TCR_Public/010828.mbx       T R O U B L E D   C O M P A N Y   R E P O R T E R

          Tuesday, August 28, 2001, Vol. 5, No. 168


360NETWORKS: Adolfson Wants Stay Relief or Interest Payments
AMES DEPARTMENT: Acadia Realty Sees Minimal Chapter 11 Impact
AMES DEPARTMENT: Gets Approval to Hire Weil Gotshal as Counsel
AMF BOWLING: Court Okays Stroock as Lead Counsel for Parent Co.
ARMSTRONG HOLDINGS: 15 Maertin Claimants Want Lawsuit to Proceed

ASSOCIATED PHYSICIANS: S&P Cuts Insurer's Strength Rating to R
AT HOME: Two Noteholders Demand for Payment of $50MM on Aug. 31
B+H OCEAN: S&P Affirms Junk Ratings & Lifts CreditWatch
BERTUCCI'S CORP.: S&P Cuts Corporate Credit Rating to B- from B
BRIDGE INFORMATION: Sells Minex Shares to Totan for $2 Million

CENTURA SOFTWARE: Files for Chapter 11 in N.D. California
CENTURA SOFTWARE: Chapter 11 Case Summary
CENTURA SOFTWARE: Nasdaq Halts Trading & Asks For More Info
COMDISCO INC.: Court Okays Piper Marbury as Special Counsel
COVAD COMMS: Files Reorg Plan & Disclosure Statement in Delaware

CROWN RESOURCES: Will Not Make Payments of $15.4MM on Debentures
EB2B COMMERCE: Faces Nasdaq Delisting Due to Bid Price Concerns
EPIC RESORTS: Fitch Junks Rating on Class C Notes
FACTORY CARD: DIP Facility Maturity Date Extended to Feb. 1
FIRST NEVADA: S&P Gives R Strength Rating to Troubled Insurer

FURRS: Smith's & Raley's Agree to Honor New Mexico Union Pacts
GENESIS HEALTH: Moves to Reject Maryland Real Property Lease
GENSYM: Proposes Rights Offer To Improve Liquidity
HAMILTON BANCORP: Fitch Cuts Ratings Citing Viability Concerns
HIGHWOOD RESOURCES: Defaults on $1.5 Million Term Loan

INNOVATIVE GAMING: Fresh Financing Critical to Avoid Liquidation
KCS ENERGY: Reports Record Profits After Chapter 11 Emergence
LEADER INDUSTRIES: Has Until October 1 to Propose CCAA Plan
LERNOUT & HAUSPIE: Dictaphone Panel Hires Kasowitz as Counsel
LOEWEN: State Street Seeks to Compel Production of White Letter

LTV CORP: Seeks Extension of Exclusive Period to January 7
METAL MANAGEMENT: Fresh Start Adjustments Delay 10-Q Filing
MULTICANAL S.A.: S&P Concerned Over Delay in $320MM Refinancing
OWENS CORNING: Rejects Asphalt Pact with Foreland Refining Corp.
PACIFIC GAS: Debtor Hires Steefel Levitt as Special Counsel

PILLOWTEX CORP: Seeks Approval of 3rd DIP Financing Amendment
PSINET: Debating True Lease vs. Disguised Financing Question
RELIANCE: Pennsylvania Argues for Remand of Commonwealth Actions
SIMON WORLDWIDE: Two Yucaipa Representatives Resign from Board
VENCOR INC: Initiates Claims Objection Process

UNIVERSAL AUTOMOTIVE: Eyes $2.8 Million Equity Investment
W.R. GRACE: Hires Wallace as Litigation & Environmental Counsel
WARNACO: Gets Okay to Reject Van Nuys Facility Lease & Sublease
WEIRTON STEEL: Continues Restructuring Talks with Bank Lenders
WILLCOX & GIBBS: Secured Lender Agrees to Extend DIP Facility

WILLIAMS COMMS: Fitch Concerned About Bank Covenant Compliance
WINSTAR COMMS: Williams Moves to Vacate Interim Utility Order


360NETWORKS: Adolfson Wants Stay Relief or Interest Payments
Adolfson & Peterson Construction seeks relief from the automatic
stay to foreclose on a project involving construction of a Point
of Presence Facility in San Antonio, Texas for 360networks Inc.,
and recover its secured claim from the proceeds of sale of the

Adolfson & Peterson Construction is a secured creditor of the

Jeffrey N. Rich, Esq., at Kirkpatrick & Lockhart LLP, in New
York, relates that the Debtors retained A&P as its general
contractor last August 2000 for the construction of a Point of
Presence Facility at 5430 Greatfare Drive, San Antonio, Texas.
A&P's retention is covered in a Construction Design-Assist

As early as July 2000, the Debtors already authorized A&P to
start procuring the materials and equipment needed to carry out
the work. Since then, A&P furnished labor and materials to the

On May 10, 2001, the Debtors suddenly issued a Stop
Work Notice to A&P. But by then, Mr. Rich notes, A&P had
substantially completed the Project. Mr. Rich tells the Court
that as of the Petition Date, the Debtor owed A&P $2,835,200.49.

A&P filed and perfected a Mechanic's and Materialman's Lien on
the Project last June 2001. Mr. Rich reminds the Court of the
Texas Property Code provision that a mechanic's lien has
priority over any other prior lien, except for a lien that
existed at the time of the inception of the mechanic's lien.

Since the Debtors' lenders filed a Deed of Trust on October 5,
2000, after A&P commenced construction work in September 2000,
Mr. Rich argues that the security interest of the Debtors'
lenders is junior to A&P's first priority lien.

Mr. Rich contends that A&P will incur substantial harm if the
relief is not granted because a significant portion of the
Debtors' debt to A&P is, in turn, owed by A&P to its Project

If A&P is not allowed to recover its Secured Claim, Mr. Rich
explains, A&P will not be able to pay its subcontractors. Thus,
A&P will incur substantial cost in defending lawsuits brought by
such subcontractors.

On the other hand, Mr. Rich maintains that the Debtor will not
be harmed because the Project is not crucial or necessary to an
effective reorganization. Moreover, the Debtor possesses cash
that is more than sufficient to pay A&P's Secured Claim. A&P has
not received any payment from the debtor since May 17, 2001.

"As a result," Mr. Rich says, "A&P is essentially being asked to
finance a multi-billion dollar conglomerate while it suffers
financial harm as a result of costs to defend lawsuits brought
against it by its subcontractors."

But if Judge Gropper will deny the relief requested, A&P
alternatively requests that the Debtor be required to adequately
protect A&P's interests in the Project and/or make periodic
payments of interest to A&P. Mr. Rich asserts that since the
value of the Project exceeds the amount of A&P's Secured Claim,
the A&P Secured Claim is oversecured and so A&P is entitled to
interest on the claim, as well as any reasonable fees, costs, or
charges provided for under the agreement.

A&P seeks monthly payments of interest at the rate set forth in
the Agreement, which is the rate that the Debtor pays on its
construction loan or the current "prime rate" of Bank of
America, whichever is higher, plus 2%. (360 Bankruptcy News,
Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900)   

AMES DEPARTMENT: Acadia Realty Sees Minimal Chapter 11 Impact
Acadia Realty Trust (NYSE: AKR), a fully integrated shopping
center and multi-family REIT, indicated that at this time the
Ames Department Stores, Inc. filing for Chapter 11 bankruptcy
protection and their earlier announcement to close 47 of their
452 stores is expected to immediately impact only two Ames
stores in the Acadia portfolio.

On Monday, August 20, 2001, Ames Department Stores, Inc. filed
for Chapter 11 bankruptcy protection. During the preceding week,
on August 16, 2001, Ames announced its decision to close 47 of
its 452 stores. Only one of these stores scheduled for closing
is within Acadia's portfolio, located in 94,000 square feet at
the Union Plaza in New Castle, Pennsylvania.

In the Company's Valmont Shopping Center, located in Hazleton,
Pennsylvania, the Ames store has ceased operating but continues
to pay rent. Although not included in the Ames list of stores
closures, it is probable that this lease, representing
approximately 97,000 square feet, will be rejected as part of
the bankruptcy proceedings.

Acadia has not received any notice from Ames as to the remaining
9 Ames locations in Acadia's portfolio, comprising approximately
625,000 square feet, which continue to operate at the Company's

Additional information related to Acadia's shopping centers,
anchors and related rents are included in the Company's
Quarterly Financial Supplemental for the quarter ended June 30,
2001 as previously filed in an 8-K filing and which is also
published on the Company's website at

Acadia Realty Trust, headquartered on Long Island, NY, is a
self-administered equity real estate investment trust structured
as an UPREIT, which specializes in the operation, management,
leasing, renovation and acquisition of shopping centers.

The Company currently owns and operates 56 properties totaling
approximately 10 million square feet, primarily in the eastern
half of the United States. Acadia's principal executive offices
are located in Port Washington, New York, with a corporate
office located in Manhattan.

AMES DEPARTMENT: Gets Approval to Hire Weil Gotshal as Counsel
Ames Department Stores, Inc sought and obtained authority from
the Court to employ Weil Gotshal & Manges LLP as their attorneys
in these chapter 11 cases.

David S. Lissy, Esq., Ames' Senior Vice President and General
Counsel, discloses that the Debtors have selected WG&M as their
attorneys because of the firm's extensive and intimate knowledge
of the Debtors' business and financial affairs as well as its
general experience and knowledge.

Mr. Lissy states that WG&M is particularly adept in the field of
Debtors' protection and creditor's rights and business
reorganization under chapter 11, including reorganization of
retail chains.

The Debtors also believe that WG&M is well-qualified and
uniquely able to represent them in these chapter 11 cases in an
efficient and timely manner.

Specifically, WG&M will:

   (1) take all action necessary to protect and preserve the
       estate of the Debtors, including prosecution of actions   
       on the Debtors' behalf, the defense of any actions
       commenced against the Debtors, the negotiations of
       disputes in which the Debtors are involved, and
       preparation of objections to claims filed against the
       Debtors' estates;

   (2) prepare on behalf of the Debtors all necessary motions,
       applications, answers, orders, reports and other papers
       in connection with the administration of the Debtors'

   (3) negotiate and prepare on behalf of the Debtors a plan of
       reorganization and all related documents;

   (4) perform all other necessary legal services in connection
       with the prosecution of these chapter 11 cases.

Martin J. Bienenstock, Esq., a member of WG&M, states that the
firm nor any of its members represent any entities other than
the Debtors in connection with these chapter 11 cases. Mr.
Bienenstock also asserts that WG&M is a disinterested person in
these cases as WG&M, its members, counsel, and associates:

   (1) are not creditors, equity security holders or insiders of
       the Debtors;

   (2) are not and were not investment bankers for any
       outstanding security of the Debtors;

   (3) have not within three years before commencement date,
       been an investment banker for a security of the Debtors
       nor an attorney for such investment banker in connection
       with the offer, sale or issuance of security of the

   (4) are not within two years before the commencement date,
       been a director, officer, or employee of the Debtors or
       an investment banker;

   (5) have not represented any party in connection with matters
       relating to the Debtors, although WG&M has certain
       relationships with other parties in interest and other
       professionals in connection with unrelated matters.

Mr. Bienenstock discloses that WG&M has been the Debtors
principal outside counsel since 1993. Over the past twelve
months, Mr. Bienenstock relates that the Debtors paid WG&M
approximately $2,150,000, of which $1,350,000 was for services
rendered while $800,000 was for retainer's fee. WG&M's
customarily bills its clients on an hourly rate plus out of
pocket expenses. The current hourly rates of WG&M are:

      $375 to $675 for members and counsel;
      $165 to $440 for associates; and
      $50 to $175 for paraprofessionals.

Mr. Bienenstock discloses that WG&M has represented, currently
represents, and may represent in the future these entities in
matters unrelated to the Debtors:

   (1) Debtors Affiliates and Related Parties - WG&M has been
       the principal outside counsel since 1993. WG&M also
       represented the bondholder's statutory committee in Ames'
       prior chapter 11 case; these bonds were all discharged
       and converted to equity.

   (2) Present & Former Officers and Directors - WG&M has not   
       and does not currently represent any officer and director
       of the Debtors as to the matters for which WG&M is to be   
       retained in these cases. WG&M has represented and   
       currently represents Alan Cohen, director and
       restructuring assistant of the Debtors and Joseph Ettore,
       director and chief executive officer of the Debtors and
       Paul Buxbaum, a director of the Debtors, in matters
       unrelated to the Debtors' chapter 11 cases. WG&M may also
       have represented entities with which some directors of
       the Debtors may be affiliated, such as Cadillac-Pontiac
       Sales Corp., Alco Capital Group, LLC, CIT Group, Inc.,
       County Seat Stores, Global Health Sciences, Inc., Health-
       Tex, Inc., Herbalife International, Inc., Lamonts
       Apparel, Inc., and Russ Togs, Inc.

   (3) Professionals Representing the Debtors - WG&M has
       represented and continues to represent the Debtors'
       accountants, Arthur Andersen LLP, financial advisors,
       Jeffries & Company and Deloitte Consulting. In addition,
       WG&M represented and may currently represent banks and
       other financial institutions underwriting the Debtors'
       public securities in matters unrelated to these chapter
       11 cases, such as: Banc of America, LLC; Bear Stearns &
       Co., Inc., BT Alex Brown; Goldman Sachs; Lehman Brothers;
       Merill Lynch & Co.; Morgan Keenan & Co., Inc.; and
       Nations Bank.

   (4) Financial Creditors - WG&M currently represents
       significant note holders with 5% or more of outstanding
       notes Bank of New York, Chase bank of Texas, N.A., First
       Union National Bank, Instinet Clearing Services, Inc.,
       Jeffries & Co., Neuberger & Berman, LLC, PNC Bank, N.A.,
       and State Street Bank & Trust Company in matters
       unrelated to the Debtors chapter 11 cases. In addition,
       the Debtors currently represent indenture trustees for
       both of Debtors' outstanding publicly traded notes - The
       Chase Manhattan Bank and State Street Bank & Trust
       Company. WG&M has also represented bank creditors in
       matters unrelated to these cases like CIT Business
       Credit, Citibank, Congress Financial, Deutche Bank,
       Daimler Chrysler, Eaton Vance, Fleet Retail Finance,
       Foothill Capital Corporation, GE Capital Corp., GMAC
       Business Credit, GMAC Commercial Credit, Goldman Sachs,
       Heller Financial, ING Capital, LaSalle Business Credit,
       Mellon Business Credit, Textron Financial, Transamerica
       Business Credit, IBJ Witehall, National City Bank, Orix
       Business Credit, Siemens Financial Services. Mr.
       Bienenstock also disclosed that GECC provided a waiver to
       allow WG&M to represent Ames when GECC became the agent
       bank lender to Ames.

   (5) Trade Creditors - WG&M has represented and continues to
       represent unsecured claimholders in matters unrelated to
       these cases, such entities includes Beacon Looms, Inc.,
       Binney & Smith, BMG Distribution, The Clorox Company,
       Columbia Tristar Home Video, Conair Corporation, Daewoo
       Corp. of America, Eastman Kodak, EMI Music, Fruit of the
       Loom, Gemini Industries, Inc., Hasbro, Konica Quality
       Photo East, Inc., Longstreet, Mead Products, Newell
       Group, Polaroid Corp., Procter & Gamble Distributing,
       Qwest, Samsung Electronics, Sara Lee Knit Products,
       Schering Plough Healthcare, Sony Music Entertainment,
       Spring Industries, Inc., Sunbeam, Tamor/MPI, Topp Telecom
       Inc., Travelers Insurance Co., TT Systems, LLC, Twentieth
       Century Fox Home Entertainment, VF, Warner Home Video,
       and The Washington Post. In addition, Abitibi
       Consolidated Sales, Coyne Chemical Co., Fisher Price,
       Hollander Home Fashions Corp., IBM Corp., Sunbeam Leisure
       Co., WEA Distribution and Wrangler have been related
       parties to transactions WG&M has been involved.

   (6) Lessors of the Debtors - WG&M has represented and
       continues to represent some of the Debtors' lessors in
       maters unrelated to these cases, such entities includes
       Acadia Realty, Atlantic Development, Amalgamated
       Financial, American Real Estate Holdings, Commerce Bank
       of Kansas City, Country Club Associates, First City WV
       Partners, LP, Forest City Enterprises Inc., Forest City
       Ratner Co., General Growth Properties, Inc., Hannaford
       Bros. Co., Hechinger Plus, LLC, I. Gordon Corp., Kanover
       Family LP Brunswick ME, Kimco Realty Corp., La Salle Bank
       National Assoc., LaSalle Bank Trust, Lennar Properties,
       Mark III Realty, LP, Mid-America Management Company, New
       Plan Realty Trust, Oxford Development Corp., Redstone
       Operating Ltd., Sun Life Insurance Co. of America,
       Sutherland Corp., Vornado Realty Trust, & Zayre Corp.

   (7) Professionals Representing Other Parties in Interest -
       WG&M represents other accounting firms including Ernst &
       Young LLP, Price Waterhouse Coopers LLP and KPMG Peat
       Marwick in matters unrelated to these cases.

   (8) Debtors' Shareholders - WG&M have represents Mellon
       Financial Corp., a large shareholder of the Debtors in
       matters unrelated to these case. Legg Mason, Inc.,
       another large shareholder of the Debtors, has been a
       related party to transactions in which WG&M has been
       involved. (AMES Bankruptcy News, Issue No. 2; Bankruptcy
       Creditors' Service, Inc., 609/392-0900)

AMF BOWLING: Court Okays Stroock as Lead Counsel for Parent Co.
AMF Bowling, Inc., sought and obtained the Court's authority to
employ and retain Stroock & Stroock & Lavan LLP, as lead counsel

   (a) give advice to the Parent with respect to its powers and
       duties as Debtors-in-possession;

   (b) assist the Parent in formulating, and taking the
       necessary legal steps to confirm, a chapter 11 plan of
       reorganization or liquidation, if needed;

   (c) analyze claims and negotiate all matters with creditors
       on behalf of the Parent; and

   (d) perform all other legal services for the Parent, which
       may be necessary in this chapter 11 case.

Stephen E. Hare, executive vice president of AMF Bowling Inc.,
explains that they chose the Stroock law firm because of its
wealth of experience in Chapter 11 reorganization cases and
other debt restructuring proceedings.

The Parent believes they will be able to rely on Stroock's
expertise since it is a full service firm well-known for the
high quality of its services in the areas of bankruptcy,
corporate, real estate, litigation, intellectual property,
labor, employee benefits and tax law.

Lawrence M. Handelsman, co-chair of the Stroock's Insolvency
Department, will be the bankruptcy attorney who will have
primary responsibility for the administration of the Parent's
case. According to Mr. Hare, other Stroock attorneys and
paralegals will be assisting Mr. Handelsman in rendering
professional services for the Debtors.

Mr. Handelsman, in his affidavit, tells the Court that Stroock
will make the appropriate application for compensation and
reimbursement of out-of-pocket expenses.

Mr. Handelsman says Stroock will bill the Parent Company with
its normal hourly rates of $425-695 for partners, $185-450 for
associates, and $145-210 for paralegals and clerks.

