TCR_Public/010709.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

               Monday, July 9, 2001, Vol. 5, No. 132


360NETWORKS INC: Court Okays Continued Use Of All Business Forms
AEROVOX INC.: Voluntarily Withdraws From Nasdaq National Market
ALPNET: Fails To Comply With Nasdaq's Minimum Bid Requirement
AMF BOWLING: Obtains Permission To Use Cash Collateral
AMTROL: S&P Cuts Ratings Following Weaker Financial Performance

BPI PACKAGING: Primary Secured Lenders Foreclose & Sell Assets
BRIDGE INFORMATION: Rejecting 20 Executory Contracts
C*STRATEGIC: S&P Lowers Class C & D Notes To BBB- & CCC
CANFIBRE OF RIVERSIDE: Seeks Third Extension of Exclusive Period
CLIMACHEM INC.: Releases First Quarter 2001 Results

DYLEX LTD.: Settles Debts Outside Court
EDISON INTERNATIONAL: Closes Private Debt Financing & Term Loan
FACTORY CARD OUTLET: Reports Results For Quarter Ended May 2001
FRUIT OF THE LOOM: Nashville Carpet Seeks Relief From Stay
GENESIS WORLDWIDE: Bank Agrees To Extend Forbearance Period

GLOBALSTAR: Qualcomm Withdraws Restructuring Investment Offer
GWI INC: Wants More Time To Assume or Reject Corporate HQ Lease
HEDSTROM HOLDINGS: Selling New York Property for $1.38 Million
ICG COMM.: Moves To Give Adequate Protection To Bank Of Denver
KITTY HAWK: U.S. Postal Service Terminates W-Net Contract

LAIDLAW INC.: Overview Of Chapter 11 Plan Of Reorganization
LERNOUT & HAUSPIE: Intercompany Agreement Allocates Revenues
LTV: Balks At C&K's & Enviroserve's Request To Examine Documents
MULTICANAL S.A.: S&P Lowers Short-Term Ratings to C From B
NETSPEAK: Plans To Hold Shareholders' Special Meeting On August

NORTHLAND CRANBERRIES: Reports Third Quarter Financial Losses
NORTHLAND CRANBERRIES: Robert Hawk Resigns as President And CEO
OWENS CORNING: Removal Period Extended to August 31
PACIFIC GAS: Asks Court to Assume Franchise Fee Agreements
PICCADILLY CAFETERIAS: B+ Ratings Remain on CreditWatch Negative

PSINET INC.: Court Grants More Time For Filing Schedules
QUANTUM NORTH AMERICA: Creditors' Meeting Set For August 9
RAYTHEON COMPANY: Fitch Affirms Low-B Debt Ratings
SERVICE MERCHANDISE: ESP Committee To Serve Until October 31
SPACEWORKS: Auctioning Software & Server Assets On July 19

SUN HEALTHCARE: NHP Demands Payment Of Administrative Expenses
SUNTERRA CORP.: Exclusive Plan Filing Period Extended To Oct. 2
TAPISTRON INTERNATIONAL: Needs More Funds To Continue Operations
TRISM INC: Defaults on Bond Covenants & Posts Q1 2001 Losses

UNIFORET INC.: Secures 45 Additional Days to Present CCAA Plan
USG CORPORATION: Can Pay $35MM to Critical Vendors And Suppliers
U.S. STEEL: Fitch Rates Senior Unsecured Debt At BB
VANGUARD AIRLINES: Posts $11.5 Million Net Loss For Q1 2001
VLASIC FOODS: Lincoln Graphics Wants Trade Debt Committee

WARNACO GROUP: Deadline For Filing Schedules Extended To Aug. 27
WILLIAMS CONTROLS: Moves To OTCBB After Nasdaq Delists Shares
WINSTAR COMM: Lucent Seeks Stay Relief To Grab Two Bank Accounts

BOND PRICING: For the week of July 9 - 13, 2001


360NETWORKS INC: Court Okays Continued Use Of All Business Forms
360networks inc. uses numerous checks and a multitude of
stationery and other business forms. Shelley C. Chapman, Esq.,
at Willkie Farr & Gallagher notes that it's no secret 360 filed
for bankruptcy protection -- it's on the front page of The Wall
Street Journal. It would be unduly burdensome and costly to
replace all of the Debtors' checks, stationery and other
business forms before they are exhausted.

By Motion, 360 sought and obtained Judge Gropper's permission to
continue using all of their Prepetition Business Forms
(including, without limitation, letterheads, purchase orders,
invoices and checks) without the requirement that they bear a
"Debtor-in-Possession" legend. (360 Bankruptcy News, Issue No.
2; Bankruptcy Creditors' Service, Inc., 609/392-0900)

AEROVOX INC.: Voluntarily Withdraws From Nasdaq National Market
Aerovox Incorporated (Nasdaq.NM:ARVXQ) announced that effective
Thursday, it has voluntarily withdrawn trading of its common
stock from the Nasdaq National Market.

Trading of the Company's securities on the Nasdaq National
Market had been halted since June 7, 2001, after the Company
announced its filing of Chapter 11 bankruptcy protection. The
Company does not expect to meet the listing requirements for the
Nasdaq National Market in the near term.

Aerovox Incorporated is a leading manufacturer of film, paper
and aluminum electrolytic capacitors. The Company sells its
products worldwide, principally to original equipment
manufacturers as components in electrical and electronic
equipment. Aerovox has operations in New Bedford, Massachusetts;
Huntsville, Alabama; Juarez and Mexico City, Mexico; and
Weymouth, England.

ALPNET: Fails To Comply With Nasdaq's Minimum Bid Requirement
ALPNET, Inc. (Nasdaq: AILP), a leading provider of multilingual
information management solutions to Global 1000 companies,
received a Nasdaq Staff Determination on June 28, 2001,
indicating that the Company fails to comply with the minimum bid
price requirement for continued listing set forth in Marketplace
Rule 4310(c)(4), and that its securities are, therefore, subject
to delisting from The Nasdaq SmallCap Market.

The Company has requested a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination. The
Company anticipates that the hearing will be scheduled, to the
extent practicable, within 45 days. There can be no assurance
the Panel will grant the Company's request for continued
listing. If delisting occurs, the Company has determined that
its stock is eligible to trade on the OTC Bulletin Board(R).

                     About ALPNET Inc.

ALPNET is one of the world's largest, publicly-owned, dedicated
providers of complete multilingual information management
solutions, with a worldwide network of offices and resources. A
pioneer in its industry, ALPNET helps corporations deploy into
international markets faster and more efficiently, through
intelligent use and reuse of multilingual informational assets.
ALPNET offers an extensive range of services, based on
innovative, proven technologies, including strategic
InfoCycle(TM) consulting, as well as Web, software and document
localization and publishing, in all business languages and
formats. Additional information about ALPNET is available at, and an investor package can be obtained by
contacting Jose Castaneda in our investor relations department
at +1 888-292-2819 or +1 303 292-1501, or by e-mailing us at

AMF BOWLING: Obtains Permission To Use Cash Collateral
At the First Day Hearing, Stephen E. Hare, serving as Executive
Vice President of AMF Bowling Worldwide, Inc., and as its Chief
Financial Officer and Treasurer since May 1996, stepped Judge
Tice through the maze of the Debtors' capital structure:

AMF Group Holdings Inc. ("Holdings"), the parent Debtor, owns
all of the issued and outstanding common stock of AMF Bowling
Worldwide, Inc. ("WINC").

                The Prepetition Credit Agreement

WINC owes approximately $614,100,000 under the Fourth Amended
and Restated Credit Agreement, dated as of June 14, 1999, as
amended. The Prepetition Credit Facility was provided to WINC by
a syndicate of banks led by Goldman Sachs Credit Partners, L.P.
and Citicorp Securities, Inc., as arrangers, Goldman Sachs
Credit Partners, L.P., as syndication agent, and Citibank, N.A.,
as administrative agent.  The Prepetition Credit Facility
consists of approximately:

        $249,000,000 of working capital advances under a
                     revolving line of credit (excluding
                     $8,500,000 of issued and undrawn standby
                     letters of credit);

          52,500,000 on account of a Term Loan;

         181,500,000 for an Amortization Extended Loan Series A;

         131,100,000 for an Amortization Extended Loan Series B.

The indebtedness under the Prepetition Credit Facility is
guaranteed by Holdings and the Subsidiary Debtors and is secured
by liens on (i) certain personal property, including inventory,
accounts receivable, equipment and general intangibles; (ii) the
capital stock of WINC and the Subsidiary Debtors; (iii) 66% of
the capital stock of certain of WINC's first-tier Foreign
Subsidiaries; (iv) certain fee property and leased property of
Subsidiary Debtors located in the United States (v) certain
improvements and appurtenances on the fee property and leased
property in the United States, and (vi) certain rents in the
United States.

                      The Missouri Mortgage

WINC is indebted under a $2,000,000 note and purchase money
mortgage granted in connection with the purchase of a bowling
center in Independence, Missouri pursuant to a Contract of Deed,
dated on or around September 30, 1988, as amended by a certain
Collection Agreement, dated April 15, 1992.  In 1990, King Louie
Bowling Corporation, an original party under the Contract for
Deed, assigned its interest to AMF Bowling Centers, Inc., a
subsidiary of WINC.

             The Hughes Equipment and Services Agreement

AMF Bowling Centers, Inc. is indebted under that certain
Equipment and Services Agreement dated June 22, 2000, by and
between Hughes Network Systems and AMF Bowling Centers, Inc. The
Hughes Lease represents a capitalized lease related to the
purchase of AMF Centers' satellite communication system. As of
June 1, 2001, Bowling Centers owed a principal balance of
approximately $1,100,000 under the Hughes Lease.

                           The Bonds

WINC owes approximately $527,000,000 under two series of
prepetition publicly traded senior subordinated notes.  These
Bond obligations consist of WINC's Senior Subordinated Notes and
WINC's Senior Subordinated Discount Notes.  WINC owes an
aggregate of approximately $250,000,000 in principal and
approximately $28,700,000 in accrued interest (including
approximately $1,500,000 of defunct interest) under the Senior
Subordinated Notes.  Additionally, WINC owes an aggregate amount
of approximately $277,000,000 in fully accreted principal and
approximately $7,100,000 of accrued interest under the Senior
Subordinated Discount Notes.  The Bonds are unsecured
obligations of WINC, which are subordinated in right of payment
to all Prepetition Credit Facility Obligations and rank pari
passu with all subordinated debt of WINC.  The Bonds are jointly
and severally guaranteed on a senior subordinated basis by
Holdings and the Subsidiary Debtors.  The guarantees of the
Bonds are subordinated to the guarantees of the Prepetition
Credit Facility, the Missouri Mortgage and the Hughes Lease.

                           *   *   *

As of the Petition Date, the Debtors collectively have about
$5,000,000 of available cash.  A material portion of that cash
is pledged to the Prepetition Lenders to secure repayment of
amounts owed under the Prepetition Credit Agreement.  The
Debtors need access to that Cash Collateral to fund their day-
to-day operations, including the payment of wages and other
employee benefits and the acquisition of raw materials, goods,
and services that are essential to the continued operation of
the Debtors' businesses.  Unless the Court authorizes use of the
Lenders' Cash Collateral, the Debtors may be unable to meet
their payroll this week, Mr. Hare warned Judge Tice.  Moreover,
Mr. Hare indicated, entry of a consensual Cash Collateral Order
is a prerequisite to obtaining any post-petition financing.
Unless the Court signs-off on a Cash Collateral Order
immediately, Mr. Hare suggests, AMF may as well begin a shutdown

Prior to the Petition Date, the Debtors sat down with the
Prepetition Lenders and hammered-out acceptable terms and
conditions under which AMF may use any Cash Collateral in
exchange for AMF's agreement to adequately protect the
Prepetition Lenders from any diminution in the value of their
interests that occurs as a result of the (i) Debtors' use of
cash Collateral, (ii) priming liens and security interests
granted to Citibank for the benefit of the DIP Lenders pursuant
to this Order and the DIP Facility, (iii) postpetition transfers
of cash between and among the Debtors and their affiliates, (iv)
Debtors' use, sale or lease of the Prepetition Lenders'
collateral other than Cash Collateral, and (v) imposition of the
automatic stay.  That adequate protection package provides for
rolling the Prepetition Lenders' claims, to the extent the
Debtors use Cash Collateral, into DIP Facility and securing the
Debtors repayment obligations by the superpriority liens granted
to the DIP Lenders under the DIP Facility.

It is obvious to the Court that AMF's access to the Prepetition
Lenders' Cash Collateral is crucial to the Debtors' ability to
maintain its operations and avoid immediate and irreparable harm
to the Debtors' estates.  The consensual Cash Collateral Order
is approved, Judge Tice ruled.  To the extent that the Debtors
use the Prepetition Lenders' Cash Collateral, the Prepetition
Lenders receive dollar-for-dollar superpriority replacement
liens and administrative claim priority status. (AMF Bankruptcy
News, Issue No. 1; Bankruptcy Creditors' Service, Inc., 609/392-

AMTROL: S&P Cuts Ratings Following Weaker Financial Performance
Standard & Poor's lowered its ratings on AMTROL Inc.  The
current outlook is negative.

The downgrade is prompted by continued weak financial
performance and reduced financial flexibility following recent
changes in the company's bank credit facility. In addition, the
company faces meaningful debt maturities beginning in 2002. Weak
financial results are due primarily to high raw material and
energy costs, increased competition in principal markets, lower
demand because of the slowing economy, and supply chain
pressures. Furthermore, the strength of the U.S. dollar is
negatively affecting earnings from overseas operations.

AMTROL Inc. is a leading producer of flow control and water
heating products. The company has a modest revenue base
(approximately $200 million), aggressive capital structure, and
a growth-through-acquisition strategy. The company's revolving
credit facility was recently reduced to $15 million. As a
result, liquidity is likely to remain tight despite a commitment
by AMTROL's equity sponsor to inject up to $20 million in
additional capital. The revolving credit facility is expected to
be refinanced before its May 2002 maturity. Operating margins
(before depreciation and amortization) have declined
significantly from the high-teens percent area due to the weaker
North American economy, increased competition, and pricing
pressures. Debt to EBITDA is very aggressive at more than 6
times, and is unlikely to improve significantly even after
planned equity infusions. Operating cash flow will likely remain
weak, with funds from operations to debt below 10%.

                   Outlook: Negative

The ratings could be lowered again if adequate flexibility is
not available under the amended revolver or if operating
performance continues to decline, Standard & Poor's said.

                      Ratings Lowered
AMTROL Inc.                                 To             From
    Corporate credit rating                  B              B+
    Senior secured bank loan rating          B+             BB-
    Subordinated debt rating                 CCC+           B-

BPI PACKAGING: Primary Secured Lenders Foreclose & Sell Assets
BPI Packaging Technologies, Inc. (OTC BB: BPIE) previously
announced that each of the Company's primary secured lenders
gave notice of a public sale of the Company's assets pursuant to
Section 5/9-504 of the Illinois Commercial Code. The sale was
re-scheduled for Monday, May 25, 2001, at 10:00 a.m. Central
Daylight Savings time at the offices of LaSalle Business Credit,
Inc., 135 South LaSalle Street, and Suite 400, Chicago, Illinois
60603. Certain alleged creditors of BPI filed an involuntary
petition under federal bankruptcy law against BPI in Boston,
Massachusetts. On June 14, 2001, after notice and a hearing,
bankruptcy court in Boston granted relief from the automatic
stay to BPI's secured lenders, LaSalle Business Credit, Inc. and
DGJ, LLC., so that they could conclude their Article 9 public
sale on Friday, June 15, 2001, at 2:00p.m. CDST at the offices
of LaSalle Business Credit in Chicago, Illinois. At the public
sale, PCL Packaging, Inc. was the only bidder to appear. LaSalle
and DGJ conducted independent auctions of substantially all of
BPI's assets, and PCL was declared the successful bidder.
Thereafter, on the evening of June 15, PCL executed the
necessary documents and tendered funds in accordance with its
successful bid. Accordingly, a purchase of substantially all of
BPI's assets has been consummated by PCL. BPI ceased operations
on June 15, 2001.

Consistent with previous company forecasts, there were
insufficient proceeds to satisfy the secured debt holders in
full. Accordingly, unsecured creditors will receive no payment
against their claims and no equity remains for the stockholders.

BRIDGE INFORMATION: Rejecting 20 Executory Contracts
David M. Unseth, Esq., at Bryan Cave, in St. Louis, Missouri,
tells Judge McDonald that Bridge Information Systems, Inc. has
identified 20 executory contracts, which are no longer necessary
for their ongoing operations and businesses.  If the Court
grants the Debtors' motion to reject 20 executory contracts, the
Debtors will save approximately $118,124 in monthly
administrative expenses.  Maintaining these contracts will only
drain the Debtors of much needed resources, Mr. Unseth adds.

The Debtors seek to reject 18 data contracts with:

       (1) Griggs & Santow Incorporated
       (2) Prisma Market Analysis Limited
       (3) TRW REDI Property Data
       (4) CIBC Woody Gundy
       (5) H.S.B.C. Greenwell
       (6) Street Software Technology
       (7) Media General Financial Services
       (8) Maria Ramirez Capital
       (9) JJ Kenny Company, Incorporated
       (10) AgResource Company
       (11) Bolsas y Valores, Limited
       (12) Bunkerfuels
       (13) Capital Techniques
       (14) Delphis Hanover Corporation
       (15) Market Data Corporation
       (16) Chronographics Nicholas Burnton
       (17) Municipal Market Advisors
       (18) Equidex

Mr. Unseth relates that these data providers give, or receive
from the Debtors, licenses to access and to distribute a variety
of data, including financial markets, mortgage, U.S. and Foreign
Treasury, municipal, commodities, energy, bonds, equity markets
and currency exchange data.  The total cost of the Debtors under
these contracts is approximately $104,611 per month.

The Debtors also seek to reject its contract with the Toronto
Stock Exchange.  The Toronto contract requires the Debtors to:

       (a) Sponsor the Toronto Stock Exchange as a founding

       (b) Have non-exclusive, revocable right and license to use
           and reproduce certain markets of the Toronto Stock

       (c) License the exclusive use of the term "Founding
           Sponsor-Global Media Wall"; and

       (d) Have signage rights in the Stock Market Place.

The total cost to the Debtors under the Toronto contract is
approximately $13,165 per month.

The Debtors also want to reject its contract with Pitney Bowes
Credit Corporation.  Pitney leases, maintains and services
copier equipment for the Debtors' print facilities.  The Debtors
pay $348 per month under the Pitney contract.  (Bridge
Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service,
Inc., 609/392-0900)

C*STRATEGIC: S&P Lowers Class C & D Notes To BBB- & CCC
Standard & Poor's lowered its ratings on the class C1, C2, D1,
and D2 floating-rate notes issued by C*STrategic Asset
Redeployment Program 1999-2 Ltd., and placed the notes on
CreditWatch with negative implications. At the same time, the
ratings on C*STrategic 1999-2's class A1, A2, B1, and B2 notes
were affirmed (see list below).

The rating actions on the notes follow the increase in the
expected default rate at the single-'A' and single-'B' level.
The increase default rate was caused by the deterioration in the
credit quality of the portfolio, combined with the actual and
further expected reduction in credit enhancement following the
default of five reference entities that together make up 1.88%
of the portfolio. The CreditWatch action was taken pending
notification of actual recoveries on two of the reference

The reference pool is a $4 billion revolving pool comprising
senior unsecured loan debt obligations originated by Citibank
N.A. and domiciled in the U.S. or Canada.

Under the terms of the credit default swap, the face amount of
the notes will be reduced as a result of cumulative losses in
the reference pool in excess of the loss threshold amount.

