of
critical vendors;

      (3) reassuring federal and state regulators that the Debtors
will have the financial resources to maintain their operations
and provide critical patient care;

      (4) providing adequate assurance of payment for utility
providers under Bankruptcy Code section 366, and for parties to
assumed contracts under section 365;

      (5) reassuring the Debtors' employees and patients of the
company's continued viability; and

      (6) continuing to provide adequate protection to and
obtaining the consent of the Prepetition Senior Secured Lenders
to use their cash collateral.

Moreover, the continued existence of DIP Agreement provides the
estates and their creditors with the assurance that financing
will be available if and when the Debtors need it.

As for the cash collateral, the Debtors explained that any
interruption in its use would cause great concern for their
suppliers, patients, employees, and government regulators, and
its negative effect on MPAN's estates may be irreparable.

The Debtors do not think they will be able to confirm a plan of
reorganization during the next few months; instead, the process
of substantive plan negotiations are just beginning. By extending
the DIP Agreement and the use of cash collateral until August 31,
2001, the Debtors believe that they will have a reasonable
opportunity to propose and confirm a plan of reorganization in
the MPAN chapter 11 cases. The Debtors believe that the covenant
to file a plan by April 30, 2001 is reasonable.

The Debtors further represent that it would not be feasible for
them to attempt to obtain an alternative source of financing
because of the expected significant due diligence which would
divert the attention of the MPAN management team and
professionals, and the additional due diligence and commitment
fees that would likely to be required. Extension of the DIP
Agreement under the existing relationships among the Chase
Manhattan Bank, the current agent and lender, the Prepetition
Senior Secured Lenders, and the DIP Lenders, avoids many of the
potential conflicts that new financing would entail, including
priming and the nonconsensual use of the Prepetition Senior
Secured Lenders' cash collateral, the Debtors note.

Following discussions among the parties and their professionals,
the Debtors and Chase have agreed upon an extension of both the
DIP Agreement and the use of cash collateral as set forth in the
Third Amendment which provides that:

      (1) The maturity of the DIP Agreement and the use of the
          Prepetition Senior Secured Lenders' cash collateral will
          be extended from January 19, 2001 to August 31, 2001;

      (2) The Debtors agree to file a plan no later than April 30,
          2001;

      (3) Certain financial covenants in the DIP Agreement will be
          modified;

      (4) The Debtors will pay to Chase and the other DIP lenders
          an amendment fee totaling $500,000.

The Debtors believe that the proposed terms of Third Amendment
are fair, reasonable, and an appropriate exercise of business
judgment. (Mariner Bankruptcy News, Issue No. 12; Bankruptcy
Creditors' Service, Inc., 609/392-0900)


MIDLAND FOOD: Committee Taps Otterbourg Steindler as Lead Counsel
-----------------------------------------------------------------
The US Bankruptcy Court, District of Delaware, entered an order
on January 18, 2001, approving the employ and retention of
Otterbourg, Steindler, Houston & Rosen PC as counsel for the
Official Committee of Unsecured Creditors.


MIDLAND FOOD: Walsh Monzack Serving Committee as Local Counsel
--------------------------------------------------------------
By order entered on January 16, 20001 by the US Bankruptcy Court,
District of Delaware, the court authorized the Committee of
Unsecured Creditors of Midland Food Services, LLC, et al. to
retain the firm of Walsh, Monzack and Monaco, PA nunc pro tunc as
of November 21, 2000, as the Committee's counsel, based on the
affidavit of Francis A. Monaco, Jr., a director of the firm.


OWENS CORNING: Agrees To Give AFCO Adequate Protection Payments
---------------------------------------------------------------
AFCO Credit Corporation and Owens Corning entered into a
stipulation and agreed order by which AFCO's Motion to terminate
the bankruptcy stay is withdrawn with prejudice to its refiling.
The Debtors agreed that AFCO is a secured creditor having a
valid, perfected security interest in all return and unearned
premiums under certain policies of insurance.

