TCR_Public/010629.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

             Friday, June 29, 2001, Vol. 5, No. 127

                           Headlines

APPLIANCE RECYCLING: Inks Recycling Program Pact with CPUC
APTIMUS INC.: Appeals Nasdaq Delisting & Explores Alternatives
AQUA VIE BEVERAGE: Selling Securities To Raise Needed Capital
BALDWIN PIANO: Enters Into DIP Financing Pact With GECC
BALDWIN PIANO: Shares Knocked Off From Nasdaq Stock Market

CASUAL MALE: Taps Pricing4Profit to Manage Markdowns
CONSECO INC.: S&P Rates $400 Million Senior Notes At BB-
DRUG EMPORIUM: Paying $21MM in Cash for Snyder's Equity Stake
EDISON INT'L: Launches Sunrise Power Project To Help Ease Crisis
ENVIROSOURCE: Exchange Offer Provides for 17% Cash Component

EXIDE TECHNOLOGIES: Lender Approves New Financial Covenants
FINOVA GROUP: Court Okays $1.3 Mil Settlement With GE Aircraft
FORMAN ENTERPRISES: Converts Bankruptcy Case to Chapter 7
FURRS SUPERMARKETS: Fleming Submits $57 Million Bid For Assets
HEILIG-MEYERS: Fitch Junks Ratings On Asset-Backed Certificates

ICG COMMUNICATIONS: Rejects 15 Equipment Leases With GECC
INSCI-STATEMENTS.COM: Obtains $700,000 New Funding From Selway
KINETIC CONCEPTS: Completes $95 Million Refinancing
MARCHFIRST: Bankruptcy Court Gives Nod On SBi's Acquisitions
MESA AIR GROUP: Reports First Quarter 2001 Losses

MEXICAN INDUSTRIES: Files for Chapter 11 Protection
MEXICAN INDUSTRIES: Chapter 11 Case Summary
MEXICAN INDUSTRIES: Union Sues Owners To Recover Benefits
MICROAGE INC: SEC Says Bankruptcy Plan Is Unfair to Shareholders
NATIONAL AIRLINES: Reports on Reorganization Progress

OWENS CORNING: Moves To Infuse Capital Into StaMax LLC
PACIFICARE HEALTH: S&P Assigns Preliminary BB- Bank Debt Rating
PENNZOIL-QUAKER: Fitch Lowers Senior Unsecured Rating To BB+
PILLOWTEX CORP.: Vigilant Insurance Asks Court To Annul Stay
PROFILE TECHNOLOGIES: Appeals Nasdaq Delisting Ruling

PSINET INC.: Employs DrKW As Financial Advisor
RELIANCE: US Trustee Appoints Unsecured Bank Lenders' Committee
RITE AID: Investors Add $100 Million To Initial Commitment
SAMSONITE INC.: Reports Losses For Fiscal Year 2002
SINGING MACHINE: Josef Bauer Reports 15.2% Equity Stake

SUN HEALTHCARE: Unsecured Creditors' Committee Membership Change
THE KNOT: Shares Face Nasdaq Delisting
TRI-UNION DEVELOPMENT: Emerges From Chapter 11 Bankruptcy
USG CORPORATION: Obtains Interim Approval For $150 Mil DIP Loan
USG CORPORATION: Honoring $20MM Prepetition Employee Obligations

WARNACO GROUP: Hires Blake Cassels As Special Canadian Counsel
WINSTAR COMMUNICATIONS: Wants More Time To Decide On Leases
ZEROPLUS.COM: Voluntarily Delists Securities From Nasdaq

BOOK REVIEW: The Rise and Fall of the Medici Bank, 1397-1494

                           *********

APPLIANCE RECYCLING: Inks Recycling Program Pact with CPUC
----------------------------------------------------------
Appliance Recycling Centers of America, Inc. (OTC BB: ARCI) has
entered into a contract with the California Public Utilities
Commission (CPUC) to operate a refrigerator/freezer/room air
conditioner recycling program in San Diego and surrounding areas
as well as a six-county region in California's Central Valley,
including the cities of Fresno and Stockton. The Appliance Early
Retirement and Recycling Program will be expanded to the seven-
county Bay Area when the current Summer Initiative energy
conservation program, which is also operated by ARCA, is fully
subscribed this summer.

The CPUC has budgeted $14 million to fund the recycling program.
The budget allocation includes $50 incentive payments to
participants for refrigerators and freezers and $25 incentive
payments for room air conditioners. Initial significant revenues
from the new program are anticipated later in this year's second
half. The program is a one-year contract through May 31, 2002.

The new program is modeled after the CPUC-mandated Summer
Initiative energy conservation program but has been expanded to
include room air conditioners. ARCA will market and advertise
the program, take orders from consumers, pick up qualified
appliances at their residences, recycle these appliances in an
environmentally responsible manner, and process customer
incentive payments.

The Appliance Early Retirement and Recycling Program is expected
to permanently remove from service approximately 70,000
operating inefficient refrigerators, freezers and room air
conditioners. Administered by the CPUC and funded by recently
enacted California legislation, this new energy conservation
program is expected to reduce residential peak summer
electricity demand by about 21 megawatts, the equivalent of a
small power plant. The program will also reduce residential
consumption of electricity by an estimated 105 million kilowatt
hours (kWh) per year, or enough to meet the total electricity
needs of about 15,000 households a year for five years.

Studies indicate that approximately 3.5 million spare working
refrigerators and freezers are currently in use in California.
These studies also estimate that without the early retirement
program, consumers would likely continue operating these
inefficient units for an additional five years. As a result of
the new program, participating customers are expected to reduce
their electric bills during this five-year period by
approximately $80 million, calculated at a residential retail
rate of $0.15/kWh. By comparison, this program costs less than
$0.03/kWh.

Edward R. (Jack) Cameron, president and chief executive officer,
commented: "We sincerely appreciate having this opportunity to
work closely with the CPUC in helping address California's
critical energy shortage and high electricity rates. Based on
our previous work with Southern California Edison Company (SCE)
and the Summer Initiative program, we believe the evidence is
compelling that retiring working inefficient household
appliances from service is a proven and cost-effective means for
reducing residential energy demand and saving money for
consumers. We view the CPUC's decision to contract with ARCA as
an expression of confidence in these programs and our company."

The Summer Initiative program calls for the Company to recycle
approximately 36,000 refrigerators and freezers in the service
areas of Pacific Gas & Electric and San Diego Gas & Electric.
Administered by SCE, this program has been fully subscribed in
San Diego and is expected to be fully subscribed in the Bay Area
during July. In addition, the Company is continuing to support a
separate residential energy conservation program sponsored by
SCE.

ARCA (www.arcainc.com) is one of the largest recyclers of major
household appliances for the energy conservation programs of
electric utilities. Through its ApplianceSmart
(www.ApplianceSmart.com) operation, ARCA is also one of the
nation's leading retailers of special-buy household appliances,
primarily those manufactured by Whirlpool Corporation. These
special-buy appliances, which include close-outs, factory
overruns and scratch-and-dent units, typically are not
integrated into the manufacturer's normal distribution channel.

ApplianceSmart sells these virtually new appliances at a
discount to full retail, offers a 100% money-back guarantee and
provides warranties on parts and labor. At the end of this
year's second quarter, ApplianceSmart was operating two stores
in the Minneapolis/St. Paul market; one in the Dayton, Ohio,
market; two in the Columbus, Ohio, market; and one in Los
Angeles.


APTIMUS INC.: Appeals Nasdaq Delisting & Explores Alternatives
--------------------------------------------------------------
Aptimus, Inc. (Nasdaq: APTM), a single-source online direct
marketing network, reports that it has requested a hearing
before Nasdaq to appeal a notice regarding the potential
delisting of its securities from the Nasdaq National Market. The
company also announced that it has retained the investment
banking firm Dain Rauscher Wessels to assist in its evaluation
of strategic alternatives.

Late last week, Aptimus received a delisting notice from the
Listing Qualifications unit of the Nasdaq Stock Market based on
the company's inability to maintain a $1.00 minimum bid price
for its securities over the periods required under National
Marketplace Rules 4310(c)(8)(B) and 4450(a)(5). The company has
requested an oral hearing before the Nasdaq Listing
Qualifications Panel to appeal this decision. Aptimus will
continue to trade on the Nasdaq National Market under the symbol
APTM pending the outcome of these proceedings.
"We have been expecting this action from Nasdaq for several
months given market conditions," said Tim Choate, Aptimus'
President and CEO, "and we are prepared to appeal the decision
through the proper channels. Nasdaq has been forced to take this
step by rules that do not look beyond stock price. I am
confident," continued Choate, "that we will present a compelling
case to the listing panel when our appeal is heard."
Aptimus also announced today that it has retained the investment
banking firm of Dain Rauscher Wessels to assist the company in
evaluating different available options, including a sale or
merger of the company.

"My confidence in the long term prospects for Aptimus and online
direct marketing in general remains strong," stated Choate.
"Yet, I am mindful of the near term challenges facing the
company, including the risk of delisting by Nasdaq, the negative
sentiment in the markets toward our business sector, and the
challenges we face in the early stages of developing our network
model. Under these circumstances," concluded Choate, "it is
prudent for the company to consider alternatives to the status
quo. Dain is an excellent company with a stellar reputation, and
I am pleased to have their help in evaluating what is best for
Aptimus and our shareholders."

                    About Aptimus, Inc.

Aptimus (formerly FreeShop.com Inc.) is seeking to create the
most powerful online direct marketing network. We provide a
single-source online solution for marketers to acquire new
customers via online media. The Aptimus Network presents
consumers with relevant offers geared to their immediate
interests, allowing marketers to reach consumers with the right
offers when they are most likely to respond. Our offer
presentation serving technology platform enables us to promote
offers contextually across the Internet. Built on a technology
platform that is flexible and scalable, the Aptimus Network can
support millions of users and hundreds of marketers and Web site
partners. Aptimus is headquartered in Seattle, and is publicly
traded on Nasdaq under the symbol APTM.


AQUA VIE BEVERAGE: Selling Securities To Raise Needed Capital
-------------------------------------------------------------
Aqua Vie Beverage Corporation, a Delaware corporation, was
incorporated on July 30, 1998 and was formed as a successor to
another Delaware corporation liquidated in bankruptcy in 1997.
Throughout most of its fiscal year ending July 31, 2000, Aqua
Vie was a traditional development stage company whose early
efforts encompassed the development of a new category of
beverages called water beverages, and the sales and marketing of
the first all-natural, lightly flavored bottled spring waters,
call Hydrators. In the quarter ended October 31, 2000, the
Company had appeared to have emerged from the development stage
and actively commenced the sale of its products. In the quarter
ended April 30, 2001, the Company's selling efforts, including a
major sales commitment from its contract bottler, pushed year-
to-date sales to just over the three quarter-million-dollar
threshold.

At April 30, 2001, the Company's total assets of $682,000
exceeded that of $585,000 at its July 31, 2000 year-end.
Although the composition of the assets changed during this
interim period as most of the year-end inventories were sold and
converted to accounts receivable. Similarly, total current
assets at April 30, 2001 of $460,000 were higher than year-end
current assets of $380,000 because of the increase in the
balance of prepaid expenses and deposits. The Company's current
liabilities decreased from $1,768,000 at July 31 to $1,296,000
at April 30 while the composition of this debt shifted from
short-term loans to increased accounts payable and shareholder
loans payable.

During its first two years of existence (from inception to July
31, 2000), the Company accumulated a deficit of $3,654,000. In
the subsequent nine months ended April 30, 2001, the Company's
accumulated deficit grew to $4,832,000 as the Company's
marketing and executive expenses burgeoned, creating a quarterly
operating loss of $205,000 and a semi-annual operating loss of
$1,274,000.

The Company's revenues of $40,000 for the quarter ended April
30, 2001 were a modest increase from the $35,000 of revenues in
the corresponding third quarter of the prior fiscal year. Year-
to-date revenues of $766,000 for the first nine months ended
April 30, 2001 also reflect successful sales efforts in
comparison with the incipient sales of $64,000 for the prior
year nine-month period but are much less than what had been
anticipated due to the processor's quality assurance problem and
the resultant lack of inventory.

Because it has sustained recurring losses from operations, the
Company cannot assure that it will be able to fully carry out
its plans as budgeted without additional operating capital. At
April 30, 2001, the Company had negative working capital of
$816,327, although this amount represents an improvement in
liquidity and capital resources from its negative working
capital position of $1,388,000 at July 31, 2000. The improvement
is principally attributable to sales of common stock the
proceeds realized from the Series D Preferred
transaction.

In the nine months ended April 30, 2001, the Company funded a
portion of its operations from the sale of its common stock,
which raised $740,000 in cash. In addition, Aqua Vie financed
its operations by a combination of increasing trade payables,
issuing shares for services valued at $345,000, converting
$341,000 of short-term debt into stock, and negotiating the
forgiveness of almost $500,000 in accrued liabilities from a
related party. This recent mix of diversified funding sources
contrasts with the corresponding nine months of the prior year
when the primary source of funds was $480,000, originating with
the Company's sale of its stock.

In the prior quarter, the Company paid off its only long-term
debt, which was $18,000 at July 31, 2000, and now stands free of
long-term debt at April 30, 2001.

Aqua Vie anticipates that its use of cash will be substantial
for the foreseeable future. In particular, management of the
Company expects substantial expenditures in connection with
production of inventory for the planned increase in sales,
expansion of the Company's marketing organization, payment of
slotting fees to obtain shelf space with new retailers, and
quality assurance and distribution management. The Company does
not expect to incur major capital expenditures in the next year.
Aqua Vie's management expects that additional funding for
operating expenditures will be available from the issuance of
equity and/or debt securities, as needed.

The availability of sufficient future funds for Aqua Vie will
depend to a significant extent on the market acceptance of the
Company's primary product line by retail chains. Accordingly,
the Company may be required to issue securities to finance such
working capital requirements. There can be no assurance whether
or not such financing will be available on satisfactory terms.
Aqua Vie is currently operating at a loss. While the Company's
nine-month revenues of $766,000 were over twenty times as large
as the nine-month revenues of the prior fiscal year, sales to
date have not been sufficient to cover the costs of operations.
The Company's ability to develop increasing revenues and
profitable net income is dependent upon the effectiveness of its
marketing efforts in generating sales of its line of flavored
spring water products.

For the nine months ended April 30, 2001, the Company's sales
produced gross profit of $181,078, which compares favorably with
the smaller gross profit of $65,000 for the nine months of the
prior fiscal year. Operating expenses were $1,899,000 for the
nine months ended April 30, 2001 and were only $1,309,000 for
the same period of the prior year. The year-to-year change
principally reflects an increase in marketing expenses which
directly correlates with increased revenues. During this same
year-to-year time frame, the increase in operating
expenses also reflects heightened expenditures for general and
administrative expenses which were substantially offset by
reduced expenses for professional fees.

The Company's net loss of $205,000 for the three months ended
April 30, 2001 resulted in a net loss per share of $0.005 for
the quarter. This contrasts with a net loss of $663,000 for the
three months ended April 30, 2000, which also posted a per share
loss of $0.025. The Company's year-to-date net loss of
$1,274,000 is after the extraordinary gain of $500,000 reported
in the previous quarter and equates to a year-to-date per share
net loss of $0.035, comparable to the prior year nine-month per
share net loss of $0.055.