For the bankruptcy attorneys and paralegals with primary
responsibility for this case, their current hourly rates are:

     Lawrence M. Handelsman (partner)     - $650
     Kristopher Hansen (senior associate) - $415
     Edward O. Sassower (associate)       - $295
     RoseMarie Serrette (paralegal)       - $150

Mr. Handelsman advises the Court that these hourly rates are
subject to periodic revision in the normal course of Stroock's
business. According to Mr. Handelsman, there will be other
attorneys and paralegals that will assist in the representation
of the Debtors from time to time. Stroock's regular hourly rates
in effect for those personnel will apply.

Mr. Handelsman explains that these rates are set a level
designed to fairly compensate Stroock for the work of its
attorneys and paralegals, and to cover fixed and routine
overhead expenses. Mr. Handelsman adds that it is Stroock's
policy to charge its clients in all areas of practice for all
other expenses incurred in connection with the client's case.
Among these expenses are telephone and telecopier toll charges,
photocopying charges, travel expenses, expenses for "working
meals" and computerized research.

Mr. Handelsman assures Judge Tice that Stroock will work
together with Kutak Rock LLP, the Parent Company's local
counsel, to ensure there will be no unnecessary duplication of
effort or expenditure of time.

On the issue of conflict of interest, Mr. Handelsman swears
Stroock neither holds nor represents any interest adverse to the
Debtors and Stroock is a "disinterested person" within the
meaning of the Bankruptcy Code.

According to Mr. Handelsman, Stroock has submitted to its
computer conflict data base the names of the Parent; its direct
and indirect subsidiaries; its officers and directors; each
entity that owns more than 5% of the Parent's common stock; the
20 largest unsecured creditors; and the names of other
significant parties-in-interest in this case.

In matters wholly unrelated to this Chapter 11 case, Mr.
Handelsman discloses that Stroock has in the past represented
and/or currently represents:

   a) Goldman, Sachs & Co., a holder of both equity securities
      and the Zero Coupon Convertible Debentures due 2018;

   b) The Blackstone Group L.P., a holder of equity securities;

   c) Citibank, a holder of equity securities;

   d) Reliance Insurance Co., an insurance provider of the
      Debtors; and

   e) National Union Fire Insurance Co., an insurance provider
      of the Debtorss.

After an analysis of Stroock's billings, Mr. Handelsman
concludes that none of these representations generate or have
generated revenues in excess of 1% of Stroock's annual revenues.
But Mr. Handelsman admits that since Stroock is a large firm
with a national practice, it may have in the past represented
and/or currently represent, and may in the future represent,
other entities whose identities are not currently known who may
be creditors of the Debtors, in matters wholly unrelated to the
Chapter 11 case.

Mr. Handelsman promises to disclose any such representations if
it becomes aware of them.

Prior to Petition Date, Mr. Hare says they gave Stroock a
retainer for its services in the amount of $250,000 in
contemplation of its continuing representation of the Debtors in
this case. Mr. Hare notes that $30,000 of the retainer has been
applied to outstanding amounts owing. The remaining $220,000
will be held as a retainer until further application in
accordance with orders of this Court, Mr. Hare explains. A year
before Petition Date, Mr. Hare adds, Stroock received $30,578.55
in connection with its representation of the Parent and the
preparation of this filing. (AMF Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

ARMSTRONG HOLDINGS: 15 Maertin Claimants Want Lawsuit to Proceed
Fifteen plaintiffs in a suit styled "Maertin et al v. Armstrong
World Industries, Inc.," pending in the United States District
Court for the District of New Jersey, before the Honorable Judge
Rosen, represented by Ian Conner Bifferato of the Wilmington
firm of Bifferato Bifferato & Gentilotti, joined by Gary D.
Ginsberg and Brian P. O'Connor of the Mount Laurel, New Jersey,
office of Law Offices of Gary D. Ginsberg, ask Judge Farnan to
annul the automatic stay in these chapter 11 cases with respect
to certain property and related declaratory relief, or in the
alternative, to modify the stay to permit the Maertin plaintiffs
to proceed with their claims against AWI and for related
declaratory relief.

Prior to the Petition Date, the Maertin Plaintiffs entered into
individual settlement agreements and releases with AWI for the
express purpose of forever settling any and all disputed claims
asserted or which could have been asserted in the civil action
in the United States District Court for the District of New

The settlement agreements are subject to a confidentiality
clause and are not included in the Motion.

The Maertin plaintiffs are former professors and employees at
Burlington County College in Pemberton, new Jersey, and/or their
representatives. The Maertin plaintiffs alleged that they were
exposed to polychlorinated byphenyls ("PCBs") during the course
of their employment at BCC from approximately 1971 to 1985.

The PCBs were purportedly contained in a coating on certain
ceiling tiles at BCC which were manufactured by AWI. The Maertin
plaintiffs sought to recover damages for personal injuries
(cancer) that they or the decedents they represented allegedly
sustained. AWI filed a third-party complaint naming Monsanto
Chemical Company and American Mineral spirits Company as third-
party defendants.

After 6 years of complex litigation and intensive motion
practice, the parties entered into protracted settlement
negotiations. Liberty Mutual Insurance Company's supervisor of
environmental and toxic tort claims actively took part in the

Liberty Mutual provided liability coverage to AWI from 1977
through 1986.

Although the Maertin plaintiffs alleged they were exposed to the
PCBs form 1971 through 1985, there were no policies of insurance
for years 1971 through 1976 supplied during discovery. At this
time, the Maertin plaintiffs do not know whether any such
policies exist. It was understood that AWI's contribution to the
settlement would come directly from insurance proceeds.

The settlement agreements expressly contemplate payment of the
settlement amount with proceeds from applicable liability
insurance policies as evidenced by the fact that punitive
damages, which are uninsurable, are specifically excluded from
the settlement amount.

Counsel for the Maertin plaintiffs, the Law Offices of Gary D.
Ginsberg in Mount Laurel, New Jersey, declare to Judge Farnan
that when settlement negotiations were first initiated in April
2000, AWI and Liberty Mutual's position was that there would
never be any negotiations on the punitive damages claim.

The settlement agreements clearly reflect that punitive damages
were never a part of this settlement. It is believed that at the
time the bankruptcy cases were filed, Liberty Mutual has agreed
to pay the majority of AWI's contribution to the settlement
amount with proceeds from its policies and the policies of
excess carriers.

Subsequent to reaching agreement on a settlement figure, there
were substantial negotiations concerning the terms of the
releases. Initially, defense counsel for AWI, Duane Morris &
Heckscher in Philadelphia, Pennsylvania, demanded that it have
60 days from the day the releases were signed by plaintiffs and
third-party defendants in which to issue the settlement drafts.
That provision was objected to by letter dated October 3, 2000.

In response to this objection, defense counsel advised that the
60-day period was necessary so that it could be determined which
of the "layers" of insurance policies would actually be utilized
to pay the settlement.

On October 11, 2000, a conference was held before Judge Rosen at
the Federal Court House in Camden, New Jersey, to resolve
various disputes surrounding the releases. Defense counsel
reiterated the need for the 60-day period so that it could be
determined which of the "layers" of insurance policies would
actually be utilized to fund the settlement.

Relying on the sincerity of defense counsel's statements to the
Court, the Plaintiffs' counsel agreed to this provision.

The Maertin plaintiffs executed the settlement agreements in
October 2000. The signature page for each of the Maertin
plaintiffs' settlement agreements were hand-delivered to defense
counsel for AWI on October 31, 2000. Plaintiffs' counsel
received a letter from AWI's defense counsel dated December 4,
2000, confirming that settlement drafts were due 60 da6ys after
the Maertin plaintiffs and third-party defendants signed the
settlement agreements, or on January 21, 2001.

On December 6, 2000, two days after acknowledging their
obligation to issue the settlement drafts on or before January
21, 2001, AWI filed its voluntary petition for relief under
chapter 11 of the Bankruptcy Code.

Plaintiffs' counsel learned of AWI's filing for relief through
the media. At no time, during the course of litigation or
settlement negotiations, were the Maertin plaintiffs or their
counsel advised of AWI's intent to file for such relief.

By letter dated January 22, 2001, AWI asserted that any action
to collect sums owed under the terms of the settlement
agreements is stayed by these bankruptcy proceedings.

AWI has taken the position that the policies of insurance on
which the Maertin plaintiffs seek to collect are property of the
estate and that, due to the enormity of the asbestos litigation
against AWI, the policies are necessary to AWI's successful

The Maertin plaintiffs therefore ask Judge Farnan to annul the
automatic stay. The Bankruptcy Code permits a party to seek
retroactive relief from the stay against property if the debtor
has no equity in the property and it is not necessary to an
effective reorganization.

The proceeds of the Liberty Mutual policies and any other
insurance policies which were assigned, or in the process of
being assigned, in satisfaction of AWI's contribution to the
agreed-upon settlement amount are not property of the estate. An
ownership interest in a policy of liability insurance does not
necessarily include ownership of the proceeds of the policy.

At the tine it filed for bankruptcy, AWI had no cognizable
equitable interest in the proceeds of the Liberty Mutual
policies and any other insurance policies which were assigned,
or in the process of being assigned, in satisfaction of AWI's
contribution to the agreed-upon settlement amount.

The fact that AWI was not required to turn over the proceeds
until a date that arose postpetition does not change this
outcome. The Maertin plaintiffs argue that, at most, defense
counsel and/or AWI had legal title to the proceeds and that
defense counsel and/or AWI held or would have held the proceeds
in trust for the Maertin plaintiffs until January 21, 2001.

Neither the insurance policies nor their proceeds are necessary
to an effective reorganization. AWI has asserted that the
policies are necessary due to the immense amount of asbestos
litigation facing the company.

However, there are only 9 potentially applicable Liberty Mutual
policies at issue here, four of which specifically exclude
asbestos-related claims from coverage.

Furthermore, throughout the course of litigation, AWI identified
numerous policies providing several layers of excess liability
coverage for the relevant time period of 1977 through 1986.
Those policies offer hundreds of millions in coverage.

Accordingly, the Maertin plaintiffs argue that Judge Farnan
should enter an order characterizing the proceeds of the Liberty
Mutual policies and any other insurance policies which were
assigned, or in the process of being assigned, in satisfaction
of AWI's contribution to the agreed-upon settlement amount as
property of the Maertin plaintiffs, and annul the stay with
respect to that property.

Judge Farnan should, in the opinion of the Maertin plaintiffs,
also order that AWI immediately pay the proceeds to the Maertin

In the alternative, the Maertin plaintiffs ask Judge Farnan to
modify the stay to allow them to proceed with an action to
enforce their settlement agreements with AWI in the United
States District Court for the District of New Jersey. The
Maertin plaintiffs cite a three-part balancing test:

   (a) whether any great prejudice to either the bankruptcy  
       estate or debtor will result from allowing the civil suit
       to continue;

   (b) whether the hardship to the non-debtor party by
       maintenance of the stay considerably outweighs the
       hardship to the debtor; and

   (c) whether the creditor has a probability of prevailing on
       the merits.

First, neither the bankruptcy estate nor AWI will suffer any
prejudice if the Maertin plaintiffs are permitted to pursue an
action to enforce their settlement agreements with AWI in the
United States District Court for the District of New Jersey. The
purpose of the stay is to enable the Bankruptcy Court to prevent
certain creditors from gaining a preference for their claims
against the debtor; to forestall the depletion of the debtor's
assets due to the legal costs in defending proceedings against
it; and, in general, to avoid interference with the orderly
liquidation or rehabilitation of the debtor.

Here, however, the Maertin plaintiffs are not attempting to gain
any unfair advantage over other creditors of AWI. The Maertin
plaintiffs are merely attempting to collect an agreed-upon sum
to the extent of AWI's applicable liability insurance coverage.

Moreover, because the action to enforce the settlement
agreements is based upon contractual law of the State of New
Jersey, the procession of such an action will neither be
connected with nor interfere with these bankruptcy proceedings.
And where, as here, the pending action is neither connected with
nor interfering with the bankruptcy proceeding, the automatic
stay in no way fosters Code policy."

Second, the hardship to the Maertin plaintiffs by maintenance of
the automatic stay considerably outweighs any possible harm that
AWI will suffer. The hardship to the Maertin plaintiffs if
relief from the automatic stay is denied is immense. The Maertin
plaintiffs are in ill health and have endured great hardship.
For example, Vince Sollimo is sixty-four years old and suffers
from Non-Hodgkins Lymphoma. All of his treating physicians agree
that it is a statistical certainty he will have a recurrence
which will ultimately be fatal; Plaintiff John Hopen is 65 years
old and suffers from multiple melanoma; James Stewart is 76
and suffers from basal cell carcinoma which has horribly
disfigured his face and caused tumors all over his face and
head; William White is 70 years old and suffers from
adenocarcinorna of the prostate.

Mr. White has developed Alzheimer's Disease which has rendered
him disabled. He currently subsists on Medicaid in a nursing
home facility without the proper medical treatment or care that
a patient with his degree of Alzheimer's should receive;
Finally, Joan Maertin lost her husband Lou Maertin to esophageal
cancer and is raising her eight year old son without the
financial support of her husband.

These Maertin plaintiffs entered into settlement agreements
which AWI agreed to pay, taking into consideration their
illness, age, financial condition and life expectancy. To
prohibit the Maertin plaintiffs from receiving the agreed sum
promptly would be manifestly unjust.

The Maertin plaintiffs have a valid, enforceable contract
against AWI and are entitled to performance. If the Maertin
plaintiffs are forced to litigate their contract action in
Delaware, they would be forced to incur a great financial

The Maertin plaintiffs, their attorneys, the witnesses, and the
relevant documents, are all located in New Jersey. That is why
it is often be more appropriate to permit proceedings to
continue in their place of origin, when no great prejudice to
the bankruptcy estate would result, in order to leave the
parties to their chosen forum and to relieve the bankruptcy
court from many duties that may be handled elsewhere. Such is
the case here.

Third, the Maertin plaintiffs have a significant probability of
prevailing on the merits in the enforcement action. The required
showing need only be very slight. New Jersey law holds that an
agreement to settle a lawsuit is a contract. AWI signed the
settlement agreements on November 6, 2000, approximately four
weeks prior to the Petition Date, the negotiations were complete
and the agreements between the parties were final in all their
terms and the parties intended that they be binding.

According to the law of the State of New Jersey, the Settlement
Agreements are enforceable. Furthermore, the fact that AWI's
duty to perform (i.e., issue the settlement drafts) did
not arise until January 21, 2001, post-petition, does not render
the contracts executory. Contracts pursuant to which the debtor
has already received the full benefit from the non-debtor
contracting parties prior to the bankruptcy filing are not
executory. Here, the Maertin Plaintiffs have executed the
settlement agreements thereby fully releasing AWI from any
liability with respect to their claims.

                        AWI Responds

Rebecca L. Booth, joined by Mark D. Collins, Deborah E. Spivack,
and Russell C. Silberglied of the Wilmington firm of Richards
Layton & Finger PA, led by Stephen Karotkin and Debra A.
Dandeneau of Weil Gotshal & Manges LLP of New York, acting on
behalf of AWI, objects to the requested relief, telling Judge
Farnan that on September 20, 2000, before the signing of the
settlement agreements, AWI filed an action seeking a declaration
of coverage for the settlement agreements in the Eastern
District of Pennsylvania, styled "Armstrong World Industries,
Inc. v. Central National Ins. Co. of Omaha".

Shortly after filing this coverage case, AWI engaged in
settlement negotiations with the insurers in the coverage case
to resolve the payment obligations of the insurers for the
settlement agreements. These negotiations were not successful,
and on February 2, 2001, the coverage case was stayed until such
time as all parties to the coverage case agreed, or until
ordered by this Court or the court before which the coverage
case was pending.

Because of the commencement of AWI's chapter 11 case, AWI says
it is prohibited from paying the settlement amount, and the
Maertin plaintiffs are stayed from collecting the settlement

AWI asserts that it has a cognizable legal and equitable
interest in the insurance policies and the proceeds thereof, and
such proceeds are necessary for AWI's effective and successful
reorganization. AWI further submits that permitting the Maertin
plaintiffs to pursue AWI's insurance coverage may adversely
affect the estate and may materially impact AWI's ability to
maximize its coverage to satisfy other claims.

The stay relief Motion is predicated upon a single factual
assumption, which is simply false - that AWI, prior to the
Petition Date, had assigned the proceeds from the insurance
policies to the Maertin plaintiffs in satisfaction of AWI's
obligations pursuant to the settlement agreements.

No such assignment ever occurred, and the stay relief Motion is
notably lacking in any substantiation for this claim. To the
contrary, AWI never represented to the Maertin plaintiffs that
AWI's obligations would be satisfied by any particular insurance
carrier and, in fact, AWI was engaged in litigation with its
carriers to try to resolve the payment obligations of its

Indeed, the settlement agreements specifically obligated AWI and
not any other party or entity to satisfy the settlement amount.
Given that no assignment of the insurance policies or the
proceeds occurred prepetition, there can be no doubt that the
insurance policies and their proceeds constitute property of
AWI's estate.

AWI's estate will be directly affected if the settlement
agreements are enforced against the insurance policies. At this
stage of AWI's chapter 11 case, modifying the stay to allow the
Maertin plaintiffs to proceed against the insurance policies may
have a detrimental impact upon AWI's reorganization efforts. The
insurance policies provide coverage for other potential claims -
including both bodily injury and property damage claims - that
may be filed against AWI in its chapter 11 case.

Accordingly, until the universe of potential claims against
AWI's estate is determined, AWI cannot know the nature or
magnitude of potential claims that may be asserted against it
for which the insurance policies may provide coverage.

AWI is proceeding promptly, however, to gather the facts
necessary to such a determination. AWI has filed a motion
requesting the Court to set a bar date of August 31, 2001 by
which creditors (other than holders of asbestos-related bodily
injury claims and certain other enumerated claims) with
prepetition claims against AWI's estate must file proofs of

Until the Bar Date passes, AWI will not be able to determine the
number and nature of other claims against AWI's estate that may
be covered by the insurance policies. Thus, it is impossible
to determine at this time whether the insurance policies will be
sufficient to cover all claims covered thereby. Allowing the
Maertin plaintiffs to proceed against the insurance policies at
this time will deplete the pool of assets available to resolve
other bodily injury claims and may give the Maertin plaintiffs
an unwarranted advantage over other creditors of AWI's estate.

Moreover, to the extent that the Maertin plaintiffs are
permitted to litigate and/or compromise AWI's coverage to
satisfy their own claims, they may adversely impact AWI's
ability to recover insurance for other claims and may also
adversely affect AWI's estate.

For instance, AWI's primary policies issued by Liberty Mutual
Insurance Company for the period from 1977 to 1989 obligate
Liberty to pay defense costs in addition to the applicable
limits of the coverage, while many of AWI's excess policies do
not pay defense costs in addition to limits, if they pay defense
costs at all. If the Maertin plaintiffs pursue and compromise
AWI's Liberty primary coverage and take their recovery from
these primary policies over multiple years instead of recovering
under a single primary policy and multiple excess policies in
one year, AWI's estate may have to expend its own money in
defending other bodily injury or property damage claims falling
into the years of primary coverage settled by the Maertin

The stay relief Motion is also predicated on the assumption that
there is more than sufficient coverage available to pay the
settlement amounts and other bodily injury or property damage
claims in full.