C*STrategic 1999-2's ratings continue to reflect the credit
quality of the reference credits, the level of credit
enhancement provided by subordination and the loss threshold,
and Citibank's ability to meet its payment obligations as
counterparty under the credit default swap, Standard & Poor's

     Outstanding Ratings Lowered And Placed On CreditWatch
                With Negative Implications

- C*STrategic Asset Redeployment Program 1999-2 Ltd.
   Eur35 Million, $43 Million, Eur9 Million, and $47 Million
   Floating-Rate Notes Due November 2009

      Class                   Rating
                       To                 From
      C1               BBB-/Watch Neg     A
      C2               BBB-/Watch Neg     A
      D1               CCC/Watch Neg      B
      D2               CCC/Watch Neg      B

                Outstanding Ratings Affirmed

- C*STrategic Asset Redeployment Program 1999-2 Ltd.
   Eur65 Million, $33 Million, Eur24 Million, and $24 Million,
   Floating-Rate Notes Due November 2009

      Class            Rating
      A1               AAA
      A2               AAA
      B1               AA
      B2               AA

CANFIBRE OF RIVERSIDE: Seeks Third Extension of Exclusive Period
CanFibre of Riverside, Inc. seeks a further 60-day extension of
its exclusive period within which it may file a Chapter 11 plan
and the exclusive period within which it may solicit acceptances
of any such plan. This is the debtor's third request for an
extension of the period during which only it can file a Chapter
11 plan and solicit acceptances thereof. The debtor seeks an
extension due to the size and complex nature of the debtor's
former business, the current state of the Chapter 11 case,
including the efforts to consummate a sale of its assets, and
the debtor's need to continue evaluating the restructuring
options available to it undeterred by the submission of a
third party sponsored plan of reorganization. The debtor is
currently attempting to finalize the terms and conditions of a
contract of sale for the debtor's assets, including the
facility, with an interested party. The debtor is also
evaluating certain other assets, including certain litigation
claims, not included in the contemplated sale. Simultaneously,
the debtor is evaluating its alternatives to exit chapter 11.

The debtor seeks a third 60 day extension of its filing period,
through to and including August 21, 2001 and its solicitation
period through to and including October 22, 2001.

Chadbourne & Parke LLP and Young, Conaway, Stargatt & Taylor
represent the debtor.

CLIMACHEM INC.: Releases First Quarter 2001 Results
Climachem Inc.'s sales in the Climate Control Business have
increased from $31.6 million for the three months ended March
31, 2000 to $35.9 million in the three months ended March 31,
2001 and the gross profit has increased from $8.4 million in
2000 to $9.4 million in 2001.

Total revenues for the three months ended March 31, 2001 and
2000 were $84.8 million and $67.4 million, respectively (an
increase of $17.7 million relating to sales and a decrease of
$.3 million in other income).

Consolidated net sales included in total revenues for the three
months ended March 31, 2001 were $84.4 million, compared to
$66.7 million for 2000, an increase of $17.7 million. This
increase in sales resulted from: (i) increased sales relating to
the Chemical Business of $13.4 million from increased sales
volumes of agricultural and industrial acid products due in part
to the operation of the Cherokee Plant beginning in the fourth
quarter of 2000 and increased customer demand and improved sales
prices of certain agricultural and explosive products and (ii)
increased sales of $4.3 million in the Climate Control Business
due primarily from an increase in customer demand and improved
sales prices relating to heat pump products and the increase in
sales of new products and services introduced in the second and
third quarters of 2000. This increase in sales was partially
offset by a decrease in foreign sales in the Climate Control

The Company had a loss before provision for income taxes and
extraordinary gain of $1.2 million in the three-month period
ended March 31, 2001 compared to $.3 million in the three months
ended March 31, 2000. The increase in loss of $.9 million was
primarily due to the decreased gross profit of the Chemical
Business. This decrease was partially offset by the loss
provision on firm purchase commitments incurred in 2000 and the
increased gross profit of the Climate Control Business.

DYLEX LTD.: Settles Debts Outside Court
Dylex Ltd., owner of the BiWay chain, is settling its
obligations to its suppliers and creditors out of court, the
Ottawa Business Journal says.

Reportedly, creditors pushed the company into bankruptcy,
including Markham, Ont.-based Orientex Industries Inc. About 30
other suppliers have claimed BiWay owed them millions of

Dylex denied any wrongdoing and added that the suppliers were
using the courts to collect on their debts.

With the new owner of Dylex, the American Hardof Wolf Group,
Orientex said Tuesday that it had settled the debt and is
receiving installments of the owed money.

EDISON INTERNATIONAL: Closes Private Debt Financing & Term Loan
Edison International (NYSE: EIX) announced that Mission Energy
Holding Company, a wholly-owned subsidiary of Edison
International, has issued and sold $800 million of its 13.50%
Senior Secured Notes due 2008 and has entered into an agreement
for a $385 million senior secured term loan.  Mission Energy
Holding is a new holding company for Edison Mission Energy.

     The notes:

     *  mature on July 15, 2008; and
     *  are secured by the common stock of Edison Mission Energy
        on a pro rata basis with the term loan.

     The term loan:

     *  matures on July 2, 2006;
     *  is secured by the common stock of Edison Mission Energy
        on a pro rata basis with the 13.50% Senior Secured Notes
        due 2008;
     *  bears interest at a floating rate equal to LIBOR plus
        7.5%; and is redeemable at the option of Mission Energy
        Holding beginning on July 2, 2004.

In addition, the lenders may require Mission Energy Holding to
repay $100 million of the term loan on July 2, 2004.

The net proceeds of the offering of the 13.50% Senior Secured
Notes due 2008 and the term loan, less amounts paid into
interest reserve accounts to secure the first two years of
interest payments on the notes and the term loan, will be paid
as a dividend to Mission Energy Holding's parent company, The
Mission Group, which in turn will loan the net proceeds to
Edison International.  Edison International will use the funds
to repay indebtedness maturing in 2001.

The 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 registration

This announcement does not constitute an offer to sell or the
solicitation of offers to buy any security and shall not
constitute an offer, solicitation or sale of any security in any
jurisdiction in which such offer, solicitation or sale would be
unlawful.  This press release is being issued pursuant to and in
accordance with Rule 135c under the Securities Act of 1933.

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

FACTORY CARD OUTLET: Reports Results For Quarter Ended May 2001
Net sales of Factory Card Outlet Corporation, operating as
Debtor-in-Possession, increased $1,793 or 3.3%, to $56,235 for
the three fiscal month period ended May 5, 2001 from $54,442 for
the three fiscal month period ended April 29, 2000. Comparable
store sales increased $2,480 or 4.6%. The increase in net sales
was the result of improved flow of merchandise to the stores.
Sales increases in the card, balloon, candy and basic party
categories were partially offset by decreases in the giftwrap,
seasonal and gift categories. The card increase was the result
of a price change from 39 cents to 49 cents late in April 2000.
The Company includes stores opened 13 or 14 months after their
opening date in the calculation of comparable store sales. If
the opening date of a store falls in the first 14 days of a
period, the store is included in the comparable store
calculation in its 13th month of operation; otherwise, a store
is included in the comparable store calculation in its 14th
month of operation.

The Company's net loss for the three month period ended April
29, 2001, was $(2,360), while in the same three month period of
2000 the Company loss was $(2,738).

As of May 5, 2001, the Company had $23,557 of borrowings
outstanding under its Loan Agreement and had utilized
approximately $402 under the Loan Agreement to issue letters of
credit. The Company believes that its cash flow from operations,
borrowings under the Loan Agreement, adequate trade terms and
the continued support of its vendors will provide it with
sufficient liquidity to conduct its operations while the Chapter
11 Cases are pending. The Company will be exploring
opportunities to obtain long-term financing to support the
Company's business plan after it emerges from chapter 11;
however, there can be no assurance that the Company will be able
to obtain such financing with satisfactory terms, if at all.

At May 5, 2001 and February 3, 2001, the Company's working
capital was $15,649 and $16,510 respectively. Net cash provided
by operating activities for the three fiscal month period ended
May 5, 2001 was $2,719 compared to $25 of net cash used during
the three fiscal month period ended April 29, 2000. The increase
is primarily due to more favorable trade vendor terms negotiated
by the Company, which resulted in an increase in accounts
payable balances.

FRUIT OF THE LOOM: Nashville Carpet Seeks Relief From Stay
Nashville Carpet Center is headquartered in Nashville,
Tennessee. Prior to the petition date, NCC furnished labor and
materials to Fruit of the Loom, Ltd. at their facility located
at and commonly known as Lot #2, Warren County, Kentucky. NCC
furnished and installed carpet and related materials at this
property. John D. Demmy Esq., of Stevens & Lee asks the Court,
under Section 362, for relief for his client from the automatic
stay. Mr. Demmy states that Fruit of the Loom owes his client
$209,235.60 plus accrued and accruing interest, fees and costs,
including attorney's fees. Under Kentucky law, a mechanic's lien
statement, like that filed by NCC, must filed within six months.
NCC last furnished labor and materials for the project on
October 20, 1999. On February 9, 2000, NCC filed its mechanic's
lien statement. NCC also has filed proofs of claim in this
case evidencing its claim against Fruit of the Loom. Under
Kentucky law, a complaint to foreclose on a mechanic's lien must
be filed within one year of the filing of a mechanic's lien
statement. However, NCC's right to bring such an action is
stayed by the automatic stay resulting from the commencement of
these cases.

Mr. Demmy cites In re Wedgewood, 878 F. 2d 693, 697 (3rd Cir.
1998); Rexene Products Co. 141 B.R. at 576. "The automatic stay
is not meant to be indefinite or absolute and the Court has the
power to grant relief from the stay in appropriate
circumstances." He also relies on In re Continental Airlines
Inc., 152 B.R. 320, 424 (D. Del. 1993). "In determining whether
cause exists to modify an automatic stay, courts consider the
policies underlying the stay and the competing interests of
the debtor and movant."

Mr. Demmy says that by applying the above standards, it is clear
that cause exists to grant relief from the automatic stay to
allow NCC to commence an action in the Kentucky state court to
foreclose on its mechanic's lien. He outlines four basic
reasons. First, granting relief from the stay will not cause any
prejudice to either Fruit of the Loom or their estates. The case
is already over 18 months old and Debtor has received the
"breathing spell" to which they are entitled. Second, the
prejudice to NCC if relief from the stay is not granted will
greatly outweigh any possible prejudice to Fruit of the Loom or
their estates. NCC may lose valuable substantive and procedural
rights if forced to litigate in Delaware. Third, NCC has a
strong possibility of success on the merits of its mechanic's
lien under Kentucky law. Last, judicial economy will be served
by the Court granting relief from the stay as requested. (Fruit
of the Loom Bankruptcy News, Issue No. 32; Bankruptcy Creditors'
Service, Inc., 609/392-0900)

GENESIS WORLDWIDE: Bank Agrees To Extend Forbearance Period
Genesis Worldwide, Inc. (OTCBB:GWOW) announced that the lender
under the Company's bank credit agreement has amended an
existing agreement to extend the forbearance period through
August 31, 2001. During this period, the lender has agreed to
refrain from taking certain actions as a result of the Company's
failure to comply with financial covenants contained in the
credit agreement. The lender also agreed to increase the
Company's line of credit to $36.25 million and to defer payment
of principal and interest from the Company during the
forbearance period.
Genesis Worldwide Inc. engineers and manufactures high quality
metal coil processing and roll coating and electrostatic oiling
equipment in the United States and the United Kingdom. The
Company also provides mill roll reconditioning, texturing and
grinding services in addition to its rebuild, repair and spare
parts business.

GLOBALSTAR: Qualcomm Withdraws Restructuring Investment Offer
Qualcomm Inc. withdrew its offer to become a lead investor in a
restructuring plan to save troubled satellite telephone company
Globalstar L.P., leaving Globalstar scrambling for another plan,
sources close to the situation told Reuters on Tuesday. The
sources also told Reuters that TE.SA.M, which provides 40
percent of Globalstar's business in terms of airtime spent, is
trying to exit the business and has frozen all spending related
to Globalstar, except salaries and office rent. The two
decisions come at a difficult time for Globalstar, which has
previously warned that it may seek bankruptcy protection if it
cannot restructure. Globalstar will now have to devise an
alternative restructuring plan under greater time pressure. (ABI
World, July 5, 2001)

GWI INC: Wants More Time To Assume or Reject Corporate HQ Lease
The debtors, GWI, Inc., et al. seek an extension of the time
within which they must assume or reject the unexpired non-
residential lease for the debtors' corporate headquarters in
Deerfield, Illinois. The debtors seek an extension through and
including August 20, 2001. The unexpired lease is critical to
the wind down of the debtors' business. It is also a potential
source of value for the debtors' estates and creditors since the
terms of the lease may be favorable, as compared to current
market terms. The debtors claim that their decision to assume or
reject the unexpired lease should be made after the debtors have
had ample time to consider their options with the unexpired

HEDSTROM HOLDINGS: Selling New York Property for $1.38 Million
Hedstrom Holdings Inc. is seeking court approval for the sale of
its Plattsburgh, N.Y., warehouse facility to Titherington
Properties Inc. for $1.375 million, according to Dow Jones. The
U.S. Bankruptcy Court in Wilmington, Del., will consider the
matter on July 17. Objections are due Monday, according to court
papers recently obtained by Dow Jones Newswires. If the
transaction is approved by the court, Titherington Properties
would deposit $137,500 in an escrow account. Under the sale
terms, if within a specific time the purchaser finds that the
environmental report for the property is unsatisfactory, the
purchaser may terminate the sale. The sale contract also
provides a $50,000 brokerage commission, according to the

In support of its request, Hedstrom Holdings, a children's
outdoor play equipment manufacturer, said it has been trying to
sell the property for several months and determined that
Titherington's offer represents the highest and best offer
received. Hedstrom is asking the court to approve the sale free
and clear of all liens and encumbrances, as permitted by 363(f)
of the U.S. Bankruptcy Code. Judge John C. Akard approved the
company's disclosure statement on May 31 and scheduled a plan
confirmation hearing for July 17. Mount Prospect, Ill.-based
Hedstrom filed for chapter 11 with eight wholly owned
subsidiaries on April 11, 2000. The company listed assets of
$399 million and debts of $377 million in its bankruptcy
petition. (ABI World, July 5, 2001)

ICG COMM.: Moves To Give Adequate Protection To Bank Of Denver
The Bank of Denver is the holder of a loan to ICG Holdings,
Inc., one of the ICG Communications, Inc. Debtors, in the
original principal amount of $1.3 million, with an outstanding
principal balance as of April 30, 2001, in the amount of
$928,666.16. The loan is evidenced by a promissory note given by
Holdings to the Bank. The note calls for regular monthly
payments of $12,895.24, the interest component of which is
approximately $6,578.05.

The loan obligations are secured by a contemporaneous Deed of
Trust granting the Bank a security interest in, among other
things, the land, machinery, equipment, and fixtures with
respect to the property owned by Holdings located at 9605 Maroon
Circle, Englewood, Colorado.

After initial discussions between the Bank and the Debtors, the
Bank made a request for adequate protection of its security
interests in the Colorado property. Rather than risk the
uncertainty and expense of litigation with the Bank concerning
the adequate protection request, the Debtors and the Bank have
negotiated consensual terms for the provision of adequate
protection, as:

      (a) Adequate Protection Payments. Each month, commencing
with July 2001, Holdings will pay to the Bank an amount equal to
approximately one regular monthly interest payment so as to be
received by the 30th day of the month, with the first such
payment due on or before July 30, 2001.

      (b) Reservation of Rights. The Debtors and the Bank reserve
all rights with respect to valuation and to final allocation of
the adequate protection payments to ultimately allowed proofs of
claim, including a determination of whether the Bank is an
under- or oversecured creditor, and the reasonableness of all
expenses and costs included in any proof of claim.

      (c) Termination. The agreement will terminate upon the
earliest of (i) conversion of these cases to liquidation
proceedings under chapter 7 or the appointment of a trustee in
these cases; (ii) substantial consummation of a plan of
reorganization in these cases; or (iii) December 31, 2002.

The Debtors tell Judge Walsh this settlement was negotiated in
good faith and is reasonable and fair, including terms
traditionally found in adequate protection situations. Approval
of this agreement is in the Debtors' best interest, the best
interest of these estates and of their creditors, as it allows
the Debtors' use of the collateral and facilitates the
consensual progress of these cases by avoiding much, if not all,
future litigation with the Bank. (ICG Communications Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-

KITTY HAWK: U.S. Postal Service Terminates W-Net Contract
Kitty Hawk, Inc. received a notice from the U.S. Postal Service
that its W-Net contract will be terminated for convenience
effective August 25, 2001. The notice and its effective date are
consistent with Kitty Hawk's business plan that is set forth in
the Disclosure Statement supporting Kitty Hawk's Amended Plan of
Reorganization dated May 30, 2001, which assumes that the W-Net
contract will be terminated as of the end of August 2001. Kitty
Hawk is unable at this time to predict the amount or form of a
termination for convenience payment from the U.S. Postal

Kitty Hawk, Inc., through its air carrier and air cargo
subsidiaries, provides scheduled overnight air cargo services to
more than 50 U.S. cities through its hub in Fort Wayne, Indiana;
as well as cargo aircraft charter and logistics services. For
more information on the company, visit Kitty Hawk's Web site at

LAIDLAW INC.: Overview Of Chapter 11 Plan Of Reorganization
Laidlaw Inc.'s financial rehabilitation under a chapter 11 plan
of reorganization is premised on a threshold series of
Restructuring Transactions:

      * Laidlaw Inc. ("LINC") will cause Laidlaw Investments Ltd.
        ("LIL") to become a direct, wholly owned subsidiary of

      * LIL will acquire from LINC, in exchange for a combination
        of Cash, New Notes and common stock of LIL all of LINC's
        assets (other than its stock in LIL), including all of
        the equity and debt of LINC's Canadian and non-U.S.
        operations, Greyhound Canada Transportation Corp. and
        Laidlaw Transit Ltd.

      * LIL will continue as a Delaware corporation, and LIL will
        become New LINC.

When Laidlaw's officers are finished inking the corporate
paperwork, the Plan calls for:

      * All of LIL's outstanding shares will be converted into
        shares of New Common Stock.

      * LINC will transfer a combination of Cash, New Notes and
        New Common Stock that LINC received from LIL in the
        Restructuring Transactions to the existing creditors of
        LINC in full satisfaction and discharge of all claims,
        liabilities and debts against LINC.

      * Each holder's recovery will be received first in
        exchange for the principal amount of the holder's Allowed
        Claim, not the unpaid pre-Effective Date interest (if
        any) on such Allowed Claim.

       * The bank debt of Laidlaw Transportation, Inc. and
         Laidlaw One, Inc. will be satisfied and discharged on
         the Effective Date pursuant to Section III.C.1 of the

       * The outstanding stock of LINC and rights to acquire such
         stock will be canceled for no consideration.

When these transactions are complete, the ultimate parent
company in the corporate structure will be New LINC, the
Delaware corporation.

The consummation of these transactions results in the
elimination of approximately $2,800,000,000 of indebtedness and
wipes-out all existing equity interests.

While New LINC will continue to be substantially leveraged
following the Effective Date of the Plan, Laidlaw management
believes it has a Business Plan that will enable New LINC's
operations to increase revenues, reduce operating costs and
enhance cash flow.

Reorganized Laidlaw's three-legged Business Plan calls for:

(A) Revenue increasing initiatives are expected to include:

      * price increases through renegotiation of contracts
        scheduled for renewal in the education services
        operations and the public transit portion of the inter-
        city, transit & tour business;

      * expansion of non-traditional, non-vehicle-intensive
        services offered by the education services business;

      * more emphasis on travel services and package express
        initiatives by Greyhound, in addition to continued growth
        of Greyhound's core businesses; and

      * improvements designed to enhance collection rates in the
        ambulance services portion of the healthcare businesses.