Owens Corning will pay to AFCO the total sum of $314,092.75 as
"adequate protection" payments to protect AFCO's collateral
interests, made in equal monthly installments of $62,818.55 each,
on the first of each month until the sum stated is paid in full.
In the event of a default in any payment, then, unless Owens
Corning cures the default within five days after service of a
notice of default, the automatic bankruptcy stay is vacated
without further request to the Court, and AFCO will be free to
exercise its rights under its agreements and all applicable laws,
regulations and statutes. Owens Corning expressly acknowledges
that this includes the right to cancel the insurance policies.
AFCO may retain any sums received upon cancellation, but not
exceeding $314,092.75, less any sums paid by Owens Corning under
this stipulation and agreement. Any excess funds will be paid
over to Owens Corning. In the event of any deficiency, the
deficiency will be due to AFCO "forthwith" and AFCO may enforce
that right in any lawful manner. Further, any deficiency will be
treated as an administrative expense of these estates.(Owens
Corning Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)


PETSEC ENERGY: First Amended Plan Declared Effective Jan. 16
------------------------------------------------------------
On November 21, 2000, the Bankruptcy Court for the Western
District of Louisiana, Opelousas Division, entered an order
confirming the first amended plan of reorganization for Petsec
Energy Inc.  The Effective Date of the plan was January 16, 2001.


PLAYDIUM ENTERTAINMENT: Covenant Defaults with Secured Lenders
--------------------------------------------------------------
Playdium Entertainment Corporation is not in compliance with
certain covenants with some of its secured lenders and one of
these lenders has issued a notice of default.  Management and a
Committee of the Board of Directors will review options for
restructuring. The Corporation expects to release further
information once the Committee and management have completed
their work.  The Corporation confirmed that all Playdium sites
continue to operate normally and there is no impact on staff or
services at any location at this time.


RELIANCE GROUP: Icahn Offer Extended Again, to 5:00 p.m. Today
--------------------------------------------------------------
On December 22, 2000, High River Limited Partnership
("Purchaser"), an affiliate of Carl C. Icahn, commenced an Offer
for up to $40 million in principal amount of the outstanding 9%
senior bonds ("9% Bonds") issued by Reliance Group Holdings, Inc.
("Reliance") for $170 per $1,000 in principal amount. The terms
of the Offer are set forth in Purchaser's Offer to Purchase and
Supplement No. 1 thereto and in the related Letter of
Transmittal. The Offer was due to expire at 5:00 p.m., New York
City Time, on February 2, 2001. Purchaser has extended the Offer.
The Offer, Withdrawal Rights and Proration Period will now expire
at 5:00 p.m., New York City Time, on February 6, 2001, unless the
Offer is extended to a later date and time. As of the end of the
business day on February 2, 2001, approximately $20,703,000 in
principal amount of 9% Bonds issued by Reliance were deposited
pursuant to the Offer with Wilmington Trust Company, the
depositary for the Offer, and not withdrawn.


SABRATEK CORP: Has Until Feb. 15 to Assume or Reject Leases
-----------------------------------------------------------
By order entered on January 22, 2001, Judge Mary F. Walrath
extended the debtors' time to assume or reject unexpired leases
of nonresidential real property to February 15, 2001.


SABRATEK CORP: Exclusive Period Extended to March 30
----------------------------------------------------
By order entered on January 22, 2001, Judge Mary F. Walrath, US
Bankruptcy Court for the District of Delaware, extended the
periods during which the debtors and the Creditors' Committee
have the exclusive right to file a plan or plans to January 29,
2001, and extended the debtors' and the Creditors' Committee's
exclusive periods to obtain acceptances of any filed plan or
plans to March 30, 2001.


STROUDS INC.: Seeks Approval For $38MM Asset Sale To iHome, Inc.
----------------------------------------------------------------
Strouds, Inc., a specialty retailer of bed, bath, tabletop and
other home textile products, announced that it is seeking
approval of the sale of substantially all of the assets of its
business. iHome, Inc. has agreed to purchase 50 stores, two
distribution centers, corporate headquarters and additional
assets including all trade names, trademarks, copyrights and the
company website for approximately $38 million.

The sale agreement, which is supported by Strouds' unsecured
creditors' committee and the boards of directors of both
companies, is subject to a formal agreement and the approval of
the Bankruptcy Court. The sale motion was filed with the Court on
Wednesday, January 31. The sale will be completed through
procedures under Section 363 of the U.S. Bankruptcy Code.