However, the stay relief Motion fails to appreciate that there
are gaps in AWI's coverage created by the insolvencies of
numerous insurers, and that, as a consequence, some claims may
not be fully satisfied from the proceeds of AWI's insurance
policies. The Maertin plaintiffs should not be given a
preference over AWI's other potential creditors so that they
can satisfy their claims in full, leaving other claimants with
only partial satisfaction resulting from the insurance
insolvency gaps.

As such, the Court should permit AWI to proceed with its
reorganization process and manage the insurance policies to
maximize the recoveries therefrom. The continued imposition of
the automatic stay with respect to the insurance policies will
promote an equitable distribution by marshalling the available
coverage for the benefit of all interested parties.

The stay relief Motion also assumes that the insurance policies
are freely available. However, it is an open issue whether a
recovery under any of the Liberty primary policies will trigger
retrospective rating premium payment obligations by AWI. While
AWI does not necessarily agree that these obligations would, in
fact, be triggered, to the extent that they are, the estate may
be subject to substantial claims.

This outcome would be plainly unacceptable to AWI and its

In the stay relief Motion, the Maertin plaintiffs alternatively
request that the Court grant the Maertin plaintiffs relief from
the automatic stay so that they may proceed with an action to
"enforce" the Settlement Agreements in the United States
District Court for the District of New Jersey.

The Maertin plaintiffs must show that "cause" exists for
granting such relief - this they have failed to do. The
claims of the Maertin Plaintiffs have been liquidated and
established pursuant to the settlement agreements. Accordingly,
what is required for the Maertin plaintiffs to "enforce" their
claims is for them to file proofs of claim in AWI's Chapter 11
case. In short, there is no further action that need be taken
before the New Jersey District Court to "enforce" the Maertin
plaintiffs' claims, and the Maertin plaintiffs have not
articulated any reason why they should be treated any
differently from any other holders of prepetition claims against
AWI's estate.

In sum, Ms. Booth, on behalf of AWI, says that the insurance
policies and their proceeds are property of AWI's estate and may
be available to address other claims against AWI's estate,
possibly even asbestos-related bodily injury claims. The Maertin
plaintiffs should not be permitted, through modification of the
automatic stay, to obtain for themselves benefits to the
detriment of AWI's other creditors.

Further, if the Maertin plaintiffs wish to enforce their claims
against AWI, they, like all other creditors, should file a proof
of claim and be subject to the process and procedures imposed by
chapter 11 for "enforcement" of claims. (Armstrong Bankruptcy
News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-

ASSOCIATED PHYSICIANS: S&P Cuts Insurer's Strength Rating to R
Standard & Poor's assigned its 'R' financial strength rating to
Associated Physicians Insurance Co.

APIC was declared insolvent and placed into liquidation on Aug.
16, 2001, by the Circuit Court of Cook County, Ill. The agreed
order was granted in response to a petition filed by Illinois
Director of Insurance, Nathaniel Shapo, based on the insurance
department's finding that APIC's policyholders' surplus was
impaired by more than $1 million.

APIC, based in Oak Brook, Ill., began operations in 1987 and is
a wholly owned subsidiary of Associated Physicians Capital Inc.,
an Illinois holding company that is also based in Oak Brook.

The company is licensed in nine states, and at year-end 1999, it
had policyholders' surplus of $403,064 and assets exceeding $5
million. The Illinois Property and Casualty Guaranty Fund will
protect the covered claims of Illinois residents.

An insurer rated 'R' is under regulatory supervision owing to
its financial condition.

During the pendency of the regulatory supervision, the
regulators may have the power to favor one class of obligations
over others or pay some obligations and not others. The rating
does not apply to insurers subject only to nonfinancial actions
such as market conduct violations.

AT HOME: Two Noteholders Demand for Payment of $50MM on Aug. 31
Excite@Home (Nasdaq: ATHM) received a written notice from two of
the holders of its Convertible Notes demanding payment of $50
million of those notes on or before Friday, August 31, 2001. The
Notes were issued on June 8, 2001 in a private placement to two
investment funds managed by Promethean Investment Group LLC.

Promethean has asserted that Excite@Home breached certain
representations made when the Notes were issued. Excite@Home
disputes both the assertion of breach of representations and the
contention that the Notes may now be declared due and payable.

However, if the company were required to make payments of the
Notes at this time, it would have a materially adverse impact on
the company's liquidity and its ability to fund its operations.

Excite@Home is the leader in broadband, offering consumers
residential broadband services and businesses high-speed
commercial services.

B+H OCEAN: S&P Affirms Junk Ratings & Lifts CreditWatch
Standard & Poor's affirmed its ratings on B+H Ocean Carriers
Ltd. and its guaranteed subsidiary, Equimar Shipholdings Ltd.
and removed them from CreditWatch, where they were placed on
June 8, 2000. The outlook is stable.

The rating on the first preferred ship mortgage notes due 2007,
issued by Equimar Shipholdings, reflects the guarantee by its
parent, B+H.

The rating affirmation reflects a series of transactions the
company has completed to bolster its liquidity position,
including the repurchase of approximately $109 million of the
$125 million rated notes, using proceeds from bank financing.

The repurchase prices, combined with an improved product tanker
market, have resulted in sharply improved liquidity. Longer
term, regulations limiting the use of older tankers remains a
concern, given that almost all of the company's fleet of medium-
range product tanker vessels are over 18 years old, with many
over 20 years old.

The corporate credit rating of B+H Ocean Carriers reflects the
term employment for several of its fleet of product tankers.
This is offset by a significant, but also reduced debt burden, a
possible increase in spot market employment in 2002, and
eventual fleet replacement requirements.

The rating on the first preferred ship mortgage notes due 2007,
issued by Equimar Shipholdings, reflects the guarantee by parent
B+H Ocean Carriers of Equimar Shipholdings, a 100%-owned
subsidiary of B+H. The company's fleet consists primarily of 14
medium-range product tankers (vessels between 31,000 to 41,000
deadweight tons), all of which were built in the 1980s.

Over the past few years, a number of 1970s and 1980s built
product tankers and bulk carriers have been scrapped or sold. In
1999 the company acquired six medium-range 35,000 dwt product
tankers, built between 1981 and 1983, from Chevron.

B+H's smaller handy-size product tankers focus on the Indo-Asian
Pacific region. The product tanker segment is less volatile than
the larger crude oil tanker markets, although rates have been
weak over the past few years, until recovering in late 2000.
Rates in 2001 through early 2002 are expected to remain fairly
solid. For 2000, EBITDA coverage of interest was less than one
times, but will be significantly better in 2001 due to improved
rates and lower interest expense.

Outlook: Stable.

The company's reduced debt burden and an improved tanker market
should enable B+H to improve its credit profile over the near
term. Medium term, fleet replacement needs are significant due
to phase-out requirements for older oil and product tankers.

          Ratings Affirmed & Removed From Creditwatch


   B+H Ocean Carriers Ltd.
   Corporate credit rating                   CCC

   Equimar Shipholdings Ltd.
   Senior secured debt*                      CCC
   *Guaranteed by B+H Ocean Carriers Ltd.

BERTUCCI'S CORP.: S&P Cuts Corporate Credit Rating to B- from B
Standard & Poor's lowered its corporate credit rating on
Bertucci's Corp. (formally NE Restaurant Co. Inc.) to single-
'B'-minus from single-'B'.

At the same time, Standard & Poor's affirmed its single-'B'-
minus senior unsecured debt rating on the company.

In addition, Standard & Poor's withdrew its single-'B' senior
secured bank loan rating on Bertucci's.

The outlook is negative.

The downgrade of the corporate credit rating is based on the
company's reduced financial flexibility resulting from weak cash
flow and lack of a revolving credit facility. Standard & Poor's
is concerned that reduced financial flexibility leaves the
company vulnerable to operating difficulties in the intensely
competitive restaurant industry.

The senior unsecured debt rating was affirmed because Bertucci's
senior bank facility has expired and not been replaced; the
unsecured debt was previously disadvantaged to the senior bank
facility. Because the senior secured bank facility no longer
exists, the senior unsecured debt is now rated the same as the
corporate credit rating.

Bertucci's senior bank facility expired in July 2001 and was not
replaced. The company is currently operating without a line of
credit and is funding all of its growth and operating needs with
cash on hand.

Moreover, the company is very highly leveraged even though it
used a portion of the proceeds from the Brinker International
Inc. sale to repurchase $14.7 million of its $100 million senior

Pro forma for the sale, total debt to EBITDA is about 6.5 times
for the six months ended July 4, 2001. EBITDA coverage of
interest is thin at about 1.5x and is highly variable due to the
company's small EBITDA base.

On April 12, 2001, Bertucci's completed the sale of 40 Chili's
and seven On The Border restaurants to Brinker International for
$93.5 million. Standard & Poor's believes the sale eliminated
proven concepts from the company's portfolio and increased its
business risk. Both concepts are nationally recognized names and
had the backing of the franchisor, Brinker International.

This association was an important support for the ratings.

The company now only operates its proprietary Bertucci's Brick
Oven Pizzeria concept, which has regional limitations and has
had some difficulties achieving operating efficiencies.

Northborough, Mass.-based Bertucci's operates 75 casual dining,
Italian-style restaurants under the name Bertucci's Brick Oven
Pizzeria located primarily in New England and the Mid-Atlantic.

                     Outlook: Negative

Bertucci's financial flexibility is very limited. If the company
experiences operating difficulties to the detriment of cash flow
the ratings could be lowered.

BRIDGE INFORMATION: Sells Minex Shares to Totan for $2 Million
Bridge Information Systems, Inc. asks the Court for an order
authorizing them to sell certain assets (Acquired Assets),
including all of Bridge's shares in Minex Corporation, free and
clear of all liens, claims and encumbrances, to the Totan
Derivatives Co., Ltd.

Thomas J. Moloney, Esq., at Cleary, Gottlieb, Steen & Hamilton,
in New York, relates that the Debtors received three all cash
offers for the Acquired Assets:

    (a) an offer in the amount of $10,000;

    (b) an offer in the amount of $1,000,000; and

    (c) the TDC Offer in the amount of $2,000,000.

According to Mr. Moloney, the Debtors believe that the TDC Offer
is the Highest and Best Offer for the Acquired Assets because:

    (1) The cash value of the TDC Offer vastly exceeds the cash
        value of the competing offers; and

    (2) Certain agreements related to Minex require the consent
        of both TDC and KDDI Corporation, the other shareholders
        of Minex.  Both KDDI and TDC have indicated that they
        would only consent to the transfer of the Acquired
        Assets to TDC, and not to any other party.

The Share Purchase Agreement between the Debtors and TDC dated
July 24, 2001 provides for the sale of all Bridge's interest in
41,362 shares of common stock of Minex, par value of Y50,000 per
share, together with all ancillary rights and claims attached,
including any rights to dividends or profit of Minex that have
not been paid out or will be allocated to Minex's current
business year.

TDC shall pay $2,000,000 to the Debtors, consisting of:

    (a) a good faith deposit of $200,000 paid by Buyer into an
        escrow account on the date of the Agreement to be held
        in accordance with the terms of the Escrow Agreement,

    (b) an amount equal to $1,800,000 due at the closing of the
        TDC Sale.

The Debtors have consulted with the Pre-petition Lenders, the
Post-petition Lenders, GECC and the Committee regarding the sale
of the Acquired Assets, Mr. Moloney reveals.  Fortunately, none
of them objects to the sale, Mr. Moloney adds.

Mr. Moloney argues that the sale of the Acquired Assets should
be approved because the net proceeds is essential and required
to fund a Chapter 11 plan for the Debtors.

In addition, Mr. Moloney asserts that the Agreement's sole
impact is to transform the composition of the Acquired Assets to
cash and relieve the estates of significant liabilities.  Mr.
Moloney assures Judge McDonald that the terms of the Agreement
were negotiated at arm's length, without collusion, and in good

The Debtors also request that the Court eliminate or reduce the
10-day stay under the Federal Rules of Bankruptcy Procedure.  
The 10-day period, according to Mr. Moloney, should be
eliminated to allow a sale or other transaction to close
immediately where there has been no objection to the procedure.

In summary, the Debtors request entry of an order:

    (a) authorizing the Debtors' sale of the Acquired Assets to
        TDC, pursuant to and in accordance with the terms and
        conditions in the Agreement, free and clear of liens,
        claims and encumbrances to TDC and exempt from any
        transfer, stamp or similar tax or any so-called "bulk-
        sale" law,

    (b) authorizing the Debtors to enter into the Escrow
        Agreement, and

    (c) eliminating or reducing the 10-day stay. (Bridge
        Bankruptcy News, Issue No. 14; Bankruptcy Creditors'
        Service, Inc., 609/392-0900)

CENTURA SOFTWARE: Files for Chapter 11 in N.D. California
Mbrane (Nasdaq:MBRN), formerly known as Centura Software, a
global m-business software company, filed a voluntary petition
under Chapter 11 of the United States Bankruptcy Code.

The goal of the Chapter 11 proceeding will be to maximize the
value of Mbrane's assets - including its mobile and embedded
business divisions, for the benefit of the company's creditors.
Central to the Chapter 11, Mbrane has reached a definitive
agreement with a publicly traded company in the mobile and
embedded space to acquire the aforementioned assets.

As part of the Chapter 11 process, a sale hearing will be held
at which time other pre-qualified bidders may enter overbids.
This process is expected to be complete within four weeks.
Further information about the sale process will follow.

The purchaser has agreed to honor existing customer contracts,
and intends to grow the business and continue to enhance the
company's key product lines, RDM and Velocis (trademarks).

Mbrane has shut down operations in the other parts of the world,
including Redwood Shores, CA and Alpharetta, GA and has laid off
all but 30 Seattle based employees whose continued services are
essential to the preservation and maximization of the return
from the assets. Customers will continue to be fully supported
during the Chapter 11 protection period.

For the latest information regarding Mbrane please visit our
investor relations section on our Web site at

CENTURA SOFTWARE: Chapter 11 Case Summary
Debtor: Centura Software Corp.
        dba Mbrane
        dba Mbrane Inc.
        aka Raima
        975 Island Dr.
        Redwood City, CA 94065

Chapter 11 Petition Date: August 21, 2001

Court: Northern District of California (San Francisco)

Bankruptcy Case No.: 01-32164

Judge: Dennis Montali

Debtor's Counsel: David S. Caplan, Esq.
                  Law Offices of Brooks and Raub
                  721 Colorado Ave. #101
                  Palo Alto, CA 94303-3913

CENTURA SOFTWARE: Nasdaq Halts Trading & Asks For More Info
The Nasdaq Stock Market halted trading in Centura Software
Corporation (Nasdaq: MBRNE), Wednesday at 8:00 a.m., Eastern
Time, for "additional information requested" from the company at
a last price of 0.10. Trading will remain halted until Centura
Software Corporation has fully satisfied Nasdaq's request for
additional information.

Mbrane, formerly Centura Software, makes products that help
large companies build and deploy applications that distribute
data across global networks, handheld devices, information
appliances, the Internet, and other computing environments.

The company abandoned a brief fling with middleware to return to
its specialty -- databases that can be embedded into such
applications. Mbrane also sells back-office connectivity

Nearly 60% of its sales come from related services. Customers
include AT&T, Hewlett-Packard, and PepsiCo; about 56% of its
sales come from outside the US.

COMDISCO INC.: Court Okays Piper Marbury as Special Counsel
Judge Barliant put his stamp of approval on the Comdisco, Inc.'s
application to employ and retain Piper Marbury Rudnick & Wolfe
LLP as special counsel.

Norman P. Blake, Jr., CEO of Comdisco, relates that Mark
Muedecking, a PMR&W partner, has been engaged in special
projects for the Debtor involving corporate, employee retention,
labor and securities matters for the past several months.  
PMR&W's retention as special counsel will allow them to continue
to deal with these matters.

So that there would be no duplication of services with the
Debtors lead counsel, PMR&W will specifically render
professional services on special projects that may be assigned
in connection with corporate restructuring, including but not
limited to corporate, employee retention, labor, and securities

The Debtors will pay PMR&W its customary hourly rates, which
range from $320 to $465 per hour for PMR&W partners.  PMR&W will
also continue to charge the Debtors for all other services
provided and for other charges and disbursements incurred in the
rendition of services.

To date, Mr. Blake says, they paid PMR&W $277,670.74 on a
current basis for pre-petition services rendered within one year
of the Petition Date.  A retainer of $100,000 was paid an
advance retainer last April, 2001.  It will be applied toward
PMR&W's fees and expenses incurred for or on behalf of the
Debtors. PMR&W will send the Debtors regular monthly bills to
show how the retainer is being applied.  

The Debtors have agreed to replenish the retainer to its
original amount promptly each month.

David N. Missner, Esq., a partner with PMR&W, assures the Court
that the partners, counsel and associates of PMRW do not have  
any connection with the Debtors or their affiliates, their
creditors, the U.S. Trustee or any person employed in the office
of the U.S. Trustee, or any other party in interest, or their
respective attorneys and accountants.  

Mr. Missner insists he and his Firm are "disinterested persons"
as defined in section 101(14) of the Bankruptcy Code, and do not
hold or represent any interest adverse to the estates. (Comdisco
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-0900)   

COVAD COMMS: Files Reorg Plan & Disclosure Statement in Delaware
Covad Communications Group, Inc. (OCTBB: COVD), the parent
company of Covad Communications Company, filed its plan of
reorganization and disclosure statement with the U.S. Bankruptcy
Court for the District of Delaware. For a copy of the document:

As previously announced, holders of a majority of the principal
amount or accreted value of Covad's bonds have agreed in writing
to vote in favor of the plan of reorganization that would
eliminate $1.4 billion in long-term debt by January 2002 if
timely court approval is obtained.

"The filing of these documents is a milestone for Covad as it
brings the company closer to eliminating its $1.4 billion in
long-term debt," said Charles E. Hoffman, Covad's president and
chief executive officer. "Most importantly, this filing has no
effect on the operations, customers, nationwide network or
employees of our operating subsidiaries, which provide DSL
services and were not included in the Chapter 11 filing."

The plan of reorganization will require court approval after it
has been voted on by the bondholders and certain other interests
affected by the Plan.

Covad Communications Group, Inc. filed its Chapter 11 petition
on August 15, 2001, in the U.S. Bankruptcy Court for the
District of Delaware.

Covad is the leading national broadband service provider of
high-speed Internet and network access utilizing Digital
Subscriber Line (DSL) technology. It offers DSL, IP and dial-up
services through Internet Service Providers, telecommunications
carriers, enterprises, affinity groups, PC OEMs and ASPs to
small and medium-sized businesses and home users.

Covad services are currently available across the United States
in 94 of the top Metropolitan Statistical Areas (MSAs). Covad's
network currently covers more than 40 million homes and business
and reaches approximately 40 to 45 percent of all US homes and
businesses. Corporate headquarters is located at 4250 Burton
Drive, Santa Clara, CA 95054. Telephone: 1-800-GO-COVAD. Web

CROWN RESOURCES: Will Not Make Payments of $15.4MM on Debentures
Crown Resources Corporation announced that it will not make the
principal and final interest payment of $15,431,250 on its US$15
million 5.75% Convertible Subordinated Debentures due Monday.
The Company will be in default under the terms of the

Crown has been in negotiations with holders of its Debentures to
restructure the Debentures. As part of the restructuring, the
Company is in the final stages of negotiations on the closing
for a secured financing.

To close the financing, the Company will be required to obtain a
minimum of $3 million. There can be no assurance that Crown will
be able to secure this financing.