(B) Operating cost reduction initiatives are expected to

      * termination and non-renewal of education services
        contracts that do not meet target return criteria;

      * information systems-driven improvements to operations;

      * administrative efficiency in all operations.

(C) Cash flow improvements are expected to result from improved
      profitability, as well as more efficient use of capital
      assets due to the increased focus on services in education
      and inter-city, transit & tour that do not require
      additional vehicles.

Laidlaw cautions that New LINC's business is capital intensive,
and the Projections anticipate that New LINC will make
significant capital expenditures after the Effective Date to
implement the Reorganized Debtors' business plan. For example,
capital expenditures in fiscal 2002-2003 are expected to be
higher than historical levels as a result of projected
replacements of a disproportionate number of older vehicles used
in the education services business that were acquired in
previously consummated acquisitions.  However, management
believes that, assuming consummation of the Plan in accordance
with its terms and achievement of the Reorganized Debtors'
business plan, New LINC will have sufficient liquidity through
at least [2004] to service the post-reorganization indebtedness
and conduct of its business as contemplated by the Reorganized
Debtors' business plan.  New LINC plans to have access to a new
senior secured revolving Exit Financing Facility, consisting of
a $350,000,000 revolving credit facility with a $150,000,000
letter of credit sub-facility, to fund its working capital
needs, including those needs created by seasonal operating

Dresdner Kleinwort Wasserstein, Laidlaw's financial advisors,
estimate the reorganization enterprise value of New LINC to fall
between $2,700,000,000 and $3,400,000,000 as of [December 31,
2001].  Based on a review of DrKW's analysis, Laidlaw assumes
that New LINC's estimated reorganization enterprise value is
$3,000,000,000, the approximate mid-point of the reorganization
enterprise value range estimated by DrKW.  In consultation with
DrKW and its other advisors, after giving effect to the Debtors'
operating businesses and the proposed debt restructuring, the
Debtors estimate total debt at the Effective Date to be
approximately $1,320,000,000, consisting of:

      $425,000,000 of senior secured term indebtedness to be
                   incurred in connection with the Exit Financing
                   Facility, assuming the Debtors distribute
                   $75,000,000 in Excess Cash at the Effective
                   Date and reduce the senior secured term
                   indebtedness by a corresponding amount, and
                   subject to increase if distributions of Excess
                   Cash are less than $75,000,000 or if all or
                   part of the corresponding debt reduction is
                   allocated to the New Notes;

       $64,700,000 in senior revolving credit facility borrowings
                   to be incurred in connection with the Exit
                   Financing Facility;

      $450,000,000 aggregate principal amount of New Notes,
                   subject to reduction in connection with
                   distributions of Excess Cash, issued to
                   holders Unsecured Bank Debt Claims,
                   Prepetition Noteholder Claims and General
                   Unsecured Claims.

      $383,500,000 in existing indebtedness of New LINC's
                   operating subsidiaries.

Laidlaw estimates the reorganization equity value to be
$1,680,000,000 billion as of an assumed Effective Date of
[December 31, 2001], after giving effect to the Debtors'
operating businesses, the expected present value of certain non-
operating assets and the debt balances resulting from the
proposed restructuring at and beyond the Effective Date.
(Laidlaw Bankruptcy News, Issue No. 1; Bankruptcy Creditors'
Service, Inc., 609/392-0900)

LERNOUT & HAUSPIE: Intercompany Agreement Allocates Revenues
Lernout & Hauspie Speech Products, N.V., and L&H Holdings USA,
Inc., through Gregory W. Werkheiser, Robert J. Dehney, and
Michael Busenkell of the Wilmington firm of Morris, Nichols,
Arsht & Tunnell, ask Judge Wizmur to authorize the allocation of
postpetition revenue from certain European sales and the
Debtors' entry into intercompany agreements nunc pro tunc, and
to approve the terms and conditions of the agreements. The
Debtors disclose that, beginning after the Petition Date, they
have been engaging in intercompany transactions by which L&H NV
provides services to and on behalf of Holdings. Counsel for the
Debtors has previously informally advised the Court that these
and other transactions have not been formalized into agreements
among the Debtors, and that certain sales have been and continue
to be made without an agreement as to the allocation of revenue
among the parties. The Debtors seek to remedy this situation
with this Motion.

                          PwC Task Force

The Debtors have established a task force from consultants with
expertise in the fields of technology transactions, financial
reporting and accounting at PricewaterhouseCoopers LLP, the
debtors' restructuring consultants and advisors. The PwC Task
Force has been skid to analyze the incidence of intercompany
transactions and, in particular, any intercompany use of
technology among members of the Debtors, and to recommend the
appropriate allocation of the Debtors' revenues relating to such
transactions. The subject of this Motion -- namely, determining
the appropriate allocation of postpetition revenues between L&H
NV and Holdings from the sale of Holdings' products in Europe --
is one segment of the allocation project. Additional aspects of
the allocation project including, without limitation, payment
for the postpetition use of "shared" intellectual property,
personnel, and other resources among the Debtors, will be the
subject of other, additional motions.

Through one or more of its members, or their subsidiaries, the
Debtors develop, market and sell products all over he world. For
example, Holdings has worldwide distribution of "Dragon
Naturally Speaking" products in the (i) retail, and (ii)
original equipment manufacturing and value-added reseller
markets. The marketing, production and distribution of these
Holdings products in Europe are functions arranged or performed
by L&H NV. The Debtors seek Judge Wizmur's authority to allocate
the revenues generated from such European sales of DNS products
and formalize agreements related to these transactions. At the
same time, the Debtors tell Judge Wizmur that, although the
transactions contemplated by the Motion and intercompany
agreement occur in the ordinary course of the Debtors'
respective businesses, in an abundance of caution, and because
the transactions are between affiliates, the Debtors are seeking
judicial approval for these transactions.

                    Retail/Shrink Wrap Products

Due to the low-margin/high volume nature of retail distribution
in Europe, Holdings has not been able to profitably market,
sell, distribute and service DNS products in the European retail
markets. On behalf of Holdings, L&H NV contacted and negotiated
with third-party Media Gold GmbH to sell Holdings' retail/shrink
wrap products in the European retail market in order to generate
income from retail sales without the attendant cost of retail
distribution. Under Media Gold's agreement with L&H NC and
Holdings, Media Gold has the right to copy and distribute
software from a master copy provided by Holdings. Media Gold
replicates, packages and sells retain/shrink wrap products to
retailers and is obligated to pay 15% of net sales to the
Debtors as a royalty. The projected annual net sales of these
retail/shrink wrap products in Europe are approximately $13.3
million, resulting in projected annual royalty income from Media
Gold of approximately $2 million. Although L&H NV has not
received any royalties from media Gold to date, there is
presently no agreement in place as to the allocation of such
royalty income as between Holdings and L&H NV.

                           OEM/VAR Products

Production, sales and distribution of Holdings' OEM/VAR products
in Europe are now functions performed entirely by L&H NV through
the latter's own resources. Specifically, L&H NV is responsible
for all marketing, production, shipping, warranty/support, legal
and administrative (i.e., invoicing and collection) functions in
respect of all DNS products sold to OEM/VAR customers in Europe.
L&H NV estimates that it incurs a cost of approximately 18% of
net sales to perform the foregoing functions. The projected
annual net sales of OEM/VAR products in Europe are approximately
$6 million. Although L&H NV has not received any revenues in
respect of its OEM/VAR sales to date, there is presently no
agreement in place as to the allocation of such revenues from
reported sales.

                  PwC Task Force Recommendations

The PwC Task Force has reviewed the distribution of DNS products
in Europe being administered or performed by L&H NV and made
recommendations to Holdings and L&H NV as to the appropriate
allocation of revenues. In preparing its recommendations, the
PwC Task Force considered, among other things, ,the level of
services performed and risks borne by each of he Debtors. In
addition, with respect to OEM/VAR sales, the PwC Task Force
determined a fair return on the costs of distribution incurred
by L&H NV by reviewing arm's length transfer prices for similar
functions performed by European distributors. The PwC Task Force
has discussed its recommendations with representatives of the
L&H Creditors' Committee, and the Committee agrees that a fair
allocation between L&H NV and Holdings is necessary under the
circumstances. As of the date of the Motion, the Committee has
not raised any objections to the relief sought.

With respect to Retail/Shrink Wrap products, the PwC Task Force
recommended to the Debtors that L&H NV should pay Holdings 1% of
the 15% of net sales actually received from Media Gold,
retaining only 1% of net sales to compensate it for its purely
administrative function. Unlike a typical distributor, in the
case of Retail/Shrink Wrap products, L&H NV is not performing
any services for Holdings other than the collection of royalties
from Media Gold. L&H NC should be compensated, however, because
Holdings had been unable to generate positive earnings from
European Retail/Shrink Wrap sales and was contemplating a
withdrawal from the European retail market until L&H NV arranged
for distribution and royalties with Media Gold. The Debtors
believe that 1% of net sales is a reasonable fee to compensate
L&H NV for its efforts in locating and arranging for a
profitable retail distribution channel, and for its continuing
administrative function. Each of the Debtors is willing, and
under no compulsion, to enter into an agreement implementing the
PwC Task Force recommendation with respect to Retail/Shrink Wrap

In order to determine a fair price for distribution of OEM/VAR
products, the PwC Task Force surveyed a broad sample of
independent "European computer and software distributors to
determine the market range for return on sales, which is defined
as operating profit divided by net sales, for a variety of
marketing and distribution services. The PwC Task Force refined
this broad survey to identify comparable pricing between
independent companies, under normal economic and market
conditions, that were engaged to perform functions similar to
those performed by L&H NV in respect of OEM/VAR products. In so
doing, the PwC Task Force eliminated situations involving
significant manufacturing or non-distribution activities, as
well as situations involving significant development or design
services. This analysis yielded a media return on sales for
software distribution services of 4.9%. In addition to the
market survey, the PwC Task Force reviewed independent industry
resources to compare the average ROS for computer and software
distribution services. For companies with assets over $200
million, the average ROS for distributors was found to be 5.1%.

Based on this market survey, the PwC Task Force recommended to
the Debtors that Holdings should pay L&H NV a distribution fee
on OEM/VAR products of 23% of reported European sales, net of
returns and allowances. This distribution fee would cover L&H
NV's actual cost (approximately 18% of net sales) and provide a
5% return on sales for the risk L&H NV is taking with regard to
the performance of all distribution functions, including the
risk of collection. The Debtors believe that a 23% distribution
fee adequately and fairly compensates L&H NV for performing
these services for the benefit of Holdings. In practice, due to
the locus of the transactions at the point of sale (Europe), and
L*H NV's obligation to invoice and collect such revenues, L&H NV
will account for all reported sales as a distributor on its
books and records and pay 77% of met sales to Holdings,
retaining 23% as a distribution fee, all in accord with the

        OEM/VAR License and Distribution Agreement

Each of the Debtors is willing, and under no compulsion, to
enter into an agreement implementing the Task Force
Recommendation with respect to the OEM/VAR products. The
Debtors' counsel has prepared forms of the Agreements which
would be entered into by and between the Debtors upon receiving
judicial approval, to implement the PwC Task Force's
recommendations. The Debtors tell Judge Wizmur that they
believe, in their respective business judgments, that the terms
and conditions of the Agreements are fair and reasonable and are
necessary to ensure the proper allocation of postpetition
revenues from European sales of DNS products between L&H NV and

     The Intercompany Administrative Services Agreement

      Administrative Services. L&H NV and Holdings agree that L&H
NV will be solely responsible for administration of a
Republishing Agreement with Media Gold and the fulfillment of
any obligations each of L&H NV and Holdings may have under that
agreement. L&H NV will (i) collect and record all royalties due
from Media Gold under the Republishing Agreement, and (ii)
within 15 days after receipt of quarterly royalty payments from
Media Gold will remit to Holdings all royalty payments less the
administrative fee, together with a copy of the quarterly report
submitted to L&H NV by Media Gold as required by the Media Gold
Agreement. All payments will be in US dollars.

      Commissions. L&H NV will receive as compensation for these
administrative services a fee in an amount equal to 1% of net
sales of the products by Media Gold under the Republishing

      Taxes. L&H NV and Holdings will each bear their respective
obligations to pay any income or similar taxes due with respect
to the income under this Agreement.

      Term: The term of this Agreement is coterminous with the
Media Gold Agreement.

      Independent Contractor. L&H NV is and shall remain an
independent contractor of Holdings. L&H NV is not, and will not
act as, an agent of Holdings, nor shall L&H NV or any of its
employees be deemed employees of Holdings.

      Consent to Jurisdiction/Venue. The parties irrevocably
consent to the exclusive jurisdiction and venue of the United
States Bankruptcy Court for the District of Delaware for
purposes of any suit, action, or other proceeding arising out of
or relating to the enforcement or interpretation of this
Agreement, if brought before either parties' Chapter 11 case is

      Choice of Law: The Agreement is governed by the laws of New

          The Intercompany License & Distribution Agreement

In addition to implementing the payment terms described in the
Motion, the Intercompany License and Distribution Agreement

      Services. Holdings will provide L&H NV with reasonable
support intended to aid L&H NV in providing the services
described in the Motion. This includes furnishing L&H NV, at no
charge, with one copy each of source and object code for the
products; two copies of existing user documentation for the
products; product fixes made available generally by Holdings to
its customers and sales and support representatives; and two
copies of documentation updates. Additional copies of these
materials, as well as copies of all promotional materials
created by Holdings, will be furnished on request for a
reasonable charge (including freight and customs) established by

      Territory: L&H NV will have the non-exclusive right and
license to solicit licensees in the OEM/VAR distribution
channels located in the Territory to enter into license
agreements for the DNS products, including documentation, as the
products may be modified from time to time. The Territory is

      Proprietary rights. Neither party will, by virtue of this
Agreement, gain any rights of ownership of copyrights, patents,
trade secrets, trademarks, or other intellectual property rights
owned by the other. Holdings will own all intellectual property
rights, title and interest in the DNS products. In addition, L&H
NV acknowledges that information about these products and any
modifications or updates to them are proprietary to and embody
the trade secrets of Holdings, and that Holdings owns the
copyright for this information.

      Nondisclosure or transfer. L&H NV will use reasonable
measures to protect the products and documentation from
disclosure or transfer to third parties, except (i) licensees
under signed License Agreements, and (ii) those employees of L&H
NV who have a need to know this information in connection with
providing the services to Holdings, and who agree not to
disclose any information except as permitted to licensees.

      Payments. Payments are to be made within 30 days after the
end of each calendar quarter. Holdings will receive 77% of all
gross revenues, net of returns and allowances, collected by or
due to L&H NV with respect to distribution of the products
during the prior calendar quarter, together with a statement
detailing all amounts collected by or due to L&H NV for such
calendar quarter. All payments are to be made in US dollars.

      Taxes. L&H NV and Holdings will each bear their respective
obligations to pay any income or similar taxes due with respect
to the income under this Agreement.

      Term. The term is one year after execution. The term will
be automatically extended for successive one-year periods unless
either party elects to terminate the Agreement by providing 30
days' advance written notice of termination to the other, which
either party may do entirely in its discretion, with or without
cause, and without any liability for invoking the termination.
Promptly after termination, L&H NV will inform Holdings in
writing of the names of any prospective licensees of which
Holdings was not previously informed and, at Holdings' option,
will either (i) deliver to Holdings all products and
information, or (ii) destroy such items. This does not eliminate
L&H NV's obligation to ensure confidential treatment of the

      Warranties. Holdings makes, and L&H NV and other licensees
receive, no warranty, express or implied, including no warranty
of merchantability or fitness for a particular purpose or use or
against infringement, with respect to any program or other
material furnished under this Agreement.

Holdings is not liable to L&H NV and neither Holdings nor L&H NV
is liable to any licensee for any loss or damage claimed to have
resulted from the use or licensing of any product. In no event
will Holdings or L&H NV be responsible for any indirect,
special, incidental, or consequential damages, including loss of

L&H NV has not authority to make any representations to any
licensee or other persons concerning the products to any third
party inconsistent with these warranty disclaimers.

      Independent Contractor. L&H NV is and shall remain an
independent contractor of Holdings. L&H NV is not, and will not
act as, an agent of Holdings, nor shall L&H NV or any of its
employees be deemed employees of Holdings.

      Consent to Jurisdiction/Venue. The parties irrevocably
consent to the exclusive jurisdiction and venue of the United
States Bankruptcy Court for the District of Delaware for
purposes of any suit, action, or other proceeding arising out of
or relating to the enforcement or interpretation of this
Agreement, if brought before either parties' Chapter 11 case is

      Choice of Law: The Agreement is governed by the laws of New

                     The Court's Approval

By Order, Judge Wizmur grants the Motion in all respects,
authorizing the allocation of revenues as described and
permitting L&H NV and Holdings to enter into the Retail/Shrink
Wrap Agreement, nunc pro tunc to March 6, 2001, and the
Administrative Services Agreement nunc pro tunc to April 9,
2001. Further, Judge Wizmur ordered that the obligations of each
of Holdings and L&H NV under these agreements would be
administrative expenses of its respective estate.
(L&H/Dictaphone Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

LOEWEN: Court Okays Revised Mandatory Claims Mediation Procedure
The Court granted The Loewen Group, Inc.'s motion with
modifications, authorizing Mediation Procedures as set forth in
the revised Mediation Procedures Term Sheet described below.

                Revised Mediation Procedures

(1) Inclusion of Claims in the Mediation Procedures

     A Claim may be included in the Mediation Procedures whether
or not a proof of claim has been filed and whether or not
the Debtors have filed an objection to the Claim. Claimants
may request that the Debtors include their Claims in the
Mediation Procedures, but the initial decision to include
claims in the Mediation Procedures shall be in the sole
discretion of the Debtors.

A Claim will be classified as a Mediation Claim, and
therefore be subject to the Mediation Procedures, upon the
filing and service of a notice of Designation on a Claimant
by the Debtors.

Upon the entry of an order approving the Mediation
Procedures (the Mediation Order), the Debtors will designate
certain Claims for resolution through the Mediation
Procedures by serving a Notice of Designation upon counsel
of holders of such Claims or the claimants if appearing pro
se. indicating that the applicable Claim has been submitted
to the Mediation Procedures. After receipt of the Notice of
Designation, the claimant may request that the Debtors
include other claims in the Mediation Procedures.

In the event of a dispute concerning inclusion of the other
claims, the Mediator will have the sole discretion to decide
whether such claims will be included in the Mediation

The Debtors will send a copy of the Notice of Designation to
the Mediator, notifying the Mediator.

Once the Notice of Designation is served, a claimant may
request that certain claims be mediated prior to other
claims, and the mediator will decide in his sole discretion
on whether the requested priority is justified.

(2) No Right to Withdraw Claim from the Mediation Process

     The Debtors will not have the right to withdraw from the
Mediation Procedures any claim once a Notice of Designation
is served.

(3) Objection to Inclusion in the Mediation Procedures

     Upon the entry of the Mediation Order, each Claimant who is
identified on either the Preliminary Mediation Claims List
or the Potential Additional Mediation Claimants List will be
subject to the Mediation Procedures upon service of the
Notice of Designation on such Claimant, without further
Opportunity to object to the Mediation Procedures in the
Bankruptcy Court, except as provided in the Mediation Order.