"Since the Company's voluntary Chapter 11 filing in September
2000, management and the Board of Directors have been exploring
various alternatives that would result in maximum recovery to our
creditors and, at the same time, have the least impact on the
jobs of our employees," said President and Chief Executive
Officer Thomas S. Paccioretti. "After careful consideration, it
was determined that sales of substantially all Company assets is
in the best interest of Strouds' creditors, employees, customers
and suppliers. Management believes that under new ownership, the
Strouds business will be able to capitalize on its industry
leader position, while having access to greater financial
resources."

Tom Paccioretti will continue to serve as president and chief
executive officer of Strouds and the existing corporate
headquarters and distribution facilities in City of Industry will
remain operational. The sale is scheduled to be completed in
March.

Strouds, Inc., the Linen Experts(R), is a specialty retailers of
bed, bath, tabletop and other home textile products. The Company
currently operates 56 stores in four states and also markets its
home products through its web sites, www.strouds.com and
www.linenexperts.com.


SUN HEALTHCARE: Moves To Divest 21 Underperforming Facilities
-------------------------------------------------------------
To realize annual savings of approximately $7,574,797, the Sun
Healthcare Group, Inc. sought the Court's authority to divest 21
more underperforming facilities by (a) approving the rejection of
the Leases, Medicare Provider Agreements and Medicaid Provider
Agreements, effective as of the Transition Date, (b) authorizing
transition and/or, if necessary, wind up operations of the
Devesting Facilities in accordance with relevant state law
transition procedures, (c) approving the Implementation
Procedures governing the transfer of the Divesting Facilities and
the treatment of related claims, and (d) finding that any cross
default provisions contained in any of the NHP Leases and
Crestwood Leases to be unforceable between the Debtors and
the relevant landlords.

The Debtors estimate that the rejection claims under the Leases,
in accordance with the limitations provided by section 502(b)(6)
of the Bankruptcy Code, would be approximately $13,511,606 in the
absence of mitigation.

Pursuant to the Implementation Procedures, the rejection of the
Leases and Provider Agreements will become effective as of the
actual date of divestiture of the facilities so that the
operations of the facilities will be maintained for the benefit
of the residents.

The Debtors explained that they have not chosen the preferred
method of disposing the facilities as a going concern because
they have not reached agreement with the landlords regarding a
going concern transfer. The Divesting Facilities are among the
weakest performing of Sun's facilities, the Debtors add.

Two of the Divesting Facilities are leased from the Crestwood
Landlord and lose in the aggregate approximately $1,085,908 in
negative yearly EBITDA, annualized based on the last six months
ending June 30, 2000. The NHP Leases contain provisions pursuant
to which a default under one of those leases constitutes a
default under one or more leases under the same landlord. The
Debtors believe that the cross default provisions contained
in the leases are unenforceable and do not prevent a possible
later assumption of other leases with the relevant landlords,
hence the Debtors requested that the Court find to be
unenforceable any cross default provisions contained in any
leases between the Debtors and the landlord.

Four of the Divesting Facilities are leased from the NHP Landlord
under a master lease. Two of these NHP Facilities constitute a
substantial ongoing economic liability for the Debtors,
aggregating in excess of approximately $1,307,367 of negative
EBITDA over the six months ending June 30, 2000. The other two
have operated with a positive EBITDA but their economic
performance is only marginal. The Debtors have determined that
any benefit arising from the retention of the two marginal NHP
Facilities is outweighed by the expenditure of time, effort and
monetary expenses to litigate the issue of whether the master
lease actually prevents the Debtors' assumption of individual NHP
Leases.

The Debtors later find that certain other Leases with NHP and
certain other leases with Ted Barnett Construction/Health Inn
also contain cross default provisions. Accordingly, in an amended
motion, the Debtors requested that any order authorizing a
rejection of the NHP/Ted Barnett Leases provide that cross
default provisions be found unenforceable.

The remaining Divesting Facilities relate to landlords that are
lessors under separate leases with the Debtors.

        Landlord's Objection and the Debtors' Omnibus Reply

Certain of the landlords filed objections to the motion and the
Debtors respond to these objections seriatim.

      (A) The Ganot Objection

          Ganot Corporation, objects to the rejection of the
leases and Provider Agreements relating to 4 facilities located
in: (i) Ocala, Florida (ii) St. Cloud, Florida (iii) Reidsville,
North Carolina and (iv) Virginia Beach, Virginia that the Debtors
lease from Ganot.