BALDWIN PIANO: Enters Into DIP Financing Pact With GECC
-------------------------------------------------------
Baldwin Piano & Organ Company has entered into a debtor in
possession financing arrangement, subject to Bankruptcy Court
approval, with General Electric Capital Commercial Finance
(GECC). The loan will permit the Company to continue its
reorganization/restructuring efforts under the protection of the
United States Bankruptcy Code.  Mr. Bob Jones, chief executive
officer and president of Baldwin, in a statement, said, "This
lending arrangement will provide Baldwin the opportunity to
continue its restructuring efforts and devote its energies to
its day-to-day operations.  GECC's commitment, coupled with our
enhanced efficiencies, will permit the Company to engage in its
normal course of business during the traditionally slow summer
season in the piano manufacturing industry. Current management
will continue to explore any and all alternatives to enhance
values, increase performance, and produce quality pianos."

Mr. Kenneth W. Pavia, chairman of Baldwin, stated "Management
continues to implement its restructuring plans. GECC, our
primary lending partner, has permitted us to continue our
operations, meet our current obligations, and begin to build a
new Baldwin Piano & Organ Company. I am optimistic in regard to
the direction of the Company and look forward to its eventual
success."


BALDWIN PIANO: Shares Knocked Off From Nasdaq Stock Market
----------------------------------------------------------
Baldwin Piano & Organ Company announced the delisting of the
Company's stock on Nasdaq. In a letter to the Company dated June
19, 2001, Nasdaq cited the Company's recent bankruptcy filing
and Nasdaq Marketplace Rules 4450(f) and 4330(a)(3) as
determining factors in its decision. Mr. Bob Jones, chief
executive officer and president of Baldwin, said in a statement,
"While we regret Nasdaq's decision, the Company understands the
ramifications of it seeking protection under Chapter 11 of the
United States Bankruptcy Code. We look forward to restructuring
the Company, regaining investor confidence, and applying for
future listing on Nasdaq. In the interim, our stock is eligible
to trade in the over-the-counter market." Mr. Kenneth W. Pavia,
chairman of Baldwin, stated that "While Baldwin's current
shareholders continue to suffer, the Company is proceeding to
disentangle itself from the horns of the legacy issues which
have negatively impacted performance."

Baldwin Piano & Organ Company, the maker of America's best
selling pianos, has marketed keyboard musical products for over
140 years.


CASUAL MALE: Taps Pricing4Profit to Manage Markdowns
----------------------------------------------------
ProfitLogic, the leading provider of Price and Revenue
Optimization solutions for the retail industry, announced that
Casual Male Corp. (Nasdaq: CMALQ), the nation's premier provider
of clothing for big & tall men, has chosen Pricing4Profit to
manage markdowns in a select area of its business. This initial
phase will "go live" in July 2001. The solution is part of a
strategy expected to help the company increase inventory
productivity and gross margin.

Casual Male Corp. faces the complex operational challenge of
determining profit-maximizing pricing strategies for each item
at each store across multiple retail businesses which include:
Casual Male Big & Tall, Repp Big & Tall, B&T Factory Store and
Work n' Gear. Corresponding apparel assortments range from
fashion, casual, and dress clothing and footwear for the big and
tall man; to workwear, health-care apparel and uniforms for
industry and service businesses. This product mix serves a
diverse customer base, which creates widely varied demand
patterns. Pricing4Profit will provide an unprecedented
opportunity to understand merchandise demand and customer
response to pricing changes.

"We selected Pricing4Profit because of its reputation for
delivering quick ROI and ProfitLogic's track record of helping
clients integrate solutions with their current systems and
processes. Through use of this system we hope to significantly
improve gross margin, reduce our markdown budget, and clear
merchandise more efficiently," said Jay Scheiner, First Senior
Vice President and Chief Information Officer, Casual Male.

Pricing4Profit will determine the optimal timing and depth of
markdowns to maximize gross margin and achieve sell-thru
targets. In addition to identifying the best markdown strategy
for each product at each store, Pricing4Profit will streamline
the markdown decision process. Merchants can view, modify,
perform "what if" analyses and approve markdown recommendations
through the application's browser-based front end. With
Pricing4Profit's automated workflow and integration
capabilities, approved price changes feed directly into a
retailer's price management system for execution.

"ProfitLogic's tools put power and intelligence into the hands
of retailers. We look forward to helping Casual Male realize
increased efficiency and productivity through the use of
Pricing4Profit," explains Scott Friend, President and CEO,
ProfitLogic. "The application provides precise forecasts
of consumer demand, superior analysis of consumer buying
patterns and actionable answers derived using sophisticated
optimization techniques. With this type of intelligence
harnessed, Casual Male buyers can be confident they are
executing profitable pricing strategies and will have more time
to focus on what they do best; uncovering and staying ahead of
trends and customer needs."

                 About Casual Male Corp.

Casual Male Corp. operates specialty retail businesses in large,
under-served niche markets. The Company currently operates 592
retail stores, three catalog titles, and two commerce-enabled
websites selling apparel and accessories for big and tall men
under the Casual Male Big & Tall, Repp Ltd. Big & Tall, and B&T
Factory trade names. The Company also offers rugged workwear and
healthcare apparel through its 70 Work 'n Gear stores, direct
marketing offerings and e-commerce initiatives.

                  About ProfitLogic

ProfitLogic, formerly TSI, is the leading provider of retail
Price and Revenue Optimization. The Company's Merchandise
Optimization Suite -- Planning4Profit(TM), Buying4Profit(TM),
Allocating4Profit(TM), Replenishing4Profit(TM),
Promoting4Profit(TM) and Pricing4Profit(TM) -- helps savvy
merchants make more profitable buying and selling decisions,
while dramatically streamlining the merchandising decision-
making process.

Headquartered in Cambridge, Massachusetts and staffed by a
unique team of retail professionals and mathematicians,
ProfitLogic's clients include JC Penney, Gymboree, KB Toys and
Ann Taylor, to name a few. For more information about
ProfitLogic, call (617) 218-1900 or visit www.profitlogic.com.


CONSECO INC.: S&P Rates $400 Million Senior Notes At BB-
--------------------------------------------------------
Standard & Poor's assigned its double-'B'-minus senior unsecured
debt rating to Conseco Inc.'s $400 million in senior notes,
which are due in 2008. At the same time, Standard & Poor's
affirmed its ratings on Conseco and Conseco's insurance
subsidiaries (see list). The outlook is stable.

Since the third quarter of 2000, Conseco has made significant
progress in a debt-restructuring plan that provided for the
retirement of more than $2 billion of debt using the proceeds
from various non-strategic asset sales. Through late June 2001,
$2.02 billion in debt has been retired, most recently with the
redemption this month of $550 million in mandatory par put
remarked securities. Financial leverage has improved to 39%,
with interest coverage of 1.3 times as of March 31, 2001.

Operating earnings have begun to improve following the
significant restructuring in 2000 that had led to an operating
loss. For the first quarter of 2001, operating earnings before
goodwill and taxes were $266.8 million compared with $221.1
million for the first quarter of 2000, which reflected
improvement in Conseco's insurance and finance sectors.

The ratings on Conseco's life insurance subsidiaries reflect
what Standard & Poor's believes is an appropriate level of
capitalization and a good level of liquidity. Standard & Poor's
also believes the earnings performance of the insurance
operations has stabilized.

                    Outlook: Stable

Standard & Poor's believes that Conseco's earnings will continue
to improve. Its insurance operations are expected to continue to
produce pretax operating earnings of at least $200 million per
quarter, maintaining the pace established in the first quarter
of 2001. Conseco Finance Corp., one of Conseco's subsidiaries,
is expected to maintain controlled growth, which will continue
to produce positive cash flow, Standard & Poor's said.

      New Rating

          Conseco Inc.
            $400M senior note issue                BB-

      Outstanding Ratings Affirmed

          Conseco Inc.
            Counterparty credit rating             BB-/B/Stable
            Senior debt rating                     BB-
            Preferred stock rating                 B-
            Commercial paper rating                B
            Subordinated debt rating               B

          CONSECO INC.'S LIFE INSURANCE SUBSIDIARIES
          Bankers Life & Casualty Co.
          Conseco Annuity Assurance Co.
          Conseco Direct Life Insurance Co.
          Conseco Health Insurance Co.
          Conseco Life Insurance Co.
          Conseco Life Insurance Co. of NY
          Conseco Medical Insurance Co.
          Conseco Senior Health Insurance Co.
          Conseco Variable Insurance Co.
          Manhattan National Life Insurance Co.
          Pioneer Life Insurance Co.
            Counterparty credit rating              BBB/Stable
            Financial strength rating               BBB


DRUG EMPORIUM: Paying $21MM in Cash for Snyder's Equity Stake
-------------------------------------------------------------
Drug Emporium, Inc. (OTCBB: DEMPE) announced that it struck a
deal with Snyder's Drug Stores, Inc. and the Committee of
Unsecured Creditors in its Chapter 11 to modify the previously
announced Acquisition and Reorganization Agreement between
Snyder's and the Company, which will fix at $21,000,000 the cash
purchase price to be paid by Snyder's to acquire all of the
equity of the reorganized Company.

As previously agreed, upon the closing of the transaction the
reorganized Company will pay off the indebtedness owing at that
time to the Company's working capital lenders and will also
assume certain other obligations of the Company outstanding at
that time. Provisions for closing date working capital
adjustments to the purchase price have been eliminated from the
Agreement. The Company and the Committee have also agreed to
cancel previously established auction and alternative
transaction procedures relating to potential third-party
bidders, and the Company has agreed that it will not support any
transaction for the acquisition of the Company by any party
other than Snyder's. In addition, the Company and Snyder's will
enter into a transition agreement, which will allow Snyder's to
commence the implementation of its business plan for the
acquired operations in advance of the closing of the
transaction. The Company's pending plan of reorganization will
be amended as appropriate to reflect the modified terms.

The Company, Snyder's and the Committee intend to proceed to
complete the Chapter 11 process and close the Snyder's
transaction as quickly as possible. In addition, the Committee
is evaluating whether additional recovery may be obtained from
pursuing certain claims against McKesson HBOC, Inc. relating to
or arising from its supply arrangement with Drug Emporium. The
Committee currently has an August 6, 2001 deadline to institute
suit against McKesson with respect to such claims.

              About Snyder's Drug Stores, Inc.

Snyder's Drug Stores was founded in 1929 and is headquartered in
Minnetonka, Minnesota. Snyder's owns and operates 81 corporate
stores and supports over 100 independent retailers in Iowa,
Illinois, Michigan, Minnesota, Montana, South Dakota, and
Wisconsin under the Snyder's name through its distribution
center in Eagan, Minnesota.

                  About Drug Emporium, Inc.

Drug Emporium, Inc. owns and operates 77 brick-and-mortar stores
under the names Drug Emporium, F&M Super Drug Stores and Vix
Drug Stores. All of the brick-and-mortar stores operate full-
service pharmacies and specialize in discount-priced merchandise
including health and beauty aids, cosmetics and greeting cards.
The company also franchises additional stores under the Drug
Emporium name. Drug Emporium, Inc. is headquartered in Powell,
Ohio


EDISON INT'L: Launches Sunrise Power Project To Help Ease Crisis
----------------------------------------------------------------
Gov. Gray Davis "switched on" California's newest power plant in
a bid to help ease the state's energy crisis. Edison Mission
Energy, an Edison International company, and Texaco Power &
Gasification, a division of Texaco Inc. (NYSE: TX), announced
that their Sunrise Power Project is providing reasonably priced
electricity to the people of California more than one month
ahead of schedule -- just in time for the long, hot summer.

Gov. Gray Davis; John Bryson, EIX chairman, CEO and president;
and James Houck, president of Texaco Power & Gasification
celebrated the plant's achieving full commercial operation at a
ribbon-cutting ceremony held at the plant site in western Kern
County.

"To solve the power crisis and restore a reliable electric
system, California must have financially healthy utilities,"
Bryson said. "Today's celebration of this vital new Sunrise
power plant -- at stable, cost-based rates for consumers for the
next decade -- is a significant step by Edison in honoring its
commitments under the agreement with Governor Davis to restore
SCE to financial health. Now we urgently need action by the
State Legislature and the California PUC to make SCE financially
sound and allow it to stay in business."

Last summer, as wholesale power prices in California began to
soar to runaway levels and it became apparent that new supply
across the western United States needed urgently to be brought
on line, Edison set out to find a means to bring a large, new
power project on line in less than one year.

This is something that had never been done before. Edison's
talented people scoured the state and found a unique
opportunity.

Our long-term partner, Texaco, had begun permitting this site as
a 320-MW enhanced oil recovery cogeneration project scheduled to
start in 2002. Permitting stalled and the project lost its steam
purchaser thereby making it uneconomical. In fact, the actual
turbine for the project was about to be shipped to Brazil. The
turbine was literally on the dock in Long Beach, ready for
shipment when the Edison Mission Energy team stepped in.

They had the vision to propose reconfiguring the project as a
combined cycle project and to split the construction into two
phases. Not only did this increase the eventual output to 560 MW
but, more importantly, the phased construction would allow for a
critical summer 2001 start-up as a 320-MW, simple cycle peaking
facility.

The Edison team negotiated with Texaco to buy the rights to the
project, and to purchase the turbine, so Edison could get the
project permitted and build the reconfigured power plant. Terms
were reached with Texaco which included an option to buy back in
to fifty percent of the project up until commercial operation.
Texaco did exercise their option this week.

As Edison completed the purchase of the project from Texaco,
Edison worked out a labor agreement with the State Building
Trades Council to work together to build the project. Finally,
Edison pushed ahead with the permitting. By December, Edison was
ready to break ground, bringing us a superb, highly efficient
power plant at a time when it is most urgently needed. From the
first shovel of dirt to the first production of power, this job
was done in a record six months.

"That is a great accomplishment resulting from innovative
thinking in response to a difficult challenge," Bryson said.

The Sunrise Power Project is being completed in two phases.
Phase 1, which is on-line now, consists of a 320-megawatt (MW),
simple-cycle peaking facility. Phase 2 will convert the peaking
facility to a 560-MW, combined- cycle operation with an in-
service date of summer 2003. Even though the project was built
in record time, it meets or exceeds all pertinent environmental
and safety standards.

Permitting approval for this project was obtained on an
expedited basis with assistance from the Governor's Green Team
and with cooperation from the CEC, the San Joaquin Valley Air
Pollution Control District and the other agencies involved. In
addition, EME negotiated an agreement with labor unions for an
adequate supply of skilled labor during the accelerated
construction process. Construction management, labor,
contractors, and equipment suppliers demonstrated a high level
of teamwork and commitment to bring the project on line as
quickly as possible.

Based in Rosemead, Calif., Edison International (NYSE: EIX) is
the parent company of Southern California Edison, Edison Mission
Energy, Edison Capital, Edison O&M Services, and Edison
Enterprises.


ENVIROSOURCE: Exchange Offer Provides for 17% Cash Component
------------------------------------------------------------
Envirosource, Inc. (OTCBB: ENSO) announced the cash portion of
its recently announced exchange offer.