Ninety percent of the funds from this financing will be set
aside in an escrow account that will be available, in part, to
restructure the Debentures as well as to move forward on the
permitting of the Crown Jewel project and general corporate

The release of the funds from escrow will require the prior
approval by the new investors of a restructuring plan related to
the Debentures.

Crown may seek protection from its creditors and file a plan of
reorganization under federal bankruptcy laws to complete the
restructuring and recapitalization of the Company.

Christopher E. Herald, President and Chief Executive Officer of
Crown, stated: "Given the limited cash and liquid assets of the
Company, the Board of Directors decided that this is the best
course of action. We believe that recapitalizing the Company and
restructuring the Debentures is necessary to achieve full
valuations for all Crown stakeholders. We look forward to
closing the financing and finalizing the framework of the
restructuring with the Debenture holders."

Crown is a U.S. domiciled gold exploration company with
properties in the U.S. Crown is traded on the OTC Bulletin Board
under the trading symbol CRRS.

EB2B COMMERCE: Faces Nasdaq Delisting Due to Bid Price Concerns
eB2B Commerce Inc. (Nasdaq:EBTB) received a Nasdaq Staff
Determination letter on Aug. 21, 2001 indicating that the
company failed to comply with the minimum bid price of $1.00
requirement for continued listing, as set forth in Marketplace
Rule 4310(c)(4). Accordingly, the company's securities are
subject to de-listing from the Nasdaq SmallCap Market.

eB2B Commerce has requested a hearing before The Nasdaq Listing
Qualifications Panel to review the Staff Determination. A
request for a hearing would defer the de-listing of eB2B's
common stock pending a decision by the panel.

There can be no assurance the panel will grant the company's
request for continued listing. If the company's common stock is
de-listed from the Nasdaq SmallCap Market, the company expects
that its common stock will continue to be listed under the
symbol "EBTB" and would trade on NASD's OTC Bulletin Board.

eB2B has filed a preliminary proxy statement with the Securities
and Exchange Commission with respect to a special meeting of
stockholders of eB2B Commerce Inc. to be held in late September
or October 2001, to consider a proposal to grant the company's
board of directors authority to amend eB2B's certificate of
incorporation to authorize: a one-for-five (1:5), one-for-seven
(1:7); one-for-ten (1:10); one-for-twelve (1:12), or one-for-
fifteen (1:15) reverse stock split of the company's common

The company's board of directors believes a reverse stock split
of eB2B's common stock may enable the company to meet Nasdaq's
requirement of a minimum of $1.00 per share price for continued
listing on the Nasdaq SmallCap Market.

eB2B Commerce Inc. utilizes proprietary software to provide
services that create more efficient business relationships
between trading partners (i.e., buyers and suppliers).

Its technology platform allows trading partners to
electronically automate the process of business document
communication and turn-around, regardless of what type of
computer system the partners utilize. Through its service
offerings, the Company's technology platform has the capability
of receiving business documents in any technology format,
translating the document into any other format readable by the
respective trading partners and transmits the document to the
respective trading partner.

The Company does not allow its customers to take delivery of our
proprietary software. It provides access via the Internet to its
proprietary software, which the Company maintains on its
hardware and on hosted hardware.

EPIC RESORTS: Fitch Junks Rating on Class C Notes
Fitch downgraded the ratings of Epic Receivables 1999, LLC as
follows: the class A notes from `A' to `BBB', class B notes from
`BBB' to `BB' and class C notes from `B-' to `C'.

In addition, the rating on the class C notes has been withdrawn
as the class C notes were primarily reliant upon Epic guarantee
payments. The class A and class B will remain on Rating Watch

This rating action is a result of a the Chapter 7 bankruptcy
filing by Epic Resorts, LLC (Epic), the company's failure to
make required cash deposits to the transaction, and continued
deterioration in collateral performance.

All classes of notes had previous been placed on Rating Watch
Negative on Feb. 16, 2001, due to unusually high loan defaults,
the relatively slow pace of spread account build-up and the
potential for future dilution of the portfolio credit quality
due to the character and performance of collateral added through
the prefunding account mechanism structured into the deal.

At the time of the last rating action, Epic Resorts proffered
several potential remedial plans in an attempt to either restore
adequate credit enhancement for the notes or improve the quality
of the collateral pool.

As of the latest servicer report Epic has not only failed to
make required payments to certain trust accounts but has failed
to make any deposits in the cash reserve which is still

With the bankruptcy filing of the company it is highly unlikely
that any of the potential remediation plans will come to fore in
the near future. Recent months have also seen a second
pronounced spike in loan defaults (the first spike occurred Q4
2000) resulting in a spread shortfall, which per the
transaction's legal documents, Epic was required to make whole.

The company did not make its shortfall payment to the collection
account during July.

Fitch will continue to monitor the ongoing delinquency and
default performance of the collateral and evaluate any effects
Epic's bankruptcy might have on the management of the resorts or
servicing of the portfolio.

FACTORY CARD: DIP Facility Maturity Date Extended to Feb. 1
Factory Card Outlet Corp. and Factory Outlet of America Ltd.
sent a letter to Factory Card Holdings, Inc., pursuant to which
the Company and the Official Committee of Unsecured Creditors
appointed in the Company's chapter 11 cases stated that they had
no further obligations to FCH under that certain Agreement on
Plan of Reorganization of Factory Card Outlet Corp. among FCH,
the Company and the Creditors' Committee.

In addition, the Company executed the Ninth Amendment to Debtor-
In-Possession Loan and Security Agreement. Pursuant to the
Amendment, the maturity date of the Company's debtor in
possession financing facility will be extended to February 1,

The Amendment also provides, inter alia, that the amount of the
facility will increase from $32,500,000 to $35,000,000 and
contains provisions for a special seasonal "overadvance" through
November 30, 2001.

The Amendment was approved by the Bankruptcy Court on August 20,

FIRST NEVADA: S&P Gives R Strength Rating to Troubled Insurer
Standard & Poor's assigned its 'R' financial strength rating to
First Nevada Insurance Co. (FNIC).

Standard & Poor's took this rating action after learning that
Judge Janet Berry of the Second Judicial District Court of the
State of Nevada issued an order placing FNIC into liquidation.
The order was in response to a motion filed by Nevada Insurance
Commissioner Alice A. Molasky-Arman. The court found FNIC to be
statutorily insolvent and unable to be rehabilitated.

FNIC organized as a Nevada corporation in 1995 and received its
certificate of authority as a property/casualty insurer from the
Nevada Division of Insurance in June 1995. It was licensed only
in Nevada.

An insurer rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one
class of obligations over others or pay some obligations and not

The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.

FURRS: Smith's & Raley's Agree to Honor New Mexico Union Pacts
Local 1564 of the United Food and Commercial Workers Union
negotiated to retain nine former Furr's supermarkets under union

Union President Diane Vigil-Kimberle said that Smith's Food and
Drug had agreed to union contracts for seven former Furr's
stores. Raley's markets has agreed to two stores under contract.

Of the some 650 union members employed in the nine stores,
Vigil-Kimberle said that the new storeowners would hire a large
majority of the current employees. Many of them are already at
work in the stores.

"Interviews of all employees are already underway. Those who are
hired will maintain current rates of pay, will have their health
benefits maintained, and will keep their contributions in their
existing pension plans. Both Smith's and Raley's also agreed to
grant vacations as previously earned at Furr's to those members
still employed after one year," said Vigil-Kimberle.

The seven Smith's stores, with approximately 500 Local 1564
members, all former Furr's, are 875, 876, 879, 884 in
Albuquerque; 891 in Santa Fe; 897 in Los Alamos; and 899 in

The Raley's stores are the former Furr's 874 in Albuquerque and
896 in Taos.

Vigil-Kimberle said that what to do about the Furr's store
closures and divestitures remains the union's highest priority
and that many other activities were ongoing.

"Our hearts go out to our members and their families in this
difficult and uncertain time. The Furr's bankruptcy is not of
our making but the union continues to utilize all tools at our
disposal to insure that our members' interests and rights are
protected," said Vigil-Kimberle.

GENESIS HEALTH: Moves to Reject Maryland Real Property Lease
Genesis Health Ventures, Inc. & The Multicare Companies, Inc.
ask the Court to authorize their rejection of non-residential
real property between Debtor Meridian Healthcare, Inc. and
Medical Facilities, Inc. (the Lessor) relating to a 122-bed
nursing home facility located in Silver Spring, Maryland.

The annual payment to the Lease is $844,000.00. The initial term
of the Lease is due to expire on June 1, 2007.

The Debtors anticipate that the Facility, operating at an
occupancy of approximately 66%, will only generate cash flow in
the amount of $408,330.00 available for the annual Lease payment
in the year 2001.

This amount, the Debtors note, will be insufficient to meet
obligations under the Lease.

In view of the economic value for reorganization, the Debtors
have determined that it is in the best interest of their estates
to reject the Lease.

The Debtors request that the rejection be effective as of the
earlier of (a) the date on which operation of the Facility is
transitioned to another operator, (b) the date on which the
Facility is closed, and (c) 60 days from the entry of the order
of the Court approving the motion.

                Medical Facilities' Objection

MFI makes it clear that it does not object to the rejection of
the lease but disagrees to the occupancy rate and financial
picture of the Facility presented by the Debtors. MFI also seek
a longer transition period of 120 days for the transition of the
Facility instead of 60 days proposed by the Debtors.

About occupancy rate, MFI tells Judge Wizmur that the existing
County zoning limits the number of comprehensive nursing beds
operable to 92 while the State of Maryland has granted a
Certificate of Need (CON) for 122 beds (the number cited by the
Debtors), 30 of which cannot be used at the leased facility but
could be used elsewhere.

The present patient census is reported as 87 or 88. Based on
this, MFI derives an occupancy rate of 95% which for practical
purpose means that the facility may be at 100% occupancy
considering deaths, discharges, hospitalization of patients,
transfers, etc.

MFI points out that the operations cost statement lists a charge
of $300,000/year or $250,000 per month, for a management fee
paid to Genesis as an operating cost. Meridian also reports as
an operating expense an item of $49,000 for bad debts as an
operating cost.

MFI tells the Court that the 60 days interval for transition
proposed by the Debtors is too short for MFI to obtain all
necessary County, State and Federal approvals to assume
responsibility for the continuum of quality nursing care for 80
or 90 physically and mentally sick patients now resident in the

MFI asserts that Meridian should be required to be responsible
for the relocation of all patients admitted by Meridian into
reimbursement programs which MFI, or its operating company or
agent does not have available, is not licensed or in which it is
unwilling to participate.

MFI request a transition period of 120 days: two months to
process the transfer application at the State level, a further
30 to 40 days as suggested by experience to process and obtain
Medicare and Medicaid approvals with provider identification
numbers. (Genesis/Multicare Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

GENSYM: Proposes Rights Offer To Improve Liquidity
Gensym Corporation (OTC Bulletin Board: GNSM), a leading
provider of software and services for expert operations
management, filed a registration statement with the U.S.
Securities and Exchange Commission relating to a proposed
offering of its common stock through the distribution of
subscription rights to all of its shareholders and holders of
vested stock options.

Under the terms of the offering, which remain subject to change,
each shareholder would receive, at no charge, 1.25 subscription
rights to purchase one share of common stock for every share of
common stock owned as of the record date for the distribution.

Additionally, holders of Gensym stock options would receive, at
no charge, 1.25 subscription rights to purchase one share of
common stock for every shares of common stock underlying the
vested portion of those stock options as of the record date for
the distribution.

The subscription price and record date would be established
immediately prior to the commencement of the rights offering,
which is anticipated to begin as soon as the registration
statement relating to the offering is declared effective.

The offering is expected to have a 20-business day subscription
period for exercise of rights. An over-subscription privilege
would be offered to shareholders and vested optionholders to
purchase shares not subscribed for pursuant to the basic
subscription rights.

The net proceeds of the offering are to be used for working
capital and other general corporate expenses, including expenses
associated with Gensym's recently announced restructuring.

Commenting on the offering, President and CEO Lowell B.
Hawkinson said, "The rights offering is designed to provide
additional working capital and liquidity to the Company by
giving each shareholder and vested optionholder a chance to buy
additional shares and the opportunity to avoid dilution of their
ownership interests. The Company is in the process of seeking
commitments to purchase shares in the rights offering from
directors and other shareholders in order to provide the Company
with a minimum subscription amount."

A registration statement relating to these securities has been
filed with the Securities and Exchange Commission but has not
yet become effective. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration
statement becomes effective.

Gensym Corporation -- -- is a leading  
provider of expert software products that model, simulate and
manage critical operations across a broad range of industries.
Gensym software is powered by G2(TM), the company's unique,
high-performance reasoning-engine technology.

Since 1986, Gensym has sold more than 15,000 product licenses to
organizations in communications, manufacturing, aerospace,
transportation, government and other industries. Gensym and G2
are registered trademarks of Gensym Corporation.

HAMILTON BANCORP: Fitch Cuts Ratings Citing Viability Concerns
Fitch lowered its ratings for Hamilton Bancorp Inc. (HABK), and
its principal subsidiary, Hamilton Bank, N.A (the bank) and has
placed the firm's ratings on Rating Watch Negative.

Specifically, Fitch lowered the Individual Rating for both HABK
and the bank to 'E' from 'D' recognizing HABK's precarious
financial position following a $24 million after-tax loss for
2Q01, which depleted capital by nearly 24%. HABK does not have
any public debt outstanding, however, Fitch lowered its long-
term issuer rating for HABK to 'CCC' from 'B' and the short-term
issuer rating to 'C' from 'B'.

While the bank's short-term deposit rating was affirmed at 'B',
the long-term deposit rating was lowered to 'B-' from 'B+'.

This rating action, which follows Fitch's June 15, 2001 and Nov.
8, 2000 downgrades, suggests that the firm's viability, in the
absence of a sale, is questionable. In an amended regulatory
notice filed on March 28, 2001, HABK's primary regulator (Office
of the Comptroller of the Currency or OCC) requested that
Hamilton Bank, NA build its capital ratios to 12% Tier I, 14%
Total and 9% Leverage.

Although management was able to reduce the size of the balance
sheet somewhat (about 11% during 2Q01), following the 2Q01 loss,
the bank's capital ratios were even further below the OCC
desired levels (specifically, 6.60% Tier I, 7.90% Total and
4.80% Leverage).

Non performing assets after substantial 2Q01 charge-offs are
equal to 30% of equity and reserves. HABK's asset quality
problems largely emanate from its lending to Ecuadorian and
other Latin American counterparties including both banks and
commercial borrowers.

Just over half of HABK's loan portfolio comprises foreign loans,
primarily to Latin America. HABK has indicated that subsequent
to the end of 2Q01, it entered an agreement to sell
approximately $42.4 million (or approximately 80%) of its
exposure to Ecuador, including $36.2 million which is subject to
a 90% Allocated Transfer Risk Reserve (ATRR) requirement.

The terms of the agreement call for HABK to realize more than
its net carrying value, although still significantly less than
face value. This should free up a portion of the firm's $39.6
million ATRR.

While HABK remains in continuous dialogue with the regulators,
it is clear that the firm faces considerable obstacles in its
quest to meet capital requirements. For example, to shrink the
balance sheet in order to achieve the prescribed Leverage ratio
based on the capital remaining at June 30, 2001, HABK will have
to reduce assets by over 40% (assuming no further additions to
or depletions from capital).

The OCC has recently reclassified the company from adequately
capitalized to undercapitalized for purposes of Prompt
Corrective Action.

Further, disputes with the regulators continue to plague the
firm. Management has indicated that it does not intend to agree
to the recently revised, higher capital ratios voluntarily and
that is believes that the timeframes set aside for achieving
such ratios are `commercially unreasonable.'

In its 2Q01 10Q, HABK stated that various regulatory matters and
the uncertainty associated with the actions that `the regulators
might take related to them, raise substantial doubt about the
Company's ability to continue as a going concern.' HABK has
hired an investment banking firm to explore strategic

                  Hamilton Bancorp, Inc.

The followings ratings, previously on Rating Outlook Negative,
were lowered and placed on Rating Watch Negative:

   * Long-Term Issuer / Senior Debt lowered to 'CCC' from 'B';

   * Short-Term Issuer lowered to 'C' from 'B';

   * Individual lowered to 'E' from 'D'.

                    Hamilton Bank, NA

The following ratings, previously on Rating Outlook Negative,
were lowered and placed on Rating Watch Negative:

   * Long-Term Issuer / Senior Debt lowered to 'CCC' from 'B';

   * Long-Term Deposits lowered to 'B-' from 'B+';

   * Short-Term Issuer lowered to 'C' from 'B';

   * Individual lowered to 'E' from 'D'.

The following ratings were affirmed:

     Hamilton Bancorp, Inc.

         * Support affirmed at '5'.

     Hamilton Bank, NA

         * Short-Term Deposits affirmed at 'B';
         * Support affirmed at '5'.

HIGHWOOD RESOURCES: Defaults on $1.5 Million Term Loan
Highwood Resources' term loan agreement with its principal
lender required a payment of $1.5M to be paid before July 31,
2001, which has not been made. The lender has not waived the
breach of this covenant and therefore the Company is currently
in default of its term loan agreement. As a result, the Company
anticipates it will be necessary to secure new loan facilities.  

The Company is in good standing with respect to all other
principal and interest payments for the existing term and
operating loans.

Highwood management is vigorously pursuing a refinancing plan,
which includes new debt financing, non-core asset sales and
placement of new equity.

The Company has a strong asset and product customer base.
Conservative sales and cash flow forecasts for the remainder of
2001 and 2002 supports management's contention that replacement
of existing financing, as well as raising new equity, can be
accomplished in the coming months.

New equity investment is being pursued with both existing and
prospective shareholders. A series of meetings and presentations
are being arranged and it is expected that the placement of
funds will be completed in the near future.

It is management's opinion that the program outlined above will,
in the near future result in the replacement of the current bank
financing and improve Highwood's financial position.

Mr Garry Lynkowski, President and C.F.O. has advised the Board
of his intention to resign these positions effective September
30,2001. Mr Lynkowski will continue as a director and advisor.

In order to ensure management continuity and overall
effectiveness, the Board of Directors has appointed the
following officers:

   * Mr. William Shaver, a senior executive of Dynatec will
     replace Mr Jim Roxburgh as Chief Executive Officer of
     Highwood effective immediately.

   * Mr. Malcolm Kane, the present Vice-President, Operations of
     Highwood is promoted to President of Highwood effective
     October 1, 2001.

   * Mr. Arnold Klassen, Chief Financial Officer. of Dynatec
     will assume the role of  Chief Financial Officer of
     Highwood, effective October 1, 2001.

   * Ms. Chris Knight, the present Controller of Highwood is
     promoted to Vice- President Finance of Highwood, effective

   * Mr. Jim Roxburgh will remain a director of Highwood.

Highwood Resources' industrial mineral products (barite, silica,
limestone, talc, and other minerals) can be found in items from
golf course sand to cars. Highwood produces barite (more than
60% of sales) for use in auto parts, plastics, rubber, and foam;
silica for use in glass and sandblast sand; and limestone,
gypsum, talc, and zeolite for agricultural, construction,
horticultural, and environmental uses.