Ganot asserts that the relief requested, if granted, would
represent an unfair and prejudicial "fast track" divestiture of
Ganot's Facilities.

The Debtors pointed out that the motion sought only the
authorization to enter into Transitiion Procedures under
applicable state law to wind up operations and such Transition
Procedures would be available to the Debtors absent their filing
petitions under chapter 11. The Debtors note that the Transition
Procedures do not impose deadlines but merely provide for minimum
notice prior to an actual exit from and closure of a healthcare
facility. The Debtors contend that they would remain free to
negotiate agreements for the ongoing transfer of te Ganot
Facilities to Ganot or another prospective new operator. The
Debtors assert that proceeding on such a dual track ensures a
timely resolution of their plans for divestiture of the Ganot
Facilities, either by consensual transfer or by state-law
governed Transition Procedures.

The Debtors told Judge Walrath that, with no assurances that a
transfer will ever transpire, they cannot afford to operate the
Ganot Facilities indefinitely until Ganot and/or a third party
operator decides to accept a transfer, while Ganot continues to
enjoy the benefits of receiving its regular monthly rental
obligations. The Bankruptcy Code, the Debtors remind, does not
condition lease rejection on a landlord's satisfaction with a
debtor's efforts to structure alternative arrangements.
Therefore, in response to Ganot's complaint about the alleged
hardship created by the lapse in negotiations regarding transfer
of the St. Cloud, Reidsville and Virginia Beach Facilities and on
the eleventh hour decision to divest the Ocala Facility, the
Debtors maintain that the history of negotiations between the
parties is irrelevant to adjudication of the motion.

The Debtors, however, agreed to Ganot's request that any order
approving the motion require the Debtors to pay post-petition
rent until the lease rejection becomes effective.

      (B) Pheo Med's Objection

          Pheo Med Limited Partnership objected to the Lease and
Provider Agreements for a certain health care facility located in
Jacksonville, Florida (the Lake Forest Facility) and asked that
the Court require the Debtors to assume these agreements and
continue operating the Lake Forest Facility for a period of up to
60 days while Pheo Med contemplates stepping in to operate the
facility itself.

The Debtors pointed out that the Transition Procedures and
Implementation Procedures expressly provide an opt-out provision
that would be triggered if Pheo Med decides to continue
operations at the Lake Forest Facility.

The Debtors observe that Pheo Med is in a way asking the Court to
defer to Pheo Med's business judgment in order to protect Pheo
Med's interest as the landlord of one facility at the expense of
the far greater interests of the estate as a whole. Therefore,
the Debtors believe that Pheo Med's objection should be overruled
because it fundamentally mischaracterizes the relief sought by
the motion.

Moreover, Florida law requires 90 days advance notification
before divestiture, so the implementation procedures proposed
actually provide more time to accomplish a going-concern transfer
than does Pheo Med's request for 60 days, the Debtors observe.

As with the Ganot Facilities, the Debtors consented to Pheo Med's
request that any order approving the motion require the Debtors
to pay post- petition rent until the lease rejection becomes
effective.

      (C) Objection of Bellevue/Lynn

          Bellevue/Lynn does not object to approval of the
divestiture or the rejection of the real property leases or
Medicaid/Medicare provider agreements. It request, as Ganot and
Pheo Med have, that any order approving the motion require the
Debtors to pay post-petition rent until the lease rejection
becomes effective. The Debtors agree to this.

With respect to Bellevue/Lynn's objection regarding the
maintenance of insurance coverage and accounting for furniture,
fixtures and equipment in the facility, the Debtors submit that
the terms of the applicable lease are controlling and they will
comply with the requirements of the lease until the rejection
becomes effective. (Sun Healthcare Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)


TEU HOLDINGS: Committee Sues Congress Financial for $11 Million
---------------------------------------------------------------
The Official Committee of Unsecured Creditors of TEU Holdings,
Inc., et al. (f/k/a This End Up) complained to the U.S.
Bankruptcy Court in Wilmington, Delaware, that Congress Financial
Corporation:

      (a) received preference payments totaling $10,490,149 within
          the 90-day period prior to the date TEU filed for
          chapter 11 protection;

      (b) failed to perfect liens in the Debtors' Korean and
          Canadian  trademarks; and

      (c) didn't perfect its purported security interest in
          $500,000 on deposit in Blocked Accounts at CoreStates
          Bank, N.A., and Crestar Bank.