In addition to both Preferred and Common Stock, the Company is
offering an aggregate of $63 million in a combination of cash
and subordinated notes to the holders of its 9 3/4% Senior Notes
due 2003. The Company has determined that $10.5 million or
almost 17% of the $63 million total will be distributed in cash.
The Company's Exchange Offer commenced on June 11, 2001. If all
of the Senior Notes are tendered in the Exchange Offer, the
holders of Senior Notes will receive an aggregate of $10.5
million in cash, $52.5 million of Subordinated Notes, $25
million worth of Preferred Stock and all of the common equity
outstanding after the restructuring. The cash portion of the
consideration to be paid to holders of Senior Notes will be
funded with proceeds from the Company's credit facility with
Bank of America.

As of June 26, 2001, a total of $176.4 million or 65% of the
outstanding principal amount of the Senior Notes had been
tendered. The Exchange Offer is conditioned upon, among other
things, having at least 98% of the outstanding principal amount
of the Senior Notes tendered prior to expiration of the Exchange
Offer, which is scheduled to expire at 5:00 p.m. on July 12,
2001. The Exchange Offer is being made pursuant to the Offering
Memorandum and Solicitation of Consents and Acceptances, dated
June 11, 2001, and the related Letter of Transmittal, Consent
and Acceptance, which more fully set forth the terms of the
Exchange Offer. If the requisite acceptances are not received,
it is the Company's intention to effect the exchange through a
pre-packaged Chapter 11 plan of reorganization on essentially
the same economic terms as contemplated by the Exchange Offer;
this would, however, take more time and there might be less cash
available for distribution because of the expenses related to
such a filing. Under the terms of the pre-packaged plan, the
filing would be done at the parent level only and the operating
subsidiaries would not be impacted; all employee and trade
obligations would be met without delay and there would be no
interruption in service of any kind to customers.

The Company's principal operation is IMS, which provides slag
processing, metal recovery, materials handling, scrap management
and a wide range of specialty services, such as surface
conditioning ("scarfing") of steel slabs, to the North American
steel industry. In addition, the Company's Technologies
operations provide waste treatment, stabilization and disposal
services, primarily to the steel industry.


EXIDE TECHNOLOGIES: Lender Approves New Financial Covenants
-----------------------------------------------------------
Exide Technologies (NYSE: EX), the global leader in stored
electrical energy solutions, announced receipt of lender
approval of the company's request for revisions through
September 30, 2002, to certain of its financial covenants
in its $900 million Senior Secured Global Credit Facility.

Kevin R. Morano, Executive Vice President and Chief Financial
Officer, said, "I am very pleased that our lenders have approved
our request to relax some of the financial covenant terms in our
global credit facility in order to provide the company
additional operating flexibility. Lender support has been, and
continues to be, an important element in our efforts to
restructure Exide."

Exide Technologies also announced that shareholder approval will
be requested for the issuance of up to 20 million shares of its
common stock to be potentially exchanged for some or all of the
public debt securities of the company and its subsidiary Exide
Holding Europe (EHE), including the company's 2.9% Convertible
Senior Subordinated Notes due in 2005 and 10% Senior Notes due
in 2005, and EHE's 9-1/8% Senior Notes due in 2004. Shareholder
approval will be sought at the company's annual meeting to be
held August 10, 2001.

It is the policy of the New York Stock Exchange to require
shareholder approval prior to the issuance, in a transaction or
series of related transactions, of a number of shares of common
stock that would equal or exceed 20% of a company's common stock
outstanding before the issuance.

Because the current market value of the debt securities of the
company and of EHE are below their face value, the company
believes that it may be able to exchange common stock for such
debt securities on attractive terms. "Although such exchanges
may be dilutive to our shareholders, we believe that if
appropriate exchanges can be negotiated, the long-term benefits
of lower leverage, interest savings, greater liquidity and a
larger equity base will be significant to Exide Technologies and
its shareholders," said Mr. Morano.

Exide Technologies is the global leader in providing electrical
energy storage solutions. The company has operations in 89
countries, serving the industrial and transportation markets.

Industrial applications include network-power batteries for
telecommunications systems, fuel-cell load leveling, electric
utilities, railroads, photovoltaic (solar-power related) and
uninterruptible power supply (UPS) markets; and motive-power
batteries for a broad range of equipment uses, including lift
trucks, mining vehicles and commercial vehicles.

Transportation uses include automotive, heavy-duty truck,
agricultural, marine and other batteries, as well as new
technologies being developed for hybrid vehicles and new 42-volt
auExide Technologiestomotive applications. The company supplies
both aftermarket and original-equipment transportation
customers.


FINOVA GROUP: Court Okays $1.3 Mil Settlement With GE Aircraft
--------------------------------------------------------------
A bankruptcy court approved a $1.3 million settlement between
Finova Group Inc. and a General Electric Co. subsidiary at a
hearing Monday afternoon. Under terms of the agreement, Finova
will purchase all of GE Aircraft Services Ltd.'s rights and
interests in five airplane engines that had once been owned by
Tower Air Inc. The settlement is contingent upon Tower Air's
motion to abandon its interests in the engines, which is
scheduled to take effect July 18. (ABI World, June 27, 2001)


FORMAN ENTERPRISES: Converts Bankruptcy Case to Chapter 7
---------------------------------------------------------
Forman Enterprises Inc., which completed going-out-of-business
sales at its remaining American Outpost stores this year, has
converted it bankruptcy case to a Chapter 7 Liquidation. When
the company filed for Chapter 11 reorganization protection in
January 2000, it had 120 stores selling low-priced khakis and
other casual attire. As recently as October, the company had 50
locations operating mainly in outlet centers. A creditors
meeting will be held in July. (New Generation Research, June 27,
2001)


FURRS SUPERMARKETS: Fleming Submits $57 Million Bid For Assets
--------------------------------------------------------------
Fleming (NYSE:FLM) has submitted a bid for real estate assets
and certain inventory of Furr's Supermarkets, Inc. Fleming's bid
totaled $57 million, plus inventory. The bid has been accepted,
subject to approval by the United States Bankruptcy Court for
the District of New Mexico. The court hearing is scheduled
today, Friday.

Fleming intends that the majority of the 66 Furr's store
locations in New Mexico and West Texas would be owned and
operated by independent and chain supermarkets, with Fleming
serving as the supplier. Approximately 10 store locations would
be converted to a price impact retail format as part of
Fleming's retail group.

"Fleming has a strong track record of successfully facilitating
the transfer of stores from regional chain companies into the
hands of quality independents and chain supermarket operators,"
said Steve Davis, Executive Vice President and President,
Wholesale. "Rather than see all of these stores liquidated and
closed, this plan offers a growth solution. We believe this is
the best use of the properties and the best opportunity to
preserve jobs and shopping alternatives in the communities where
these stores operate."

Fleming is the industry leader in distribution and has a growing
presence in value retailing. Fleming's primary business is
buying and selling merchandise. The company serves approximately
3,000 supermarkets including more than 700 North American stores
of global supermarketer IGA and other regional banners, 5,000
convenience stores and nearly 1,000 supercenters, discount,
limited assortment, drug, speciality, and other businesses
across the country. To learn more about Fleming, visit:
www.fleming.com.


HEILIG-MEYERS: Fitch Junks Ratings On Asset-Backed Certificates
---------------------------------------------------------------
Fitch downgrades ratings on the asset backed certificates issued
by Heilig-Meyers Master Trust as follows:

      * Series 1998-1 6.125% class A asset-backed certificates to
        'CC' from 'BB';

      * Series 1998-1 6.35% class B asset-backed certificates to
        'C' from 'CCC'.

      * Series 1998-2 floating-rate class A asset-backed
        certificates to 'CC' from 'BB';

      * Series 1998-2 floating-rate class B asset-backed
        certificates to 'C' from 'CCC'.

All securities remain on Rating Watch Negative. The 'CC' ratings
on the class A certificates of both series indicate that default
of some kind is probable. The 'C' ratings on the class B
certificates signal imminent default. The downgrade is in
response to further severe deterioration in collateral
performance since the ratings were first lowered in February.

By all measures delinquency rates continue to worsen according
to the most recent portfolio stratification reports, which cover
the May collection period. On a contractual basis, just 6.6% of
outstanding balances are current while 83.25% are 60+ days past
due. From a recency method, 21% of outstanding balances are
current and 63% are 60+ days past due. The percentage of account
balances on which a payment was made in May dropped to 21.3%,
down from 31% in January. Also, roll rates in the early
delinquency stages trended up significantly in the latest period
after improving from February through April.

As a result, collections have fallen off sharply in the last few
months and will register another steep decline for June. After
averaging $33 million per month for December through April,
total collections declined to $25 million for May, or just 3.5%
of the outstanding pool balance (including delinquencies). For
the current month, collections totaled just $16.56 million
through June 25th.

Taking into account the June 20 distribution, series 1998-1
class A certificates' remaining outstanding balance is $168.5
million, or 54.8% of their initial balance; series 1998-1 class
B certificates have not received any principal distributions and
maintain an outstanding balance of $61 million. Series 1998-2
class A certificates have $119.8 million outstanding, or 52% of
the issued amount; series 1998-2 class B maintains its initial
balance of $50 million.

The pool is currently generating enough collections to meet
interest requirements on the class A and class B certificates.
That ability, however, will be tested as collections approach
the $10 million per month level. Assuming a 10% monthly decline
factor from May's collection level and all other factors being
equal, that could occur as soon as December 2001.

Given that scenario and taking into account available cash on
hand through amounts in the collection account (including the
pre-petition collections now in dispute) and the cash collateral
accounts, the class A certificates will likely ultimately suffer
a principal shortfall. The severity of that shortfall will
depend on collection performance going forward.

Fitch will continue to monitor the ratings and take additional
actions if warranted. All ratings were originally placed on
Rating Watch Negative on Aug. 18, 2000 following Heilig-Meyers
Co. filing for Chapter 11 bankruptcy protection. The securities
are backed by a pool of finance contracts made through
subsidiary MacSaver Finance for purchases at Heilig-Meyers
furniture stores.


ICG COMMUNICATIONS: Rejects 15 Equipment Leases With GECC
---------------------------------------------------------
ICG Communications, Inc. and related Debtors ask Judge Walsh for
authorization to reject 15 individual equipment leases with
General Electric Capital Corporation as lessor, and either ICG
Holdings, Inc., ICG Telecom Group, Inc., or ICG Equipment, Inc.,
as lessee.

GECC is a diversified financial services company offering
services covering consumer and business financing. The Debtors
and GECC entered into 92 separate equipment leases between
November 1999 and August 2000. The Debtors remind Judge Walsh
that they previously submitted a Motion, which was granted, to
reject 10 equipment leases with GECC. The Debtors have not yet
made a decision as to whether to assume or reject the remaining
67 equipment leases between GECC and ICG.

Under the equipment leases subject to this Motion, the Debtors
lease from GECC certain office equipment, including fax machines
and copiers. Due to various steps taken by the Debtors to
facilitate their rehabilitation, including but not limited to
labor force reductions and site consolidations, the Debtors have
found themselves in possession of excess office equipment of the
variety leased under the equipment leases. Having no ongoing
need for this equipment, and the leases having no excess value
which can be assigned profitably to a third party, the Debtors
have determined it is in their best interests to reject these
leases as unprofitable and unnecessary for the Debtors'
reorganization. The Debtors have attempted to consolidate the
excess equipment leased under the equipment leases at several
sites throughout the country. Under the terms of the equipment
leases, the Debtors have informed GECC of the status of
equipment which has been moved from its original location. The
Debtors assure Judge Walsh and GECC that all of the equipment
leased under the equipment leases made the subject of this
Motion are located at two sites in Englewood, Colorado, and
Charlotte, North Carolina. If this Motion is granted, the
Debtors will provide GECC with the exact location of the
equipment leased under the rejected leases, the name of a point
person at ICG who will help coordinate return of the leased
equipment, and provide any other information necessary to ensure
the prompt return of the equipment to GECC in a commercially
reasonable manner.

Judge Walsh agrees with the Debtors' arguments and authorizes
rejection of these additional 15 equipment leases with GECC,
ordering that the Debtors take appropriate steps to return the
equipment to GECC. (ICG Communications Bankruptcy News, Issue
No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900)


INSCI-STATEMENTS.COM: Obtains $700,000 New Funding From Selway
--------------------------------------------------------------
insci-statements.com Corp. (OTCBB:INSI), now doing business as
INSCI, announced that it has closed a convertible debt facility
of up to $700,000, which is being provided by Totowa, N.J.-based
Selway Partners, LLC.

Selway, an existing INSCI shareholder, is a technology holding
company engaged in building technology-oriented companies. INSCI
received gross proceeds of $250,000 from the financing at the
closing and is scheduled to receive an additional $100,000 upon
completion of several post-closing
items.

INSCI can draw on the remainder of the facility, at the
discretion of Selway, and upon attaining certain operating
milestones. In addition, because of a capital insufficiency and
the price of recent share trades, the company's Common Stock
began trading on the Over The Counter (OTC) Market effective
today under the trading symbol INSI.

According to the announcement by INSCI President Henry F.
Nelson, the financing will be used to meet the company's current
working capital needs. "We have taken a number of steps to
further reduce and contain costs across the board and this
financing should help fund programs needed to increase sales and
bring us to a point of becoming cash flow positive."

The convertible debt bears an annual interest rate of 13 percent
payable in cash or in additional debentures and is secured by a
junior lien on all of INSCI's assets. Unless previously
converted into shares of Class B Convertible Preferred Stock,
principal and interest are payable at the earlier of June 15,
2002, or upon demand by the holder of the debt.

The Class B Preferred Stock is convertible into common stock at
the average closing price of the common stock for the 10 days
preceding the conversion date. The Preferred Stock has
liquidation preferences which are pari passu with other pre-
existing shares of Preferred Stock.

Selway Partners, LLC CEO and INSCI Chairman Yaron Eitan said,
"Supported by this financing, the current business plan
strategies and programs should move the company forward in
reaching its goal of locating alliances, partnerships or other
strategic business combinations that should lead to an
enhancement in shareholder value."

                       About INSCI

insci-statements.com Corp., doing business as INSCI, is a
leading-provider of highly scalable digital document repository
solutions that provide high-volume document capture, storage and
delivery functions via Local and Wide Area Networks or the
Internet. Its award-winning products bridge back-office with
front-office mission critical and customer-centric applications
by Web-enabling legacy-generated reports, bills, statements and
other documents.

The company has strategic partnerships and relationships with
such companies as Bell & Howell, Xerox, Moore and Unisys. For
more information about INSCI, visit www.insci.com. For
additional investor relations information, visit the Allen &
Caron Inc. Web site at www.allencaron.com.


KINETIC CONCEPTS: Completes $95 Million Refinancing
---------------------------------------------------
Kinetic Concepts, Inc. has completed and funded a $95 million
Tranche D Term Loan as part of a refinancing of its Senior
Secured Credit Facilities. The refinancing was accomplished by
means of an Amended and Restated Credit and Guarantee Agreement
effective June 15, 2001. Proceeds from the Tranche D Term Loan
were used to pay down existing indebtedness, including $60
million outstanding under the Tranche A Term Loan, $8 million
outstanding under the Acquisition Facility and $26 million under
the Revolving Credit Facility with the remaining proceeds used
to pay fees and expenses associated with this transaction.