The company has mining and processing operations in North
America and Southeast Asia. It operates joint venture Sino-Can
Micronized Products (barite processing, China), as well as Rare
Metal Alloys, a beryllium development project in Canada's
Northwest Territories. It also holds gold-mining interests in

INNOVATIVE GAMING: Fresh Financing Critical to Avoid Liquidation
Innovative Gaming Corp. of America's total sales for the quarter
ended June 30, 2001, were $4,728,000 compared to $2,387,000
recorded in the quarter ended June 30, 2000. This increase in
revenues was due to the sale of a $3 million one-time license of
the Company's proprietary slot machine technology to Delta
Automaten, a manufacturer and distributor of gaming equipment
based in Holland.

Total sales for the six months ended June 30, 2001, were
$6,819,000 compared to $3,771,000 in  the six months ended June
30, 2000. Net income in the quarter and six months ended June
30, 2001, was $400 and $626, respectively.  In the same periods
of 2000 net losses were $(219) and $(1,222), respectively.

The Company had an accumulated deficit of $34,459,000 as of June
30, 2001.  The Company has experienced stronger demand for its
products over the past four quarters, with corresponding
improvements in its results from operations.  

However, due to the Company's short-term capital requirements,
the high degree of regulation and other factors of the business
environment in which the Company operates, the likelihood of
future profitable quarters cannot be predicted.

Future short-term results are highly dependent on the Company's
ability to, among other things, finance production and
distribution new products, gain customer acceptance of its
existing and new products and the necessary Company licenses
and/or product approvals in various jurisdictions in order to
expand its market base.

There can also be no assurance as to the time frame during which
such anticipated approvals may occur due to uncertain time
periods involved in the regulatory approval process.

The Company had $297,000 and $321,000 in cash as of June 30,
2001 and December 31, 2000, respectively. The Company has
experienced negative cash flow from operations of $1.7 million,
$5.1 million and $2.1 million for the years ended December 31,
2000, 1999, and 1998, respectively.

Given the relatively large fluctuations in the frequency and
size of the Company's sales, the Company continues to experience
significant fluctuations in its cash position.

The Company presently estimates that if current sales forecasts
are met its cash, anticipated funds from operations and the
proceeds from issuance of new Preferred Stock issues will be
adequate to fund cash requirements through September 30, 2001.

However, if current sales forecasts are not met, or if accounts
receivable for such sales are not collected as anticipated, the
Company may not have enough cash to fund operations and the
Company would have to consider a number of strategic
alternatives, including sales of additional capital stock at
discounted prices or discontinued operations.

There can be no assurance that the Company will be successful in
achieving its current sales forecasts and receivables
collections, or in obtaining any additional financing on terms
acceptable to the Company.

Failure to obtain additional financing would have a material
adverse affect on the Company, and the Company would have to
consider liquidating all or part of its assets and potentially
discontinuing operations.

Management believes that the costly process of product
development and introduction would require the Company to seek
additional financing to successfully complete any such future

KCS ENERGY: Reports Record Profits After Chapter 11 Emergence
Net income of KCS Energy, Inc., for the three months ended June
30, 2001, was $20.5 million compared to $14.8 million for the
same period in 2000. This increase was attributable to higher
natural gas prices, increased working interest production and
lower interest expense, partially offset by lower production
from the Company's volumetric production payment program and
higher operating expenses.

The 2000 period included $1.3 million of reorganization items
associated with the Chapter 11 proceedings.

Income before reorganization items for the six months ended June
30, 2001 was $75.7 million compared to $23.6 million for the
same period a year ago. This increase was attributable to higher
natural gas prices, increased working interest production,
higher other revenue and lower interest expense, partially
offset by lower production from the VPP program and higher
operating expenses.  

Reorganization items for the six months ended June 30, 2001 were
$2.6 million compared to $9.4 million for the same period last
year. The cumulative effect of an accounting change, net of tax,
associated with the adoption of SFAS No. 133 on January 1, 2001
was a $28.5 million expense. Net income for the six months ended
June 30, 2001 was $44.6 million compared to $14.2 million for
the same period a year ago.

The Company's liquidity and financial condition have improved
significantly during the last eighteen months. Year 2000
earnings were a record $41.5 million and cash flow from
operating activities (before reorganization items) was $137.3

In addition, the Company funded a $69.1 million capital
investment program while significantly reducing debt and
increasing cash balances. Following confirmation of the
Company's Plan of reorganization on January 30, 2001, KCS
emerged from Chapter 11 on February 20, 2001 having reduced its
outstanding debt balances from a peak of $425 million in early
1999 to $215 million and reduced it further to $204.8 million.

Net income adjusted for non-cash charges and reorganization
items for the six months ended June 30, 2001 increased 10% to
$57.1 million compared to $49.8 million during the same period
in 2000 primarily due to the effect of higher realized natural
gas prices, partially offset by amortization of deferred revenue
associated with the Enron Production Payment.

Net cash provided by operating activities before reorganization
items for the first half of 2001 was $163.0 million compared to
$57.6 million for the same period a year ago.  The current year
six-month period also reflects the net proceeds of $175.4
million from the Enron Production Payment, the payment of $61.5
million of interest and the $28 million cost of terminating
certain derivative instruments in connection with the emergence
from Chapter 11.

LEADER INDUSTRIES: Has Until October 1 to Propose CCAA Plan
For the first six months ended June 30, 2001, Leader Industries
Inc. achieved sales of $16.2 million, down 2.4% from the $16.6
million achieved last year for the same period.  This reduction
was mainly due to sales of paintball masks that were lower in
2001 compared to 2000.

Selling, marketing and administrative expenses increased, mainly
due to the related spending of the restructuring, representing
40.9% of sales during the first half of 2001 versus 33.9% in
2000. For this six-month period, Leader incurred a loss before
income taxes of $2.3 million compared with net earnings of $0.2
million for the same period last year.

As at June 30, 2001, the Company was in default in regard to the
requirements for working capital and other financial ratios.
Therefore, the Company's principal lender has the right to
demand the payment of the amount due.  For that reason, $3.5
million in long-term debt was reclassified as short-term debt,
bringing the current portion of long-term debt to $5.4 million.

The losses incurred in 2000 and 2001, combined with the various
investments made over the past 24 months to manufacture and
market new products, seriously affected the Company's cash flows
and capacity to respect its commitments to creditors.  

Operating under the Companies' Creditors Arrangements Act since
May 2, 2001, Leader was granted on August 17, 2001, by the
Superior Court of the District of Montreal, a 45-day extension
prorogation giving it until October 1st, 2001, to come to an
agreement with its creditors.

                      Financial Highlights

(a)  The cost of sales increase of 7.5% in 2001 compared to
     2000, being 65.1% versus 57.6%, is mainly due to the
     inventories reduction of $3.2 million and the lower gross  
     margin on certain product lines.

(b)  $0.5 million of professional fees related to the
     restructuring and $0.5 million of commissions and sales
     expenses, included in the selling and administrative
     expenses are the cause of this variance

Dedicated exclusively to protective eyewear, Leader designs,
manufactures and distributes a wide range of eyeguards, goggles,
visors and masks for sports (swimming, paintball, hockey,
racquetball, lacrosse, football, motocross/VTT and
snowmobiling), as well as for the industrial sector.  

Founded in 1972, the Company records 42% of its sales in the
United States and 36% in Europe.  Some 155 employees work in the
Company's six locations and offices in Canada, the United
States, France and Brazil.

LERNOUT & HAUSPIE: Dictaphone Panel Hires Kasowitz as Counsel
The Official Committee of Unsecured Creditors of Dictaphone
Corporation asks Judge Judith Wizmur for an Order approving its
employment of the law firm of Kasowitz Benson Torres & Friedman
LLP as special counsel.

The Committee reminds Judge Wizmur that as a duly appointed
committee it is permitted to employ, with her approval,
attorneys on any reasonable terms and conditions of employment
to perform services for the committee.

By this Application, the Dictaphone Committee seeks to employ
and retain Kasowitz as its attorneys to assist and represent it
in connection with the investigation of the incurrence of
certain guaranty and inter-company obligations of Dictaphone.  

The Dictaphone Committee also asks that Judge Wizmur authorize
it to employ and retain Kasowitz effected as of May 9, 2001,
which the Dictaphone Committee says is the date Kasowitz
commenced work with respect to this chapter 11 case.

Although the Dictaphone Committee has employed Cadwalader
Wickersham & Taft as its primary attorneys in these chapter 11
cases, the Dictaphone Committee believes that retention of a
separate professional to investigate and report upon the origin
of certain of Dictaphone's obligations is necessary to prevent
any appearance of any impropriety or conflict on the part of
Cadwalader and its representation of the Dictaphone Committee.

The professional services to be rendered by Kasowitz will

       (a) Assistance to the Dictaphone Committee in
           investigating and analyzing factual and legal matters
           relating to the incurrent of certain guaranty
           obligations by Dictaphone as evidenced by that
           certain Limited Guaranty dated May 30, 2000, of the
           obligations of Lernout & Hauspie Speech Products
           N.V., including any amendments and restatements
           thereof, under certain credit agreements;

       (b) Assistance to the Dictaphone committee in
           investigating and analyzing factual and legal matters
           in connection with the incurrence of intercompany
           obligations by and among L&H, Dictaphone, and/or L&H
           Holdings USA Inc., during the prepetition period;

       (c) Reporting to the Dictaphone Committee, in writing and
           orally, regarding its findings with respect to the  
           foregoing; and

       (d) All other legal matters requested by the Dictaphone
           Committee that are reasonably related to the
           foregoing (but not including the analysis of
           intercreditor subordination issues).

Subject to the Court's approval, Kasowitz will charge for its
legal services on an hourly basis in accordance with its
ordinary and customary hourly rates in effect on the date
services are rendered.

The Dictaphone Committee warns Judge Wizmur that the hourly
rates charged by Kasowitz professionals differ based upon, among
other things, such professional's level of experience.  The
current hourly rates for those Kasowitz attorneys who will
represent the Dictaphone Committee are:

        Partners                            $ 400-$625
        Associates                          $ 175-$400
        Special Counsel/Staff Attorneys     $ 175-$400
        Paralegals                          $  60-$135

However, these rates may change from time to time in accordance
with Kasowitz's established billing practices and procedures.

David M. Friedman, a partner of Kasowitz, assures Judge Wizmur
that Kasowitz is a "disinterested" person and neither holds nor
represents any interest adverse to the Dictaphone Committee in
these cases.

However, in the interests of full disclosure, Mr. Friedman
advises that:

       (a) Conseco Capital Management, Inc., is a member of the
           Unofficial Committee of 12% Secured Noteholders in
           the chapter 11 cases of AmeriServe Food Distribution,
           Inc., and Kasowitz represents such committee;

       (b) Magten Asset Management Corp. is a member of the
           Official Committee of Unsecured Creditors in the
           chapter 11 case of American Pad & Paper, and Kasowitz
           is counsel to such committee;

       (c) SBC Communications, Inc., is a member of the Official
           Committee of Unsecured Creditors in the chapter 11
           cases of Northpoint Communications, Inc., and
           Kasowitz is special litigation counsel to such
           committee; and

       (d) Kasowitz may represent creditors and shareholders of
           the Debtors in matters unrelated to the Debtors'
           chapter 11 cases, but will not represent any entity
           other than the Dictaphone Committee in connection
           with the Debtors' chapter 11 cases.

Further, Mr. Friedman advises that as part of its practice,
Kasowitz appears in cases, proceedings, and transactions
involving many different attorneys, accountants, financial
consultants and investment bankers, some of which may represent
claimants and parties in interest in the Debtors' cases.  

Kasowitz does not represent any such entity in connection with
the pending cases or have a relationship with any such entity or
professionals which would be adverse to the Dictaphone Committee
or the Debtors or their estates.

In addition, Mr. Friedman avers that, because of the nature of
its practice and its involvement in a variety of chapter 11
cases and other matters, Kasowitz may have appeared in the past
and may appear in the future in cases unrelated to this case
where one or more creditors, equity security holders, or other
parties in interest may be involved and may have represented or
may currently represent or may represent in the future, one or
more of said parties or other potential interested parties or
creditors in matters unrelated to this chapter 11 case.  

In addition, certain members of Kasowitz and certain associates
or and certain of such person's relatives may have familial or
personal relationships with officers, directors and/or
shareholders or creditors of L&H, competitors of L&H, and/or
other parties in interest in this case.  

However, Mr. Friedman says that, as of this date, Kasowitz is
not aware of any such relationship and will abstain from
representing any of these parties with respect to this matter.

The retention of Kasowitz nunc pro tunc is said to be warranted
by the circumstances present in this case.  Specifically, the
Third Circuit Court of Appeals has identified "time pressure to
begin service" and the absence of prejudice as factors favoring
nunc pro tunc retention. The complexity, tremendous dollar
amounts, and speed which have characterized these cases have
necessitated that the Dictaphone Committee and its
professionals, including Kasowitz, focus their immediate
attention on numerous time-sensitive matters.  

These matters have required the Dictaphone Committee's
professionals to devote substantial resources to their
representation of the Dictaphone Committee and to begin service
as soon as possible.  Since May 9, 2001, the Dictaphone
Committee has asked Kasowitz to commence its review and
investigation relating to the subject matter of its engagement.
Accordingly, the Dictaphone Committee and Kasowitz request that
this Application be granted nunc pro tunc.

             The L&H Unsecured Committee Objects

The Official Committee of Unsecured Creditors of Lernout &
Hauspie Speech Products N.V., and L&H Holdings USA, Inc.,
appearing through its counsel, Joseph J. Bodnar and Francis A.
Monaco of the Wilmington firm of Walsh Monzack & Monaco, P.A.,
and Daniel H. Golden and Ira A.

Dizengoff of the New York office of Akin Gump Strauss Hauer &
Feld, LLP, object to this Application.  Mr. Bodnar advises Judge
Wizmur that, due to the extraordinarily high number of
professionals already retained in these chapter 11 cases and the
resulting financial burden on the Debtors' estates, retention by
the Dictaphone Committee of another law firm is inappropriate
and unjustified.  

Moreover, the purported need of the Dictaphone Committee to
retain additional special counsel results from the fact that
Cadwalader, the Dictaphone Committee's primary counsel, failed
to disclose to this Court and other interested parties its
inability to fully represent the interests of the Dictaphone

Mr. Bodnar tells Judge Wizmur that the existence of the Limited
Guaranty dated May 30, 2000, given by Dictaphone to the Belgium
Banks and the related intercompany obligations between L&H and
Dictaphone has been known since the beginning of the Debtors'
chapter 11 cases, and both the Dictaphone Committee and
Cadwalader have known that investigating the validity of these
obligations represents perhaps the single most important aspect
of Dictaphone's chapter 11 case.  

He complains that it is unexplainable to his Committee why
Cadwalader, the Dictaphone committee's self-described primary
counsel, did not explicating disclose and explain in their
retention application or by supplemental disclosure, that they
could not undertake this investigation because Cadwalader could
not be adverse to certain of the Belgium Banks.  

This situation is exacerbated by the fact that Cadwalader, as is
evident, he says, from a letter dated April 10, 2001, from
Theodore Zink of Chadbourne & Park LLP, counsel to certain of
the Belgium Banks, to Bruce Zirinsky of Cadwalader, had
knowledge of and was categorically denied a waiver of this
ethical conflict prior to its retention.

The letter arises from a review by Mr. Zink of the affidavit of
Cadwalader made in support of the Dictaphone Committee's
application to retain Cadwalader.  In the application,
Cadwalader stated that it represents and continues to represent
Artesia, Dresdner and Fortis in various matters described as
unrelated to the proposed retention of Cadwalader by the
Dictaphone Committee.  

In his letter, Mr. Zink notes that Mr. Zirinsky and Mr. Greg
Petrick of the Cadwalader firm have "on many occasions publicly
questioned the validity of the Dictaphone guaranty", and notes
that it is conceivable that Mr. Zirinsky may have counseled or
will counsel the Dictaphone Committee or its individual members
with respect to alleged infirmities of the Dictaphone guaranty
and/or recommend that the Dictaphone Committee take a position
or action that is or may be adverse to the interests of Artesia,
Dresdner and/or Fortis under the Dictaphone guaranty or the
revolving credit facility, or in the various insolvency
proceedings of Lernout & Hauspie Speech Products N.A. and
Dictaphone Corporation.

Mr. Zink states firmly that under the applicable conflict of
interest provisions of the Disciplinary Rules of the Code of
Professional Responsibility, Cadwalader may not represent the
Dictaphone Committee (or any other party) in matters that may be
adverse to Artesia, Dresdner and Fortis without their consent.  
He advises that Artesia, Dresdner and Fortis do not consent to
Cadwalader's representation of the Dictaphone Committee, or any
other party, in matters that may be adverse to their interests
in the insolvency proceedings of L&H Speech Products N.V. or
Dictaphone Corporation, and asks for a letter assuring
the Banks that Cadwalader will comply.

Mr. Bodnar continues that, regardless of the rationale of
Cadwalader's failure to disclose its actual conflicts, the
Debtors' estates should not be further burdened by the retention
of additional professionals, especially when The Bayard Firm is
already retained by the Dictaphone Committee, in familiar with
all relevant facts and circumstances and which, to the L&H
Committee's knowledge, has no ethical conflicts preventing them
from performing the same investigation which Kasowitz
proposes to perform.  If The Bayard Firm is unable or unwilling
to perform the proposed investigation, or Kasowitz has special
skill or knowledge with respect to the proposed investigation,
these facts need to be disclosed.  Otherwise, the retention of
Kasowitz would be an unnecessary economic burden on the Debtors'
estates and their creditors.

For these reasons, the L&H Committee asks Judge Wizmur to deny
the Kasowitz Application.

               All of the Debtors Are Unhappy Too

Lernout & Hauspie Speech Products N.V., L&H Holdings USA, Inc.,
L&H N.V., and Dictaphone object to this Application too.  The
Dictaphone Committee already has representation by Cadwalader
and The Bayard Firm in Delaware, and by Lafili as counsel in
connection with L&H N.V.'s concordat.  

The L&H Group believes that the current counsel of the
Dictaphone Committee are experienced practitioners who are more
than capable of handling any and all issues that may arise in
these chapter 11 cases.  The retention of Kasowitz will further
deplete scarce resources of these estates (including the
Dictaphone estate) and continue to "overpopulate" these chapter
11 cases with too many professionals.

If the Dictaphone Committee believes that it is not appropriate
for Cadwalader to represent it in connection with a particular
issue to prevent any appearance of any impropriety or conflict,
the Dictaphone Committee is fortunate enough to have another
experienced and capable law firm - Bayard - at its disposal to
handle the issue. The Debtors say the Dictaphone Committee can
provide no justification for employing additional counsel.

The Debtors complain that the monthly "burn-rate" attributable
to professional fees in these cases continues to grow at an
exponential rate.  Between the members of the L&H Group, the two
Creditors' Committees, and the L&H Group's postpetition secured
lenders, these estates currently pay the fees and expenses of
approximately 20 professionals.  

These estates are facing liquidity constrains.  Since the
Dictaphone Committee and the Dictaphone creditors already are
adequately represented in these cases, the employment of
Kasowitz will do nothing more than deplete already scarce
resources.  For these reasons, the Debtors ask that the Court
deny the application.