Accordingly, the Committee, represented by Norman N. Kinel, Esq.,
at Brown & Wood LLP, commenced an Adversary Proceeding against
Congress in TEU's liquidating chapter 11 cases. The Committee
looks to Judge Walsh for a judgment in its favor:

      (1) avoiding, pursuant to 11 U.S.C. Sec. 547, each and every
          preferential payment to Congress within the 90-day
          period prior to TEU's chapter 11 filing that enabled
          Congress to receive more than it would have received in
          a chapter 7 liquidation;

      (2) requiring Congress to return $10,490,149 to the Debtors'
          estate pursuant to 11 U.S.C. Sec. 550 for the benefit of
          TEU's unsecured creditors;

      (3) declaring that because Congress did not record its
          interests in the Debtors' Korean and Canadian trademarks
          in the USPTO or elsewhere, Congress' purported liens on
          those trademarks (and whatever sale proceeds they may
          generate) are unenforceable; and

      (4) finding that because Congress did not have exclusive
          possession of, or control over, $500,000 on deposit in,
          or in transit to, the Blocked Accounts, Congress has no
          perfected security interest in those funds.


THERMALTEC INTERNATIONAL: Future Looks Bleak As Losses Continue
---------------------------------------------------------------
Thermaltec International Corporation's financial statements show
the company incurred a net loss of $ 1,230,225 for the year ended
September 30, 2000 and has incurred substantial net losses for
each of the past two years.  At September 30, 2000 current
liabilities exceeded current assets by $247,137.  According to
the company's auditors these factors raise substantial doubt
about the company's ability to continue as a going concern.


THOMPSON'S NUTRITIONAL: Midwest Grain Wins Bid for Assets
---------------------------------------------------------
Midwest Grain Products, Inc. (Nasdaq: MWGP) has been named the
successful bidder for certain fixed assets, consisting of land,
buildings and equipment, owned by Thompson's Nutritional
Technology, Inc., a Kansas City, Kansas firm that is in Chapter
11 bankruptcy proceedings. The order approving Midwest Grain's
bid of approximately $6.5 million was signed by the bankruptcy
court late yesterday. Midwest Grain expects the closing to occur
by the middle of February.

Midwest Grain President and CEO Ladd Seaberg said the company
intends to use the facilities to produce Wheatex(TM), a line of
specialty wheat proteins that enhance the flavor and texture of
vegetarian and extended meat products. The company also plans to
devote a portion of the assets to the production of edible and
non-edible wheat-based polymers that can be used in the
manufacture of pet treats and biodegradable items.

"After careful study, we determined that this acquisition would
be an excellent fit for our company," Seaberg said. "It will
allow us to forego our previously announced plans to construct a
Wheatex(TM) plant, a project which would not have been completed
until roughly this time next year. It also provides additional
opportunities for the future production of other lines of
specialty wheat protein and wheat starch products."
In addition to manufacturing space and equipment, the assets
include administrative offices, warehousing and shipping areas,
material storage silos and approximately 13 acres of surrounding
property. The primary manufacturing building is approximately
80,000 square feet in size. It is estimated that 6-8 employees
will initially be required to run the operation.

Seaberg also stated that the acquisition will play a key role in
the company's long-term sales and marketing strategies. "Not only
will this move assist us in achieving our objective to become a
premier supplier of value-added wheat ingredients, it will allow
us to more quickly meet the demands of the marketplace and may
give us more flexibility in the types of goods and services we
can offer our customers."

Wheatex(TM) is a specialty wheat protein that goes through an
extrusion process to produce particles ranging in size from small
flakes to large chunks. It is used primarily as an extender in a
variety of meat products, including chicken, beef and seafood,
and is also used to replace meat for vegetarian applications.
Midwest Grain also produces the Polytriticum(TM) line of edible
and biodegradable resins, which are made through a proprietary
blend of wheat protein and wheat starch. The resins have
applications in pet treats and a variety of injection-molded
plastic-like products, including pet treats, golf tees, cutlery
and smart cards.