Significant revenue growth in the Company's negative pressure
wound therapy devices has had the short-term effect of
increasing working capital needs for KCI. The Company believes
that the refinancing will provide the Company with the liquidity
necessary to continue investing in the growth of this product
line while meeting its operating and debt service obligations.
The Tranche D Term Loan amortizes at 1% per year through
December 31, 2005 with a final payment of $90.7 million due
March 31, 2006. The initial interest rate for the Tranche D Term
Loan is LIBOR plus 3.125% or 7.115%.


MARCHFIRST: Bankruptcy Court Gives Nod On SBi's Acquisitions
------------------------------------------------------------
SBi, a profitable and rapidly growing professional services
company, announced its acquisitions of employees, client
relationships and offices from the now defunct marchFIRST has
been approved by the bankruptcy court. The combined acquisitions
include the over 300 employees and 200 client relationships from
the New York, Portland, San Francisco and Denver offices.

"These acquisitions represent an important milestone in SBi's
business plan to offer customers in key vertical markets a set
of strategic services across their value chain that enable them
to improve operational efficiencies and profitability, to
improve customer acquisition and retention, and to increase
sales for their products and services," said Ned Stringham,
president and CEO of SBi. "Our work now will be to fully
integrate the newly acquired award-winning professionals and
clients into SBi and to continue on our path of impressive
organic growth of about 30 percent a year."

                      About SBi, Inc.

SBi is a rapidly growing and profitable professional services
company that helps customers fully leverage technology to solve
business problems. The company works with clients to evaluate
and implement a focused set of customer-facing, internal systems
and supplier-facing solutions across their entire value chain.
These solutions enable customers to improve operational
efficiencies and profitability, and to increase sales for their
products and services. The company's vertical market expertise,
knowledge of customer business processes, technology experience
and integrated marketing knowledge, coupled with proven
methodologies and processes, enable SBi to provide solutions on
time and on budget.

With the recently announced acquisition of strategic marchFIRST
assets, SBi, headquartered in Salt Lake City, has well over 700
employees and offices in 11 U.S. cities. For more information,
visit www.sbionline.com.


MESA AIR GROUP: Reports First Quarter 2001 Losses
-------------------------------------------------
In the quarter and six months ended March 31, 2001, Mesa Air
Group Inc.'s operating revenues increased by $13.8 million
(12.1%), and $34.5 million (15.3%), respectively, as compared to
the corresponding periods in 2000. This increase was primarily
due to the increase in capacity, as measured by available seat
miles, in the Mesa system. Available seat miles increased by
8.9% and 10.8% for the quarter and six-month period ended March
31, 2001 over the same period in 2000, respectively. The
increase in available seat miles was a result of the number of
regional jets added to the fleet, which have additional seats
and fly longer stage lengths. The regional jet aircraft, which
are generally faster and flown over a longer stage length than
the turboprop aircraft, typically generate lower revenue and
cost per available seat miles. Because Mesa expects to operate
increasing number of regional jet aircraft in the future,
overall revenue per available seat miles and cost per available
seat miles are expected to decrease in the future.

The air group experienced a net loss for the quarter ended March
31, 2001 of $(12,862) compared to a net gain of $780,600 in the
same quarter of the prior year. In the six month period ended
March 31, 2001 net loss was $(7,154), while in the six months
ended March 31, 2000 net gain was $ 32,587.


MEXICAN INDUSTRIES: Files for Chapter 11 Protection
---------------------------------------------------
Detroit-based Mexican Industries Inc., an auto supplier founded
22 years ago by former Detroit Tigers pitcher Hank Aguirre and
now controlled by one of his daughters, filed for chapter 11
protection on Monday, according to the Associated Press. The
company, which had lost key customers and executives in a
slowing automotive market, plans to liquidate its assets. One of
the nation's largest Hispanic-run auto suppliers, the Detroit-
based supplier of air bags, steering wheel systems, injection-
molded plastics and other products, had sales of $178 million in
2000. It shuttered factories in Detroit and Tempe, Ariz., last
week, leaving hundreds of workers without jobs.

In the chapter 11 petition, Mexican Industries said it plans to
liquidate all assets and sell its stakes in two Detroit-based
joint ventures-Dos Manos Technologies LLC and Aguirre, Collins &
Aikman Plastics Co. LLC-so they may continue full production.
The president of United Auto Workers Local 600 said Mexican
Industries owes nearly $2 million in unpaid union dues and
health insurance premiums. In an interview with the Detroit Free
Press on Saturday, Pamela Aguirre, chief executive officer of
Mexican Industries, denied that union dues had not been paid or
that employee health insurance payments have been stopped. (ABI
World, June 27, 2001)


MEXICAN INDUSTRIES: Chapter 11 Case Summary
-------------------------------------------
Debtor: Mexican Industries in Michigan Inc.
         1801 Howard Street
         Detroit, MI 48216

Chapter 11 Petition Date: June 25, 2001

Court: Eastern District of Michigan (Detroit)

Bankruptcy Case No.: 01-52300

Judge: Steven W. Rhodes

Debtor's Counsel: Phillip J. Shefferly, Esq.
                   Shefferly, Silverman & Morris
                   7115 Orchard Lake Rd., Ste. 500
                   West Bloomfield, MI 48322
                   248-539-1330


MEXICAN INDUSTRIES: Union Sues Owners To Recover Benefits
---------------------------------------------------------
Staff attorneys for the International Union, UAW, acting on
behalf of members affected by the recent plant closings
at Mexican Industries and UAW local 600, filed suit on Tuesday,
June 26, 2001, against Pamela, Rance, Robin and Jill Aguirre,
owners of Mexican Industries. The lawsuit seeks recovery of
health care and other benefits from the owners of Mexican
Industries as individuals because they used the company's money
as their own.

"The UAW worked hard to assist Mexican Industries workers during
their organizing efforts and their first contract negotiations,"
said UAW President Stephen P. Yokich, "and we will continue to
aggressively demand that their rights be recognized and
protected."

The UAW's suit was filed at Federal District Court in Detroit in
response to Mexican Industries owners' decision to close its
Detroit, Michigan and Tempe, Arizona facilities last week and
subsequent Chapter 11 Bankruptcy filing.  The UAW's complaint
states, in part, "Pamela Aguirre, Robin Krych, Jill Aguirre and
Rance Aguirre are the owners and alter egos of MIIM (Mexican
Industries in Michigan) ... diverted corporate funds and assets
to themselves, failed to adequately capitalize the corporation,
and otherwise used the corporation as an alter ego and mere
instrumentality of themselves, and as a device to defraud
creditors and employees.  Defendants diverted in excess of
$7 million in MIIM funds to themselves."

Commenting on the plant closing and the litigation, UAW Region
1A Director Gerald Bantom said, "Any plant closing has a
negative effect on workers, the communities and the customers it
supports.  But the Mexican Industries plant closings are
especially outrageous and difficult because of the role played
by the shameless personal aggrandizement of the owners.  It is
now clear that throughout the entire time that creditors,
workers, customers and the UAW were working to salvage Mexican
Industries, that goal was undermined at every turn by the greed
and irresponsibility of the owners of the company."

The UAW's suit is an attempt to recover benefits owed to the
workers, including health, dental and vision coverage, bonus pay
and vacation pay. Many displaced Mexican Industries workers are
now burdened with medical bills due to lapsed medical coverage
resulting from unpaid premiums by the owners of Mexican
Industries.

The suit also claims that the Mexican Industries owners violated
the Workers Adjustment and Retraining Act (WARN), which states
that if a permanent plant shutdown or mass layoff occurs, the
company must either give employees a 60-day notice or 60 days
pay.

The suit also seeks the payment of union dues withheld from
workers' paychecks but not forwarded to the union.


MICROAGE INC: SEC Says Bankruptcy Plan Is Unfair to Shareholders
----------------------------------------------------------------
An attorney representing the Securities and Exchange Commission
(SEC) challenged the liquidation plan of MicroAge Inc., saying
it would unfairly deprive the company's shareholders of certain
rights to sue and collect on claims against parties in the case,
according to Dow Jones. "At least 12,000 shareholders are having
their rights taken away from them," said Sandra LaVigna, senior
bankruptcy counsel for the Pacific Regional Office of the SEC.
She participated via conference call in a U.S. Bankruptcy Court
hearing in Phoenix, where MicroAge's chapter 11 plan to
liquidate the company was expected to win the confirmation of
Judge Charles Case.

Instead, Judge Case said he will need 24-36 hours to determine
whether to release the parties in the case from liability as
outlined in the plan, reported Dow Jones. The U.S. Trustee's
Office had earlier filed a written objection to the language in
the plan that would release all parties in the case, including
attorneys, from liability related to any actions taken after the
chapter 11 bankruptcy petition was filed on April 13, 2000. The
SEC added its voice in a late-filed objection on Friday. If
Judge Case strikes the release language in whole or in part,
MicroAge attorney Don Gaffney indicated that the company likely
would no longer seek confirmation of the rest of the plan as
drafted. Tempe, Ariz.-based MicroAge was delisted due to the
bankruptcy filing. (ABI World, June 27, 2001)


NATIONAL AIRLINES: Reports on Reorganization Progress
-----------------------------------------------------
In U.S. Bankruptcy Court, National Airlines Inc. received
approval to further pursue a financial agreement that would
enable the company to successfully reorganize.

The Court ruling followed testimony and support from the
airline's lessors, Creditors' Committee and a letter from an
aerospace company stating that it was working in concert with
another major travel industry entity with significant ties to
the Las Vegas market and which has a serious interest in the
restructuring of National Airlines. The aerospace company,
International Lease Finance Corp. (ILFC), is the world's largest
aircraft lessor and as of March 2001, had $20.8 billion in
assets. ILFC's letter also stated that the "investor" it had
identified could "also bring significant resources to bear."

Michael J. Conway, president and CEO for National Airlines,
said, "The light at the end of the tunnel just got significantly
brighter. We have come a long way in our reorganization, and
still have a lot of work to do. But I have known the principals
at ILFC for 20 years, and I am extremely encouraged by their
expression of interest in National Airlines thus far."

He noted that the company would continue to work diligently
toward the goal of submitting an outline of a restructuring plan
by July 31, 2001.

"I would be remiss in not recognizing the efforts of a number of
people and entities, not the least of which are the employees of
National Airlines, our aircraft lessors, major creditor
constituents, travel agent partners, and of course, our
customers. Without their continued support, the company would
not have had the opportunity to reach this stage. I am
especially grateful to ILFC for the initiative they have taken,"
Conway added.

National has continued to operate its scheduled service
uninterrupted since its reorganization filing on Dec. 6, 2000,
and began new service at Chicago O'Hare International Airport in
May. The carrier has operated 5,257 of its scheduled 5,278
flights since April 1, a 99.6 percent flight completion factor,
"arguably the best completion factor in the industry," Conway
noted.

The CEO said that the airline would not make any further
statements about the identities of potential investors or
negotiations until definitive agreements are reached.


OWENS CORNING: Moves To Infuse Capital Into StaMax LLC
------------------------------------------------------
As part of its business, Owens Corning owns a 50% interest in
StaMax North America LLC, which is a Delaware limited liability
company. The remaining 50% of StaMax is owned by DSM
Polypropylenes North America, Inc., a non-affiliated entity.
Owens Corning also owns, through its wholly-owned subsidiary
IPM, Inc., 50% of StaMax B.V., which is a company organized
under the laws of the Netherlands. The remaining 50% of StaMax
B.V. is owned by DSM Polypropylenes B.V.

StaMax LLC and StaMax BV represent an important element of Owens
Corning's automotive strategy. The StaMax businesses were
founded in 1999 for the purpose of manufacturing raw materials
used in the production of car parts, such as front-end modules,
door modules, seating, instrument panels, running boards, and
the like. When founded, the StaMax businesses received a total
equity infusion from Owens Corning, IPM, DSM Polypropylenes
North America, Inc., and DSM Polypropylenes B.V. of $2.1
million. $600,000 of that amount was funded to StaMax LLC, and
$1,500,000 was funded to StaMax B.V.

Since its creation, the StaMax businesses have focused their
resources primarily on working with global automotive original
equipment manufacturers to secure contracts to place automotive
parts made with StaMax materials on future automobile platforms.
The typical lead-time in the automotive industry is three to
five years from development work to production; accordingly, a
program developed in 2001 is expected to generate revenues
starting in 2004-2006. Although the StaMax businesses have not
yet realized appreciable sales volume (in their start-up years
of 1999 and 2000, they lost $2.2 million and $3.1 million,
respectively), their current business plans yield revenue of
$4.0 million in 2001, $14.0 million in 2002, $22 million in
2003, and $31 million in 2004. The Debtors believe that the
StaMax businesses will meet their projections and that StaMax
B.V. will be profitable by 2002 and that StaMax LLC will be
profitable by 2003.

In order for the StaMax businesses to realize their anticipated
value, it is imperative that they receive additional working
capital. Specifically, in order to maintain the StaMax
businesses as going concerns, and allow them to realize their
anticipated value, they need $4.0 million of working capital -
$1.4 million for StaMax LLC (one-half of which would be funded
by Owens Corning) and $2.6 million for StaMax B.V. (one-half of
which would be funded by Owens Corning) to sustain operations
until their businesses are cash-flowing.

Although the Debtors believe that an equity infusion of $700,000
of working capital into StaMax LLC is within the ordinary course
of Owens Corning's businesses, authority is sought for the
transfer by judicial review and approval, out of an abundance of
caution. The proposed infusion of funds into StaMax LLC is
without a doubt necessary to preserve StaMax LLC as a going
concern. Without this working capital infusion, StaMax will be
forced to cease its operations and the anticipated benefit of
the StaMax investment will have been lost. The Debtors submit
that the proposed infusion is therefore an exercise of their
sound business judgment. (Owens Corning Bankruptcy News, Issue
No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900)


PACIFICARE HEALTH: S&P Assigns Preliminary BB- Bank Debt Rating
---------------------------------------------------------------
Standard & Poor's affirmed its double-'B'-minus issuer credit
rating on PacifiCare Health Systems Inc. At the same time,
Standard & Poor's assigned its preliminary double-'B'-minus bank
loan rating to PacifiCare's senior secured $150 million bank
line and $350 million senior secured term loan, and it assigned
its preliminary double-'B'-minus debt rating to PacifiCare's
$500 million senior unsecured notes due 2011. The outlook is
stable.

The senior unsecured notes are a private placement 144-A
offering. PacifiCare intends to use the proceeds from the sale
of the notes--together with funds available under the new senior
secured credit facility--to repurchase $100 million of
outstanding 7% senior notes due 2003 and to repay its existing
credit facility. The proposed new senior secured credit facility
includes a five-year revolving credit facility of $150 million
and seven-year term loan of $350 million. At the closing of the
refinancing, the company expects the term loan to be fully drawn
and the revolving credit facility to be undrawn.