(4) Non-Included Claimants

     "A Claimant not identified on the Preliminary Mediation
Claims List or the Potential Additional Mediation Claimants
List (a Non-Included Claimant) that the Debtors serve with

      (a) a copy of the Mediation Order,
      (b) a copy of the Mediation Procedures term sheet attached
          to the Mediation Order and
      (c) a Notice of Designation

will have 20 days to file an objection with the Court to the
inclusion in the Mediation Procedures of any of its Claim(s)
identified in the Notice of Designation (Non-Included

If the Non-Included Claimant fails to file with the Court an
objection to its inclusion in the Mediation Procedures within
this 20-day time period, the Non-Included Claimant shall be
subject to the Mediation Procedures without further order of the
Court. If the Non-Included Claimant timely files an objection to
its inclusion in the Mediation Procedures, the Debtors shall
have 20 days from the date of the filing of the objection to
file a response to the objection and a request for a hearing
before the Court regarding inclusion of the applicable Claim in
the Mediation Procedures."

(5) Removal from ADR Procedures

     If a Claim with respect to which a Notice of Designation is
served is subject to the ADR Procedures, the Claim will be
removed from the ADR Procedures and included in the Mediation

(6) Status Conference

     Within 20 days of the service of the Notice of Designation,
the Mediator will conduct by telephone a status conference with
the Claimant, Claimant's counsel and counsel to the Debtors, to
discuss the preparation for the mediation.

(7) The Mediation Conference

     The Mediator, in consultation with the parties, shall set
the date of the Mediation Conference. The Mediator may schedule
one or more Mediation Conferences subsequent to the Mediation
Conference if the Mediator believes that doing so would further
the likelihood of resolution. Mediation Conferences will be
conducted for not longer than one-half day (four hours), unless
further extended by agreement of the parties.

      (a) Telephonic Mediation Conferences

          While disfavored, the Mediator may, where appropriate,
allow the Mediation Conferences to be held telephonically.

      (b) In-Person Mediation Conferences

          In-person Mediation Conferences will be held in
Washington, D.C., unless the Mediator directs otherwise or the
parties mutually agree to another location.

(8) Submission Materials

     Not less than 7 calendar days before the date of the
Mediation Conference, each party shall submit directly to the
Mediator, and serve on all counsel and pro se claimants, a
written statement of no more than 5 pages, exclusive of
exhibits, setting forth the parties' respective positions on
the Mediation Claim(s). The Mediator may, in his sole
discretion, permit a party to file a submission of more than
5 pages. In the case the Submission consists of previously
filed pleadings, the five-page limit will not apply. The
Mediator may at any time request that the parties submit
additional materials or designate that materials be submitted
only to the Mediator. The Submissions and all other materials
provided to the Mediator shall not be filed with the Court
and the Court shall not have access to them.

(9) Persons Required to Attend

     The following persons must attend the Mediation Conference:

     (a) The applicable claimant and the claimant's attorney
unless the claimant's attorney certifies in writing to the
mediator that he has full settlement authority without the
need to contact the client, in which case the claimant may
be excused from attending the mediation. If the claimant
has appeared pro se in the Debtors' chapter 11 cases, only
the applicable claimant; and

     (b) A representative of the Debtors (e.g, an attorney for
the Debtors) who has full authority to negotiate and settle
the matter on behalf of the Debtors must attend the Mediation

(10) Failure to Attend

      If the claimant fails to appear at the Mediation without
the consent of the Mediator, the Debtors may file a motion to
disallow the claim. If the Debtors fail to appear at the
Mediation without the consent of the Mediator, the Claimant may
file a motion to allow the claim in full.

(11) Mediation Fees

      The Mediator will direct how his fees and out-of-pocket
costs and expenses of the mediation will be shared between the
Debtors and the claimant. In the event the amounts are not
paid within 30 days, the Mediator may request that the Court
reduce the amount owed to a money judgment in favor of the

(12) Other costs and expenses

      The Mediator may request that the Debtors provide him with
publicly available information so as to develop background
information and establish appropriate and efficient incurred by
the Mediator in reviewing this information and establishing the
Mediation Procedures.

(13) Mediation Procedures and the Local Rules

      The Mediation Procedures are based in large part on Rule
9019-3 of the Local Rules of Bankruptcy Practice and Procedure
of the United States Bankruptcy Court for the District of
Delaware (the Local Rules). In the event of any conflict between
the Local Rules and the Mediation Procedures, the Mediation
Procedures shall govern.

(14) Confidentiality of Mediation Materials and Communications

      All memoranda, work product and other materials contained
in the case files of the Mediator are confidential. Any
communication made in or in connection with the mediation that
relates to a controversy being mediated, whether made to the
Mediator or to a party, or to any person if made at the
Mediation Conference, is confidential. Confidential materials
and communications are not subject to disclosure in any judicial
or administrative proceeding.

(15) Civil Immunity

      The Mediator shall be immune from civil liability for or
resulting from any act or omission done or made while engaged in
efforts to assist or facilitate a mediation unless the act or
omission was made or done in bad faith, with malicious intent or
in a manner exhibiting a willful, wanton disregard of the
rights, safety or property of another.

(16) Protection of Information Disclosed at Mediation

      The Mediator and the participants in mediation are
prohibited from divulging, outside of the mediation, any oral or
written information disclosed by the parties or by witnesses in
the course of the mediation. No person may rely on or introduce
as evidence in any arbitral, judicial or other proceeding
evidence pertaining to any aspect of the mediation effort,
including but not limited to:

      (a) views expressed or suggestions made by a party with
respect to a possible settlement of the dispute;

      (b) the fact Ihat another party had or had not indicated
willingness to accept a proposal for settlement made by the

      (c) proposals made or views expressed by the Mediator;

      (d) statements or admissions made by a party in the course
of mediation; and

      (e) documents prepared for the purpose of, in the course of
or pursuant to the mediation.

In addition, without limiting the foregoing, Rule 408 of the
Federal Rules of Evidence, and any applicable federal or state
statute, rule, common law or judicial precedent relating to the
privileged nature of settlement discussions, mediation or other
alternative dispute resolution procedures shall apply.
Information otherwise discoverable or admissible in evidence,
however, does not become exempt from discovery, or inadmissible
in evidence, merely by being used by a party in the mediation.

(16) Discovery from Mediator

      The Mediator shall not be compelled to disclose to the
Court or to any person outside the Mediation Conference any of
the records, reports, summaries, notes, communications or other
documents received or made by the Mediator while serving in such
capacity. The Mediator shall not testify or be compelled to
testify in regard to the mediation in connection with any
arbitral, judicial, or other proceeding. The Mediator shall
not be a necessary party in any proceedings relating to the

(17) Preservation of Privileges

      The disclosure by a party of privileged information to the
Mediator does not waive or otherwise adversely affect the
privileged nature of the information.

(18) Recommendations by Mediator

      The Mediator is not required to prepare written comments or
recommendations to the parties. The Mediator may present a
written settlement recommendation memorandum to attorneys or
pro se litigants, but not to the Court. The Mediator may, in
his sole discretion and without disclosing the information
protected from disclosure as described above, submit reports
to the Court that would categorize unresolved Claims and make
recommendations to the Court with respect to the manner in
which the legal issues raised by the Claims should be

(19) Preparation of Orders

      The Debtors shall have the authority to compromise and
settle Mediation Claims without further Court order in
accordance with the parameters set forth in the Court Order
Granting Debtors and Debtors in Possession Ongoing Authority to
Settle and Pay Certain Categories of Claims and Controversies,
dated December 28, 1999 (D.I. 3066) (the Settlement Order.
Beginning at the end of the third calendar quarter of the year
2001, for all settlements falling outside the parameters of the
Settlement Order, the Debtors shall submit on a quarterly basis
fully executed stipulations and orders to the Court with respect
to all settlements reached under the Mediation Procedures during
the calendar quarter, together with a motion for approval of the

(20) Final Disposition of Claims

      Claims not resolved through the Mediation Procedures shall
be resolved by the Court or another appropriate court or forum.

(21) Injunction

      During the period that a Mediation Claim is subject to the
Mediation Procedures, the Debtors and the Claimant on which
the notice has been served will be enjoined from, among other
things, commencing or continuing any action or proceeding in
any manner or any place to resolve, reconcile, determine the
nature, priority or amount of or collect upon a Mediation
Claim other than through the Mediation Procedures described
herein. This injunction (the "Mediation Injunction" will

      (a) with respect to Claims held by Claimants identified on
the Preliminary Mediation Claims List or the Potential
Additional Mediation Claimants List, on the date that the
applicable Notice of Designation is filed and served; and

      (b) with respect to Non-Included Claims, if no objection to
inclusion in the Mediation Procedures is timely filed, upon the
expiration of the 20-day objection period described above or, if
an objection to inclusion in the Mediation Procedures is filed,
upon the entry of an order of the Court overruling the

The Mediation Injunction will expire with respect to a Mediation
Claim only when the Mediation Procedures have been completed
with respect to that Claim. In addition, Mediation Claims will
remain subject to the automatic stay under section 362 of the
Bankruptcy Code after expiration of the Mediation Injunction
through the date of confirmation of a plan or plans of
reorganization in the applicable Debtors chapter 11 cases,
unless the stay is or has been earlier terminated by an order of
the Court.

The Court's order specifies that, during the period that a
Mediation Claim is subject to the Mediation Procedures, the
Debtors and the Claimant on which the Notice of Designation has
been served will be enjoined from, among other things,
commencing or continuing any action or proceeding to resolve,
reconcile, determine the nature, priority or amount of or
collect upon a Mediation Claim other than through the Mediation
Procedures. This Mediation Injunction will commence: (a) with
respect to Claims held by Claimants identified on the
Preliminary Mediation Claims List or the Potential Additional
Mediation Claimants List, on the date that the applicable Notice
of Designation is filed and served, and (b) with respect to Non-
Included Claims, if no objection to inclusion in the Mediation
Procedures is timely filed, upon the expiration of the 20-day
objection period described above or, if an objection to
inclusion in the Mediation Procedures is filed, upon the entry
of an order of the Court overruling the objection. The Mediation
Injunction shall expire with respect to a Mediation Claim only
when the Mediation Procedures have been completed with respect
to that Claim.

Judge Walsh makes it clear that Mediation Claims will remain
subject to the automatic stay under section 362 of the
Bankruptcy Code after expiration of the Mediation Injunction
through the date of confirmation of a plan or plans of
reorganization in the applicable Debtors' chapter 11 cases,
unless the stay is or has been earlier terminated by an order of
the Court or by consent of the Debtors.

Judge Walsh expressly directs that, notwithstanding anything to
the contrary, the claims asserted by American Commercial Bank,
Bayview Services, Inc., U.S. Attorney's Office on behalf of the
Small Business Administration, William Eldridge, Tecon
Corporation, Trousdale Northwest, Inc., Mary Wilcoxen, Anne P.
Nix, Nix Realty, Inc., James P. Nix, and Jim Nix will not be
subject to the Mediation Procedures.

        Appointment of Roger M. Whelan As Mediator

The Court finds Roger M. Whelan to be a disinterested person
under 11 U.S.C. section 101(14) and approves the appointment of
him as the Mediator. The Court's order provides that Mr.
Whelan's compensation will include an hourly rate for mediation
services of $350 per hour, subject to future adjustments
following notice to the Court, and reimbursement of out-of-
pocket costs and expenses.

                  Whelan Biography:

"Roger Whelan, outside counsel to Shaw Pittman, practices in
insolvency and bankruptcy law. Mr. Whelan served as United
States Bankruptcy Judge for the District of Columbia from July
1, 1972 through December 31, 1983 and was also designated by
Chief Justice Warren Burger to serve on the United States
Bankruptcy Court for the District of Maryland from August 1981
through December 1982.

"As a Bankruptcy Judge, Mr. Whelan was a governor of the
National Conference of Bankruptcy Judges, as well as an active
member of the American Judicature Society and the National
Conference of Special Court Judges for the American Bar
Association. In 1978, Judge Whelan was appointed as Special
Master by United States District Judge Charles Richey to preside
over the National American Life Insurance Company. This was the
first time that a federal Bankruptcy Judge (acting as a Special
Master) presided over a complicated reorganization hearing
together with two state court judges in one trial hearing. The
reorganization trial was the first of its kind in the history of
the nation (as evidenced by an article in the Judge's Journal,
Fall 1978). In 1984, Judge Whelan received an award for
distinguished service from the Judicial Conference of the
District of Columbia Circuit, as well as the Bar Association of
the District of Columbia.

"Mr. Whelan has lectured and written extensively for the
District of Columbia Bar Association's continuing legal
education programs since 1976, and is also a Distinguished
Lecturer at Columbus School of Law, Catholic University of
America, where he teaches Creditors' Rights, Bankruptcy Law and
Business Reorganizations, is a contributing editor for Callaghan
& Company's Norton Bankruptcy Law Advisor and was a contributing
editor for Garland Publishing Company's work on bankruptcy law.
He is a co-author of "Representing Small Businesses", published
by Wiley Law Publications; author of the "Compliance Handbookfor
Consumer Bankruptcy" (Second Edition - prepared by Washington
Credit Letter); a contributing author of Volume 4 of Current
Legal Issues Affecting Central Banks, published by the
International Monetary Fund) (March 1997); and he has been
author of numerous articles and law review articles dealing with
various aspects of the new Bankruptcy Code. Mr. Whelan has
appeared as guest lecturer for numerous bankruptcy and
commercial law institutes, including the Uniform Commercial Code

"Mr. Whelan has represented client interests in most of the
nation's major Chapter 11 cases including Johns-Manville, A.H.
Robbins, U.P.L. and Columbia Gas System, Inc. He was debtor's
counsel for the limited partnerships in the EPIC chapter 11
cases, which at that time represented the largest real estate
bankruptcy case in the nation. Together with the major bank
creditors, a plan of reorganization was filed and confirmation
of the plan was achieved within six months of the filing of
these Chapter 11 cases. Mr. Whelan has also developed an active
practice in all aspects of A.D.R. and he has served as a
mediator and arbitrator in numerous cases, including service as
a single arbitrator in the Raytech Chapter 11 case. Mr. Whelan
has also served as a consultant for the Office of Independent
Counsel in connection with its investigation into charges which
eventually resulted in an indictment against former Governor Jim
Guy Tucker and two related co-defendants.

"Mr. Whelan's educational background includes undergraduate
work at Georgetown University (cum laude), 1959, and a graduate
degree from Georgetown University Law Center (ID, 1962). He is
also an active member of the Bar Association of the District of
Columbia, a past Chairman of the Business Bankruptcy
Subcommittee of the District of Columbia Bar Association, the
American Bar Association, the Federal Bar Association (past
Chairman of the Business Bankruptcy Litigation Section; a member
of the Executive Committee of the Federal Bar's Bankruptcy
Section and is President-elect of that Section), the American
Bankruptcy Institute (a member of the Board of Directors and
Chairman of the Legislative Committee and Regional Chairman of
the Membership Committee), and the Commercial Law League. In
1989, he was elected a Fellow and appointed to the Board of
Regents of the newly incorporated American College of Bankruptcy
and presently serves on its Board of Directors. In that same
year, he was named as a Master of the Walter Chandler American
Inn of Court. In 1993, he was appointed to the Board of
Directors of Bankruptcy Arbitration and Mediation Services,
Inc., and was also elected to the Board of the Consumer Finance

"Mr. Whelan was most recently appointed by the United States
Agency for International Development to serve as a member of a
three person Commission to review and report on existing
commercial law problems in the Ukraine." (Loewen Bankruptcy
News, Issue No. 41; Bankruptcy Creditors' Service, Inc.,

LTV: Balks At C&K's & Enviroserve's Request To Examine Documents
Speaking on behalf of The LTV Corporation, Carl E. Black of the
Cleveland firm of Jones, Day, Reavis & Pogue says that C&K's and
Enviroserve's request for an oral examination and for documents
is nothing more than a strategic attempt to harass the Debtors
with the goal of coercing them to pay C&K and Enviroserve's
prepetition unsecured claims ahead of other creditors' claims.
The Debtors say the request seeks highly
confidential proprietary information, and say that it was filed
in an attempt to prod the Debtors into acquiescing to the relief
sought by the Movants in their separate motions for orders
designating them as critical vendors within the meaning of the
Critical Vendors Order, and directing the Debtors to pay the
Movants' prepetition claims.

The Debtors say that the Movants have no legal or factual basis
to demand the relief sought in their Motion to be a critical
vendor. By the express terms of the Critical Vendor Order, the
Debtors' authority to pay "critical vendor claims" is wholly
discretionary, and there is no basis for any creditor of the
Debtors' estates to challenge the Debtors' confidential and
discretionary business decision not to designate any creditor's
prepetition unsecured claim as a critical vendor claim. Under
these circumstances, the Movants should not be permitted to
conduct a 2004 examination to obtain sensitive and confidential
information related to the Debtors' strategic business decisions
in response of the Critical Vendors Motion, nor are the Movants
and other creditors permitted similar access to the Debtors'
management and confidential business information to obtain an
advantage in these cases.

If such relief were available, creditors would have an
unfettered mechanism to harass and inconvenience the Debtors at
a great expense to the Debtors' estates and great risk to the
Debtors' other creditors and business relationships to coerce
the Debtors for personal benefit (such as by seeking
preferential payment of prepetition unsecured claims, as
requested by the Movants). The Debtors tell Judge Bodoh this
type of conduct is neither contemplated nor permitted by Fed R
Bankr Pro 2004, so that the request for examination and
production should be denied.

If the Court was to be inclined to grant the requested
examination and production, the Debtors say that any such grant
should be expressly conditioned upon the prior entry of an
appropriate protective order to guard against the further
distribution of sensitive and confidential business information.
The information sought by the Movants in their 2004 Motion
constitutes highly confidential, extremely sensitive information
regarding the Debtors' business decisions that could have an
extraordinarily adverse affect upon the Debtors' vendor and
customer relations if made publicly available. The Debtors'
discretionary decisions to treat a particular customer or vendor
as a critical vendor, and the consideration received from any
such critical vendor in exchange for such treatment, constitute
sensitive proprietary information that, if made public, could be
highly disruptive to the Debtors' day-to-day business
relationships with their other customers and vendors, as well as
with other critical vendors that may have entered into different
business arrangements with the Debtors. To make that information
publicly available could cause incalculable damage to the
Debtors' business relationships and, potentially, their
operations. Accordingly, any such information must be subject to
an appropriate protective order entered in advance of the
Debtors' production of such information.

              C&K and Enviroserve's Response:
                What are the Debtors hiding?

Robert W. McIntyre, Robert R. Kracht, and Scott J. Dean of the
Cleveland firm of McIntyre, Kahn, Kruse & Gillombardo Co., LPA,
respond that it is obvious that the Debtors are highly reluctant
to open the issues that they have created when they obtained
permission to pay the prepetition claims held by certain
"critical" vendors in the early days of this proceeding. To
date, the Debtors have obtained the relief that they initially
sought and some bonus benefits as well. Now the Debtors not only
seek to deny liability, but similarly seek to foreclose any
reasonable inquiry into the situation to prevent a potential
embarrassment before the Court for their conduct, which will
be provided in this in advance of a hearing on this Motion, if
necessary, and in the relief sought under the critical vendor
motions as well.

The Movants only desire to demonstrate to the court that they
fit the criteria that was established in this Court's order and
whether the payments have been made under that order in a
consistent and equitable manner, so that they can argue their
case with the information presumed known by outside
investigation, but that can be confirmed only by the Debtors at
this point.

The Movants remind Judge Bodoh that the original critical vendor
order was couched to permit the payment, on an expedited basis,
of prepetition creditors that provided essential goods and/or
services and/or were retained by contracts highly beneficial to
the Debtors. In this case, both of these issues are present as
to the Movants because:

      (a) The Movants, as the so le significant vendor of
services under their contracts since 1998, were obligated to
continue to provide services to the Debtor postpetition at a
contract negotiated rate that has provided literally millions of
dollars of annual savings to the Debtors over spot or market
rates for comparable services, particularly
in the postpetition environment.