Mike Trautschold, executive vice-president of marketing and
sales, sees a great future for these products "Wheatex provides a
perfect fit for a variety of extended meat and vegetarian
applications that satisfy the growing demand of consumers for
quick, convenient, natural and healthy foods," he said. "And our
Polytriticum resins are safe, natural ingredients that let
manufacturers create products that are highly functional and made
from renewable resources."

Midwest Grain Products, Inc. is a pioneer in producing and
marketing value-added proteins and starches derived from wheat.
The company provides natural products for a variety of markets
and conducts ongoing research to help customers stay at the
leading edge of ingredient technology.


UNIVERSAL BROADBAND: Committee Taps Irell & Manella As Counsel
--------------------------------------------------------------
The Official Committee of Unsecured Creditors of Universal
Broadband Networks, Inc. submitted its application for authority
to employ Irell & Manella LLP as counsel.

The firm will employ the following types of professional
services:

      * To advise the Committee regarding its powers, rights and
responsibilities under the Bankruptcy Code;

      * To represent the Committee in proceedings or hearings in
the US Bankruptcy Court for the Central District of California,
or other forum, in which an action or proceeding may affect the
debtor, its assets, claims of creditors or the Committee.

      * To advise and assist the Committee in connection with the
administration of the case and the confirmation and consummation
of any proposed plan of reorganization or liquidation;

      * To advise the Committee concerning the requirements of the
Bankruptcy Code and the federal and local rules relating to the
administration of this case;

      * To prepare such pleadings, applications, schedules, order
and other papers as may be necessary or appropriate in connection
with the case;

The Committee seeks authority to pay the firm a post-petition
retainer in the amount of $30,000 in connection with services to
be rendered to the Committee in connection with the Universal
Broadband case and the related case of IJNT, Inc. The firm will
charge its customary hourly rates for its services.


VENCOR INC.: Court Okays Extension Of DIP Financing To March 31
---------------------------------------------------------------
Vencor, Inc. announced that the United States Bankruptcy Court
for the District of Delaware approved an amendment to the
Company's DIP Financing to extend its maturity until March 31,
2001. The Amendment also revises and updates certain financial
covenants. In addition, the Amendment extends through March 31,
2001 the period of time for the Company to file the appropriate
pleadings to request confirmation and consummation of its plan of
reorganization.

The DIP Financing and existing cash flows will be used to fund
the Company's operations during its restructuring. As of January
17, 2001, the Company had no outstanding borrowings under the DIP
Financing.

The Company is currently soliciting approval of the Company's
fourth amended plan of reorganization filed with the Court on
December 14, 2000. The Court has scheduled a confirmation hearing
on the Amended Plan for March 1, 2001. (Vencor Bankruptcy News,
Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900)


WEHRENBERG INC.: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Wehrenberg, Inc.
         P.O. Box 31159
         12800 Manchester
         St. Louis, MO 63131

Type of Business: Motion picture exhibitor and concessionaire

Chapter 11 Petition Date: January 26, 2001

Court: Eastern District of Missouri

Bankruptcy Case No.: 01-40792-172

Debtor's Counsel: E. Rebecca Case, Esq.
                   Stone, Leyton & Gershman
                   7733 Forsyth, Suite 500
                   Clayton, MO 63105
                   (314) 721-7011

Total Assets: $6,565,112

Total Liabilities: $9,445,125

Debtor's 20 Largest Unsecured Creditors:

Entity                        Nature of Claim     Claim Amount
------                        ---------------     ------------
Fox                           Film Rent           $860,623
20th Century Fox
Mr. David Hansen
14755 Preston Road,
Suite 420
Dallas, TX 75240
972-392-0101

Para                          Film Rent           $524,374
Paramount Pictures
Mr. Jeremy Devine
12222 Merit Drive
Suite 1700
Dallas, TX 75251
972-628-3321

Miram                         Film Rent           $326,887
Miramax Films
Mr. Steve Garrett
8439 Sunset Blvd., 3rd Floor
West Hollywood, CA 90069
323-822-4170

Buena Vista Distribution      Film Rent           $246,943

USA Films                     Film Rent           $192,214

S.K.W.400                     Theatre Rent        $187,358
c/o Colliers Turley Martin

Developers Diversified        Theatre Rent        $148,856
    Realty Corp.