                The Dictaphone Committee Replies

The Official Committee of Unsecured Creditors, appearing through
Christopher A. Ward and Neil B. Glassman of The Bayard Firm,
joined by Bruce R. Zirinsky and Gregory R. Petrick of
Cadwalader, replies to these objections, telling Judge Wizmur
that the objections are "pretextual" and are being interposed
for the sole purpose of gaining leverage against the Dictaphone
estate.  As is becoming abundantly clear, at least to the
Dictaphone Committee, consistency is not the forte of L&H or the
L&H Committee.  Both lodge objections to the Application based
on the argument that the retention of Kasowitz as special
counsel would unnecessarily burden the Debtors' estates with
excessive professional fees.  Yet, at the same time, L&H seeks -
and the L&H Committee has not objected to - the retention of
CSFB as exclusive financial advisor to the Debtors.  The CSFB
application seeks a minimum fee of $5,000,000 which the
Dictaphone Committee believes is -- viewed charitably --
disproportionately high compared to the results that are likely
to be achieved in these cases.

The Dictaphone Committee tells Judge Wizmur that there really is
only one explanation for the seemingly conflicting and
"nonsensical" positions taken by L&H and the L&H Committee with
respect to these matters.  

As is apparent from their objections to the Application, both
L&H and the L&H Committee are using the pretext of excessive
professional fees as a lever to halt any progress with respect
to the reorganization of Dictaphone, in an effort to gain
bargaining leverage and the perceived ability to extract
concessions from Dictaphone on a host of open issues in these
cases.  Yet, at the same time, both are willing to burden these
estates with CSFB's $5,000,000 fee, all of which will be paid by
Dictaphone under L&H's debtor-in-possession financing facility.

The Application seeks to retain Kasowitz as special counsel to
the Dictaphone Committee to investigate and report upon the
circumstances surrounding the issuance of a guaranty by
Dictaphone in favor of L&H's bank group for debts in excess of
$200,000,000.  The L&H Bank Group Guaranty was incurred and
documented in the months leading up to the Petition Date -
during a period of time when L&H may have been conducting its
business affairs with a view toward filing for bankruptcy

The L&H Committee - which is controlled by members of the L&H
Bank Group and acts at its behest - apparently does not want any
meaningful scrutiny of the facts and circumstances surrounding
the issuance of the L&H Bank Group Guaranty.  Initially the
Dictaphone Committee sought to have existing counsel to the
Committee, Cadwalader, do this investigatory work.  

However, the L&H Bank Group, through certain of its members that
sit on the Dictaphone Committee, objected to Cadwalader's
efforts in this regard, as shown by the letter attached to their
objection.  In an effort to remain neutral and accommodate all
interests, Cadwalader recommended that the Dictaphone Committee
select another law firm to do this work.  After careful
consideration (and further objection from members of the L&H
Bank Group which claimed that any such investigation was not
necessary), the Dictaphone Committee selected Kasowitz.

The objection alleging that Cadwalader failed to make adequate
disclosure in its own retention application with respect to an
investigation of the L&H Bank Group Guaranty, and that  
Cadwalader was denied a waiver of an ethical conflict prior to
the filing of the application, are described by the Committee as
"patently false", and are said to border on statements
sanctionable under the Bankruptcy Rules.  A cursory review of
the L&H Bank Group letter demonstrates the falsity of these
assertions and calls into question whether the L&H Committee
conducted a reasonable inquiry or has any evidentiary support
for these allegations, as required by the Bankruptcy Rules.

In fact, Cadwalader's retention application disclosed every
significant relationship Cadwalader has with all known parties
in interest. Cadwalader is and always has been capable if
conducting the investigation in question.  The L&H Bank Group
letter was received by Cadwalader approximately two weeks after
the firm's retention application was filed and specifically
references the fact that the requests set out in the letter were
based upon a review of the affidavit submitted in support of
that application.

Now the L&H Bank Group - this time through the L&H Committee -
has again objected to any inquiry into the L&H Bank Group
Guaranty and is again attempting to stymie progress in these
cases.  In addition, L&H, apparently under pressure from the L&H
Bank Group, its largest creditor, has also objected to the
Application on substantially similar grounds, even though the
resolution of issues relating to the validity of the obligations
evidenced by the L&H Bank Group Guaranty is a central issue in
these cases.  No one - not even the L&H Committee - disputes
this fact.

Nevertheless, L&H and the L&H Committee have both objected to
the Application based primarily on the fact that an additional
professional retained in these cases will somehow unnecessarily
burden the Debtors' estates with excessive administrative
expenses.  Although it is true that another professional will be
required to submit fee applications in these cases, the fees
incurred are expected to be relatively low given the discrete
nature and scope of Kasowitz's engagement.

Moreover, some law firm - whether it be Cadwalader, Kasowitz,
The Bayard Firm (local counsel to the Dictaphone Committee) or
any other firm - will incur nearly the same cost in doing this

Accordingly, other than the cost incurred in attending a court
hearing with respect to the Application, it is difficult to
envision how exactly the Debtors would incur unnecessary
incremental administrative expense as a result of the
Application or the tasks to be performed pursuant thereto.

Furthermore, Mr. Ward says that the fees attributable to
Kasowitz's investigation will be allocated in full to Dictaphone
since the work is being done on behalf of the Dictaphone
Committee.  Mr. Ward admonishes Judge Wizmur not to permit L&H
and the L&H Committee to second-guess decisions made by the
Dictaphone Committee acting in its fiduciary capacity for the
benefit of the Dictaphone estate and its creditors.

The economic reality of this situation is that L&H and the L&H
Committee should have little say in how the Dictaphone Committee
exercises its judgment - and chooses to spend Dictaphone estate
resources - in furtherance of the resolution of the Dictaphone
case. (L&H/Dictaphone Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

LOEWEN: State Street Seeks to Compel Production of White Letter
At the conclusion of the Court-ordered mediation to resolve the
dispute over the secured status of debt issued under the
Collateral Trust Agreement in the amount of approximately $1.1
billion, Professor James J. White, the Mediator, sets forth in
his letter to John S. Lacey, Chairman of The Loewen Group, Inc.,
his opinion with respect to a plan of reorganization that would
fairly discount the various parties' risk of loss in Adversary
Proceeding No. 00-1181.

After receiving the Professor White's letter of April 30, 2001,
the Debtors used the Mediator's recommendations and as discussed
with the parties during the course of the mediation to develop
the Plan under which the CTA Note Claims are not treated on a
pari passu basis.

During and following the mediation, certain parties to the
mediation raised questions concerning the propriety of
disclosure of the Mediator's recommendations. These concerns
were based, in part, on Local Rule 9019-3, which was amended
after the mediation commenced and which imposes various
confidentiality requirements with respect to information
disclosed during mediation and on mediator's recommendations.

Therefore, the Debtors take the position that they would
disclose the White Letter only pursuant to an appropriate Order
of the Court.

Accordingly, in response to the motion by State Street Bank and
Trust Company, a nonparticipant in the mediation, for an order
to compel the Debtors to produce the White Letter, the Debtors
point out that State Street's motion is an attempt,
unilaterally, to obtain the White Letter prior to other parties
in interest in these cases, including the parties to the

The Debtors make it clear that they do not object to disclosing
the White Letter as part of the Disclosure Statement, subject to
the rights of other parties to the mediation to be heard on this
issue at the hearing on the Disclosure Statement and subject to
an appropriate Order of the Court.

The Debtors do, however, object to the disclosure of the Letter
selectively to State Street prior to other parties in these
cases, including the parties to the mediation. The Debtors also
note that "if State Street's motion is treated as what it truly
is -- a Disclosure Statement objection -- the selective
disclosure problem that the motion presents can be avoided."

State Street's rationale for the manner and timing of the motion
is that discovery is necessary to decide whether the White
Letter should be included in the Disclosure Statement.

The Debtors take the position that selective disclosure of the
White Letter only to State Street would be wholly inappropriate.
The Debtors' view is that, if the Court concludes that the White
Letter should be disclosed, it should be made available to all
interested parties in these cases, including the parties to the

The Debtors tell the Court that State Street's discovery motion
should be treated as a Disclosure Statement objection and its
request should be considered at the Disclosure Statement

State Street's moving papers also attack certain provisions of
the Plan. In particular, State Street argues that the Court has
no authority to enter certain factual findings with respect to
the Debtors' Plan and that those findings are otherwise

While indicating their disagreement to State Street's position,
the Debtors note that these concerns of State Street's are
appropriately raised in connection with a confirmation hearing
on the Plan and have no relevance to either State Street's
discovery motion or to the upcoming hearing on the Debtors'
Disclosure Statement. (Loewen Bankruptcy News, Issue No. 44;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

In connection with the Court's generalized approval of Loewen's
Third Amended Disclosure Statement earlier this month, Judge
Walsh directed that all references to the White Letter be
stricken from that document.  Professor White's letter to the
core parties-in-interest is confidential, Judge Walsh ruled, and
will not be made available to the public.

LTV CORP: Seeks Extension of Exclusive Period to January 7
The LTV Corporation asks Judge Bodoh to further extend the
period during which only they may propose a plan of
reorganization and solicit acceptances for that plan by
approximately four months, through and including January 7, 2002
for filing their plan, and March 7, 2002, for the solicitation
of acceptances.

During the period since the Court's initial extension of the
exclusive periods, the Debtors have aggressively pursued, and
have made substantial progress towards, their reorganization

The Debtors not only have effectively addressed the numerous
day-to-day administrative matters in these chapter 11 cases,
with over 1,300 pleadings filed in these cases to date, but they
also have begun to lay a solid foundation for their emergence
form chapter 11.

Among other things, the Debtors have stabilized their business
operations and workforce, in part by obtaining new DIP financing
facilities approved by the Court, developed their long-term
business plan and global restructuring strategy, initiated
discussions with their various constituencies regarding the
restructuring plan, commenced an exhaustive review of their
executory contracts, unexpired leases and non-core assets, and
where necessary or appropriate, commenced the process to obtain
authority to assume, reject or sell certain contracts, leases
and assets, filed their respective schedules of assets and
liabilities, developed and obtained judicial approval of bidding
procedures to facilitate the sale of substantially all of the
assets of VP Buildings, and developed and implemented their key
employee retention program to retain those employees who are
critical to the Debtors' ongoing business operations and

At this stage in these chapter 11 cases, the Debtors' primary
focus is on implementing and validating the restructuring plan,
which will form the basis of the Debtors' plan or plans of
reorganization. A key component of the restructuring plan is the
implementation of certain modifications to the CBAs among the
Debtors and the USWA.

After months of intense negotiations with the USWA regarding the
necessary modifications to the labor agreements and the filing
of a motion by the Debtors to reject the CBAs with eh USWA and
to modify certain retiree benefits plans, the Debtors and the
USWA agreed to the terms of a modified labor agreement. This has
now been approved.

Approval of the MLA puts in place one of the essential building
blocks for the Debtors' restructuring. With the MLA concluded,
the Debtors now can pursue and implement the other components of
the restructuring plan, which include obtaining a loan under the
Emergency Steel Loan Guarantee Program and certain other
restructuring initiatives to cut costs, improve efficiencies and
complete asset sales.

In light of the Debtors' substantial ongoing progress towards
the ultimate goal of successfully emerging from chapter 11, the
Debtors seek an order extending both of the exclusive periods by
approximately four months. (LTV Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 609/392-00900)

METAL MANAGEMENT: Fresh Start Adjustments Delay 10-Q Filing
Generally accepted accounting principles require that the Metal
Management, Inc., a Delaware corporation, adopt Fresh Start
Accounting which results in the creation of a new reporting

Accordingly, the Company's assets and liabilities must be
recorded at estimated fair market value as of June 30, 2001.  

The Company is still in the process of finalizing its fresh-
start accounting adjustments and reviewing these adjustments
with its independent auditors and will be unable to timely file
its Form 10-Q with the SEC.  The Company says it will file its
quarterly report on Form 10-Q with the Securities and Exchange
Commission as soon as practicable.

Metal Management, Inc., a Delaware corporation emerged from
bankruptcy effective June 29, 2001 (for financial reporting
purposes, the effective date is June 30, 2001).

MULTICANAL S.A.: S&P Concerned Over Delay in $320MM Refinancing
Standard & Poor's ratings on Multicanal S.A. remain on
CreditWatch with negative implications, where they were placed
Aug. 8, 2001.

On Aug. 17, 2001, Multicanal announced that it had obtained
consent from 100% of the holders of its US$150 million and US$14
million notes to extend the maturity of both instruments until
August 30.

The ratings were placed on CreditWatch with negative
implications due to the delays in the closing of the refinancing
of approximately $320 million in maturities the company has to
face before February 2002. The ratings will remain on
CreditWatch until the completion of this process, which also
includes the sale of some assets whose proceeds will be used to
reduce leverage.

   Ratings Remain on CreditWatch with Negative Implications

     Multicanal S.A.

        Long-term corporate credit rating       B-
        Short-term corporate credit rating      C
        Senior unsecured debt                   B-

OWENS CORNING: Rejects Asphalt Pact with Foreland Refining Corp.
J. Kate Stickles at Saul Ewing LLP in Wilmington, Delaware,
states that Owens Corning have determined that it is in their
best interests to reject the Joint Asphalt Production &
Marketing Agreement dated April 5, 1999 with Foreland Refining

The Debtors anticipates that they will either negotiate a new
agreement with Foreland or find an alternative supplier of
asphalt for this region. Ms. Stickles believes that the
rejection of the agreement will result in significant cost
savings for the Debtors.

In view of the motion and the response of the Debtors to reject
the agreement with Foreland, Judge Fitzgerald orders the
rejection of Agreement.

Foreland Refining Corporation filed a motion to compel Owens
Corning to assume or reject Agreement dated April 5, 1999.

Foreland is the owner of an asphalt manufacturing facility
located in Salt Lake City, Utah, which produces, manufactures
and packages certain oxidized asphalt products.

Kathleen M. Miller, Esq., at Katzenstein & Furlow LLP in
Wilmington, Delaware revealed that pursuant to this five-year
agreement, Foreland agreed to sell its Asphalt Product solely to
the Debtors.

In return, the Debtors agreed to purchase at least 40,000 tons
of asphalt per year, failure to meet the purchase requirement
would allow Foreland to convert the contract to non-exclusive as
a remedy.

During the year 2000, Ms. Miller contended that the Debtors
failed to purchase the required 40,000 tons of asphalt while
during the current year, the Debtors has failed to provide
projections and order sufficient products to reach the required
40,000 for the year. As of petition date, Ms. Miller added that
the Debtors owed Foreland $296,207.75 under the contract.

After the petition date, Ms. Miller stated that she had
communicated with various counsels for the Debtors to determine
whether the Debtors would assume or reject the contract but it
still had not been done so.

Ms. Miller asserted that Foreland was bound to sell exclusively
to the Debtors but the Debtors were not bound to order
sufficient quantities of the asphalt product necessary for
Foreland to stay in business due to the automatic stay. Ms.
Miller added that Foreland would be harmed more by inaction than
the Debtor would be harmed by being required to make a decision.

If the Debtor did not make a decision expeditiously, Ms. Miller
believed that Foreland would suffer substantial economic harm
from its inability to sell their product. (Owens Corning
Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service,
Inc., 609/392-0900)

PACIFIC GAS: Debtor Hires Steefel Levitt as Special Counsel
Pacific Gas and Electric Company sought and obtained the Court's
approval for the employment of Steefel, Levitt & Weiss, as its
special counsel, to represent it in civil and regulatory
litigation matters necessitating special regulatory and energy
expertise before the California Public Utilities Commission, the
Federal Energy Regulatory Commission and state and federal
courts and arbitration panels; and to provide advice and
coordination respecting those activities and the proceeding
before this Court.

Mark Fogelman, Esq., is the SL&W shareholder principally
responsible for this engagement.

Pre-petition, SL&W represented and advised the Debtor in
connection with the defense of certain CPUC certificate and
complaint matters, and those matters were successfully concluded
prior to January 1, 2000. Subsequently, SL&W represented the
Debtor's affiliates, PG&E Generating Company and the PG&E
National Energy Group, in CPUC proceedings involving the
Debtor's application to transfer certain assets, and those
matters are effectively concluded, the Debtor advises.

SL&W is a full-service firm with extensive experience in, among
other fields, civil and regulatory law and litigation and
bankruptcy proceedings. SL&W has extensive experience
representing corporations similar to the Debtor in connection
with regulatory and civil litigation matters. The Debtor
believes that SL&W is well-qualified and able to represent it in
an efficient and timely manner.

Specifically, SL&W will serve as PG&E's special counsel to:

   (1) advise the Debtor with respect to civil and regulatory
       litigation matters necessitating special regulatory and    
       energy expertise;

   (2) represent the Debtor in such potential matters before the
       CPUC, the FERC, state and federal courts and arbitration
       panels; and

   (3) without representing the Debtor as counsel of record in
       this bankruptcy proceeding, advise and coordinate with    
       the Debtor's general counsel and counsel of record  
       regarding civil and regulatory litigation matters.

The firm will not appear on behalf of the Debtor in its chapter
11 bankruptcy proceeding and will not be responsible for the
Debtor's general restructuring efforts or other matters
involving the conduct of the Debtor's chapter 11 case.

By delineating SL&W's role, the parties have ensured that there
will be no overlap or duplication of services between SL&W and
the Debtor's general and other special counsel.

Mr. Fogelman tells the Court that that SL&W has represented,
presently represents, and in the future will likely represent,
certain creditors of the Debtor and other parties in interest in
this case on matters that are wholly unrelated to those
entities' claims against or relationship with the Debtor.

This representation, Mr. Fogelman submits, does not create an
actual or potential conflict of interest, since SL&W will not be
representing the Debtor in these bankruptcy proceedings as
bankruptcy counsel.

Mr. Fogelman advises that a computerized conflicts check reveals
that SL&W represents or has represented the following known
creditors or their affiliates on matters unrelated to the scope
of representation sought in the application to employ SL&W: The
Bank of New York, Bankers Trust Company, Bank of America, N.A.,
Deutsche Bank, U.S. Bank, Bank One, Sempra Energy, Texaco USA,
United Airlines, and U.S. Trust Company of California.

SL&W has undertaken the representation of DK Acquisition
Partners, a holder of certain debt and/or equity interests in
PG&E Corporation, the Debtor's parent, to monitor this chapter
11 bankruptcy case and to appear and participate in this
bankruptcy case on its behalf, should DKAP be a claimant or
other party in interest in this case and should it request that
SL&W do so.

The Debtor has waived any actual or potential conflict of
interest in SL&W's representing DKAP in connection with this
proceeding, and DKAP has waived any actual or potential conflict
of interest in SL&W's representing the Debtor in matters other
than bankruptcy matters in this proceeding. In addition, with
the consent of both parties, SL&W has established an ethical
wall to ensure that the confidentiality of the information of
each party is preserved.

SL&W has represented the Debtor's affiliates, PG&E Generating
Company and the PG&E National Energy Group, in the CPUC
proceeding involving the divestiture of PG&E's hydroelectric
assets, A.99-09-053, and related CPUC proceedings, A.00-05-029
and A.00-05-030.

SL&W believes these representations are essentially concluded,
particularly in light of the enactment on January 1, 2001, of
state legislation which prohibits the Debtor from transferring
or selling its power generation assets, and in any event SL&W
does not believe they raise any conflict of interest with
respect to our representation of the Debtor in the matters in
which the Debtor seeks to employ SL&W as special counsel.