      (b) The Movants provided one of the most essential of
services to the Debtors, the on-site and off-site handling and
disposal of hazardous materials resulting from the operations of
the Cleveland West and East bank operations. As noted above, the
Movants were the exclusive vendor of these services, comprising
over 95% of such work at the Debtors' Cleveland facilities.

In addition, upon the filing of the petition, the Debtors'
representatives induced Movants to continue to provide their
services postpetition by advising them that they would receive
payment under both the critical vendor order and would be paid
timely for postpetition services as performed. Unfortunately,
Mr. McIntyre says the Debtors have not only reneged on their
representations, but have also now completely refused to pay
substantial parts of the legitimate postpetition invoices as
leverage to try to force the Movants to abandon all of their
prepetition claims, both as general unsecured creditors and as
critical vendors.

This situation is of great concern, since the Debtors have
enjoyed the continuation of below-market pricing from the
Movants, with savings of over $1,200,000 in costs for goods and
services over the last year of the contract, and now not only
refuse to pay the promised prepetition invoices, but refuse to
pay the postpetition invoices, taking the benefit of the savings
of $1,200,000 as well as the contract amount owed of $1,076,000,
unless the Movants abandon both their critical vendor claims and
their prepetition general claims as well.

It is ironic that not only are the Debtors claiming a coercive
intent on the part of the Movants, but that such claims are made
in the face of the coercion by the Debtors who are refusing to
pay event postpetition claims as leverage.

                        The "Real" Story

Regarding the confidentiality of this information, the Debtors
do not tell Judge Bodoh that, within days of the filing of the
Motion, the Movants were in telephone contact with Mr. Ellman,
one of the Debtors' attorneys and a signatory on the objection.
The Movants offered in writing to provide any reasonable form of
confidentiality necessary to protect any information that the
Debtors would designate as confidential. The Debtors' claim of
confidentiality is therefore made in bad faith and is
unsupported by law or fact.

         Concealment of Possible Payments to Insiders

The Movants say that the real reason the Debtors don't want to
divulge information is to conceal possible payments to insiders.
The Movants say that the critical vendor motion has apparently
been sued to funnel nearly $1,000,000 to an insider of the
Debtors without judicial knowledge and oversight as part of
approximately $33,000,000 the Debtors were authorized to pay to
critical vendors. This situation has been uncovered by outside
independent investigation by the Movants who have learned, upon
information and belief, that somewhere between $750,000 to
$1,000,000 has been paid on prepetition claims to a company
known as Wallbridge Coatings. Wallbridge Coatings is a vendor
that provides the services of coating the Debtors' flat-rolled
products with a variety of coatings to meet the Debtors'
customers' orders. Wallbridge is owned by Bethlehem Steel, who
is the Debtors' partner in Columbus Coatings, f/k/a LSE II, a
joint venture and part of the Debtors' group of companies.

                   Abuse of the Court's Order

The Court has provided some powers to the Debtors to act in an
equitable manner in dealing with specifically and rather
narrowly defined prepetition creditors. Inherent in this concept
is that the Debtors will use this authority to benefit the
Debtors without abusing the pre- and postpetition creditors and
the estate for which the Debtors are fiduciaries.

The good cause test under Fed R Bankr Pro 2004 is clearly met in
this case, since the Movants are seeking to obtain the payment
of $571,000 they are owed for prepetition services and goods
under the very circumstances that were established by this Court
for such payments. In addition, the Debtors have used the
existence and procedures of the critical vendor motion to obtain
an additional $606,000 in unpaid postpetition services, and over
$1,200,000 in contract savings from Movant. (LTV Bankruptcy
News, Issue No. 11; Bankruptcy Creditors' Service, Inc.,

MULTICANAL S.A.: S&P Lowers Short-Term Ratings to C From B
Standard & Poor's affirmed its single-B long-term foreign and
local currency corporate credit ratings on Multicanal S.A. At
the same time, Standard & Poor's lowered the short-term
corporate credit ratings to single-C from single-B, the same
level as the Republic of Argentina (single-B long-term
foreign and local currency rating/Negative/single-C short-term
foreign and local currency rating). The outlook is negative.

Multicanal faces about $320 million in maturities in the next
eight months. Although financial flexibility is restricted by
the current market conditions, Standard & Poor's expects
Multicanal to continue to receive shareholder support in this
refinancing process. Multicanal is 100% directly and indirectly
owned by Grupo Clarin. In addition, the current rating
incorporates, based on the group's good banking relationships in
Argentina, the successful refinancing of the balance. Standard &
Poor's expects the process to be completed within the next six
to eight weeks. Nevertheless, given Multicanal's significant
short-term maturities and continued financial flexibility
concerns for Argentine corporates, Standard & Poor's does not
believe the short-term rating should be higher than that of the
Republic of Argentina.

The ratings on Multicanal, one of the two largest cable-
television providers in Argentina, with about 1.35 million
subscribers as of March 2001, reflect the company's aggressive
financial profile, deteriorated cash flow protection measures,
and its dependence on the level of economic activity in the
country. However, the ratings also incorporate the company's
strong market position and parent-supported operations.

                    Outlook: Negative

The outlook on Multicanal reflects the outlook on the ratings of
the Republic of Argentina. The outlook is based on Standard &
Poor's persistent concern that the absence of an economic
recovery and the long-lasting high interest rate environment
could continue to affect financial flexibility and heighten
refinancing risk. In addition, the depressed economic activity
hinders production and revenue growth and contributes to higher
demand volatility, Standard & Poor's said.

NETSPEAK: Plans To Hold Shareholders' Special Meeting On August
Netspeak Corporation will hold a special meeting of shareholders
at the Embassy Suites Hotel, 661 Northwest 53rd Street, Boca
Raton, Florida 33487, at 10:00 A.M. local time, on August __,
2001, (date yet to be announced) for the following purposes:

      1. To consider and vote upon a proposal to approve the
merger and merger agreement dated June 11, 2001 whereby, among
other things:

         * A Tech Merger Sub, Inc., a wholly-owned subsidiary of
Adir Technologies, Inc., will merge with and into NetSpeak,
which will survive the merger and become a wholly-owned
subsidiary of Adir,

         * Each outstanding share of NetSpeak common stock will
be converted into the right to receive the cash merger
consideration, which is equal to $3.10, without interest,
subject to adjustment to not less than $3.00 based on the cash
on hand at the closing date, and

         * Each option to purchase NetSpeak common stock
outstanding as of June 11, 2001 and that remains outstanding at
the closing of the merger with an exercise price less than the
cash merger consideration will be canceled and the holder
thereof will be entitled to receive cash equal to the difference
between the cash merger consideration and the applicable
exercise price of the option, less applicable withholding taxes.

Only shareholders of record at the close of business on July 2,
2001 are entitled to notice of and to vote at the special

NORTHLAND CRANBERRIES: Reports Third Quarter Financial Losses
Northland Cranberries, Inc. (Nasdaq: CBRYA), manufacturer and
marketer of Northland brand 100% juice cranberry blends and
Seneca brand fruit juice products, today reported fiscal 2001
third quarter financial results for the three-month period ended
May 31, 2001. The company announced a loss for the period of
$2.4 million, or $0.12 per share, on revenues of $30.3 million.
For the comparable period last year, the company reported a net
loss of $4.4 million, or $0.22 per share, on revenues of $61.4
million. Year-to-date revenues for the nine-month period ending
May 31, 2001 were $107.5 million, with a net loss of $3.6
million, or $0.18 per share. Last year's comparable period
showed revenues of $205.0 million, with a net loss of $25.1
million, or $1.24 per share.

John Swendrowski, Northland Chairman and CEO, stated, "Our third
quarter results reflect the continuation of our efforts to
implement a comprehensive turnaround plan and, at the same time,
satisfy the obligations to our creditors under the terms of our
existing debt arrangements. The elements of our turnaround plan,
which include a consolidation of our sales and marketing efforts
through our alliance with Crossmark, Inc., a corporate-wide
focus on profitability as opposed to revenue growth, the "27%
Solution" reformulation of our flagship Northland brand 100%
juice products, the restructuring of our manufacturing
operations and a reduction of total personnel, have produced
positive results. However, we are still confronted by major
challenges due to the interest expense on current debt levels.
From an operational standpoint, we feel that we have made
significant improvements over last year, resulting in income
from operations of $1.3 million for the quarter and $6.2 million
for the first nine months of the year. This compares to a loss
from operations last year of $1.2 million for the third quarter
and $28.7 million for the first nine months of fiscal 2000.
Going forward, we expect to continue our efforts to reduce
costs, as we attempt to produce and sell quality cranberry
products in a highly competitive market. Also, we will continue
to actively explore alternative sources of debt and equity
capital, as well as potential corporate reorganization
transactions, in order to significantly reduce our interest
expense, restructure our debt and equity capitalization
structure and provide additional funds to more actively support
our branded product sales."

NORTHLAND CRANBERRIES: Robert Hawk Resigns as President And CEO
Robert E. Hawk, President and Chief Operating Officer, as well
as a Director of Northland Cranberries, Inc., announced his
resignation Thursday in order to pursue other business
opportunities. Ricke Kress, formerly the company's Executive
Vice President, has been named his successor. Regarding the
executive change, John Swendrowski, Northland Chairman and CEO,
stated, "we will certainly miss the drive and dedication Bob
Hawk contributed to Northland over the past decade as we evolved
from a grower of cranberries into a national juice company. We
wish him every success in his future endeavors. Ricke Kress has
extensive leadership experience in the juice business with
Seneca and has worked closely with Bob Hawk in his capacity as
Executive Vice President. We have every confidence in Ricke's
ability to carry out the duties of company President and Chief
Operating Officer."

Kress joined Northland in 1998 when the company acquired three
of Seneca's manufacturing plants. While at Seneca, Kress held
positions of Executive Vice President and President of the
Seneca Juice Division.

Reporting on company actions taken to comply with the recently
announced USDA marketing order that restricts this year's
industry-wide cranberry production to 65% of an historic
average, Swendrowski stated that, "measures have already been
implemented to reduce the crop at Northland's Massachusetts
properties. Because of current inventory levels, the mandated
crop reduction should have little impact on our marketing
strategy or the anticipated sales volume of our branded

Northland is a vertically integrated grower, handler, processor
and marketer of cranberries and value-added cranberry products.
The company processes and sells Northland 100% juice cranberry
blends, Seneca and Treesweet juice products, Northland brand
fresh cranberries and other cranberry products through retail
supermarkets and other distribution channels. Northland also
sells cranberry and other fruit concentrates to industrial
customers who manufacture juice products. With 24 growing
properties in Wisconsin and Massachusetts, Northland is the
world's largest cranberry grower. It is the only publicly-owned,
regularly-traded cranberry company in the United States, with
shares traded on the Nasdaq Stock Market under the listing
symbol CBRYA.

OWENS CORNING: Removal Period Extended to August 31
Owens Corning sought and obtained a second order from Judge
Fitzgerald extend the time during which they may file notices of
removal of the numerous judicial and administrative proceedings
to which the Debtors are parties throughout the country. These
actions involve a wide variety of claims. Due to the number of
actions and variety of claims, the Debtors have asked for
additional time to determine which, if any, of these actions
should be removed to federal courts and, if appropriate,
transferred to the District of Delaware. The Debtors assert that
the adversaries in these various matters will not be prejudiced
by any extension because the adversaries may not prosecute the
actions absent relief from the automatic bankruptcy stay.

In connection with determining whether to request removal of any
particular action, the Debtors must evaluate various issues. At
this stage in the Debtors' Chapter 11 cases, the Debtors have
not had an opportunity to evaluate those issues and determine
which actions, if any, they will seek to remove. The Debtors'
management and counsel have devoted substantial time to numerous
bankruptcy-related issues, including administering these Chapter
11 cases, and otherwise managing the Debtors' business
operations. In light of such matters, the Debtors have not had
sufficient time to analyze each of the actions pending, and to
determine which, if any, should be removed to this Court.
Without the requested extension, the Debtors will be forced to
make these decisions prematurely. An extension is necessary to
permit the Debtors' management and professionals to focus on the
administration of these Chapter 11 cases and to give the Debtors
sufficient opportunity to evaluate the actions and determine
whether removal of any of the individual actions is appropriate.

None of the Debtors' adversaries will be prejudiced by the
extensions requested by this Motion, because each of the actions
is stayed by operation of the Bankruptcy Code. Moreover in the
event that the Debtors seek to remove any of the individual
actions, any party to that action may thereafter seek to have it
remanded. Thus the requested extension will not prejudice the
rights of any of the parties.

The Debtors have therefore requested an additional period to and
including August 31, 2001, or an additional 120 days, in which
removal of pending judicial and administrative proceedings may
be effected. (Owens Corning Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

PACIFIC GAS: Asks Court to Assume Franchise Fee Agreements
Pacific Gas and Electric Company has filed a motion in U.S.
Bankruptcy Court asking for the authorization to assume more
than $76 million in franchise fee agreements with cities and

California cities and counties have granted Pacific Gas and
Electric Company permission to install, operate and maintain
electric, gas, oil, and water facilities in the public streets
owned by these local governments. In exchange for the right to
use public streets and roads, privately owned utilities and
other public service companies pay an annual franchise fee.
The company has 267 electric franchises, 238 gas franchises, 4
oil pipeline franchises, and 1 water franchise. Pacific Gas and
Electric Company understands that many cities and counties
depend on the fees paid by the utility to fund services and the
company wants to limit the impact on local governments.

By requesting to assume the franchise agreements, the company is
ensuring that it will have the authority to pay its franchise
fees when they become due, and minimize any inconvenience to
local governments.

PICCADILLY CAFETERIAS: B+ Ratings Remain on CreditWatch Negative
Standard & Poor's single-'B'-plus corporate credit and senior
secured debt ratings on Piccadilly Cafeterias Inc. remain on
CreditWatch with negative implications, where they were placed
May 11, 2001. The CreditWatch placement continues to reflect the
company's deteriorating credit protection measures.

Piccadilly recently announced that it has reached an agreement
with its senior bank lenders to amend it senior credit facility.
The amendment waives the fiscal 2001 third quarter violation and
lowers the required minimum tangible net worth to a level that
accommodates the third quarter charges as well as previously
announced charges for the fourth quarter ended June 30, 2001.
Piccadilly's third quarter violation of the tangible net worth
covenant provision of its senior credit facility was the result
of a $9.9 million accounting charge for impairments of property,
plant, and equipment that reduced the tangible net worth of the
company below the required level.

Piccadilly's operating performance has deteriorated due to
reduced customer traffic and same-store sales. Same-store sales
were 3.4% lower in the third quarter of fiscal 2001 on top of
declines of 2.4% in the second quarter and 3.8% in the first
quarter. As a result, EBITDA coverage of interest was only about
2.0 times (x), well below Standard & Poor's expectations of more
than 3.0x. In response to this deteriorating performance,
Piccadilly has initiated a comprehensive evaluation of its
organizational structure, management, operations, and
facilities. The company anticipates concluding the evaluation in
the summer of 2001, at which time it will begin implementing its

Standard & Poor's will continue to monitor developments and
expects to meet with management to discuss Piccadilly's plan to
restore better results.

Baton Rouge, La.-based Piccadilly is the largest cafeteria-style
restaurant chain in the U.S., with 242 cafeterias in 16 states.

PSINET INC.: Court Grants More Time For Filing Schedules
In a Motion, PSINet, Inc. seeks the Court's authorization,
without prejudice to their ability to seek similar relief in
future, an extension of the period within which they must file
the Schedules and Statements of financial affairs and list of
equity security holders by 105 days, that is, to and including
September 28, 2001.

Pursuant to section 521 of the Bankruptcy Code and Bankruptcy
Rule 1007, a debtor is required, within 15 days from the date of
filing, to file with the court:

       (1) schedules of assets and liabilities,
       (2) a schedule of current income and expenditures,
       (3) a schedule of executory contracts and unexpired
       (4) a statement of financial affairs and
       (5) a list of equity security holders required by
           Bankruptcy Rule 1007(a)(3).

Bankruptcy Rule 1007(a)(4) and (c) authorize the Court to extend
a debtor's time to file the Schedules and Statements on motion
for cause.

The Debtors submit that there is cause for the requested
extension in the PSINet cases. Given the size and complexity of
their businesses, the Debtors have to accumulate and distill a
substantial amount of information in order to prepare their
Schedules and Statements with the appropriate level of accuracy,
completeness and detail that will be required. This task will be
complicated by the international scope of the Debtors'
operations, including delays associated with the retrieval of
geographically dispersed business records and the translation of
foreign language documents. Given the significant burdens
already imposed on the Debtors' management and employees by the
Chapter 11 filings and the recent departures of many employees
knowledgeable about the Debtors' financial affairs and
operations, the Debtors anticipate that they will require an
additional 105 days to gather the information to complete
accurately the Schedules and Statements.

Accordingly, the Debtors request that this Court establish
September 28, 2001 as the date on or before which they must file
their Schedules and Statements, without prejudice to their right
to seek any further extensions from this Court, or to seek a
waiver of the requirement of filing certain schedules.

"Motion granted," Judge Gerber ruled, noting that similar
extensions are routinely granted by the bankruptcy court in
other large-scale chapter 11 cases. (PSINet Bankruptcy News,
Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900)

QUANTUM NORTH AMERICA: Creditors' Meeting Set For August 9
A bankruptcy case concerning Quantum North America Inc. d/b/a
E4L North America was originally filed under Chapter 11 on
October 20, 2000. The case was converted to Chapter 7 on June
20, 2001. A meeting of creditors will be held on August 9, 2001
at 1:30 PM. Richard Pachulski, Los Angeles, represents the
debtor. Proof of claim must be received by the bankruptcy
clerk's office by November 7, 2001.

RAYTHEON COMPANY: Fitch Affirms Low-B Debt Ratings
Fitch affirmed the debt ratings of Raytheon Company (RTN)
following the announcement by the company regarding higher cost
estimates to complete projects recently abandoned by Washington
Group International (WGI). The Rating Outlook remains Stable.
Debt ratings affirmed include: Raytheon's `BBB-` senior debt
rating; the company's bank facility rating of `BBB-`; RTN's
`BB+' trust preferred rating and the company's `F3' short-term
debt rating.

Raytheon sold its Engineering and Construction (REC) unit to WGI
in July 2000 and in March 2001, WGI abandoned and defaulted on
numerous projects. RTN is the contract guarantor on several
projects (50 in all) and is required to complete the
construction contracts. During the first quarter of 2001, RTN
took a charge to discontinued operations of $325 million to
reflect the cost estimate to complete two sizable projects with
corporate guarantees for Sithe Energies Inc. in Massachusetts.

Recently, RTN increased its estimate to complete the two Sithe
projects from $325 million to between $450 million and $700
million. Accordingly, the company will take a charge to
discontinued operations of $125 million during the second
quarter of 2001 to reflect the additional cash exposure to the
Sithe projects. RTN is also the contract guarantor on 15 other
projects that are, on average, 75% complete and RTN will take a
charge to discontinued operations of $36 million during the
second quarter of 2001 to reflect the cash exposure to complete
the contracts. Other charges to discontinued operations during
the second quarter of 2001 include $40 million of cash exposure
associated with 4 indemnified projects and a non-cash charge of
$71 million related to a write-off of an account receivable from
WGI. RTN's charges to discontinued operations during the second
quarter of 2001 total $272 million and reflect the company's
revised cost estimate to see the WGI contracts to completion.