Nor900, Northwest Plaza       Theatre Rent        $135,378

Pepsi-Cola General            Trade Debt          $128,719
    Bottlers, Inc.

Sony Pictures                 Film Rent            $93,179

Universal Film Exchange       Film Rent            $92,343

Simon Property Group, LP      Theatre Rent         $87,089

General Cinema Theatres       Theatre Rent &
                               Real Estate Taxes    $76,269

DRUCO                         Theatre Rent         $55,329

Gre700, Greentree Village     Theatre Rent         $53,462

New Line Cinema               Film Rent            $43,441

Grace Investment Company      Theatre Rent         $36,104

St. Louis Post Dispatch       Trade Debt           $33,784

ICEE-USA Corp.                Trade Debt           $33,228

Sony Classics                 Film Rent            $32,632


XEROX: Gives Details About Mexico Accounting Problems
-----------------------------------------------------
Xerox Corporation (NYSE:XRX) released the conclusion and findings
of an independent investigation of its Mexican subsidiary.

The investigation commissioned by Xerox and conducted by external
legal and accounting firms determined that the improprieties were
caused by the convergence of several disparate factors including
the dominating management styles of certain Xerox Mexico
executives, the desire of those managers to drive growth at any
cost, and implementation of questionable business decisions and
practices. The investigation also concluded that upon learning of
the problem, and ascertaining and verifying the extent of the
issue, the company's response and plan of corrective action was
timely and proper.

"Several managers of Xerox Mexico circumvented well-established
corporate accounting and ethics policies and practices, and
engaged in collusion," said Barry Romeril, chief financial
officer of Xerox Corporation. "Their actions were deplorable.
These managers were promptly removed from their positions as soon
as we learned of the problem. We subsequently terminated them
after confirming the nature and extent of their involvement.
However, their actions resulted in a broken trust with our
customers and a troubling sense of dishonor shouldered by all of
our conscientious Xerox Mexico employees who abide by Xerox
ethics policies and practices."

Xerox management uncovered the issues and informed the Board of
Directors, and the Audit Committee immediately commissioned the
independent investigation last June.

The committee engaged the law firm of Akin, Gump, Strauss, Hauer
& Feld, which enlisted the assistance of the independent
accounting firm of PricewaterhouseCoopers, to perform the
investigation to determine whether current or former employees of
Xerox Mexico or Xerox Corporation had engaged in any practices
that violated either Xerox policies or accepted accounting and
record-keeping standards.

The investigation revealed irregularities including: ineffective
collection actions and inappropriate re-aging of past-due
accounts; billing inaccuracies; insufficient bad-debt reserves;
improper transaction classification pertaining to the sale, lease
or rental of equipment; failure to adhere to Xerox's well-
developed and extensive corporate policies and procedures; and
inadequate internal controls including appropriate segregation of
duties. The report made recommendations to enhance controls and
processes, many of which were already under way. These are all
being implemented with the oversight of the Audit Committee of
the Board.

A week after Xerox publicly disclosed the accounting issues in
Xerox Mexico last June, the Securities and Exchange Commission
initiated a non-public investigation. Xerox has been fully
cooperating with the SEC and, once completed, shared the results
of its independent investigation with the SEC staff.

Separately, Xerox launched a worldwide review of its internal
audit controls to ensure that the issues identified in Mexico
were not present elsewhere. This review was recently completed.
The issues identified in Mexico were not found in any other major
unit operated by Xerox. As a result of the review, Xerox has
increased receivables reserves in certain smaller Latin American
countries.

"We are confident that this unfortunate and regrettable incident
was the result of special circumstances conducted by a small
group of senior Xerox Mexico and Latin American group executives
in collusion to circumvent our policies and practices. We can say
with confidence that the appropriate corrective actions were
taken and that those who were responsible were removed," said
Paul A. Allaire, Xerox chairman and chief executive officer.

Xerox in 2000 took a $120 million after-tax provision in
association with the accounting issues in Mexico.

                           *********

Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.

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Wednesday's edition of the TCR. Submissions about insolvency-
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conferences@bankrupt.com.

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of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
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For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.

                           *********

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Copyright 2001.  All rights reserved.  ISSN: 1520-9474.

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