Major Rating Factors:

      --  Although PacifiCare is profitable, its earnings in 2000
and 2001 have been negatively affected by the transition in some
of its contracts with providers. This has occurred primarily in
its commercial health plan operations and largely stemmed from a
change from capitated to shared-risk contracts with California
hospitals in its networks.

      --  On May 30, 2001, PacifiCare announced lower revised
earnings projections for 2001. The revised expectations of
EBITDA of $350 million and net income of $56 million-$59 million
for the year ended Dec. 31, 2001, are not inconsistent with
Standard & Poor's expectations in November 2000, when Standard &
Poor's lowered its issuer credit rating on PacifiCare to double-
'B'-minus from double-'B'-plus. Full-year 2000 EBITDA was $498
million.

      --  Although earnings issues have also reduced the
flexibility of PacifiCare's operating companies to produce cash
for the consolidated organization, Standard & Poor's believes
each regulated unit will meet regulatory requirements for
statutory capital over the next few years. However, Standard &
Poor's considers PacifiCare's consolidated statutory
capitalization (regulated entities only), based on Standard &
Poor's proprietary capital adequacy model, to be marginal.

      --  Pretax interest coverage would be about 2.5 times in
2001. PacifiCare's debt-to-total-capital ratio as of year-end
2000 was 29%, with $836 million of outstanding debt as of Dec.
31, 2000. On a pro forma basis, if the company's debt
refinancing had occurred on March. 31, 2001, debt leverage would
be about 29%, which Standard & Poor's considers acceptable for
the rating category. However, Standard & Poor's also notes that
PacifiCare carries about $2.2 billion of goodwill and other
intangibles on its balance sheet, which is an aggressive 80% of
capital. The goodwill is being amortized over periods ranging
from three to 40 years and primarily reflects the operations in
the Western region, including California. About half of this
goodwill, held at regulated entities, is generally not
recognized as an asset under statutory accounting principals.
Any future goodwill writedowns related to unprofitable markets
could affect the company's debt leverage.

      --  Liquidity remains good, with free cash flow projected
to be about $150 million in 2001. This projection assumes that
the debt refinancing is successfully completed and that medical
claim trends do not continue to exceed premium yields projected
by the company.

      --  PacifiCare holds a strong business position as a
regional managed care organization. With 3.7 million members as
of March 31, 2001, PacifiCare operates HMOs in eight states,
with key market shares in California, Colorado, Oklahoma,
Arizona, and Texas. PacifiCare covers more than 1 million
members in its Medicare+Choice programs. The company has
historically had a strong position in the Medicare Risk
marketplace, but this product design has relied on capitated
contracts. Historically, it also focused on strict HMO products
and is now building preferred provider organization capacity to
broaden its product range and respond to market needs.

                      Outlook: Stable

Standard & Poor's expects PacifiCare's 2001 EBITDA to be close
to its announced expectations, but there is potential for
significant variation. The company is expected to continue to
meet regulatory capital requirements in all states. Enrollment
is expected to decline somewhat because of the company's efforts
to repair its earnings and exits from certain Medicare markets.
Standard & Poor's believes the company is in a transition
period, during which it is putting various systems into effect
to manage health care utilization and costs, tasks that were
previously assumed under the capitated contracts by providers.


PENNZOIL-QUAKER: Fitch Lowers Senior Unsecured Rating To BB+
------------------------------------------------------------
Fitch lowers Pennzoil-Quaker State Company's senior unsecured
debt rating to 'BB+' from 'BBB-' following the company's
announcement that it has lowered its guidance for 2001 recurring
earnings from continuing operations. This rating action affects
about $850 million of the company's debt. The Rating Outlook is
Stable. Fitch also withdraws its commercial paper rating as the
program has been discontinued.

During 2000, Pennzoil's operating and financial performance was
negatively impacted by lower volumes in the company's lubricant
and consumer products segments. This is due to a sharp increase
in crude and base oil prices, the company's primary raw material
components, as well as higher gasoline prices which has lead to
fewer miles driven and less frequent oil changes. In 2001 volume
levels had been expected to remain flat, however, continued high
base oil prices, leading to the sixth price increase in July
2001, and high gasoline prices, which reduces miles driven, are
expected to result in volumes that will be 6% lower than the
previous year, negatively impacting revenues and earnings.

Fitch recognizes that Pennzoil is taking steps to reduce its
cost base and improve cash flow generation by accelerating its
restructuring program and reducing its dividend. In addition,
the company plans to reduce its debt levels by about $200
million in 2001 primarily funded by proceeds from asset sales.
Despite these actions, Fitch expects the fall off in volume and
weakened operating performance will result in slower than
previously expected improvement in the company's credit profile.
For the latest twelve months ended March 31, 2001, leverage,
measured by total debt to EBITDA, was 4.7 times (x) and EBITDA
coverage of interest was 2.8x.

Pennzoil's $450 million unsecured revolving bank credit facility
is due on Dec. 13, 2001, with any borrowings on that date
converted into a one-year term facility, and its $150 million
8.65% senior unsecured notes are due in 2002. Fitch expects the
company to renew its facilities and refinance the notes. Fitch
will continue to monitor the company's operating performance
and its refinancing progress.

The rating continues to reflect Pennzoil-Quaker State's leading
market positions in motor oil and automotive consumer products,
significant fast oil change operations, and geographic diversity
of sales.


PILLOWTEX CORP.: Vigilant Insurance Asks Court To Annul Stay
------------------------------------------------------------
Vigilant Insurance Company became one of Pillowtex Corporation's
claimants after it paid $490,028.13 to Harley and Ruth Barker,
their policyholders whose house burned down in a fire that was
triggered by a malfunction of an electric warming blanket. The
blanket was manufactured by Fieldcrest.

After almost two years of negotiations, Vigilant and Fieldcrest
failed to settle Vigilant's subrogated claim amicably. This
prompted Vigilant to file a case against Fieldcrest in the
Superior Court of Harricopa County, Arizona, in March last year.

Vigilant discovered that Fieldcrest had insurance in place with
Lumberman's Mutual Casualty (Kemper) to cover the Barkers'
claim.

Mark E. Felger, Esq., at Cozen and O'Connor, in Wilmington,
Delaware, notes that the Barkers' Claim was tendered to
Lumberman's in June 2000. But Lumberman responded in silence.

Vigilant sought an order for relief to continue their State
Court Action against the Debtors, in connection with its
subrogation claim. Judge Robinson granted their petition.

Mr. Felger assures Judge Robinson that Vigilant will limit its
recovery to the insurance proceeds of Debtors' insurance
policies in effect at the time of the incident.

Vigilant also waives any deficiency claim, so long as the
Debtors' insurance policies were in effect at the time of the
accident. If it weren't, then Vigilant merely seeks to liquidate
its claim. (Pillowtex Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)


PROFILE TECHNOLOGIES: Appeals Nasdaq Delisting Ruling
-----------------------------------------------------
Profile Technologies, Inc. (NASDAQ: PRTK) announced that it will
appeal a ruling received from Nasdaq stating that Profile has
not complied with certain requirements for continued listing on
the Nasdaq SmallCap Market.

As a result of its appeal, Profile Technologies will continue to
trade on Nasdaq until a hearing is held before Nasdaq's Listing
Qualifications Panel.

On June 20, Profile received a Nasdaq Staff Determination letter
indicating that the Company has not met the net tangible assets
requirement for continued listing as set forth in Nasdaq
Marketplace Rule 4310(c)(2)(B). The letter further advised that
the Company's common stock would be subject to delisting from
Nasdaq's SmallCap Market. Had Profile Technologies not appealed
this determination, the Company's common stock would have been
subject to delisting action on June 28, 2001. While the hearing
request has delayed the delisting process, the Company's common
stock will be delisted from the SmallCap Market without further
notification if the Listing Qualifications Panel denies the
Company's appeal. The Company said that it would make
significant efforts to strengthen its working capital position
in order to satisfy the concerns of Nasdaq.

Profile is engaged in the business of researching and developing
a high speed, non-invasive and non-destructive scanning process
to remotely test buried and insulated pipelines for corrosion.
The Company's electromagnetic wave inspection process, referred
to as Profile's Inspection EMW or "EMW," is a patented process
of analyzing wave forms of electrical impulses in a way that
extracts point-to-point information along a pipeline segment in
order to determine the integrity of the entire pipeline without
the need to remove pipeline insulation or excavate the
pipelines.


PSINET INC.: Employs DrKW As Financial Advisor
----------------------------------------------
PSINet, Inc. seeks Bankruptcy Court authority to employ DrKW as
investment banker and financial advisor pursuant to 11 U.S.C.
Secs. 327(a) and 328(a), effective as of the petition date.

The Debtors hired DrKW as their investment banker and financial
advisor in connection with, among other things, the commencement
and prosecution of their Chapter 11 cases, and to assist PSINet
in their efforts to restructure or sell their assets.  The
Debtors desire that DrKW's employment continue, without
interruption.

Harry G. Hobbs, Chief Executive Officer of PSINet Inc., tells
the Court that the DrKW's services are necessary to enable the
Debtors to execute their duties as debtors in possession.

The Debtors' selection of DrKW is based on, among other things,
an excellent reputation of DrKW and its senior professionals for
providing high quality financial advisory services to debtors
and creditors in bankruptcy reorganizations and other debt
restructurings. To the knowledge of PSINet and its affiliated
Debtors, DrKW has extensive experience advising
telecommunications companies facing circumstances similar to
those the Debtors face. DrKW professionals expected to have
primary responsibility for providing services to the Debtors in
these chapter 11 cases are:

             Kenneth Buckfire     Managing Director
             Fred Seegal          Managing Director
             Jeffrey Johnson      Managing Director
             Marc Puntus          Managing Director

On January 3, 2001, DrKW became an indirect, wholly owned
subsidiary of Dresdner Bank AG and part of Dresdner Kleinwort
Wasserstein, the Investment Banking Division of Dresdner Bank
AG.

The Investment Banking Division, the Debtors note, has over
8,000 professionals in more than 30 locations around the world,
including a major presence in the key financial centers of
London, Frankfurt and New York. In the year 2000, the Investment
Banking Division ranked as one of the leading global M&A houses,
advising on M&A deals with a total value in excess of $440
billion.

Moreover, the Debtors believe that DrKW's familiarity with the
Debtors' financial affairs, their businesses, and the
circumstances surrounding the commencement of these Chapter 11
cases, will minimize expenses to the Debtors' estates for the
services contemplated.

The services to be provided by DrKW in these Chapter 11 cases
include:

(a) Financial Advisory Services

      As requested by the Debtors, DrKW will:

      (i)  to the extent it deems necessary, appropriate and
           feasible, continue to familiarize itself with the
           business, operations, properties, financial condition
           and prospects of the Debtors; and

      (ii) if the Debtors determine to undertake a Restructuring,
           Financing and/or Sale, advise and assist the Debtors
           in structuring and effecting the financial aspects of
           such a transaction or transactions, subject to the
           terms and conditions of the Engagement Letter.

(b) Restructuring Services

      If the Debtors pursue a Restructuring, DrKW will:

      (i)   provide financial advice and assistance to the
            Debtors in developing and obtaining approval of a
            Restructuring plan, including a plan of
            reorganization under Chapter 11 of the Bankruptcy
            Code;

      (ii)  in connection therewith, provide financial advice and
            assistance to the Debtors in structuring any new
            securities to be issued under the Plan;

      (iii) if requested by the Debtors, assist the Debtors
            and/or participate in negotiations with entities or
            groups affected by the Plan; and

      (iv)  if requested by the Debtors, participate in hearings
            before the Bankruptcy Court with respect to the
            matters upon which DrKW has provided advice,
            including, as relevant, providing testimony.

(c) Financing Services

      If the Debtors pursue a Financing, DrKW will, as requested
      by the Debtors:

      (i)   provide financial advice and assistance to the
            Debtors
            in structuring and effecting a Financing, identify
            potential Investors and, at the Debtors' request,
            contact such Investors;

      (ii)  if DrKW and the Debtors deem it advisable, assist the
            Debtors in developing and preparing a financing
            offering memorandum to be used in soliciting
            potential Investors; and

      (iii) if requested by the Debtors, assist the Debtors
            and/or participate in negotiations with potential
            Investors.

(d) Sale Services

      If the Debtors pursue a Sale, DrKW will, as requested by
      the Debtors:

      (i)   provide financial advice and assistance to the
            Debtors in connection with a Sale, identify potential
            acquirors and, at the Debtors' request, contact such
            potential acquirors,

      (ii)  at the Debtors' request, assist the Debtors in
            preparing a Sale Memorandum to be used in soliciting
            potential acquirors; and

      (iii) if requested by the Debtors, assist the Debtors
            and/or participate in negotiations with potential
            acquirors.

Under the terms of the Engagement Letter, subject to the Court's
approval pursuant to Section 328(a) of the Bankruptcy Code, DrKW
will be entitled to the following fees for its services:

(a) Initial Fee

      The Debtors paid DrKW an initial financial advisory fee of
      $200,000 on March 2, 2001 and prepaid the first four
      Monthly Advisory Fees upon the execution of the Engagement
      Letter.

(b) Monthly Advisory Fees

      DrKW is entitled to additional financial advisory fees of
      $200,000 per month, payable on the first of each month
      beginning April 1, 2001.

(c) Transaction Fees

      Upon consummation of certain business and/or financing
      transactions, DrKW is entitled to receive Transaction Fees:

      (1) Sale Transaction Fee

          Upon consummation of a Sale during the term of DrKW's
          engagement or within 12 months thereafter (the "Fee
          Period") and payable at the closing of such sale, DrKW
          will be entitled to receive a Sale Transaction Fee
          equal to:

          2.0% of the first $200 million of Aggregate
          Consideration, plus 0% of all Aggregate Consideration
          between $200,000,001 and $500,000,000, plus 0.5% of
          Aggregate Consideration in excess of $500,000,000;

          provided, however, that the maximum Sale Transaction
          Fee payable to DrKW shall be $12,000,000.

          In general, Aggregate Consideration includes all forms
          of value transferred and debt assumed or paid, directly
          or indirectly, by the acquiring party in the Sale
          transaction; and, in the case of a Sale structured as a
          recapitalization, all forms of value received or
          retained by the Debtors' shareholders or creditors in
          the transaction with respect to their interests or
          claims.

      (2) Restructuring Transaction Fee

          Upon consummation of a Restructuring during the Fee
          Period, DrKW will be entitled to receive a
          Restructuring Transaction Fee equal to $12,000,000.
          This fee equals approximately 3.4% of the approximately
          $3,500,000,000 in debt obligations of the Debtors and
          certain affiliates.

      (3) Financing Transaction Fee

          Upon consummation of a Financing during the Fee Period,
          DrKW will be entitled to receive:

          * 1.0% of the gross cash proceeds to the Debtors of any
            indebtedness issued that is secured by a first lien;
          * 3.0% of the cash gross proceeds to the Debtors of any
            indebtedness issued that (x) is secured by a second
            or more junior lien, (y) is unsecured and/or (z) is
            subordinated;
          * 5.0% of the gross cash proceeds to the Debtors of any
            equity or equity-linked securities or obligations
            issued; and
          * with respect to any other securities or indebtedness
            issued, such underwriting discounts, placement fees
            or other compensation as shall be customary under the
            circumstances and mutually agreed by the Debtors and
            DrKW.