Fitch's affirmation considers the cash flow strain the company
will face during the next 18 months in order to bring the WGI
projects to completion. Also considered is the potential for
future charges to complete work on the remaining WGI projects.
Notwithstanding the additional WGI liabilities, the ratings and
rating outlook rely upon management's commitment to the
company's investment grade rating and their ability to offset
cash obligations related to WGI projects by taking appropriate
measures in order to generate cash flow from investing and
financing activities. Although the higher cost estimates for the
WGI projects puts further pressure on the company's debt
ratings, RTN's current rating outlook reflects the company's
improving operating performance from its key segments--
Electronic Systems, C3I and Technical Services--collectively
representing more than 90% of the operating profits. Fitch also
recognizes RTN's position as a leading defense contractor, near-
record backlog level and significant roles in current and future
defense programs.

Raytheon Company, formed in 1925, is the third largest
Department of Defense (DOD) contractor and a leader in defense
electronics and tactical missile systems. RTN's DOD business
possesses a broad program base with significant participation in
both domestic and foreign military sales. RTN had sales of $16.6
billion through the last 12-month period ended 4/1/01 and by
segment were 43% electronic systems; 19% C3I; 11% technical
services; 7% aircraft integrated services; 3% commercial
electronics; and 17% aircraft. The U.S. government was
responsible for 66% of RTN's fiscal 2000 sales. Current backlog
as of April 1 was $25.9 billion.

SERVICE MERCHANDISE: ESP Committee To Serve Until October 31
Upon the request of Service Merchandise Company, Inc. and with
the blessing of the Court, the date on which the function and
duties of the Executive Security Plan Committee (the ESP
Committee) will terminate has been further extended until the
earlier to occur of (x) October 31, 2001 instead of April 30,
2001, or (y) final resolution with respect to the treatment of
Plan III benefits.

As previously reported, the ESP Committee was formed with the
approval of the Court to serve in a limited advisory role with
respect to the treatment of certain portions of the Debtors'
Executive Security Plan, which is a supplemental retirement plan
adopted by Service Merchandise on October 10, 1982.

Since its formation, the ESP Committee and the Debtors have met
and had various discussions with respect to the treatment of the
ESP participants and the Debtors have provided to the ESP
Committee numerous requested documents in order to assist the
ESP Committee in its review of the ESP and the discharge of its

The work of the ESP Committee was not complete as the Original
Deadline approached and the deadline has been extended several
times before.

The process of determining the eventual treatment of the ESP is
still being developed and negotiated. The ESP Committee has made
an offer to the Debtors to resolve the claims of its members,
and the Debtors are still evaluating this offer.

The Debtors tell the Court that they and the ESP Committee
continue to make progress toward a consensual resolution
regarding the treatment of Plan III benefits, and require
additional time to pursue their negotiations regarding their
resolution of the ESP issues.

Accordingly, at the request of the ESP Committee, the Debtors
have sought and obtained the Court's approval of the current
extension of the date upon which the ESP Committee must complete
its duties.

The Debtors submit that the relief requested is in the best
interests of the Debtors' estates and will not prejudice any
parties in interest. (Service Merchandise Bankruptcy News, Issue
No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900)

SPACEWORKS: Auctioning Software & Server Assets On July 19
On July 20, 2001 at 9:45 a.m., a hearing will be held before the
Honorable Paul Mannes, United States Bankruptcy Judge, at the
United States Courthouse, 6500 Cherrywood Lane, Greenbelt,
Maryland 20770, to consider the application of SpaceWorks, Inc.,
for an order authorizing and approving the bid (made subject to
higher and better bids) of Manugistics, Inc., for the sale of
the Debtor's Software and Server Assets (described below), free
and clear of all liens, claims, encumbrances and interests.
Pursuant to an asset purchase agreement on file with the
Bankruptcy Court, the Buyer has agreed to pay a purchase price
of $8.3 million.

By order dated June 28, 2001 the Bankruptcy Court approved
certain bidding and auction procedures, including a break-up fee
and over-bid protections for the benefit of the Buyer, and
scheduled an auction for July 19, 2001 at 10:00 a.m. Eastern
Time at the offices of Debtor's counsel, Shaw Pittman, 2300 N
Street, N.W., Washington, D.C. 20037-1128. Parties interested in
participating in the Auction must submit bids to Debtor's
counsel (which bids must conform with the Bid Procedures), no
later than 4:00 p.m. Eastern Time on July 17, 2001. Copies of
all relevant pleadings and attached documents, including the
Procedures Order and Bid Procedures attached thereto, may be
obtained from Debtor's counsel or the United States Bankruptcy
Court for the District of Maryland. The case number for the
Debtor's chapter 11 case is 01- 17875-PM.

The Debtor is a privately-held company, formed in 1993,
originally to develop proprietary on-line service solutions for
major corporations. The Debtor generated a significant portion
of its revenues through the sale of licenses and, of equal or
greater importance, professional services fees.

As is more fully described in the Asset Purchase Agreement, the
Debtor is selling the assets used in connection with its "B2B"
software business, including without limitation: computer
software commonly identified as the "Web Business Manager Suite"
of products and includes, without limitation, OrderManager,
Integration Manager (including webMethods Enterprise Adapter),
Mobile Manager, Marketing Manager, Offline Manager, Sales
Manager Adapter, Billing Manager Adapter, Service Manager
Adapter and Report Manager Adapter, and related documentation
and equipment (including certain servers, desktops and laptop
computers); associated intellectual property, copyrights, trade
secrets, trademarks, servicemarks and trade and domain names
(including SpaceWorks and and related rights;
inventory and related materials; related executory contracts and
licenses; the rights and interest to certain confidentiality
agreements with employees, vendors, customers, consultants or
independent contractors relating to the assets being acquired;
and goodwill, customer lists and patronage and other tangible
and intangible property (collectively, the Debtor's "Software
and Server Assets").

Bidders interested in making higher and better bids must adhere
to the Bid Procedures approved in the Procedures Order. All
parties interested in making bids should contact the Debtor's
counsel, Patrick J. Potter, Esq., Shaw Pittman, 2300 N Street,
N.W., Washington, D.C. 20037-1128,, tel. 202-663-8000, fax 202-663-

All bidders shall have and be deemed to have had the opportunity
to examine and review all relevant documents relating to the
Software and Server Assets prior to making offers, and shall be
deemed to acknowledge that they rely solely upon their own
independent review, investigation and inspection of the
documents and the Software and Server Assets in making offers.
No bidder shall be entitled to make any claim against the Debtor
or the estate for fees, expenses or costs or to assert any claim
that it is entitled to any payment or claim by reason of its
having made a bid or participated in the Auction.

All parties asserting a security interest in any of the Software
and Server Assets are required to file with the Bankruptcy Court
and serve upon counsel to the Debtor, Manugistics, Inc., and the
Creditors' Committee a detailed statement of the nature of their
security interest, the specific statement of their collateral,
and proof thereof, so as to be received no later than July 17,
2001 at 5:00 p.m. Eastern Time. Any such party that fails to
timely file and serve such a statement will be deemed to have
consented to the transfer of the Software and Server Assets free
and clear of all liens, claims and encumbrances and waived the
right to assert any security interest in the alleged collateral.
Objections, if any, to the relief to be sought at the Sale
Hearing, shall be served and filed so as to be received no later
than 5:00 p.m. Eastern Time on July 17, 2001. If no objection to
the Application is filed and served on or before the Objection
Deadline, the Bankruptcy Court, in its discretion, may cancel
the Sale Hearing, approve the sale to the Buyer (or to such
other bidder whose bid conforms to the Bidding Procedures and is
the highest and best bid) and grant all or any portion of any
other relief requested in the Motion. The Bankruptcy Court may
further adjourn the Sale Hearing without any further notice
other than an announcement at the Sale Hearing.

SUN HEALTHCARE: NHP Demands Payment Of Administrative Expenses
Pending before the Court is an argument between Nationwide
Health Properties, Inc. and Sun Healthcare Group, Inc.
in connection with two healthcare facilities located in
Lakeland, Florida, and Hartford, Connecticut, which are subject
to a master lease from NHP. NHP asks the Court to direct the
Debtors to pay it the sum of $2,803,225 as an administrative
expense relating to rent and the need for substantial repairs
and diminution to the value of the building pursuant to sections
365(d)(3) and 503 of the Bankruptcy Code. Sun objects and asks
that the Court overrule NHP's request. The matter, originally
scheduled for a hearing on June 7, 2001, has been continued to
July 13, 2001.

                        NHP's Motion

NHP alleges that the Debtors failed to pay rent increases called
for in the Master Lease from October 1999 through February 2001
with respect to (i) SunBridge Care & Rehabilitation for
Lakeland, Florida, and (ii) Mediplex of Greaer Hartford,
Connecticut. NHP alleges that the unpaid postpetition rent for
the Lakeland Facility is $14,738.83, with late charges of
$1,473.88, for a total of $16,212.71. For the Hartford Facility,
NHP alleges that the unpaid postpetition rent is $9,377.82, with
late charges of $937.78, for a total of $10,315.60.

NHP further alleges that the value of the Lakeland Facility has
declined by $2.8 million since Sun's bankruptcy was commenced,
directly as a result of Sun's negligence, and NHP has been
forced to pay $76,697 for roof repairs directly resulting from
NHP's negligent postpetition maintenance of the Facility.

Specifically about the alleged negligence of the Debtors
resulting in the decline in value of the Lakeland Facility, NHP
tells Judge Walrath that, prior to calendar year 2000, the
Lakeland Facility demonstrated a long history of excellent
financial and operational performance. Unfortunately,
postpetition, the Debtors have neglected their contractual
obligations at the Lakeland Facility, resulting in damages to
the building itself and substantially reducing the value of the
Lakeland Facility.

NHP tells Judge Walrath that statements that the Debtors are
required to send them quarterly reveal that the Lakeland
Facility was profitable through the second quarter of 2000. An
on-site inspection by NHP representatives near the date of Sun's
filing of its Petition revealed that the Lakeland Facility was
"thriving." Resident census was approximately 172 out of 185
licensed beds.

In NHP's estimation, the fair market value of the Lakeland
Facility was at least $8.5 million at the time Sun filed its
Petition, with an annualized cash flow of $1.49 million.

In November 1999, the Debtors informed NHP of their intent to
terminate their obligations with respect to the Lakeland
Facility. NHP believes that Sun commenced a pattern of
misconduct after deciding to abandon Lakeland, including
inadequate staffing, delivery of poor patient care, and neglect
of necessary building maintenance.

Beginning early in 2000, NHP started looking for new operators
for the Lakeland Facility. Several parties were highly
interested. However, poor patient care and lack of proper
maintenance were beginning to damage the Lakeland Facility's
clinical reputation, operational capabilities, census, and
financial performance, NHP says. By May 26, 2000, resident
census had declined from 172 to 144.

NHP eventually arranged with an entity called "Salem Villages"
to sign a lease with an option to purchase the Lakeland
Facility. On July 26, 2000 to pay about $600,000 annually in
rent with an option to buy the Lakeland Facility for
approximately $7.1 million.

However, on or about July 14, 2000, the Honda Agency for Health
Care Administration, Division of Health Quality Assurance,
conducted an annual inspection ("Survey") which revealed the
results of Sun's pattern of misconduct - widespread instances of
poor resident care, inadequate supervision of that care, failure
to properly evaluate serious resident health and disease issues,
failure of infection control procedures, and other serious

On August 23, 2000 inspection by NHP representatives revealed
that the patient census had fallen to 135, and that follow-up by
the Florida Division of Health Quality Assurance had found
continuous and even more serious failures to adequately care for
the Lakeland Facility's residents. An official at the Lakeland
Facility admitted these problems were due to the Debtors'
failure to adequately staff the Lakeland Facility, that the
physical plant had been allowed to decline resulting in the
building leaking, and that doctors were not referring patients
to the Lakeland Facility because of the poor care, poor
staffing, and decline in the physical plant, NHP tells the

By August 2000, NHP estimates, the fair market value had fallen
to $7.5 million, based on its own evaluation and a negotiated
purchase option.

These failures by Debtors resulted in a suspension of Medicaid
payments for Medicaid patients, such suspension being commonly
referred to as a "New Admissions Freeze". This "Freeze" caused a
further deterioration of reputation, census, and financial
results, NHP accuses.

By August 23, 2000, Salem asked for material concessions in
financial terms based on June 2000 financial reports provided by
Sun, Salem's onsite inspection of the Lakeland facility, and the
continuing quality-of-care and census declines. Eventually,
Salem refused to continue in the negotiations to take over the
Lakeland Facility. NHP representatives visited the Facility in
November 2000, at which time NHP discovered the patient census
had declined to 104 patients and that there were numerous claims
asserted by patients, including for serious postpetition
neglects of patients.

By April 1, 2001, NHP estimates the fair market value of the
Lakeland Facility had fallen to $5.8 million based on a
negotiated purchase option, a census nearly at 100 residents and
an annualized cash flow of $181,000.00.

Thus, NHP estimates that the value of the Lakeland Facility has
declined by $2.8 million since Sun's bankruptcy was commenced,
directly as a result of Sun's negligence.

NHP argues that the Debtors must comply with the Master Lease
and failure to do so creates an Administrative Expense. NHP
draws upon section 365(d)(3) of the Bankruptcy Code which
requires that debtors immediately comply with postpetition
obligations even prior to assumption or rejection. NHP also draw
the Court's attention to Section 503(b) of the Bankruptcy Code
which describes six, general non-exclusive categories of claims
entitled to administrative expense status, and therefore,
entitled to first priority of distribution under section 507(a)
of the Bankruptcy Code. The first of these categories, NHP
reminds the Court, is described as "the actual and necessary
costs and expenses of preserving the estate." Generally for a
debt to qualify as a necessary preservation expense, it must
satisfy two requirements: (i) it must have arisen from a
transaction with the estate; and (ii) it must have benefited the
estate in some demonstrable way.

NHP argues that because the damages occurred from a lease
between NHP and the Debtors, which provided a benefit to the
estate, these factors are satisfied and the unpaid postpetition,
pre-rejection rent is an administrative expense of the Debtors.

The cost of upkeep or repairs should also be an administrative
expense because the Debtors were obligated to maintain the
building postpetition while they used the building, and the
estate benefited from the postpetition use of the Lakeland and
Hartford Facilities, NHP argues.

That the Lakeland or Hartford Facilities may have operated at a
loss is irrelevant, NHP says, citing cases In re Beverage
Canners Int'l Corp., 255 B.R. 89 (Bankr. S.D. Fla. 2000),
Reading Co. v. Brown, 391 U.S. 471, 483, 88 S. Ct. 1759, 20 L.
Ed. 2d 751 (1968).

                     Debtors' Objection

The Debtors draw Judge Walrath's attention to a stipulation
between NHP and the Debtors, so ordered by the Court on February
12, 2001. The Debtors contend that, pursuant to the stipulation:

      -- the lease pertaining to the Lakeland Facility has been
terminated and the Debtors have discontinued operations at that

      -- the Debtors are currently winding down operations at the
Hartford Facility;

      -- because the Debtors continue to operate the Hartford
facility until the closure process is completed, the master
lease relating to these facilities is not, as yet, rejected;

      -- the lease will be deemed rejected on the date that the
Hartford facility is closed, such rejection relating back to the
petition date in accordance with section 365(g).

      -- as between the parties, termination of the Debtors'
operation of the Lakeland facility operates as a rejection of
the lease as it pertains to that facility, the Debtors assert.

      -- NHP's claims pertaining to the Lakeland facility were
limited to all claims for damages including lease rejection
damages attributable solely to Lakeland during the period the
Debtors maintained operations at that facility.

In this Objection, the Debtors refer to the lease as it pertains
to the Lakeland facility as rejected.

Sun's rent payment obligations, the Debtors note, were to end on
March 1, 2001 pursuant to the February 2, 2001 order.

The Debtors point out that the vast majority of NHP's claim is
attributable to a speculative and unsubstantiated decline in the
"fair market value" of the Lakeland facility due to Debtors'
alleged "negligence" in post-petition operations. These
allegations cannot form the basis for administrative expense
claims under applicable principles of bankruptcy law, the
Debtors contend, because an alleged decline in fair market value
does not implicate an obligation that must be performed under
section 365(d)(3) of the Bankruptcy Code, and NHP's claim fails
to satisfy the standard for administrative claims under section
503(b)(l) of the Bankruptcy Code.

Indeed, NHP's claim for damages for loss of fair market value of
the Lakeland facility is a transparent attempt to avoid the
statutory caps on rejection damages under section 502(b)(6) of
the Bankruptcy Code and elevate its claims to administrative
expense status, the Debtors observe.

Repairs to the roof similarly are not entitled to administrative
expense priority because claims are given the status of
administrative expenses only when they result in a direct
benefit to the estate, but the repairs were not accomplished
prior to the Debtors' termination of operations and therefore
could not provide any actual benefit to the estate.

Therefore, the portion of NHP's claimed administrative expenses
attributable to lost fair market value and roof repairs at
Lakeland should be disallowed, with prejudice, as a matter of
law, the Debtors contend.

The Debtors do not object to payment of post-petition, pre-
rejection rent and interest on overdue amounts as an
administrative expense, subject to verification of the
appropriate amounts. However, the Debtors dispute the amounts
claimed by NHP. According to the Debtors' records, outstanding
unpaid postpetition rent of $6,802.25 and late charges of
$680.23 are attributable to the Lakeland facility, totaling
$7,482.48. Outstanding unpaid postpetition rent of $5,526.59 and
interest of $552.66 are attributable to the Hartford facility,
totaling $6,078.25. The Debtors object to NHP's claim to the
extent it exceeds these amounts.

Specifically, with respect to market value of the Lakeland
Facility, the Debtors tell Judge Walrath that they will
demonstrate at the hearing that the facility was a consistent
financial underachiever due to numerous factors beyond the
Debtors' control. These factors include:

      * An inefficient and outdated physical plant;

      * a tight labor market in central Florida;

      * Dramatically increased liability insurance costs for
healthcare facilities in the state of Florida; and

      * An extremely competitive market with numerous other
skilled nursing facilities in the Lakeland area and fluctuating
demand for beds given the seasonal nature of the business in

The Debtors tell Judge Walrath that, as a result of their
efforts in devoting financial and personnel resources, all prior
survey deficiencies were cleared effective October 15, 2000, the
Lakeland facility was found to be in "substantial compliance"
with state and federal regulatory requirements, and the DPNA was
lifted as of that date. Moreover, the Lakeland facility never
lost its certification to participate in the Medicare and
Medicaid programs and never lost its state license.

The Debtors also point out that average patient census at
Lakeland for 1999 was 157, not the 172 claimed by NHP, and
financial results for that year were a small net loss.

The Debtors admit that the patient census at Lakeland did
decline during 2000. This, however, was not due to Sun's
"negligence" the Debtors protest, but rather because Sun
prudently decided to limit new admissions at Lakeland during
that latter half of 2000 and into 2001 to ensure that staffing
levels exceeded all applicable regulatory requirements.

Even with this limitation, by the time the Debtors transferred
operation of the Lakeland facility and rejected the lease, the
patient census had recovered to approximately 117 by January,
2001, the Debtors tell the Court.

With respect to visits by NHP personnel to the Lakeland facility
during 2000 and the alleged survey deficiencies and leaky roof,
Sun points out that NHP never issued a notice of default under
the lease. In point of fact, the Debtors say, NHP did not raise
any allegations of negligent management of the facility or
breach of lease requirements until the Debtors moved to reject
the lease.

The Debtors further argue that:

      (1) Damages for a Breach of the Operating and/or
Maintenance Covenants Are Not Recoverable as Administrative
Expenses Under Section 365(d)(3)

As a threshold matter, to establish an entitlement to damages
NHP must first prove a breach of some "obligation" under the
lease but the lease did not obligate the Debtors to maintain
the patient census at any particular level, or require that
the facility have any particular going concern valuation upon
return to NHP.