SL&W represents, or has represented, one of the Debtor's
professionals, Deloitte & Touche, in a matter unrelated to the

Mr. Fogelman submits that, to the best of his knowledge, SL&W
does not represent any of the above entities in any matters
adverse to SL&W's representation of the Debtor or the Debtor's
estate. Mr. Fogelman believes that SL&W and the attorneys at the
firm are "disinterested persons," as that term is defined in
section 101(14) of the Bankruptcy Code, and do not hold or
represent any interest adverse to the Debtor's estate.

The current hourly rates for SL&W's professionals and para-
professionals, Mr. Fogelman advises, are:

     $290 to $450 for shareholders;
     $310 to $345 for counsel;
     $180 to $290 for associates; and
     $115 to $180 for legal assistants.
(Pacific Gas Bankruptcy News, Issue No. 12; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

PILLOWTEX CORP: Seeks Approval of 3rd DIP Financing Amendment
Pillowtex Corporation and its debtor-affiliates ask Judge
Robinson for authority to enter into a Third Amendment to their
Post-Petition Credit Agreement and to pay a related amendment
fee to their Post-Petition Lenders.

Michael G. Wilson, Esq., at Morris, Nichols, Arsht & Tunnell,
reminds the Court that the Debtors previously entered into a
Second Amendment to Post-Petition Credit Agreement, which made
non-substantive modifications to certain financial information
reporting requirements.

In this Third Amendment, the Debtors and the DIP Lenders have
agreed to modify the asset coverage ratio from the current ratio
of 1.34 to 1.00 to an asset coverage ration ranging between 1.23
to 1.00 to 1.20 to 1.00, based on specified time periods.

     Period                                     Minimum Ratio
     ------                                     -------------
  June 30, 2001 through August 29, 2001         1.23 to 1.00
  August 30, 2001 through September 29, 2001    1.22 to 1.00
  September 30, 2001 through October 30, 2001   1.21 to 1.00
  October 31, 2001 through November 14, 2001    1.20 to 1.00

In addition, Mr. Wilson says, the Debtors and DIP Lenders have
also agreed to the inclusion of an EBITDA covenant in lieu of
the current operating cash flow covenant.

The Debtors covenant that they will not permit EBITDA for the
periods set forth below to be less than the amount set forth
opposite each such period:

         Period                    Amount
         ------                    ------
       1 month ended 6/30/01       ($5,900,000)
       2 months ended 7/31/01      ( 7,700,000)
       3 months ended 8/30/01      ( 4,800,000)
       4 months ended 9/30/01      ( 4,600,000)
       5 months ended 10/30/01     $0

According to Mr. Wilson, the Third Amendment also amends the
Post-Petition Credit Agreement to modify and supplement current
reporting requirements. Among other things, the Debtors have
agreed to deliver to the DIP Lenders:

   (a) on or before August 15, 2001, a report from Interbrand

   (b) on or before September 15, 2001, a draft term sheet
       summarizing the Debtors' proposed plan of reorganization,

   (c) on or before September 30, 2001, the Debtors' 3-year
       financial forecast,

   (d) on or before September 15, 2001, a report from Stern
       Stewart, and

   (e) on or before October 15, 2001, a draft of the Debtors'
       proposed plan of reorganization and disclosure statement.

Mr. Wilson adds that the Third Amendment also eliminates the
provision providing for an automatic extension of the
Termination Date for the Post-Petition Credit Agreement upon the
satisfaction of specified conditions.

Previously, the November 14, 2001 maturity date could be
extended for an additional period of six months upon payment of
an extension fee equal to 0.50% of the portion of the DIP
Financing Facility being extended.

In its latest quarterly report filed with the SEC, Pillowtex
says management believes they will be able to obtain an
extension of the DIP Financing Facility beyond November 14, 2001

And finally, Mr. Wilson says, the Third Amendment provides that
the Debtors will pay an amendment fee of 75 basis points, or

The Debtors assure the Court that an approval to enter into the
Third Amendment is in the best interests of their estates and
creditors. Mr. Wilson explains that the modification of the
asset coverage ratio is necessary to accommodate the reduction
in assets that has occurred as part of the Debtors' ongoing cost
reduction and asset rationalization process. According to Mr.
Wilson, the new EBITDA requirements - which replace minimum
operating cash flow requirements - will more accurately track
the Debtors' performance.

If the Court won't authorize the Debtors to enter into the Third
Amendment, Mr. Wilson warns, the Debtors will shortly be in
technical non-compliance with the asset coverage ratio in the
Post-Petition Credit Agreement. The Third Amendment addresses
this issue and enables the Debtors to continue with their
reorganization efforts with the certainty that the DIP Facility
is available to them, Mr. Wilson says. (Pillowtex Bankruptcy
News, Issue No. 12; Bankruptcy Creditors' Service, Inc.,

PSINET: Debating True Lease vs. Disguised Financing Question
PSINet, Inc. sought and obtained the Court's authorization to
stay payments of their obligations, if any, arising under
certain equipment-related and fiber-related agreements pending a
determination by the Court as to whether these are true leases
or financing arrangements and hence the propriety of such

Between 1994 and 2001, PSINet regularly purchased equipment and
IRU's from various vendors for use in its domestic and foreign
businesses. The Debtors told the Court that in most instances
they purchased the equipment by entering into financing
agreements with vendors and other third parties.

With respect to agreements with 56 counter-parties relating to
191 Lease Schedules, as listed in Exhibit B to the motion, the
Debtors said they consistently maintained the position that the
agreements as well as any related IRU agreements are secured
financings as opposed to true leases, although some of these
financing agreements are described on their face as leases.

Accordingly, the Debtors believe that they would not be required
to make payments under the Agreements pursuant to section
365(d)(10) because section 365 would no longer be applicable;
the Debtors would own the equipment and IRUs, subject to the
potential lien (if perfected) of the respective financier.

On July 3, 2001, the Debtors commenced a number of adversary
proceedings seeking to re-characterize a large number of the
Agreements as secured financings, which the Debtors believe
these truly are. The Adversary Proceedings are captioned nos.
01-02839, 01-02840, 01-02841, 01-02842, 01- 02843, 01-02844, 01-
02845, 01-02846, 01-02847, 01-02848 and 01-02849. The Debtors
intend to seek similar relief with respect to the remaining
Agreements shortly.

Andrew N. Goldman at Wilmer, Cutler & Pickering, as attorney for
the Debtors, argued that the Debtors should not be required to
make payments under Section 365(d)(10) of the Bankruptcy Code
for obligations arising under the Agreements while proceedings
were going on to determine the nature of such agreements and
hence the propriety of payments.

It is clear, Wilmer, Cutler asserted, that in the event the
Court determines that the Agreements are secured financings, the
Debtors would not be required to make payments under the
Agreements pursuant to section 365(d)(10). The Second Circuit
has determined that a lease disguised as a security agreement
does not invoke section 365 protections because that section
applies only to a "true" or "bona-fide" lease, as in
International Trade Admin. v. Rensselaer Polytechnic Inst., 936
F.2d 744, 750 (2d Cir. 1991), PCH Assoc. v. Liona Corp., N.V.,
804 F.2d 193, 200 (2d Cir. 1986), Wilmer, Cutler cites.

If the Court rules otherwise, the Debtors will promptly remit
all payments properly due and owing under the Agreements from
July 31, 2001 onward to the counter-parties in accordance with
section 365(d)(10) of the Bankruptcy Code, Wilmer, Cutler told
the Court.

The Debtors believe that there should be no practical concern on
the part of the counter-parties to the Agreements as to PSINet's
ability to make "catch-up" and "going-forward" payments, Wilmer,
Cutler represent, because they hold approximately $300 million
in unencumbered cash and continue to receive additional cash in
the form of sale proceeds from their divestiture of businesses.

Wilmer, Cutler argued that, while it is beyond dispute that
counter-parties to the Agreements will not be prejudiced by the
grant of relief requested in the motion, the Debtors and their
estates will be prejudiced if compelled to make payments under
the Agreements and the Court ultimately determines that the
Agreements are secured financings.

The Debtors anticipated several scenarios in which they will be
prejudiced. First, if the counter-parties to the Agreements do
not immediately return such payments, the Debtors would be
forced to commence and prosecute numerous turnover actions under
section 542 of the Bankruptcy Code at great cost and use of
precious resources.

Also, the counterparties may raise (whether correctly or
incorrectly) defenses to the turnover or seek to setoff or
recoup the payments or may themselves suffer financial
difficulty and perhaps even seek bankruptcy protection
themselves, making their ability to assure repayment to the
Debtors unclear. Finally, because the aggregate amount of the
payments is so large, the Debtors and their estates would lose
substantial interest payments while waiting for return of the

The Debtors advised that they commenced the Adversary
Proceedings within 33 days of the Petition Date and will seek
resolution of the Adversary Proceedings on as expeditious a
timetable as due process and the Court's calendar will allow.
The Debtors believe that the issues in the Adversary Proceeding
are legal in nature, involve relatively straightforward
interpretations of the Agreements in accordance with the Uniform
Commercial Code, and may be determined by summary judgment.

The Debtors submit that the counter-parties to the Agreements
will not be prejudiced by this stay because they are actively
and expeditiously seeking resolution of the respective rights of
the parties in a timely manner.

The Debtors further indicated that, to the extent that the Court
determines that it is necessary, they would place such payments
in a segregated account pending resolution of the Adversary
Proceedings, but in their view, such a segregated account is
wholly unnecessary because of the amount of unencumbered cash in
the PSINet estates.

The Debtors believe that the equities favor a stay of payments
to the counter-parties to the Agreements pending an adjudication
of the nature of the Agreements because:

   (1) they have acted diligently to obtain a determination of
       the relative rights of the parties;

   (2) in the event that the Debtors obtain a favorable
       determination and the Agreements are characterized as
       secured financings, no payments would be required
       pursuant to section 365(d)(10);

   (3) the relief requested is without prejudice to the counter-
       parties to the Agreements to seek reinstatement were the
       facts to change;

   (4) there is no prejudice to the counter-parties to the
       Agreements because the Debtors hold an abundance of
       unencumbered cash that could be used to make "catch-up"
       and "going-forward" payments if their efforts to
       recharacterize the Agreements are unsuccessful; and

   (5) the PSINet estates will be prejudiced should the Debtors
       be required to make payments under the Agreements and
       thereafter seek return of those payments if successful in
       the Adversary Proceedings.

At the hearing on August 1, 2001, Judge Gerber determined that
sufficient cause exists for the relief requested. Pursuant to
the Court's order granting the motion, the Debtors are
authorized to withhold payments under the Agreements to the
counter-parties until the nature of the underlying Agreements
are finally resolved by order of the Court and it its determined
that the Agreements are or are not secured financing or true

In addition, the Debtors are not required to seek further order
of the Court in connection with payments pursuant to section
365(d)(10) in the event that the Court determines that the
Agreements are secured financings.

The Court's order specifies that the authorization is granted to
the Debtors without prejudice to the rights of any counter-party
to the Agreements to seek reconsideration of the section
365(d)(10) payment stay in the event that the underlying facts
presented in the motion materially change.

As proposed by the Debtors, the Court directs that in the event
a counter-party does not receive notice of the relief sought and
granted, the party will have 10 days from the date of actual
receipt of notice to file a motion to reconsider the relief as
it relates to the Agreement.

The Court's order also addresses the concern raised by General
Electric Capital Corporation in its limited objection to the
motion. GECC is the lessor, and PSINet, Inc., is the lessee
under certain Master Agreements for the lease of equipment. GECC
agrees that the Master Agreements and Lease Schedules are not
true leases and makes no claim to "lease" payments under
Bankruptcy Code Section 365(d)(10).

GECC is not the subject of a pending adversary proceeding. GECC
only wants to reserve its rights to move for adequate protection
under Bankruptcy Code sections 361(1), 363(e) and 362(d)(1).
Each of the Lease Schedules entered into between GECC and the
Debtor contains a Schedule of Stipulated Loss Values &
Termination Values, under which the parties agreed to a straight
line depreciation of value over the 36 month of the lease, i.e.
3% per month.

Judge Gerber entertains the request and makes it clear that the
Order is without prejudice to the rights of GECC to seek
relief to protect its interest in the equipment which is the
subject of the Agreements, including without limitation,
adequate protection under Bankruptcy Code sections 361(1),
363(e) and 362(d)(1) and without prejudice to the Debtors'
rights to contest such relief.

Objections to the motion were filed before the hearing. The
Court specifies in its Order that it retains jurisdiction over
any disputes, controversies or claims arising out of or relating
to the Motion or the Order.

                    FINOVA's Objection

FINOVA Capital Corporation, filed an objection dated July 26,
2001 (the date of the Objection Deadline). FINOVA is also a
debtor-in-possession in a chapter 11 case -- Case No. 01-0697
(PJW) through 01-0705 (PJW), commenced on March 7, 2001 in the
United States Bankruptcy Court for the District of Delaware.

FINOVA and PSINet, Inc. are parties to a Master Lease Agreement
dated as of December 15, 1995 under which PSINet leased from
FINOVA certain equipment for use in its business. According to
FINOVA, the aggregate monthly lease payment which PSI is
obligated to pay to FINOVA under the terms and provisions of the
Lease is $451,994.58, including taxes.

On or about July 3, 2001, the Debtors filed an adversary
complaint against FINOVA in the PSINet case designated Adversary
No. 01-02844 (REG) seeking a determination that the Lease is not
a "true lease" but instead a financing agreement which creates a
security interest. FINOVA contends that the Adversary Proceeding
has no legal effect because PSINet did not first obtained
modification of the automatic stay in FINOVA's bankruptcy case.

FINOVA alleges that the Debtors' violation of the automatic stay
in FINOVA's Chapter 11 case was willful and FINOVA is proceeding
accordingly in the United States Bankruptcy Court for the
District of Delaware.

FINOVA argued that equities of the case would not favor a stay
pointing out that with approximately $300 million of
unencumbered cash and proceeds from the sale of business assets,
the Debtors should have more than sufficient resources to carry
out their statutory obligations and FINOVA has a right to rely
on Bankruptcy Code Section 364(d)(10) to protect its interests.

In addition, FINOVA disputes that the Lease is not an unexpired
lease under Section 365.

         Objection By Citicorp Vendor Finance, Inc.

Citicorp Vendor Finance, Inc. f/k/a Copelco Capital, Inc. as
assignee of Minolta Business Solutions, Inc. and JDR Capital
Corp., filed an Objection dated August 1, 2001. Prior to
PSINet's petition date, CVF as lessor and PSINet as lessee,
entered into 26 separate equipment lease agreements, which
provided for the rental of certain office equipment. According
to CVF, the 26 Leases cover approximately $500,000.00 of
outstanding obligations relating to equipment which collectively
require monthly payments totaling approximately $12,000.00.

CVF accused the Debtors of taking a wholesale approach to retain
use and benefit of the leased equipment without makking payment
mandated by statute. CVF argued that "this wholesale approach to
effect an entire class of claimants, without any facts, without
identifying the basis upon which the Debtors contend the Leases
are not true Leases under the Uniform Commercial Code Art. 2A,
and without addressing the economics of each transaction must

Specifically, CVF contends that the 26 Leases with CVF are true
leases. CVF asserts that until such time as the Debtors can
independently establish to the contrary with documentary
evidence, they are obligated under the confines of the
Bankruptcy Code to make payments pursuant to Section 365(d)(10)
commencing August 1, 2001.

             Response of NTFA Capital Corporation

NTFC Capital Corporation ("NTFC"), a subsidiary of General
Electric Capital Corporation, is the assignee of Agreements
entered between the Debtors and Nortel Networks Inc.: (i) a
Master Agreement dated as of December 22, 1999 with the relating
Lease Schedule No. 1 dated as of December 22, 1999; and (ii) a
Master Agreement dated as of June 29, 2000 together with
relating Lease Schedule Nos. 1-5 dated June 29, 2000, September
11, 2000, September 29, 2000, December 29, 2000 and December 29,
2000, respectively.

NTFC draws the Court's attention to the requirement on the
Debtors to make payments under Leases pursuant to Section
365(d)(10) of the Bankruptcy Code from and after the 60th day
following the commencement of their chapter 11 case. NTFC also
contends that the $300 million unencumbered cash held by the
Debtors should enable them to disgorge payments in respect of
the NTFC Leases if required to do so.

NTFC indicates that it will consent to the Debtors not making
payments to NTFC under the NTFC Leases on a current basis
subject to:

   (a) NTFC will reserve all rights under section 365(d)(10) of
       the Bankruptcy Code and the NTFC Leases to seek payment,
       at any time, of amounts required to be paid under the
       terms of the NTFC Leases from and after the commencement
       of the PSINet chapter 11 cases;

   (b) the amounts required to be paid under the terms of the
       NTFC Leases from and after the 60th day following the
       commencement of the PSINet cases should be deposited in a
       segregated escrow account; and (c) NTFC will reserve all
       rights under sections 361, 362 and 363 of the Bankruptcy
       Code, the applicable Federal Rules of Bankruptcy
       Procedure and otherwise to seek adequate protection
       payments from and after the commencement of the PSINet
       cases and other forms of adequate protection. (PSINet
       Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
       Service, Inc., 609/392-0900)    

RELIANCE: Pennsylvania Argues for Remand of Commonwealth Actions
Counsel for the Insurance Commissioner at Obermayer, Rebmann,
argue to Judge Kevin J. Carey in the U.S. Bankruptcy Court for
the Eastern District of Pennsylvania, that the proceedings there
be remanded back to the Commonwealth Court of Pennsylvania.

Counsel for the Insurance Commissioner states that there are
four grounds for remand.

   * First, the McCarran-Ferguson Act explicitly controls the
     issue of removal. The Act reverse preempts the Bankruptcy     
     Court in matters of the business of insurance. The
     Rehabilitator commenced the Constructive Trust Action in
     furtherance of the Commonwealth's regulation of insurance.

   * Second, removal of the Constructive Trust Action is
     expressly prohibited under 28.U.S.C. 1452(a) which states:

     "A party may remove any claim or cause of action in a civil
     action other than a proceeding before the U.S. Tax Court or
     a civil action by a governmental unit to enforce such
     governmental unit's police or regulatory power, to the
     district court for the district where such civil action is
     pending, if such district court has jurisdiction of such
     claim or cause of action under section 1334 of this title."

The Constructive Trust Action is one brought by a governmental
unit to enforce its regulatory power. Grode, 572 A.2d 798 and
Vickodil, 559 A.2d 1010. The Constructive Trust Action is
brought pursuant to the Act and the Insurance Companies Holding
Act. Constructive Trust Action seeks to recover RIC's money,
which RGH is wrongfully holding in trust for RIC. When the money
is recovered it will be used to ensure that RIC policyholders
are satisfied.

The U.S. Supreme Court clearly held that an action such as this
is the business of insurance as it includes the protecting or
regulating the performance of an insurance contract. The Court
further explained that actions by a state to ensure that
policyholders will ultimately receive payments on their claims
is a critical element of the business of insurance.

Since this is indisputably an action under the police and
regulatory powers of a governmental unit, it is statutorily
excepted from those actions that may be removed under 28 U.S.C.

   * Third, the Constructive Trust Action should be remanded on
     equitable grounds pursuant to 28 U.S.C.(b), which provides    

     "The court to which such claim or cause of action is
     removed may remand such claim or cause of action on any
     equitable ground."