          In addition, DrKW is to be offered the right, but will
          not be obligated, to act as:

          (a) at DrKW's option, lead or co-manager with respect
              to a public offering of the Debtors' equity
              securities;

          (b) at DrKW's option, sole or lead agent of any private
              placement of the Debtors' equity securities; and

          (c) at DrKW's option, sole or lead manager or sole or
              lead agent of any public offering or private
              placement of the Debtors' debt securities or
              obligations.

          -- No Double Counting

             Notwithstanding the Engagement Letter, DrKW has
             agreed with the Debtors that, if more than one
             transaction fee becomes payable to DrKW in
             connection with a single transaction (which does not
             include a series of related transactions or a series
             of transactions conditioned on one another), DrKW
             will be entitled to collect only the highest
             transaction fee payable with respect to such
             transaction.

Under the terms of the Engagement Letter, DrKW will also be
entitled to monthly reimbursement of its reasonable out-of-
pocket expenses incurred in connection with its engagement by
the Debtors.

The Debtors propose that any Transaction Fees be paid to DrKW at
the time of closing of the applicable transaction, subject to
the Court's approval, the applicable provisions of the
Bankruptcy Code, the Bankruptcy Rules and the Local Rules of the
United States Bankruptcy Court for the Southern District of New
York.

Specifically, the Debtors propose that:

(a) the Transaction Fees and other fees and expenses described
     in the Engagement Letter will in all cases be subject to
     approval of the Court under Section 328(a) of the Bankruptcy
     Code, as incorporated in Section 330 of the Bankruptcy Code,
     upon a proper application by DrKW in accordance with
     Sections 328(a), 330 and 331 of the Bankruptcy Code,
     Bankruptcy Rule 2016, the fee and expense guidelines
     established by the United States Trustee for the Southern
     District of New York, the Local Bankruptcy Rules, and the
     orders of the Court;

(b) the Monthly Fees and any other fees and expenses in addition
     to the Transaction Fees will be paid to DrKW on an interim
     basis only upon specific approval from the Court or in
     accordance with any other procedures for the compensation of
     professionals established by the Court in these Chapter 11
     cases, such as the procedures proposed in the Compensation
     Procedures Motion, and

(c) any fees or expenses paid to DrKW but disapproved by the
     Court will be promptly returned by DrKW to the Debtors.

DrKW has agreed that it will not seek a fee with respect to any
DIP financing obtained by the Company, unless the Company agrees
to such fee in a future writing, subject to the approval of the
creditors' committee and Court.

Although DrKW will be retained on a monthly fee and
transactional basis, DrKW will maintain time and expense records
in connection with the rendering of its services in these cases
in accordance with the Local Bankruptcy Rules and other
orders/guidelines of this Court.

The Debtors will indemnify and hold harmless DrKW and its
affiliates, their respective directors, officers, agents,
employees and controlling persons, and each of their respective
successors and assigns (collectively, the "Indemnified Persons")
pursuant to the Engagement Letter, provided, however, that, in
no event shall an Indemnified Person be indemnified in the event
of a claim asserted by the Debtors, their estates, or the
Committee and determined by the Court to be arising out of bad-
faith, self-dealing, breach of fiduciary duty, if any, gross
negligence, or willful misconduct on the part of any Indemnified
Person.

All requests of Indemnified Persons for payment of indemnity,
contribution or otherwise pursuant to the indemnification
provisions of the Engagement Letter shall be made by means of an
Interim or Final Fee Application subject to review by the Court.
In the event an Indemnified Person seeks reimbursement for
attorneys' fees from the Debtors pursuant to the Engagement
Letter, the invoices and supporting time records from such
attorneys shall be included in DrKW's own Interim and Final Fee
Applications, and such invoices and time records shall be
subject to the United States Trustee's guidelines for
compensation and reimbursement of expenses and the approval of
the Bankruptcy court under the standards of section 330 of the
Bankruptcy Code without regard to whether such attorney has been
retained under section 327 of the Bankruptcy Code.

Prior to the Petition Date, DrKW received a total of
$1,088,791.91 for prepetition Monthly Fees, estimated related
expenses to date and as a retainer for Monthly Fees to be
incurred postpetition, pursuant to the Engagement Letter.

The Debtors submit that to the best of their knowledge, DrKW has
no connection with, and holds no interest materially adverse to,
the Debtors, their creditors, or any other party in interest, or
their respective attorneys or accountants in the matters for
which DrKW is proposed to be retained, except as disclosed in
the Buckfire Affidavit.

Kenneth A. Buckfire assures the Court that the firm is a
"disinterested person", as such term is defined in Section
101(14) of the Bankruptcy Code.  In an affidavit, Mr. Buckfire
presents to the Court a list of the Interested Parties in the
PSINet cases that have employed or currently employ the
Investment Banking Division in matters unrelated to these
chapter 11 cases.  For full disclosure, Mr. Buckfire
specifically identifies certain details of the most significant
of these employment relationships.

Mr. Buckfire notes that DrKW is currently retained by trade
creditors of the Debtors - ICG Communications, Inc. and Viatel,
Inc. - in their respective chapter 11 cases. DrKW believes that
such retention does not create an interest materially adverse to
the Debtors in these cases.

Mr. Buckfire also tells the Court that, in May 1999, a
separately managed business unit of the Investment Banking
Division, Wasserstein Parella Securities, Inc. ("WPS", n/k/a
Dresdner Kleinwort Wasserstein Securities, Inc., participated
with several other investment banks, in a syndicate of non-
controlling members, in the underwriting services for PSINet,
Inc., in connection with a secondary offering of PSINet Inc.'s
common stock. The role of WPS was limited to the temporary
holding of 120,000 of the 16,000,000 shares issued by PSINet
Inc. The limited number of shares purchased by WPS were
concurrently sold to customers and are no longer held by WPS or
any entity or affiliate of DrKW. Mr. Buckfire believes that such
services do not present any overlap or conflict with the role of
DrKW as financial advisor in the PSINet chapter 11 cases. Mr.
Buckfire notes that  the Debtors have acknowledged in their
latest Form 10-K that "it is likely that our common stock . . .
will have no value. . . ."

Mr. Buckfire has identified these parties in interest in the
PSINet cases to which DrKW and its affiliates that are part of
the Investment Banking Division provide or have provided
financial advisory services:

              * Ameritech
              * AT&T
              * BellSouth
              * Bombardier
              * Charter
              * Citibank
              * Comerica
              * Morgan Stanley Dean Witter (advised Dean Witter
                on its combination with Morgan Stanley)
              * Deutsche Bank
              * Donaldson, Lufkin & Jenrette
              * Ernst & Young
              * General Electric Capital Corporation
              * Goldman Sachs
              * ICG Telecom Group (advisor re: ICG
                Telecommunications restructuring)
              * ING Barings
              * JP Morgan Chase (expert witness)
              * Lehman Brothers
              * Merrill Lynch
              * MCI Worldcom
              * National City Bank
              * Northern Trust Company
              * Nortel
              * PricewaterhouseCoopers
              * Siemens
              * Sumitomo Trust & Banking Co.
              * UBS Warburg (advised UBS on its combination with
                Warburg)
              * Union Planters
              * Verizon
              * Viatel (advisor re: Viatel restructuring)

Mr. Buckfire notes that:

      "It is typical in its relationship with many of its clients
and prospective clients that DrKW and its affiliates that are
part of the Investment Banking Division are readily available to
provide advice and guidance in the ordinary course of business
regarding prospective deals. DrKW will supplement its disclosure
by further filings (or, if appropriate, in camera before the
Court) if any such matters develop into the retention of DrKW
and its affiliates that are part of the Investment Banking
Division by a party in interest in these Chapter 11 cases."

      "Certain affiliates of DrKW that are part of the Investment
Banking Division [(the "Sales and Trading Affiliates")] have
from time to time made a market in and bought and sold or
otherwise effected transactions for customer accounts and for
its own account in the securities and/or liabilities of the
Debtors. The Sales and Trading Affiliates, however, are not and
were not an investment banker for any outstanding security of
the Debtors and are not and have not been an investment banker
for a security of the Debtors in connection with the offer, sale
or issuance of a security of the Debtors. ... The Sales and
Trading Affiliates may buy and sell or otherwise effect
transactions in the securities and/or liabilities of the Debtors
on an unsolicited basis for customer accounts. A customary
securities industry 'information wall' exists between DrKW and
the Sales and Trading Affiliates."

      "The Sales and Trading Affiliates may have acted or may
from time to time act as an underwriter or may have made or may
from time to time make a market in, have a short or long
position in, buy or sell or otherwise effect transactions for
customers accounts and for their own accounts in the securities
of creditors or other parties in interest in [the PSINet]
Chapter 11 case wholly unrelated to these cases or DrKW's
financial advisory services for the Debtor."

      "Certain of the creditors and other parties in interest in
these Chapter 11 cases are actively engaged in the purchase and
sale of debt securities and liabilities. The Sales and Trading
Affiliates are a leading dealer of such instruments and
accordingly have trading relationships with certain ...
creditors or other parties in interest in these Chapter 11
cases.

      "An affiliate of DrKW that is part of the Investment
Banking Division has from time to time acted as a broker for the
purchase and sale of the assets of creditors or other parties in
interest in these Chapter 11 cases which are subject to leasing
agreements, such as aircraft and railway cars."

      "An affiliate of DrKW that is part of the Investment
Banking Division has from time to time managed investments for
clients and purchase or sold securities on behalf of those
clients who may be creditors or other parties in interest in
these Chapter 11 cases. In addition, this affiliate has from
time to time purchased or sold the securities of creditors or
other parties in interest in these Chapter 11 cases on behalf of
its clients, and currently holds positions in the securities of
creditors or other parties In interest in these Chapter 11 cases
on behalf of its clients. The amount of such holdings does not
require disclosure under Section 13(g) of the Securities
Exchange Act of 1934."

Mr. Buckfire represents in his affidavit that, in its
relationship with clients and prospective clients, the
Investment Banking Division are readily available to provide
advice and guidance in the ordinary course of business regarding
prospective deals. Nevertheless, Mr. Buckfire assures that the
Investment Banking Division will not act for a client in a
matter related to the Debtors and these Chapter 11 cases. Mr.
Buckfire also covenants that DrKW will supplement its disclosure
by further information to the Court if any such matters develop
into the retention of DrKW and its affiliates that are part of
the Investment Banking Division by a party in interest in these
Chapter 11 cases.

With respect to the Sales and Trading Affiliates of DrKW that
are part of the Investment Banking Division, Mr. Buckfire
acknowledge that these entities may have from time to time made
a market in and bought and sold or otherwise effected
transactions in the securities and/or liabilities of the Debtors
for customer accounts and for its own account. The Sales and
Trading Affiliates, however, are not and were not an investment
banker for any outstanding security of the Debtors and are not
and have not been an investment banker for a security of the
Debtors in connection with the offer, sale or issuance of a
security of the Debtors. Thus, Mr. Buckfire believes that the
Sales and Trading Affiliates' activities relating to the
securities of the Debtors do not present a conflict of interest
such that DrKW should be disqualified from providing the
financial advisory services as described in the Application and
Engagement Letter.

The Sales and Trading Affiliates may also have acted or may act
as an underwriter or effect transactions for customers accounts
and for their own accounts in the securities of creditors or
other parties in interest in the PSINet Chapter 11 case wholly
unrelated to these cases or DrKW's financial advisory services
for the Debtor, Mr. Buckfire relates.

Mr. Buckfire reveals that an affiliate of DrKW that is part of
the Investment Banking Division has from time to time acted as a
broker for the purchase and sale of the assets of creditors or
other parties in interest in these Chapter 11 cases which are
subject to leasing agreements, such as aircraft and railway
cars.

In addition, an affiliate of DrKW that is part of the Investment
Banking Division has from time to time managed investments for
clients and purchase or sold securities on behalf of those
clients who may be creditors or other parties in interest in
these Chapter 11 cases. In addition, this affiliate has from
time to time purchased or sold the securities of creditors or
other parties in interest in these Chapter 11 cases on behalf of
its clients, and currently holds positions in the securities of
creditors or other parties In interest in these Chapter 11 cases
on behalf of its clients. The amount of such holdings does not
require disclosure under Section 13(g) of the Securities
Exchange Act of 1934, Mr. Buckfire says.

In general aspects, Mr. Buckfire notes that:

      -- From time to time, DrKW may perform or may have
performed services for, or maintained other commercial or
professional relationships with certain creditors of the Debtors
and various other parties adverse to the Debtors in matters
unrelated to these Chapter 11 cases.

     -- DrKW and its affiliates that are part of the Investment
Banking Division have worked with, continue to work with and
share mutual clients with certain law firms, accounting firms
and financial advisory firms who represent parties in interest
in these cases in matters unrelated to these Chapter 11 cases.

     -- In the ordinary course of its business and unrelated to
these cases, Dresdner Bank, in connection with its sales and
trading business, has trading relationships with certain parties
in interest which includes short-term credit exposure related to
the clearance of trades; and

     --In the ordinary course of its business, and unrelated to
these cases, Dresdner Bank, in connection with its commercial
lending business, acts as an agent for and participates in
commercial loan syndicates of certain of the creditors in these
cases.

     -- In the ordinary course of its business, Dresdner Bank
has, directly or through one of its subsidiaries or affiliates,
extended loans or provided financing to creditors and parties in
interest in these cases. In each case, the loans represent a de
minimus amount of the outstanding principal amount of all
outstanding loans made by Dresdner Bank and its subsidiaries and
affiliates;

     -- Dresdner Bank, in the ordinary course of its business and
unrelated to these cases, may hold the securities or liabilities
of certain parties in interest in these cases in accounts on
behalf of its customers or in proprietary accounts for its sales
and trading activities;

     -- In order to maintain an investment strategy which tracks
the Standard & Poor's 500 Index, Dresdner Bank holds shares of
certain Interested Parties which are listed on the Standard &
Poor's Index for similar purposes;

     -- It is possible that certain of the emloyees of DrKW and
the Investment Banking Division hold interests in mutual funds
or other investment vehicles that may own debt or equity
interests in the Debtors, given that DrKW has several thousand
employees and the Investment Banking Division has over eight
thousand employees.

     -- Dresdner Bank, unrelated to these cases, may have held in
the past, may currently hold or may hold in the future de
minitnus amounts of securities of certain of the parties in
interest in these cases other than the Debtors or its
affiliates.

Dresdner Bank AG also has affiliations with many businesses
(including Allianz and its subsidiaries) that are operated
separately from Dresdner Bank AG, DrKW and the Investment
Banking Division. Because of the separateness of these
businesses from Dresdner Bank AG, DrKW and the Investment
Banking Division, DrKW has not determined (nor could it
determine) whether such entities have any relationship with the
Debtors or other parties-in-interest in these cases. DrKW does
not believe that such potential relationships are material to
DrKW's representation of the Debtors, Mr. Buckfire represents.