NHP presumably bases its claim upon section 5.2.1 of the lease
which requires the tenant to "comply with all federal, state,
and local licensing and other laws and regulations applicable
to Nursing Homes as well as the certification requirements of
Medicare and Medicaid (or any successor program)." There is no
breach of this provision, because, the Lakeland facility
always was state licensed and Medicare/Medicaid certified,
and, at the time the Debtors transferred operations, was in
substantial compliance with all applicable regulatory

Furthermore, the lease specifically provides that breach of
section 5.2.1 is a curable default for which the tenant is
permitted a cure period of up to 120 days from the date of
receipt of a notice of default from the landlord. Here, NHP
never issued a notice of default and, in any event, all survey
deficiencies were cleared by October 15, 2000, five months
before the Debtors transferred operations at the facility and
rejected the lease.

Even if NHP ultimately proved a post-petition breach,
compliance with the operating and/or maintenance covenants is
not an "obligation" as that term is used in section 365(d)(3),
as In In re R.H. Macy & Co., 170 B.R. 69 (Bankr. S.D.N.Y.
1994), In re Ernst Home Center, Inc., 209 B.R. 955 (Bankr.
W.D. Wash. 1997).

In contrast, the two eases cited by NHP -- In re Cukierman,
2424 B.R. 486 (Bankr. 9th 1999) and In re DeCicco of Montvale,
Inc., 239 B.R. 475 (Bankr. D.N.J. 1999) -- involved specific,
clear, and unambiguous monetary obligations imposed by
specific provisions of the applicable contract, including the
debtors' responsibility to pay taxes, common area maintenance
charges, and attorneys fees.

Interface Group-Nevada, Inc. v. Trans World Airlines, Inc.,
145 F.3d 124 (3d Cir. 1998) and First Bank National Ass'n v.
FDIC, 79 F.3d 362 (3d Cir. 1996), also are inapposite. First
Bank takes place outside of a bankruptcy context and is
irrelevant to an analysis of administrative expense claims
under section 365(d)(3). TWA involved a lessor's claims for
administrative expense priority for damages arising from
failure to meet return maintenance conditions under a lease
that was the subject of a post-petition agreement entered into
by the debtor under section 1110 of the Bankruptcy Code.

      (2) NHP is simply the landlord for the Lakeland facility

The core problem with the claim is that it is based upon a
complete mischaracterization of the relationship between NHP and
Debtors. NHP owns real estate, for which the lease gives
it a right to collect rent. The only risk NHP bore was credit
risk associated with Debtors' ability to pay the rent and
other monetary lease obligations, such as taxes and utilities.
The lease entitles NHP the same rent regardless of whether
there were 2, 102, or 172 patients in the facility.

In contrast, the Debtors were the operators of the skilled
nursing home business located at the leased premises. It was
the Debtors, not NHP, who bore all the risks associated with
operation of the business, such as the loss of revenue fat a
facility. Any decline in the fair market value of the Lakeland
facility as a going-concern is a loss that Debtors have
suffered, not NHP.

Having chosen in the first place not to assume any of the
risks of operating the Lakeland facility and to accept a fixed
rental stream from the Debtors, NHP cannot now claim damages
on account of an alleged decrease in the going-concern value
of the facility.

      (3) NHP's Claims Are Not Entitled to Administrative Expense
Priority Under Section 503(b)(1)(A)

Unlike prepetition claims, postpetition claims for
administrative expenses do not enjoy a presumption of validity
and accuracy. See In re Fullmer, 962 F.2d 1463, 1467 (10th
Cir. 1992); In re Downtown Inv. Club III, 89 B.R. 59, 64
(Bankr. 9th Cir. 1988).

Instead, the claimant requesting administrative priority must
demonstrate that the claim qualifies for allowance under
section 503(b)(1)(A). See In re O'Brien Env'l Energy, Inc.,
181 F.3d 527, 537 (3d Cir. 1999); In re Hemingway Transport
Inc., 954 F.2d 1, 5(1st Cir. 1988).

Claims for administrative expense priority should be narrowly
construed to include only those claims by creditors for
services that are actual and necessary to preserve the
bankruptcy estate. See In re Dant & Russell, Inc., 853 F.2d
700, 707 (9th Cir. 1988); In re Mammoth Mart~ Inc., 536 F.2d
950, 954 (1st Cir. 1976); In re CIS Cp~p1, 142 B.R. 640, 642
(S.D.N.Y. 1992).

In R.H. Macy & Co., the court set forth a two-prong test to
determine whether a claim merits treatment as an
administrative expense: "(1) the obligation must arise from a
transaction with the debtor in possession, and (2) must result
in a direct benefit to the estate."

In this case, there was no actual benefit derived by the
estate. The breaches alleged by NHP, even if proved, conferred
no actual benefit upon the Debtors' estates and thus do not
constitute administrative expenses.

Indeed, just the opposite is true - the Debtors incurred losses
of well over $1.2 million at Lakeland for 2000 in an effort to
fix operational problems at Lakeland caused, in large part, by
intrinsic problems associated with the facility itself,
including an outdated and inefficient floor plan, chronic labor
shortages, and a highly competitive, seasonal market.

      (4) NHP's Claims for Roof Repairs Should Not Be Afforded
Administrative Expense Status

Here, the Debtors derived no benefit from any such repairs.
The Debtors will demonstrate that roof repairs were not done
prior to the rejection of the lease and the Debtors' transfer
of operations at Lakeland.

The Debtors also note that the various components of NHP's
claims do not add up to the total amount claimed. Although NHP
asserts that the actual amount of lost value is $2.8 million, it
has included only approximately $2.7 million in its calculation
of the total amount of the claim. ($76,607 + $16,212.71 +
$10,315.60 + $2,699,999.99 = $2,803,225.30)

In conclusion, the Debtors request that the Court enter an

      (1) denying the Motion with prejudice insofar as it seeks
administrative expense status for alleged breaches of operating
and/or maintenance covenants related to alleged decline in value
and repairs at the Lakeland Facility,

      (2) denying the motion without prejudice as to the claims
for unpaid, post-petition, pre-rejection rent, and

      (3) granting the Debtors such other and further relief as
is just. (Sun Healthcare Bankruptcy News, Issue No. 21;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

SUNTERRA CORP.: Exclusive Plan Filing Period Extended To Oct. 2
Timeshare company Sunterra Corporation will maintain the
exclusive right to file a plan in its chapter 11 case for three
more months as it continues taking steps to shed non-core
assets. The order, signed Wednesday by Judge James F. Schneider
of the U.S. Bankruptcy Court in Baltimore, blocks other parties
from filing competing plans in the case through October 2,
extended from June 4. If the company files its plan by that
time, other parties would be further barred from filing plans
through November 30, while the company solicits plan votes. (ABI
World, July 5, 2001)

TAPISTRON INTERNATIONAL: Needs More Funds To Continue Operations
Tapistron International Inc.'s revenues for the three months
ended April 30, 2001 were $895,280 compared with $2,094,891 for
the three months ended April 30, 2000. The decrease in revenues
was due to a decrease in units sold. Revenues for the nine
months ended April 30, 2001 were $2,757,206 compared with
$6,001,181 for the nine months ended April 30, 2000. The
decrease in revenues was also due to a decrease in units sold.

The company's net loss in the three months ended April 30, 2001,
was $(400,811) as compared to a net gain in the prior comparable
three month period of 2000, when gain was $291.933. The net loss
for the nine months ended April 30, 2001, was $(1,250,525),
while in the 2000 nine month period ended April 30, 2000, the
net gain was $728,255.

The Company's consolidated cash and cash equivalents balance at
April 30, 2001 was $247,798, a $181,986 increase from the July
31, 2000 balance of $65,812. Operating activities used $111,873
of cash in the first nine months of 2001 verses cash used of
$393,089 in 2000.

Cash provided by financing activities was $299,859 in the first
nine months of 2001, verses cash used of $160,313 in 2000. The
increase in cash provided by financing activities is the result
of short term borrowing required to fund working capital in the
first nine months of 2001.

The Company's ability to improve its operating results and
financial position will depend on a variety of factors, several
of which are described below, and some of which are outside of
the control of the Company's management. The applicable risks
and uncertainties include general and industry specific economic
conditions that affect all international business and the
markets that Tapistron serves. Such conditions include interest
rates, housing starts, existing home sales, corporate profits,
and hotel/motel occupancy rates. These factors affect the number
of machines sold and the timing of sales of those machines.
The Company is experiencing a critical shortage of working
capital. The Company has no unused credit lines and must satisfy
all of its working capital and capital expenditures requirements
from cash provided by operating activities or from external
borrowings. Substantially all of the Company's assets have been
pledged to secure various outstanding indebtedness of the
Company. In the event that the Company is unable to increase its
credit lines or generate cash from operating activities to
satisfy its liquidity needs, the Company's ability to continue
to operate will be jeopardized. In this event, the Company would
be forced to seek working capital from other sources to fund
delinquent payable balances and meet ongoing trade obligations.
However, no such sources have been identified as of this date
and there is no assurance that other financing sources will
identified. Even if the Company is able to meet its short-term
capital needs, the Company's ability to meet long-term capital
needs will be subject to factors outside its control, and there
can be no assurance that the Company will be able to satisfy its
long-term capital needs.

Tapistron's management is currently negotiating with a qualified
buyer to execute an asset purchase agreement to sell
substantially all the assets of the Company. Additional
information will be provided as the negotiations progress.

An auction of certain CLEC, Internet and satellite teleport
assets of Telscape International, Inc. and several of its
affiliates will occur on July 10, 2001 at 2:00 p.m. at the
offices of the law firm of Greenberg Traurig in New York City,
with a hearing to approve the sale to be held on July 13, 2001
in the United States Bankruptcy Court for the District of
Delaware, according to David Neier, the Chapter 11 Trustee for
Telscape. Telscape is an international facilities based
communications company serving residential and commercial
customers in the United States, and in Central and South
America. In the United States, Telscape offers local access and
network products, international, long distance and other voice
and data services, primarily to "niche" markets in Hispanic
communities in Los Angeles, San Diego and Houston. Telscape
filed for bankruptcy in Delaware on April 27,2001. Bids for
Telscape assets must be submitted by July 9. Anyone interested
in receiving information concerning the sale should contact
David Neier via e-mail at

TRISM INC: Defaults on Bond Covenants & Posts Q1 2001 Losses
Trism, Inc., has incurred net losses of $4.5 million, $11.8
million, $18.4 million and $7.4 million during the quarter ended
March 31, 2001 and the years ended December 31, 2000,
1999 and 1998, respectively. The Company had been faced with a
variety of operating challenges, including, among others,
escalating fuel costs, an increase in insurance costs, the
ability to attract and retain qualified driving employees, and a
reduced shipping demand given present domestic economic
conditions. These factors have significantly impacted, and
continue to significantly impact, the Company's liquidity.

The Company is presently in default of certain covenants related
to its Senior Subordinated Notes Due 2005 and has not made its
most recent interest payment relating to such notes, which was
due March 15, 2001. Under the terms of the New Notes, the
Company had a thirty-day grace period on this interest payment
before the note holders can call the New Notes. The Company did
not make the interest payment of $1.86 million on April 15 and
this constituted an Event of Default under the terms of the
indenture pursuant to which the New Notes were issued. The total
arrearage as of May 21, 2001 is $1.91 million, including
interest at 13% on the past due amount. In addition, beginning
in October 2000 the Company has also been in default of certain
covenants relating to its revolving credit facility. Since that
time, the Company has negotiated several forbearance agreements
with the lender for the Revolver, the terms of which have
included payment of fees in exchange for such forbearance, as
well as an increase in interest rates under the Revolver and a
reduction in borrowing capacity. The most recent forbearance
expired on June 4, 2001. The Company has been negotiating with
its lender for a continued extension of the forbearance
agreement, however, such extension is not assured. The Company
is also in technical default on certain of its equipment debt
and is several months behind in making certain of its equipment
debt payments.

These matters raise substantial doubt about the Company's
ability to continue as a going concern. The Company's continued
existence is dependent on several factors, including the
Company's ability to overcome the operational and liquidity
issues discussed above. The Company's near and long term
operating strategies focus on exploiting existing and potential
competitive advantages while eliminating or mitigating
competitive disadvantages. In response to current market
conditions and as a part of its ongoing corporate strategy, the
Company is pursuing several initiatives intended to increase
liquidity and better position the Company to compete under
current market conditions. The Company has closed and reduced in
size its network of terminal facilities throughout the United
States and also reduced the number of non-driver employees.
Sales and marketing efforts have been augmented by increasing
the number of customer service personnel, increasing the number
of outside sales personnel, and establishing an outbound
telemarketing effort. Accounts receivable collection efforts
have been expanded by the addition of collection personnel

On March 9, 2001, the Company announced the Board of Directors
had engaged the Carreden Group, Inc., investment bankers located
in New York City, as financial advisor to explore strategic
alternatives. With the assistance of Carreden Group, the Company
is currently exploring alternative financing to replace the
Revolver and is also engaged in preliminary discussions with
potential purchasers of substantially all of the Company's
assets who have indicated their interests in pursuing such a
transaction. There can be no assurances that the Company will be
successful in accomplishing either of these objectives.
Moreover, the consummation of either of these alternatives may
require a restructuring of the Company's existing indebtedness.
In order to effect any such sale or restructuring of its
indebtedness, it may be necessary for the Company to file for
protection under Chapter 11 of the Bankruptcy Code.

On April 18, 2001, the Board of Directors authorized the
retention of Transport Management, a trucking management firm,
to assist in the management of the Company. Existing credit
facilities are not expected to be sufficient to cover liquidity
requirements for the next twelve months and the Company is
facing the prospect of not having adequate funds to operate its
business. Due to a number of uncertainties, many of which are
outside the control of the Company, there can be no assurance
that additional credit facilities can be arranged or that any
long term restructuring can be successfully initiated or
implemented, in which case the Company may be compelled to file
for protection under Chapter 11 of the Bankruptcy Code.
Moreover, it may be necessary for the Company to file under
Chapter 11 to implement any consensually negotiated
restructuring of its indebtedness or a sale of the Company as
discussed above.

Net loss for the quarter ended March 31, 2001 amounted to $4.5
million, or $2.24 per basic and diluted share, compared to a net
income of $2.1 million, or $0.37 per basic and diluted share, in
the first quarter of 2000. First quarter operating results were
negatively impacted by lower asset productivity and fewer miles
driven in both the Heavy Haul and Secured segments.
Additionally, the Heavy Haul segment was negatively impacted by
a decline of $0.6 million in brokerage revenues.

Operating revenue decreased $6.5 million, or 9.4% from the first
quarter 2000 to 2001. Revenue per loaded mile increased to $1.85
for the quarter ended March 31, 2001 from $1.81 for the quarter
ended March 31, 2000, excluding brokerage, Super Heavy Haul and
fuel surcharge revenues. Operating revenues were impacted by a
decline in total miles driven of approximately 4.5 million from
the first quarter of 2000 to 2001, which can be attributed to
lower asset productivity and a reduction in total tractor count.

Operating income for the three months ended March 31, 2001
decreased $2.5 from the three months ended March 31, 2000. The
following factors negatively affected operating income: (a)
miles driven declined by approximately 4.5 million miles; (b)
insurance cost increased by $0.049 per mile; (c) contractor
equipment costs increased by $0.044 per mile; (d) company driver
wage costs increased by $0.034 per mile; and (e) maintenance
costs increased by $0.019 per mile. The decline in revenues and
increase in certain variable costs in the first quarter of 2001
were partially offset by lower fixed freight operating costs of
$1.9 million. The reductions resulted from a reduced tractor and
trailer fleet size and lower equipment rental expenses as a
result of the sale of Super Heavy Haul in 2000.

UNIFORET INC.: Secures 45 Additional Days to Present CCAA Plan
UNIFORET INC. and its subsidiaries, Uniforet Scierie-Pate Inc.
and Foresterie Port-Cartier Inc. said that they have obtained
from the Superior Court of Montreal an order extending for an
additional period of 45 days the delay to present a plan of
arrangement under the "Companies' Creditors Arrangement Act"
which will set out the terms of the restructuring of their debts
and obligations.

The Company intends to keep on its current operations and its
customers are not affected by the Court order. Suppliers who
will provide goods and services necessary for the operations of
the Company will continue to be paid in the normal course of

Uniforet Inc. is an integrated forest products company which
manufactures softwood lumber and bleached chemi-thermomechanical
pulp. It carries on its business through its subsidiaries
located in Port-Cartier (pulp mill and sawmill) and in the
Peribonka area in Quebec (sawmill). Uniforet Inc.'s securities
are listed on The Toronto Stock Exchange under the trading
symbol UNF.A, for the Class A Subordinate Voting Shares, and
under the trading symbol UNF.DB, for the Convertible Debentures.

USG CORPORATION: Can Pay $35MM to Critical Vendors And Suppliers
USG Corporation deems certain vendors and service providers to
be critical to their reorganization effort and request authority
to pay prepetition claims not exceeding $35,000,000 to those
vendors and suppliers.

Certain essential materials required to manufacture certain of
the Debtors' products are available only from a single supplier.
Because the Debtors have no viable alternatives to obtain
substitute goods from other suppliers, the Debtors have
determined that, in their discretion, they must be able to
satisfy the prepetition claims of these vendors to ensure that
these single-source goods will continue to be available without

Additionally, Executive Vice President and CFO Richard H.
Fleming Explains, USG undertakes a rigorous and typical vendor
and supplier qualification process that takes months to complete
before USG will commit to purchase product from any particular

Paul E. Harner, Esq., at Jones, Day, Reavis & Pogue, explains
that USG fears that certain high-quality critical suppliers will
refuse to continue doing business with USG if not paid and USG
will have to turn to substandard suppliers of raw materials used
in the Company's wallboard, cementboard, plasters, joint
compounds, and ceiling grid and tile products. While fiber and
starch products, for example, might seem like generic products
any supplier could provide, consistent high-quality supply
delivered just-in-time is critical to USG.

The Debtors provide no detail about who, if anyone, they intend
to pay. The Debtors make it clear that their request is premised
on retaining sole discretion to determine who gets paid what
when and payments under this Critical Vendor Program will be
conditioned on a vendor's agreement to continue supplying goods
on ordinary credit terms. (USG Bankruptcy News, Issue No. 2;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

U.S. STEEL: Fitch Rates Senior Unsecured Debt At BB
Fitch has assigned a `BB' issuer rating to the senior unsecured
debt of U.S. Steel Corporation.

U.S. Steel will become independent of USX Corporation on or
about the end of the year subject to shareholder approval. As
part of the separation, U.S. Steel intends to refinance in the
capital markets certain obligations issued on its behalf by USX.
As required by the terms of the separation, the company will
also seek to establish an adequate level of liquidity
facilities. USX, to be renamed Marathon Oil Corporation, will
retain certain indebtedness allocated to U.S. Steel in support
of its operations since the issuance of its target stock back in

U.S. Steel appears braced for another difficult year for the
industry. Domestic steel demand is soft; imported steel still
has a significant market share thanks to a weak Euro; and
producers who have filed Chapter 11 continue to add supply
further unbalancing the market. Fortunately, the company is just
concluding its last blast furnace reline and will not face any
large, imminent maintenance bills. U.S. Steel produces a full
panoply of value-added steel products with only modest cash
legacy costs, courtesy of an overfunded pension plan and a
substantially funded retiree medical benefit plan.

Fitch expects that U.S. Steel's financial situation will worsen
marginally this year but will recover quickly with any price
increases. The company has strong upside operating leverage.
Historical data indicate that if a $20/ton sustainable price
increase were to occur in hot-rolled and cold-rolled sheet, U.S.
Steel could produce an EBITDA/interest coverage of 2 times (x)
or greater.