Mr. Buckfire submits that, as far as he has been able to
ascertain, neither he nor DrKW nor any of DrKW's member or
employee, has any connection with the Debtors, their creditors,
the United States Trustee or any other party with an actual or
potential interest in the PSINet chapter 11 cases or their
respective attorneys or accountants. Nor does any of the
entities hold or represent any interest adverse to the Debtors
or their respective estates in the matters for which DrKW is
proposed to be retained, Mr. Buckfire adds. Moreover, DrKW is
not and has not been employed by any entity other than the
Debtors in matters related to the PSINet chapter 11 cases, Mr.
Buckfire declares.

Mr. Buckfire recognizes that DrKW is in a transition period
occasioned by the acquisition of DrKW by Dresdner Bank AG that
affects DrKW's ability to disclose all relevant relationships in
connection with the Debtor or parties-in-interest in these
cases. Before the Acquisition, neither Dresdner Bank AG nor the
Investment Banking Division maintained records for the purposes
of the disclosures required. On April 1, 2001, Dresdner Bank AG
announced an agreement pursuant to which it would combine with
Allianz AG, an entity engaged in diverse financial services
businesses. That transaction has not yet closed, and DrKW has no
access to Allianz's conflicts databases. Thus, Mr. Buckfire
acknowledges that DrKW is unable to state with certainty that
every client representation or connection has been disclosed
despite the best efforts afforded, given that the Debtor is a
large enterprise with numerous unidentified creditors and other
relationships. Mr. Buckfire covenants that as DrKW discovers
additional information (if any) that requires disclosure, DrKW
will promptly file supplemental disclosures with the Court.
(PSINet Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)


RELIANCE: US Trustee Appoints Unsecured Bank Lenders' Committee
---------------------------------------------------------------
The United States Trustee appoints these nine unsecured bank
claimants to the Official Committee of Unsecured Bank Lenders in
Reliance Group Holdings, Inc.'s Chapter 11 cases:

       Parker Douglas
             c/o ABN AMRO Bank N.V.
             10 East 53rd Street, 37th Floor
             New York, NY  10022
             (212) 891-0631

       Geoffrey R. McConnell
             c/o Bank of Montreal
             115 South LaSalle Street
             Chicago, IL  60603
             (312) 750-8702

       Linda D. Tulloch
             c/o Credit Lyonnais, New York Branch
             1301 Avenue of the Americas
             New York, NY  10019
             (212) 261-7744

       Jerry McDermott
             c/o Sanwa Bank California
             601 South Figueroa W9-2
             Los Angeles, CA  90017
             (213) 896-7067

       Thomas L. Stitchberry
             c/o First Union National Bank
             1339 Chestnut Street
             Philadelphia, PA  19107
             (215) 973-3246

       Kent Nelson
             c/o Firstrust Bank
             15 East Ridge Pike
             Conshohocken, PA  19428
             (610) 238-5026

       Thomas M. Dinneen
             c/o Chase Manhattan Bank
             380 Madison Avenue
             New York, NY  10017
             (212) 622-4864

  (Reliance Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)


RITE AID: Investors Add $100 Million To Initial Commitment
----------------------------------------------------------
Rite Aid Corporation (NYSE, PCX: RAD) announced that
institutional investors who previously agreed to invest $302.4
million in shares of Rite Aid common stock have increased their
commitments to $402.4 million, which will result in a total
private placement of 53.6 million shares (at $7.50 per share) of
common stock when the transactions are completed.

The company said that as a result of the increase in the
commitments, it has reduced its previously announced $200
million offering of new Senior Notes due 2008 to $150 million.

Both transactions are part of the company's $3.0 billion
refinancing package which, when completed, will significantly
reduce Rite Aid's debt and debt obligations maturing before
March 2005. The company said that it expects the refinancing to
be completed by the end of June, earlier than previously
anticipated.

Additionally, the company said it would release results for its
First Quarter of Fiscal 2002 during the week of July 9.
The common stock and senior notes will not be registered under
the Securities Act of 1933 and may not be offered or sold in the
United States absent registration or an applicable exemption
from the registration requirements of the Securities Act of
1933. The closing of the sale of common stock and the senior
notes will take place simultaneously with, and is contingent
upon, the completion of the refinancing.


SAMSONITE INC.: Reports Losses For Fiscal Year 2002
---------------------------------------------------
Consolidated net sales of Samsonite Inc. declined from $192.4
million in fiscal 2001 to $192.1 million in fiscal 2002, a
decline of $0.3 million or less than 1%. Fiscal 2002 sales were
unfavorably impacted by the decline in the value of the euro
compared to the U.S. dollar. Without the effect of the exchange
rate difference, fiscal 2002 sales would have increased by $3.9
million or approximately 2.0%.

Sales from European operations increased from $78.7 million in
fiscal 2001 to $79.3 million in fiscal 2002, an increase of $0.6
million. Expressed in the local European reporting currency
(euros), fiscal 2002 sales increased by 6.1%, or the U.S.
constant dollar equivalent of $4.8 million, compared to fiscal
2001. Local currency sales of softside product improved by
approximately 6% from the prior year while hardside product
sales decreased by approximately 5%, reflecting a shift in
consumer demand towards softside products. An 11% increase in
local currency sales of Black Label products (clothing, footwear
and accessories) contributed to the European sales growth. Sales
of Black Label products were $10.6 million during fiscal 2002.
Sales from the Americas operations declined from $97.9 million
in fiscal 2001 to $91.3 million in fiscal 2002, a decline of
$6.6 million or 6.7%. U.S. Wholesale sales for the first quarter
decreased by $5.7 million from the prior year, U.S. Retail sales
decreased by $1.6 million, and sales in the other Americas
operations increased by $0.7 million from the prior year. The
decrease in U.S. Wholesale sales is due primarily to the loss of
sales to a single customer in the catalog sales distribution
channel which discontinued its luggage category due to the high
cost of customer freight. Sales to this customer totaled $6.4
million in the prior year first quarter. Partially offsetting
the loss of this customer in U.S. Wholesale were increased sales
to the mass merchant, office superstore and premium channels
during fiscal 2002. U.S. Retail sales declined from $28.6
million in the prior year to $27.0 million in fiscal 2002 due to
a comparable store sales declined of 5.6% from the prior year
caused by continued weakness in the outlet store distribution
channel and a net of nine fewer stores compared to the prior
year.

First quarter sales from Asian operations of $15.0 million were
$3.5 million higher than the prior year sales, an increase of
30.5%. Sales from Asian operations have benefited from the
economic recovery in the region, Samsonite's strategy of
building market share in the region during the previous economic
crisis and the prestige of the Samsonite brand name in this
region. It is expected that the recent slowing economies in
Singapore and Taiwan will reduce the rate of near term sales
growth for the Asian operations.

Revenues from U.S. licensing operations were $2.2 million higher
than the prior year at $6.4 million. Samsonite and American
Tourister label licensing revenues increased $1.1 million due to
new license agreements signed during fiscal 2002 and Global
Licensing revenues increased $1.1 million due to the sale of the
McGregor trademark registrations primarily in China.

The Company had a net loss in fiscal 2002 of $4.8 million
compared to a net loss in fiscal 2001 of $2.3 million. The
increase in the net loss from the prior year of $2.5 million is
caused by the effect of the decline in operating income,
interest and other income, partially offset by the decline in
income taxes and the extraordinary gain during fiscal 2002.


SINGING MACHINE: Josef Bauer Reports 15.2% Equity Stake
-------------------------------------------------------
Mr. Josef Bauer is deemed to beneficially own 683,773 shares of
the Singing Machine's common stock, representing approximately
15.2% of Singing Machine's issued and outstanding common stock
(based on 4,399,320 shares outstanding on June 1, 2001). This
total includes 282,541 shares held directly by Mr. Bauer,
200,000 shares held by the Bansia Corporation Pension Plan
Trust, Mr. Bauer's self directed pension plan, 106,232 shares
held by the Bauer Family Limited Partnership, options to
purchase 10,000 shares of the Singing Machine's common stock,
currently exercisable, and warrants to purchase 85,000 shares of
the Singing Machine's common stock, currently exercisable.

Mr. Bauer is a general partner of the Bauer Family Limited
Partnership and has a 49% interest in the partnership. His wife
is also a general partner and has a 49% interest in the
partnership. Under the federal securities laws, Josef Bauer is
deemed to be the beneficial owner of the 53,116 shares the
Singing Machine's common stock owned by his wife through her
interest as a general partner; however, pursuant to Rule 16a-
1(4) of the Exchange Act, Mr. Bauer disclaims any beneficial
interest in shares of the Signing Machine common stock owned by
his wife.

Mr. Bauer has sole voting and dispositive power over 577,541
shares of the Singing Machine's common stock. By virtue of the
partnership agreement and his marital relationship, he may be
deemed to share voting and dispositive power of the 106,232
shares held by the Bauer Family Limited Partnership.

Mr. Bauer is a director of the Singing Machine and he presently
serves as the Chief Executive Officer of three companies. He has
served as the Chief Executive Officer of Bansia Corporation, a
privately owned investment company, since 1975, of Trianon, a
jewelry manufacturing and retail sales company since 1978, and
of Seamon Schepps, a jewelry manufacturing and retail sales
company.

On June 28, 1999, Mr. Bauer purchased 2 units from the Singing
Machine in a private offering. The purchase price for each unit
was $27,500. Each unit consisted of 20,000 shares of the Singing
Machine's preferred stock and 4,000 warrants with an exercise
price of $2.00 per share. Each share of preferred stock could be
converted into one share of the Singing Machine's common stock
at any time after issuance. Each share of preferred stock
automatically converted into one (1) share of the Singing
Machine's common stock on April 1, 2000. Each warrant was
exercisable at any time after issuance and expires on April 1,
2002.

On April 15, 1999, Mr. Bauer personally loaned the Singing
Machine funds sufficient to pay one of its documents of
acceptance in the amount of $33,948.66. As consideration for
this loan, in March 2000, the Singing Machine issued Mr. Bauer
warrants to purchase 10,000 shares of its common stock at an
exercise price of $2.00 per share, exercisable until January 1,
2003. In July 1999, Mr. Bauer arranged for a credit facility
with Bank Julius Baer in the amount of $1 million. Further, in
order to ensure approval of the extension of credit by Bank
Julius Baer, Mr. Bauer personally guaranteed the line of credit.
The Bank Julius Baer credit loan was fully repaid by the Singing
Machine in February 2000. As consideration for guarantying this
loan, in March 2000, the Singing Machine granted him warrants to
purchase 50,000 shares of its common stock at an exercise price
of $1.00 per share. The warrants expire in July 2005.

In May 2000, the Singing Machine obtained a working capital loan
in the amount of $500,000 from Josef Bauer. The loan was for a
period of eight months and bore interest at the rate of 15% per
annum. As consideration for extending the loan, the Singing
Machine issued 25,000 warrants to Mr. Bauer. These warrants have
an exercise price of $3.25 per share and expire on May 25, 2003.
In September 2000, the Singing Machine granted Mr. Bauer 10,000
options to purchase shares of its common stock for services
rendered as a director of the Singing Machine. The options have
an exercise price of $3.06 per share and expire on September 6,
2006.

On September 20, 2000, Mr. Bauer, on behalf of his self-directed
pension plan, purchased 200,000 shares of common stock at a
price of $3.00 from the Harry Fox Agency, Inc. On November 13,
2000, Mr. Bauer acquired 500 shares of the Singing Machine's
common stock in the open market at a price of $4.5625 per share.
On November 13, 2000, the Bauer Family Limited Partnership
acquired 200 shares in the open market a price of $4.5625 per
share. On January 2, 2001, the Bauer Family Limited Partnership
acquired 200 shares of the Singing Machine's common stock in the
open market at a price of $4.0625 per share. On March 13, 2001,
Mr. Bauer purchased 110,675 shares in the open market at a price
of $3.25 per share.

Mr. Bauer acquired the securities for investment purposes.


SUN HEALTHCARE: Unsecured Creditors' Committee Membership Change
----------------------------------------------------------------
Pursuant to 11 U.S.C. Sec. 1102(a)(1), the United States Trustee
for Region III appoints these creditors to serve on the Official
Committee of Unsecured Creditors in Sun Healthcare Group, Inc.'s
chapter 11 cases:

     (1)  HSBC BANK USA, as Indenture Trustee
           140 Broadway, New York, NY 10005-1180
                Attn: Robert A. Conrad, V.P.,
                Tel: (212) 658-6029     Fax: (212) 658-6425

     (2)  U.S. BANK, NATIONAL ASSOCIATION, as Indenture Trustee
           1180 East Fifth Street, St. Paul, MN 55101
                Attn: Timothy Jon Sandell
                Tel: (651) 244-0713     Fax (651) 244-5847

    (3)  CREDIT SUISSE FIRST BOSTON CORPORATION,
          11 Madison Avenue, New York, NY 10022
                Attn: Alex Lagetko, Director
                Tel: (212) 325-3810     Fax (212) 352-8290

    (4)  BANK OF AMERICA, N.A.
          555 South Flower Street
          Mail Code: CA-706-10-10, Los Angeles, CA 90071
                Attn: M. Duncan McDuffle, Managing Director
                Tel: (213) 228-2609     Fax: (213) 228-6003

    (5)  FOOTHILL INCOME TRUST,
          c/o Foothill Capital Corporation
          11111 Santa Monica Blvd., Suite 1500,
          Los Angeles, CA 90025
                Attn: Marshall E. Steams, Senior V.P.,
                Tel: (310) 996-7158     Fax: (310) 472-0461

    (6)  LTC PROPERTIES, INC.
          300 Esplanade Drive, Suite 1860, Oxnard, CA 93030
                Attn: Neil B. Glassman, Attorney-in-fact,
                Tel: (805) 981-8655     Fax: (805) 981-8663

    (7)  CRESTWOOD HOSPITALS, INC.
          6653 Embareadero Drive, Suite Q, Stockton, CA 96219,
                Attn: Bryan Burr, CFO
                Fax: (209) 481-9410

    (8)  SERVICE EMPLOYEES INTERNATIONAL UNION
          1313 L. Street, N.W. Washington, DC 20005
                Attn: Andrew L. Stern, President
                Tel: (202) 898-3200     Fax: (202) 898-3481

   (9)   CREDIT LYONNAIS,
          1301 Avenue of the Americas, New York, NY 10019-6022
                Attn: James Hallock
                Tel: (212) 261-7000     Fax: (212) 459-3170

   (10)  COOPERATIVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.
         "Rabobank Nederland" New York Branch
          245 Park Avenue, New York, NY 10157-0062
                Attn: John P. McMahon
                   Tel: (212) 916-7800       Fax: (212) 986-7621

Accordingly, Credit Lyonnaise replaces Van Kampen Investment
Advisory Group and Rabobank Nederland replaces Morgen,
Waterfall, Vintiadis & Company. (Sun Healthcare Bankruptcy News,
Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900)


THE KNOT: Shares Face Nasdaq Delisting
--------------------------------------
The Knot Inc. (NASDAQ: KNOT), the nation's leading wedding
resource, said it received a Nasdaq Staff Determination on June
21, 2001 that the Company failed to comply with the minimum bid
price requirement for continued listing set forth in Marketplace
Rule 4450(a)(5), and that its securities are, therefore, subject
to delisting from The Nasdaq National Market.