VANGUARD AIRLINES: Posts $11.5 Million Net Loss For Q1 2001
Vanguard Airlines Inc. realized a net loss for the quarter ended
March 31, 2001 of $11.5 million as compared with a net loss of
$7.6 million for the quarter ended March 31, 2000. Operating
revenue decreased 7%, or $1.9 million, for 1Q 2001 compared with
1Q 2000, while operating expenses increased 3%, or $1.2 million.
Other expense increased $0.8 million.

The Company's results for 1Q 2001 reflect a significant increase
in the Company's average length of haul (the average length of a
passenger's flight) resulting from the reconfiguration of its
route system to longer-haul flying from a Kansas City hub. As a
result of an increase in the Company's average fleet as compared
to 1Q 2000, the Company's scope of operations (as measured by
ASMs) increased 15% between the periods despite a 24% decrease
in flight departures, attributable to the transition to longer-
haul flying. The Company's passenger miles (as measured by RPMs)
increased in proportion to the increased scope of operations,
resulting in the Company's load factor remaining relatively
constant. The Company's operating expenses declined 10.4% on a
unit basis as a result of the longer-haul flying, but such
decline was more than offset by a 19.7% decline in yield also
attributable to the longer haul flying and to an increase in
discount fares resulting, in part, from the Company's entering
new markets, seasonality, and general decreases in passenger
demand for air travel in 1Q 2001 resulting, management believes,
from general passenger concerns over a worsening economy.
Results in 1Q 2001 varied substantially during the quarter due,
in part, to normal spool up of new markets, as indicated by the
Company's load factor increasing from 42% in January 2001 to 74%
in March 2001.

Total operating revenues decreased 7% to $26.5 million for 1Q
2001 from $28.4 million for 1Q 2000 despite a 16% increase in
the Company's revenue passenger miles (RPMs) to 239 million for
1Q 2001 from 207 million for 1Q 2000, primarily as a result of a
20% decline in yield. The Company's average length of haul
increased 51%, which more than offset a 21% increase in the
Company's average fares.

Fare levels (and yields) were impacted during the first quarter
as a result of the Company's efforts to stimulate traffic. The
Company's traffic levels had declined significantly in January
in part as a result, management believes, of general uncertainty
over the domestic economy, as well as passengers booking away
from the Company due to a decline in the Company's operational
performance in December 2000.

Certain passengers who do not complete their travel as scheduled
are entitled to a credit toward future travel for up to 180
days. Non-refundable fares that are forfeited as well as
estimated forfeitures of future travel credits are recognized in
passenger revenue. These revenues totaled $2.3 million in 1Q
2001 and $2.9 million for 1Q 2000. Other revenues consist of
service fees from passengers who change flight reservations on
nonrefundable fares, charter revenue, liquor sales, and mail
cargo revenues. Service fees were $0.9 million in 1Q 2001 and
$1.2 million for 1Q 2000.

As a result of the Company's operating losses and limited
financial resources, the Company's independent auditors have
expressed a "going concern" qualification on the Company's
financial statements. As of March 31, 2001, the Company had a
working capital deficit of $35.6 million.

Since inception, the Company has financed its operations and met
its capital expenditure requirements primarily with proceeds
from public and private sales of equity and debt securities. In
recent years, such financings have been made possible by two
principal stockholders, The Hambrecht 1980 Revocable Trust and
the J. F. Shea Company (together, the "H/S Investors"). During
the twelve months ended December 31, 2000, the H/S Investors
invested $11.5 million in the Company. In the first quarter of
2001, the Company also raised $3.25 million through the sale of
equity securities to Vanguard Acquisition Company ("VAC"), and
raised an additional $0.5 million through further sales of
equity securities in April 2001. On April 30, 2001, the Company
agreed, subject to conditions, to sell up to 37.5 million shares
of common stock to VAC, the H/S Investors, and additional
investors to be arranged by VAC, at a price per share of $0.20.
If fully subscribed, this placement will raise an additional
$7.5 million of equity proceeds.

Over the short term, the Company's continued operations are
dependent upon additional financings. The Company is currently
seeking to close the May Private Placement and to obtain
additional debt and/or equity financing; no assurance can be
made that such financing will be made available and close on
terms satisfactory to the Company. Failure to close the May
Private Placement or raise additional funds in the future could
result in the Company significantly curtailing or ceasing

In late 2000, the Company ceased making payments on its aircraft
leases and entered into negotiations with its lessors to defer
rental payments coming due through June 2001. The Company has
executed agreements with lessors of nine aircraft agreeing to
the deferral terms and continues to negotiate a similar
agreement with the lessor of three aircraft agreeing to deferral
terms. As a result of these agreements, certain lease arrearages
which had been included in accounts payable are now included in
long-term debt. Repayment of these loans, including interest at
10%, generally commence in July 2001 with maturities varying to
December 2002.

The Company expects to expend approximately $5 million on
various capital expenditures in 2001, which are primarily
related to improvements to aircraft, increased aircraft parts
inventory levels, additional heavy ground equipment and
improvements to its computer systems, including the Company's
switch to Sabre as its host reservations system. As of March 31
2001, approximately $1.2 million of such capital expenditures
had been incurred.

The Company continues to review its financing alternatives in
order to purchase or lease additional aircraft under suitable
terms. The Company has agreed with Pegasus Aviation to lease
eight MD-80 aircraft, the first two of which were delivered to
the Company in March and April 2001. The Company is required to
provide lease deposits aggregating $2.3 million with respect to
these aircraft, of which $0.6 million was deposited in the first
quarter of 2001.

Nearly all of the Company's advance ticket sales are charged to
credit cards. The Company provides collateral to secure the
bank, which processes the Company's credit cards and pays the
credit card receivable. The amount of required collateral varies
in direct relation to the Company's air traffic liability: as
ticket sales and air traffic liability increase, the Company
must either provide additional collateral satisfactory to the
bank or allow cash to be held by the bank as collateral.
Currently, the Company has provided letters of credit from the
H/S Investors in the aggregate amount of $4 million and a surety
bond in the amount of $8 million to secure the bank. The bank's
exposure (as computed under the credit card
processing agreement) has exceeded $12 million from time to
time, which has resulted in the bank holding cash as additional

The $8 million surety bond referenced above is cancelable by its
issuer on 90 days' notice. The Company has had discussions with
the issuer of the bond to gradually replace the bond with
alternative collateral, and has had discussions with third
parties about providing such replacement collateral but does not
currently have firm commitments from a third party to provide
replacement collateral. Management believes that satisfactory
arrangements to provide substitute collateral may be worked out
on a schedule satisfactory to the issuer of the bond, but there
can be no assurance that such arrangements will be completed.

On February 14, 2001, the H/S Investors agreed to renew for a
two-year period the letters of credit referenced above. In
consideration for the establishment of the letters of credit,
the Company issued to the H/S Investors warrants to purchase up
to an aggregate of 4,000,000 shares of common stock at an
exercise price of $1.17. Upon execution of the letter of credit,
the Company issued 800,000 of the warrants, which immediately
vest. The remaining warrants will be issued over the remaining
term of the letters of credit depending on the amount of

On March 9, 2001, the Company issued 162,500 shares of a new
issue of Series C Convertible Preferred Stock to VAC, a
subsidiary of Pegasus Aviation, in exchange for a capital
investment of $3.25 million. The Series C Convertible Preferred
Stock has a liquidation preference of $20 per share, subject to
annual accretion over three years, and is convertible into
common stock at a price of $1.25 per share of common stock. The
net proceeds from the sale were added to the Company's working
capital and used to fund the Company's operating cash
requirements and to fund security deposits on aircraft leased to
the Company. On April 9, 2001, the Company issued an additional
25,000 shares of Series C Preferred Stock to VAC in exchange for
a further capital investment of $0.5 million.

On April 30, 2001, the Company executed a term sheet with VAC
providing for VAC, investors to be arranged by it and the H/S
Investors, subject to conditions, to purchase up to 37.5 million
shares of the Company's common stock for an aggregate purchase
price of $7.5 million or $0.20 per share of common stock.
Closing of the transaction is subject to certain conditions,
including approval by the Company's Board of Directors and
approval of the Company's budget by VAC. The term sheet provides
for funds advanced prior to closing to be made as loans callable
on demand by the investors. VAC advanced $3.0 million to the
Company in May 2001, which is evidenced by a demand promissory
note bearing interest at an annual rate of 9%. The H/S
Investors and VAC have agreed that certain anti-dilution
provisions contained in preferred shares held by them will not
be triggered by the transaction. The H/S Investors have also
agreed to restrict the anti-dilution adjustments to be triggered
in certain warrants previously issued to them. Upon closing of
the transaction, in addition to the shares of common stock to be
issued pursuant to the transaction, (i) the H/S Investors will
hold shares of preferred stock convertible into an aggregate of
8,994,456 shares of common stock and warrants entitling the
holders to purchase up to 13,566,812 shares of common stock at a
per share price of $0.50 (certain of the warrants are subject to
vesting) and (ii) VAC will hold shares of preferred stock
convertible into an aggregate of 3,000,000 shares of common
stock. Also upon closing of the transaction, Seabury Advisors
LLC and Seabury Securities LLC, financial advisors to the
Company, will convert $0.5 million of fees owed to them into
common stock at a price of $0.20 per share. The exact beneficial
ownership of the Company upon closing of the transaction is not
presently determinable as it depends upon the number of shares
actually purchased by the investor group.

VLASIC FOODS: Lincoln Graphics Wants Trade Debt Committee
Lincoln Graphics, Detroit Edison, Oregon Potato Company, and
Barry Callebut USA, Inc., seek an entry of a court order
directing the appointment of a Trade Debt-holders Committee to
represent the interests of creditors holding some $50,000,000 in

Eric A. Browndorf, Esq., at Cooper Perskie April Niedelman
Wagenheim & Levenson, in Atlantic City, New Jersey, relates that
majority of the members of the Official Unsecured Creditors'
Committee are holders of subordinated bonds while some are trade

The Trade Creditors believe that the economic interests of the
subordinated bondholders and trade debt-holders are completely
opposite. With the subordinated bondholders outnumbering the
trade debt-holders, the Trade Creditors doubt if the Creditors'
Committee can adequately protect the interests of the trade

Mr. Browndorf states that the subordinated bondholders cannot
receive any distribution unless and until certain Senior Secured
Debt in excess of $300,000,000 is paid in full. On the other
hand, Mr. Browndorf notes, the trade debt holders' economic
interests compel them to try and reduce, modify or eliminate as
much of the Senior Secured Debt as possible for better

To further support their request for an additional committee,
the Trade Creditors claim that the subordinated bondholders may
allow and encourage the Vlasic Foods International, Inc. Debtors
to use proceeds from the sale of unencumbered assets to pay a
portion of the secured lender's claim. But the Trade Creditors
would not take the same position, Mr. Browndorf says. Instead,
the Trade Creditors would want to pursue a comprehensive
examination of the extent and validity of the Senior Secured

The Trade Creditors further allege that the principal
obligations of the secured debt are held by the Debtors' holding
company, and that these obligations are guaranteed by
subsidiaries holding free and clear assets. But there was no
consideration given to the subsidiary for the guarantee, Mr.
Browndorf charges. This makes the guarantees invalid, Mr.
Browndorf suggests, and the consequences to the Trade Debt could
be extraordinary favorable yet extremely detrimental to the
Subordinated Debt.

With such conflicting interests, Mr. Browndorf suggests, it is
better to have a separate trade debt-holders' committee to
protect the $50,000,000 of trade debt.

                United States Trustee Objects

The United States Trustee sees no reason why there should be a
separate committee for trade debt-holders when they are
adequately represented in the Creditors' Committee.

The U.S. Trustee asks Judge Walrath to deny the motion of the
trade debt-holders for lack of merit.

Contrary to the Trade Creditors' claim, Joseph J. McMahon, Jr.,
Esq., in Philadelphia, Pennsylvania, notes, the subordinated
bondholders and the trade debt holders have very similar
interests because:

      (A) both may want to investigate the validity and amount of
          the secured lenders' claims;

      (B) both are interested in maximizing the value of the
          estate to increase the potential distribution to all of
          the unsecured creditors; and

      (C) both are similarly situated in relations to the secured
          lenders' claim.

Besides, Mr. McMahon says, the presence of potential conflict
does not necessarily require the creation separate committees
for adequate representation. Mr. McMahon adds, the trade
creditors have a substantial voice in the Creditors' Committee
and there has been no evidence that they have been prevented
from participating.

Mr. McMahon dismisses the rest of the Movants' allegations as
speculative, unsupported, and irrelevant.

               The Debtors Don't Like It Either

Robert A. Weber, Esq., at Skadden, Arps, Slate, Meagher & Flom
in Wilmington, Delaware, argues that the appointment of a second
official committee of creditors only would result in substantial
and unnecessary duplication of costs and expenses. And the costs
of appointing a second official committee far outweighs the
Trade Creditors' asserted need for such duplicative
representation, Mr. Weber adds.

The Debtors appeal that the Court should not appoint a second
official committee of creditors because the Trade Creditors
failed to establish the necessity of such appointment. Mr. Weber
agrees with the U.S. Trustee that the Trade Creditors' arguments
are not persuasive, but merely speculative.

Even in complex cases where the interests of unsecured creditors
may conflict, Mr. Weber notes, there is typically only one
committee formed.

            The Creditors' Committee Also Protests

The Creditors' Committee assures Judge Walrath that they are
capable of representing all unsecured creditors in these chapter
11 cases.

Michael R. Lastowski, Esq., at Duane Morris & Heckscher, in
Wilmington, Delaware, relates that the committee is comprised of
a representative cross-section of the Debtors' diverse creditor
body and more than adequately represents the interests of all
creditors of the estates.

Unless it is discovered that the U.S. Trustee acted in an
arbitrary or capricious manner in making such appointments, Mr.
Lastowski argues that the US Trustee's refusal to appoint a
separate trade debt-holders committee should not be undermined.
(Vlasic Foods Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

WARNACO GROUP: Deadline For Filing Schedules Extended To Aug. 27
The deadline by which The Warnaco Group, Inc. must file its
schedules of assets and liabilities, statements of financial
affairs, lists of equity security holders and lists of executory
contracts and leases required by 11 U.S.C. Sec. 521 and Rule
1007 of the Federal Rules of Bankruptcy Procedure is extended to
Monday, August 27, 2001.

Elizabeth R. McColm, Esq., at Sidley Austin Brown & Wood, in New
York, notes that the Debtors' businesses are large and complex,
their operations and assets are diverse. The Debtors require
more time to update their books and records.

Warnaco Canada will be filing a separate Schedule while the rest
of the Debtors will consolidate their Schedules.

If needed, the Debtors retain the right to request further
extensions. (Warnaco Bankruptcy News, Issue No. 3; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

WILLIAMS CONTROLS: Moves To OTCBB After Nasdaq Delists Shares
Williams Controls, Inc. (OTC Bulletin Board: WMCO) announced
that it has received a ruling on its delisting appeal to the
Nasdaq Stock Market, stating that the company's common stock
will no longer be listed on the Nasdaq National Market effective
July 2, 2001. The Company's common stock is now trading on the
Over The Counter Bulletin Board under the same stock symbol.

In late April, the company received notice from Nasdaq that it
had failed to comply with certain requirements for continued
listing on the National Market and would be potentially
delisted, to which the company responded with its appeals before
the Nasdaq Listing Qualifications Panel. This delisting was a
result of the company's inability to meet the net tangible
assets requirement for continued listing on either the National
Market or the Small Cap Market.

Williams Controls President and CEO Thomas K. Ziegler stated,
"We would obviously have preferred to continue our listing on
the Nasdaq National Market or to be on the Small Cap Market, and
followed the appeal process as far as we could. We continue to
operate our core businesses while we remain committed to our
previously announced sale plans of some or all of our operating
subsidiaries in an expeditious manner."

Williams Controls is a designer, manufacturer and integrator of
sensors, controls and communications systems for the
transportation and communications industries. For more
information, you can find Williams Controls on the Internet at

WINSTAR COMM: Lucent Seeks Stay Relief To Grab Two Bank Accounts
Winstar Communications, Inc.'s subsidiaries, WVF-I and WVF-LU2,
granted the Bank of New York (as collateral agent for Lucent
Technologies) a first priority security interest in the accounts
and cash proceeds under the terms of:

      (a) The Cash Account Security Agreement, dated as of June
          23, 2000 between WFV-I and the Bank of New York; and

      (b) The Cash Account Security Agreement, dated as of
          December 22, 2000 between WFV-LU2 and the Bank of New

Daniel J. DeFranceschi, Esq., at Richards Layton & Finger, in
Wilmington, Delaware, explains this was done to further secure
WVF-I and WFV-LU2's obligations under the Lucent Credit

Under these Lucent Cash Collateral Agreements, Mr. DeFranceschi
relates, accounts were established subject to certain Investment
Intermediary Acknowledgements and the Disbursing Bank

The borrowers currently maintain investment and disbursement
accounts under the Acknowledgements that together constitute the

      (a) Certain investment accounts (including Nos. 9427772529
          and 9428385707) with Fleet National Bank;

      (b) Certain investment accounts (including Nos. 3274457 and
          3324773) with State Street Bank & Trust Company; and

      (c) Certain disbursement accounts (including Nos.
          9427772510 and 9428385694) with Fleet National Bank.

The estimated total balance in these accounts currently exceeds
$14,000,000. This constitutes the cash proceeds and is Lucent's
collateral under the Lucent Credit Agreement and the Lucent Cash
Collateral Agreements, Mr. DeFranceschi notes.

The Bank of New York, as Lucent's collateral agent, was granted
sole dominion and control over the accounts.

But when Lucent sent a notice of default last April, the
accounts were automatically blocked. The borrowers were divested
of any and all rights and interests in the accounts and the cash
proceeds. However, despite receiving the notice of default prior
to the Petition Date, the borrowers continued to assert an
interest in the accounts and the cash proceeds.

By motion, Lucent Technologies Inc. seeks Judge Farnan's
authority for relief from the automatic stay by:

      (a) Terminating the automatic stay with respect to certain
          investment and disbursement accounts because the
          Debtors do not have any interest in the Accounts or the
          ability to provide adequate protection of Lucent's
          interest in the accounts, and

      (b) Permitting Lucent to take all actions necessary or
          appropriate to block and liquidate the Accounts and to
          apply the proceeds to its claims against some of the

If the Court won't terminate the automatic stay, Lucent seeks an
order providing for adequate protection of their secured
interest in the accounts instead.

Mr. DeFranceschi emphasizes that the relief requested is made
without prejudice to Lucent's rights with respect to collateral
other than the accounts. Lucent reserves all of its rights with
respect to all of its collateral, Mr. DeFranceschi adds,
including its rights to seek further relief from the automatic
stay and to seek adequate protection of Lucent's interest in the
collateral. (Winstar Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

BOND PRICING: For the week of July 9 - 13, 2001
Following are indicated prices for selected issues:

Algoma Steel 12 3/4 '05          20 - 24(f)
Amresco 9 7/8 '05                53 - 55
Arch Communications 12 3/4 '05    8 - 11(f)
Asia Pulp & Paper 11 3/4 '05     24 - 26(f)
Chiquita 9 5/8 '04               67 - 69(f)
Friendly Ice Cream 10 1/2 '07    55 - 58
Globalstar 11 3/8 '04             5 - 6(f)
Level III 9 1/8 '04              42 - 44
PSINet 11 '09                     6 - 7(f)
Revlon 8 5/8 '08                 45 - 47
Trump AC 11 1/4 '06              67 - 69
Weirton Steel 10 3/4 '05         30 - 32
Xerox 5 1/4 '03                  79 - 81


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

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 Go 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
re-mailing and photocopying) is strictly prohibited without
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contained herein is obtained from sources believed to be
reliable, but is not guaranteed.

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