Further, on March 30, 2001, the Company received notification
from Nasdaq that it failed to meet the minimum market value of
public float requirement for continued listing also set forth in
Marketplace Rule 4450(a)(2) and that the Company has until June
28, 2001 to comply with this requirement.

The Knot has requested a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination
concerning the minimum bid price requirement. According to
Nasdaq procedures, the hearing date will be set, to the extent
practicable, within 45 days of the request, and the Company's
stock will continue to trade on The Nasdaq National Market
pending the Panel's decision.

                      ABOUT THE KNOT

The Knot is the leading wedding resource providing a variety of
online and offline products and services to couples planning
their weddings and future lives together. The Knot Web site, at
www.theknot.com, is the most trafficked wedding destination and
offers comprehensive content, extensive wedding-related
shopping, an online wedding gift registry and an active
community. The Knot is the premier wedding content provider on
America Online (AOL Keywords: Knot and weddings) and MSN.
The Knot publishes The Knot Wedding Gowns, a national wedding
fashion magazine, and, through its subsidiary Weddingpages,
Inc., publishes Weddingpages, regional wedding magazines in over
40 company-owned and franchised markets in the U.S. The Knot
also authors a best-selling series of books on wedding planning
with Broadway Books (a division of Random House) and, through
another subsidiary, Click Trips, Inc., offers honeymoon booking
and other travel services. The Knot is based in New York and has
several other offices across the country.


TRI-UNION DEVELOPMENT: Emerges From Chapter 11 Bankruptcy
---------------------------------------------------------
Tri-Union Development Corporation announced it has emerged from
bankruptcy and that its plan of reorganization was declared
effective on Monday, June 18, 2001. Tri-Union's plan provided
that all allowed claims would be paid in full, including
interest, in cash, on the effective date of the plan.

To fund its plan of reorganization, Tri-Union issued $130
million of senior secured notes, which offering also closed on
Monday, June 18, 2001. The proceeds of the notes offering and
available cash were used to repay Tri-Union's senior credit
facility and all other secured and unsecured debts, including
accrued interest.

Since 1999, Tri-Union has completed a very successful
development drilling program, which resulted in a 42% increase
in production and a 203% increase in earnings before interest
expense, income taxes, depletion, depreciation and amortization
and reorganization expenses ("EBITDA"). Additionally, despite a
capital budget limited by the constraints of the bankruptcy
proceeding, Tri-Union maintained its reserves by replacing 30.2
Bcfe of production in 1999 and 2000.

"We significantly improved our financial condition during
bankruptcy allowing us to complete the notes offering and emerge
a much stronger company. Our debt has been reduced by
approximately $40 million and we expect to have substantial cash
on hand by the end of June. Our cash and strong cash flow from
operations will allow us to accelerate the development of our
core assets," said Tri-Union President and Chief Executive
Officer Richard Bowman.

Tri-Union is an independent oil and natural gas company engaged
in the acquisition, development, exploration and production of
oil and natural gas with operations in northern California,
Texas, Louisiana, and in the shallow waters of the Gulf of
Mexico.


USG CORPORATION: Obtains Interim Approval For $150 Mil DIP Loan
---------------------------------------------------------------
USG Corporation (NYSE: USG) announced it has received Bankruptcy
Court approval to, among other things, pay pre-petition and
post-petition employee wages, salaries and benefits during its
voluntary Chapter 11 case. As previously announced, USG and its
major U.S. subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code on June
25, 2001 to manage the growing asbestos litigation costs of its
United States Gypsum Company subsidiary and to resolve asbestos
claims in a fair and equitable manner.

The Court also approved $150 million of interim debtor-in-
possession (DIP) financing for immediate use by the Company to
continue operations, pay employees, and purchase goods and
services going forward. In conjunction with the filing, USG
received commitments for up to $350 million in DIP financing
from JP Morgan Chase to supplement liquidity and fund operations
during the restructuring process. A final hearing on the DIP
agreement is expected to occur in 30 to 60 days.

Chairman, President and Chief Executive Officer William C. Foote
said he was pleased with the Bankruptcy Court's prompt approval
of its "first-day" orders and interim DIP financing.

"We expect the DIP financing to provide adequate funding for our
post-petition trade and employee obligations," Foote said,
noting that since the filing earlier this week, the Company has
contacted many of its major suppliers and customers, who have
expressed their support of USG and its initiatives toward
resolution of the asbestos liability.

The Court also granted approval for the Company to honor
customer programs in place at the time of the filing, including
rebates, credits and discounts on previously purchased goods.
Foote said that USG's operations continue without interruption
during the Chapter 11 process. "Our operations remain open for
business and will maintain their commitment to safety, and to
providing quality products and superior service to their
customers. Vendors will be paid for all goods furnished and
services provided after the filing. Employee wages and benefit
programs will continue as before."

USG and its subsidiaries filed their voluntary petitions in the
U.S. Bankruptcy Court for the District of Delaware in
Wilmington. The filing also included U.S. subsidiaries United
States Gypsum Company, USG Interiors, Inc. and L&W Supply
Corporation. USG's international operations were excluded form
the filing.

USG Corporation is a Fortune 500 company with subsidiaries that
are market leaders in their key product groups: gypsum
wallboard, joint compound, cement board and related gypsum
products; ceiling tile and grid; and building products
distribution. Additional information about the Company's
restructuring is available at www.usg.com .


USG CORPORATION: Honoring $20MM Prepetition Employee Obligations
----------------------------------------------------------------
USG Corporation sought and obtained authority at a First Day
Hearing, in accordance with the Company's stated policies, as
such policies may be modified from time to time, and in their
sole discretion, to pay:

      $12,800,000 for certain prepetition employee wages,
                  salaries, contractual compensation, bonuses,
                  sick pay, vacation pay (including personal
                  days), holiday pay, and other accrued
                  compensation and for reimbursements of
                  prepetition employee business expenses;

       1,800,000 for amounts for which employee payroll
                  deductions were made for union dues,
                  garnishments, tax levies, support payments,
                  investment programs, benefit plans, insurance
                  programs and the like;

       4,120,000 for prepetition contributions to and benefits
                 under employee benefit plans;

         710,000 on account of accrued but unpaid disability,
                 life insurance, long-term care and business
                 travel accident insurance premiums; and

         280,000 for administrative costs and expenses incident
                 to the foregoing payments and contributions.
     -----------
     $19,700,000 Total

The Debtors currently employ approximately 12.300 hourly and
salaried workers.

"The continued and uninterrupted service of these Employees is
essential to the Debtors' continuing operations and to their
ability to reorganize," David G. Heiman, Esq., at Jones, Day,
Reavis & Pogue told Judge Farnan at the First Day Hearing.  Mr.
Heiman explains that USG filed for chapter 11 protection in the
midst of their regular payroll period.  Paychecks need to be
issued this week.  Telling employees to file proofs of claim is
not something for which USG management is prepared and
management is convinced that the Company's failure to honor the
first postpetition payroll would destroy employee morale.

Persuaded by these arguments, Judge Farnan granted USG authority
to honor these obligations.  Judge Farnan makes it clear that
nothing in the Debtors' Motion or the Court's Order shall be
construed as an assumption of any executory contract pursuant to
11 U.S.C. Sec. 365. (USG Bankruptcy News, Issue No. 1;
Bankruptcy Creditors' Service, Inc., 609/392-0900)


WARNACO GROUP: Hires Blake Cassels As Special Canadian Counsel
--------------------------------------------------------------
The Warnaco Group, Inc. and its debtor-affiliates seek the
Court's authority to employ and retain Blake, Cassels & Graydon
LLP as special Canadian counsel for the limited purpose of
providing legal services in the bankruptcy case of Warnaco
Canada alone.  Warnaco Group Vice-President Stanley P.
Silverstein emphasizes that Blake Cassels will not be acting as
their general bankruptcy counsel.

Warnaco Canada needs a special counsel with extensive experience
in Canadian law, Mr. Silverstein explains, and the attorneys at
Blake Cassels fit the bill.

Subject to the Court's approval, Blake Cassels will charge the
Debtors for its legal services on an hourly basis in accordance
with its ordinary and customary rates.  Blake Cassels hourly
rates currently range from:

         Partners           - $380 to $650 (in Canadian dollars)
         Associates         - $210 to $385
         Para-professionals - $87 to $215
         Articling students - $110 to &135

Blake Cassels will also seek reimbursement for all costs and
expenses incurred in connection with Warnaco Canada's bankruptcy
case, including telephone and telecopier toll and other charges,
mail and express mail charges, special or hand delivery charges,
document processing, photocopying charges, travel expenses,
expenses for "working meals", computerized research,
transcription costs, as well as non-ordinary overhead expenses
such as secretarial overtime.

Mr. Silverstein informs the Court that they already gave Blake
Cassels a retainer of Cdn.$75,000 for preparing the filing of
Warnaco Canada's bankruptcy case and for its proposed post-
petition representation of Warnaco Canada.  A portion of the
retainer will be used to pay any remaining pre-petition fees and
expenses that will later be identified.  While the remaining
balance, Mr. Silverstein says, will serve as Blake Cassels'
general retainer for post-petition services and expenses.

According to Mr. Silverstein, Blake Cassels started providing
services to Warnaco Canada in May 2001.  The Debtors gave Blake
Cassels Cnd.$32,985.50 on account of legal services rendered.

David J. Kee, a partner of the law firm of Blake, Cassels &
Graydon, informs the Debtors that they also intend to apply to
the Court for compensation of professional services rendered and
reimbursement of charges and costs and expenses incurred in
relation to Warnaco Canada's bankruptcy case.

Mr. Kee discloses that Blake Cassels have in the past
represented or is currently representing and may in the future
represent, bank lenders of the Debtors.  But only unrelated
cases of financial restructuring, litigation, corporate and
other matters, Mr. Kee notes.

At present, Mr. Kee assures the Court that Blake Cassels does
not represent any adverse interest against the Debtors.

                      *     *     *

On an interim basis, Judge Arthur Gonzales granted the Debtors'
application at the First Day Hearing.  Objections must be filed
on or before July 5, 2001.  This interim order shall remain in
effect until the entry of a final order. (Warnaco Bankruptcy
News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-
0900)


WINSTAR COMMUNICATIONS: Wants More Time To Decide On Leases
-----------------------------------------------------------
Winstar Communications, Inc. asks Judge Farnan for an extension,
pursuant to 11 U.S.C. Sec. 365(d)(4), of the time within which
it must decide whether to assume, assume and assign, or reject
unexpired leases. The Debtors tell Judge Farnan that they are
parties to hundreds of unexpired leases of nonresidential real
property and these leases are an integral part of the Debtors'
businesses.

Pauline K. Morgan, Esq., at Young, Conaway, Stargatt & Taylor,
tells Judge Farnan that, since the Petition Date, the Debtors
have taken a number of steps to stabilize their businesses.
Until Winstar has had a reasonable opportunity to stabilize
their operations, pursue strategic alternatives, and ultimately
develop a business plan, reasoned decisions about assuming and
rejecting leases is impossible, Ms. Morgan suggests.

Judge Farnan will convene a hearing on July 19, 2001, to
consider the merits of the Debtors' request and fix a deadline
by which lease disposition decisions must be made. By
application of Del.Bankr.LR 9006-2, the current deadline is
automatically extended through the conclusion of the July 19
hearing. (Winstar Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)


ZEROPLUS.COM: Voluntarily Delists Securities From Nasdaq
--------------------------------------------------------
ZeroPlus.com, Inc. (Nasdaq: ZPLS) announced that the Company has
requested a voluntary delisting of its securities from The
Nasdaq SmallCap Market.

Nasdaq informed ZeroPlus on April 4th, that the Company's common
stock had failed to maintain a minimum bid price of $1.00 for 30
consecutive days as required under The Nasdaq SmallCap Market
rules. Nasdaq informed the Company that its stock would be
delisted on July 3rd if the Company failed to maintain Nasdaq
listing requirements.

Nasdaq indefinitely halted trading on the stock pending the
receipt of additional information subsequent to a June 5, 2001,
announcement from the Company that it had laid off most of its
employees and begun a phased shutdown of the Company's
operations while it seeks any opportunities that may exist to
realize value from its technology assets and its strategic
partnerships.

The Company has determined that it was in its best interest to
request delisting rather than to expend further resources to
maintain the listing of its common stock.


BOOK REVIEW: The Rise and Fall of the Medici Bank, 1397-1494
------------------------------------------------------------
Author:      Raymond de Roover
Publisher:   Beard Books
Softcover:   500 Pages
List Price:  $34.95
Review by:   Susan Pannell
Order your own copy today at
http://amazon.com/exec/obidos/ASIN/1893122328/internetbankrupt

It's the name on the door that grabs you. The Medicis were
wheeler-dealers extraordinaire. From modest beginnings as
tradesmen in the thirteenth century, they became dukes of
Tuscany, the richest family and de fact governors of Florence,
builders of monuments (often to themselves--for example, the
church of San Lorenzo), and compilers of an excellent library
that still exists (the Biblioteca Laurenziana). Their political
power shaped history: two Medicis sat in the Vatican;
Machiavelli dedicated The Prince to a Medici, Lorenzo the
Mangnificent, in vain hopes of getting his job back; and the
Medicis may have been indirectly responsible for the invasion of
Italy in 1494 by Charles VIII of France.

Despite their colorful splash in history, the Medicis;
activities as bankers and traders have received less scrutiny--
oddly, in view of the fact that it was financial power that
quite literally bankrolled everything. Economic historian
Raymond de Roover puts business first in this book, a classic
analysis of medieval period banking and trade.

Founded by Giovanni di Bicci de Medici, the Medici Bank was the
most powerful banking house of the fifteenth century, achieving
its zenith in the years from 1429 to 1464 when Cosimo was in
charge, and then skidding for the thirty years between his death
and the expulsion of the Medici family from Florence in 1494.
From its headquarters in Florence, the bank established branches
everywhere that mattered. It served as financial agent of the
Roman Catholic Church, extended credit to monarchs, and
facilitated international trade in Western Europe. By their
personal influence and the use of their profits, the owners and
administrators of the bank contributed significantly to the
development of Florence as the greatest center of the
Renaissance.

As the author points out, a study of the Medici Bank is
worthwhile from a microeconomic perspective as well. In the pre-
industrial era of the Medicis, banking and trade were synonymous
with big business--there was nothing bigger. While the
techniques of modern business have changed in the past five to
six hundred years, most notably in methods of communications,
the human resource problems confronting business today are
remarkably similar to those the Medicis wrestled with centuries
ago: how to select the right manager for the right job, how to
coordinate different branches and departments, when to retain
personal control and when to delegate.

The bank used the best methods available for handling every
business problem, representing, therefore, not a typical
business of the time but rather the optimum that was achieved in
the Middle Ages and the Renaissance. Despite their stature,
however, the Medicis were not immune to unfavorable economic
conditions or political forces, such as organized consumers
groups and the climate created by the War of the Roses in
England.

The book combines superb research and analysis with graceful
writing. The numerous illustrations, diagrams, charts and tables
(including genealogies), drawn from archival material, make this
work as valuable now as when it was first published in 1963.

                            *********

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

A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.

Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.

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.

                           *********

S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Bernadette de Roda, Aileen Quijano and Peter A.
Chapman, Editors.

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

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
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