This Court must look at the totality of circumstances in
deciding to remand on equitable grounds. The Notice of Removal
is a litigation tactic designed to afford more credibility to
RGH Chapter 11 cases. Removal cannot be viewed in a vacuum and
this Court should not allow the Commonwealth Court to be
divested of its exclusive jurisdiction that it has under
Pennsylvania law.

   * Fourth, this Court should remand the Constructive Trust
     Action as it should abstain, mandatorily or
     discretionarily, pursuant to 28 U.S.C. 1334(c), which

     (1) "Nothing in this section prevents a district court in
         the interest of justice, or in the interest of comity
         with state courts or respect for state law, from
         abstaining from hearing a particular proceeding arising
         under title 11 or arising in or related to a case under
         title 11."

     (2) "Upon timely motion of a party in a proceeding based
         upon a state law claim or state law cause of action
         related to a case under title 11 but not arising under
         title 11 or arising in a case under title 11, with
         respect to which an action could not have been
         commenced in a court of the U.S. absent jurisdiction
         under this section, the district court shall abstain
         from hearing such proceeding if an action is commenced
         and can be timely adjudicated, in a state forum of
         appropriate jurisdiction."

This Court noted and fully discussed in Grace the grounds for
mandatory abstention. Applying the standards of Grace, the
Constructive Trust Action should be remanded to the Commonwealth
Court on the grounds of mandatory abstention pursuant to 28
U.S.C. Sec. 1334(C)(2). The six requirements of mandatory
abstention, set forth by this Court in Grace are satisfied in
this case:

   (a) This motion for remand is timely;

   (b) The Constructive Trust Action is based upon a state law
       claims and state law cause of action in a state court
       having jurisdiction thereof;

   (c) The Constructive Trust Action is related to a case under
       title 11;

   (d) The Constructive Trust Action does not arise under title

   (e) The Constructive Trust Action could not have been
       commenced in a federal court absent jurisdiction under
       28 U.S.C. Sec. 1334 because of the statutory requirement
       that such actions be initiated in the Commonwealth
       Court, which has the exclusive jurisdiction for such
       actions; and

   (f) The Constructive Trust Action is already commenced and
       can be timely adjudicated in the state court.

The attorneys close by telling Judge Carey that the Commonwealth
Court is competent and statutorily mandated to adjudicate the
Constructive Trust Action. Furthermore, the Commonwealth Court
is a specialized state court charged with the responsibility of
supervising all matters relating to insurance company
rehabilitations and liquidations. In Grace, this Court
recognized the special deference that should be afforded to such
specialized state courts under recognized principles of comity.
(Reliance Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)

SIMON WORLDWIDE: Two Yucaipa Representatives Resign from Board
Simon Worldwide, Inc. (Nasdaq: SWWI) announced that Ron Burkle
and Erika Paulson of The Yucaipa Companies have resigned from
the Company's Board of Directors.

Two of the three Yucaipa representatives resigned from the
Company's Board because they are also Directors of a
corporation, Golden State Foods, that is a major McDonald's

Legal counsel has advised that, under the circumstances, the
dual Board memberships would pose a potential conflict of

Simon Worldwide is a diversified marketing and promotion agency
with offices throughout North America, Europe and Asia. The
company works with some of the largest and best-known brands in
the world and has been involved with some of the most successful
consumer promotional campaigns in history.

Through its wholly owned subsidiary, Simon Marketing, Inc., the
company provides promotional agency services and integrated
marketing solutions including loyalty marketing, strategic and
calendar planning, game design and execution, premium
development and production management.

Simon is one of the world's largest creators, developers and
procurers of promotional games and toys. The company was founded
in 1976.

Last week, McDonald's terminated its 25-year relationship with
Simon Marketing, Inc., effective immediately, following a
sweepstakes security breach. Simon, founded in 1976, generated
65% of its total net sales of $768.4 million in 2001 and 77% of
its total net sales of $217.6 million in this year's first half
from conducting the McDonald's Happy Meal promotions.

Also, Phillip Morris and other clients have terminated their
relationships with Simon Marketing, Inc., late last week as the
result of published reports and press related to this incident.

VENCOR INC: Initiates Claims Objection Process
Vencor, Inc. et al. (now known as Kindred Healthcare Inc.) and
the other reorganized Debtors in the jointly administered case,
by and through their counsel, object to 195 proofs of claim and
ask the Court to enter an order, pursuant to Bankruptcy Code
Section 502(b) and Bankruptcy Rule 3007 disallowing in full or
reducing the claims.

Specifically, the Debtors object to:

   (A) 26 Duplicate Claims, mostly in an amount of a few hundred
       or thousand dollars and none of which exceeds $70,000,
       duplicative of other claims filed by the same claimants
       against one or more of the Debtors;

   (B) 18 Fully Paid Claims mostly in an amount of a few hundred     
       or thousand dollars and none of which exceeds $7,000;

   (C) 55 Invalid claims, mostly in an amount under one hundred      
       or of a few hundred or thousand dollars and none of which
       exceeds $140,000, with respect to which the Debtors have
       determined that they do not have any valid and         
       outstanding obligations to the claimants;

   (D) 13 Post-petition claims, mostly in an amount under one
       hundred or of a few hundred or thousand dollars and none  
       of which exceeds $9,000, asserting liabilities that arose
       after the Petition Date and, pursuant to the Plan and the
       Confirmation Order, will be resolved in the ordinary
       course of the Debtors' ongoing business;

   (E) 11 Partial Post-Petition Claims, mostly in an amount of a    
       few hundred or thousand dollars and none of which exceeds
       $8,000, that the Debtors assert should be reduced on the
       basis that each Claim relates in part liabilities that
       arose after the Petition Date.

   (F) 36 Excessive Claims, mostly in an amount of a few
       hundred or thousand dollars and none of which exceeds
       $120,000, that the Debtors assert should be reduced  
       because the claims originally assert excessive   
       liabilities due to one or more of the following reasons:

       (1) the claim has been partially paid;

       (2) the claim includes a Punitive Damages Claim as
           defined in the Plan and as such is entitled to no  
           distribution under the Plan;

       (3) no documentation was attached in support of a portion
           of the claim;

       (4) a portion of the claimed amount is owed, if at all,
           by an entity other than the Debtor and/or

       (5) the Claim includes post-petition interest and/or
           penalties, which the Debtors are not obligated to pay
           because the interest and/or penalties accrued during       
           the automatic stay imposed by these proceedings when
           the Debtors were unable to pay the Claim.

   (G) 9 Amended Claims, mostly in an amount of a few hundred or
       thousand dollars and none of which exceeds $120,000, that  
       have been amended and superseded by other claims filed by  
       the same respective Claimants;

   (H) Common Equity Claims

The Debtors object to 246 Common Equity Claims totaling
$1,275,703.4 and submit that each be disallowed in full and
expunged because the Common Equity Claims are for Debtors'
common stock and represents an equity interest in the Debtors
that is resolved under Section 5.13 of the Plan. (Vencor
Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service,
Inc., 609/392-0900)

UNIVERSAL AUTOMOTIVE: Eyes $2.8 Million Equity Investment
Universal Automotive Industries, Inc. (Nasdaq: UVSL) said it
expects to execute and close within the next five business days
a definitive agreement with an affiliate of Wanxiang American
Corporation for the issuance of $2,800,000 of Series A Preferred
Stock, convertible into 2,014,380 shares of Common Stock,
subject to standard weighted average antidilution protection,
and representing approximately 20% of the Company's capital
stock on a post-closing basis.

The stock carries no dividend, but has an 8% per annum
compounding liquidation preference. According to Universal's
CEO, Arvin Scott, "We are very excited about the prospects of
Wanxiang becoming a major investor in the Company. The Wanxiang
Agreement, if consummated, will provide us with a strategic
partnership with China's leading auto parts manufacturer.
Wanxiang is the second largest privately owned company in China
and is the world's largest universal joint supplier. China is
the manufacturing capital of the world. Having a local partner
will enhance our ability to source Chinese manufactured parts as
well as provide a potential channel to sell the Company's brake
parts in China."

The proposed Agreement provides Wanxiang with one-year warrants
to purchase up to 800,000 shares of common stock at $2.00 per
share and 800,000 shares of common stock at the greater of 2.00
per share or 90% of the rolling average public market price for
the Company's shares.

It also provides Wanxiang with a "Default" Warrant which would
be triggered in the event of the Company's default of certain
covenants, representations or warranties to Wanxiang; the
default warrant provides Wanxiang the right to purchase up to
2,500,000 shares of the Company's common stock at the greater of
150% of book value per share or at a per share price based on a
formula tied to six times EBITDA of the Company.

The common stock issuable on conversion of the preferred or
exercise of the warrants will be registrable pursuant to a
registration rights agreement.

The Agreement further contemplates a shareholders' agreement
pursuant to which in the event the Default Warrant is exercised,
Wanxiang would receive a proxy to vote a corresponding
percentage of the shares held by the Company's two largest
shareholders, Arvin Scott and Yehuda Tzur, as well as certain
rights of first refusal with respect to off market sales of
their shares.

In addition, the Agreement calls for a long-term supply
agreement whereby Wanxiang will be provided a right of first
refusal to source on competitive terms the products purchased by
the Company in China.

Although the Company believes the transaction documents are
fully negotiated and ready for execution subject to review of
informational schedules and procurement of necessary consents,
there is always a risk that the documents will not be executed
or that their terms may vary prior to closing. Also see the
discussion below.

The Company met on August 17, 2001 with a Delisting Panel
authorized by the NASDAQ Stock Market, Inc., which was convened
due to the Company's failure to maintain net tangible assets of
at least $2,000,000 (as of the dates covered by its most recent
Form 10-K and Form 10-Q filings) and its need to demonstrate an
ability to meet this requirement in the future.

At the hearing the Company advised the Panel of its proposed
equity infusion plan of $2,800,000 from Wanxiang, which when
coupled with the approximately $186,000 of net tangible assets
computed as of June 30, 2001 (plus subsequent equity infusions
of $500,000 and other plans to increase assets), it believes,
but can provide no assurances, would comfortably satisfy
NASDAQ's net asset requirements.

The Panel has not yet advised the Company as to whether it will
grant the Company an exception, to provide it sufficient time to
effect the plan and evidence compliance with NASDAQ's

The Wanxiang Agreement contemplates the issuance of the
preferred stock at closing, but will contain a "put" right
(enabling Wanxiang to effectively put back its shares for a
return of its funds) and termination of the various agreements
covered by the Wanxiang Agreement, in the event the Company is
unable to demonstrate within 90 days following closing that
NASDAQ has confirmed that the Company has corrected its net
tangible assets deficiency to NASDAQ's satisfaction.

W.R. GRACE: Hires Wallace as Litigation & Environmental Counsel
W.R. Grace & Co. asks Judge Joseph Farnan to authorize and
approve their employment of the Washington DC law firm of
Wallace King Marraro & Branson PLLC as special litigation and
environmental counsel for the debtors, nunc pro tunc to the
Petition Date, to perform services the Debtors say that they
will require during the course of these chapter 11 cases.  

Specifically, the Debtors seek authorization for WKMB to render
legal services to the Debtors in connection with various
environmental and commercial litigations, and counseling on
environmental and other related matters.  In addition, WKMB will
continue to represent the Debtors in various, smaller maters as
an ordinary course professional in accord with prior
applications of the Debtors and orders of the Court.

The Debtors tell Judge Farnan that WKMB has been representing
them for ten years prior to the Petition Date in litigations,
arbitrations, and negotiations of environmental, commercial, and
First Amendment matters, and has provided advice to senior
management on these issues.  The Debtors currently seek to
employ WKMB, subject to Judge Farnan's oversight and orders, to
represent the Debtors with respect to potential matters which
have the potential to either bring substantial monies into the
Debtors' estates, or help reduce the Debtors' exposure to costs
or claims related to these matters:

     (a) Representation of the Debtors W. R. Grace &'Co., W. R.
         Grace Ltd. and ECARG, Inc. in a citizen suit action
         captioned Interfaith Community Organization v.
         Honeywell International, Inc. et al., which is
         currently pending in the United States District Court
         for New Jersey. In that action, W. R. Grace & Co., W.
         R. Grace Ltd. and ECARG, Inc. have brought cross-claims
         against defendant Honeywell International Inc.
         regarding costs and damages incurred in connection with
         a valuable 32-acre water front parcel owned by the
         ECARG, Inc. in Jersey City, N. J.  W. R. Grace & Co.,
         W. R. Grace Ltd. and ECARG, Inc. intend to pursue these
         cross-claims post-petition in order to obtain
         injunctive relief and recover substantial costs and
         damages arising out of environmental contamination of
         the property that was caused by Honeywell and/or
         its corporate predecessors.

     (b) Prosecution of an environmental cost recovery action
         against Zotos International Inc. captioned W. R. Grace
         & Co. - Conn. v. Zotos International Inc., which is
         currently pending in the United States District Court
         for the Western District of New York and involves a
         claim by W. R. Grace & Co. - Conn. to recover response
         costs incurred in connection with environmental
         contamination caused by the defendant or its corporate,
         predecessors. W. R. Grace & Co. - Conn. expects this
         action to continue post-petition because the automatic
         stay does not apply as W. R. Grace & Co. - Conn. is
         plaintiff and there are no counterclaims by the
         defendant.  Additionally, the Debtors seek to
         retain VMVM, subject to the oversight and orders of
         this Court, to represent the Debtors with respect to
         similar or related environmental litigation or
         counseling matters involving Debtors that may arise
         post-petition. WKMB has indicated its willingness
         to render the necessary professional services described
         herein as special litigation and environmental counsel
         to the Debtors. None of the services performed or to be
         performed by WKMB include giving advice with respect to
         the restructuring options available to the Debtors.

In accord with the requirements of the Bankruptcy Code, and with
an exception described in the decision of Interfaith Community
Organization v. Honeywell International, Inc., the Debtors
propose to compensate WKMB on an hourly basis at its customary
hourly rates for services rendered, plus reimbursement of
actual, necessary expenses incurred by WKMB.  The principal
members of WKMB who will be handling these matters and their
current standard hourly rates are:

            Attorney                      Hourly Rate
            --------                      -----------
            Christopher H. Marraro           $420
            Richard E. Wallace               $420

These hourly rates are subject to periodic adjustments to
reflect economic and other conditions.  Other attorneys or
paralegals may from time to time serve the Debtors in the
matters for which WKMB's retention is sought.

The Debtors and WKMB have an alternative fee arrangement in
which WKMB will receive a mixed reduced fee and contingent fee.  
The reduced fee is equal top 60% of the WKMB normal hourly
rates.  The contingent fee is equal to 20% of any net recovery,
which is defined as the gross recovery obtained in the
Interfaith suit, less the sum of the Debtors' expenses and $1
million.  Based on the amount of time expected to be expended,
WKMB expects that its fees for the Interfaith matter will be
substantially lower on a per-hour basis than its normal fees.

A significant proportion of WKMB's services will necessarily
require the involvement of experienced senior partners such as
Messrs. Marraro or Wallace.  Accordingly, the Debtors warn Judge
Farnan that they believe that the staffing, hourly rates, and
contingent fee arrangement set out above are reasonable and  
should be approved.

Mr. Christopher H. Marraro, a member of WKMB, assures Judge
Farnan that WKMB is a "disinterested" person within the meaning
of the Bankruptcy Code and neither holds nor represents any
interests adverse to the Debtors or these estates in the matters
for which his approval is sought.  He discloses that, over the
course of WKMB's prepetition representation of the Debtors, WKMB
periodically has received regular compensation from the Debtors
for services rendered and expenses incurred through February

The Debtors owe WKMB approximately $351,894.75 in additional
professional fees, and $91,864.90 in disbursements for its  
prepetition legal services rendered through April 2, 2001.  None
of the services performed by WKMB have included giving advice
with respect to the restructuring options available to the
Debtors, and none of the fees paid to WKMB represent payments
for legal services in connection with the preparation and filing
of these chapter 11 cases.

Mr. Marraro also advises Judge Farnan that WKMB has in the past
represented, currently represents, and likely in the future will
represent, certain of the Debtors and their affiliates'
significant current customers and unsecured creditors.  However,
after a review of their files, Mr. Marraro says that WKMB's
representation of these customers and creditors involves
unrelated litigation in which none of the Debtors or their
affiliates is a party.

Judge Farnan agrees that this representation is necessary and
appropriate, and grants the Application, approving the  
employment nunc pro tunc. (W.R. Grace Bankruptcy News, Issue No.
11; Bankruptcy Creditors' Service, Inc., 609/392-0900)

WARNACO: Gets Okay to Reject Van Nuys Facility Lease & Sublease
Judge Bohanon put his stamp of approval on a Stipulation
allowing The Warnaco Group, Inc., to reject the Van Nuys
Facility Lease and Sublease. At the same time, the Court also
authorized the Debtors to enter into a new lease agreement for a
portion of the Van Nuys Premises.

In the event that the Debtors decide it is in their best
interest to exercise the Renewal Option under the New lease,
Judge Bohanon directs the Debtors to send the Option Exercise
Notice by fascimile, no later than 5:00 p.m. on December 15,
2001, to:

    (i) Otterbourg, Steindler, Houston & Rosen, P.C., Attn:
        Scott L. Hazan, Esq., counsel for the Committee;

   (ii) Shearman & Sterling, Attn: James L. Garrity, Esq.,
        counsel for the Debt Coordinators for the Debt
        Coordinators for the Debtors' pre-petition secured
        lenders; and

  (iii) Weil, Gotshal & Manges LLP, Attn: Brian Rosen, Esq.,
        counsel to the agent for the Debtors' post-petition
        secured lenders.

By sending the Option Exercise Notice, it is understood that the
Debtors want to exercise the Renewal Option under the New Lease
by no later than January 4, 2002.

Those parties receiving such Notice are given 5 calendar days
after the delivery of such Option Exercise Notice to object in
writing to the Debtors' proposed exercise of the Renewal Option.
Objections should be sent to Sidley Austin Brown & Wood, counsel
to the Debtors, 875 Third Avenue, New York, New York 10022,
telecopier number (212) 906-2021, Attn: Kelley L. Cornish.

If the Debtors' counsel receives no written objection prior to
the expiration of such 5-day period, Judge Bohanon explains,
then the Debtors are free to exercise the Renewal Option under
the New Lease without further order of the Court and without
further notice.

But if a Notice Party timely objects to the Renewal, the Court
rules that the Debtors and each such objecting Notice Party
should try to resolve the objection amicably. If that's
impossible, Judge Bohanon suggests that the Debtors seek the
Bankruptcy Court's approval of their proposed exercise of the
Renewal Option. A hearing on the objection should be held and
the matter determined no later than January 4, 2002.  (Warnaco
Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service,
Inc., 609/392-0900)  

WEIRTON STEEL: Continues Restructuring Talks with Bank Lenders
Weirton Steel Corp. (NYSE: WS) has taken significant steps to
address the adverse affects of the current environment within
the domestic steel industry in order to ensure its long-term

    The steps include:

    -- A tentative agreement, reached Thursday, with the    
       Independent Steelworkers Union (ISU) for a new labor
       agreement for its 3,010 production and maintenance
       employees. Negotiations are underway with the 375
       salaried non-exempt employees, also represented by the

    -- A reduction in the management staff and other employment  
       costs related to exempt compensation.

    -- An agreement in principle with certain key vendors to  
       provide the company with additional liquidity.

    -- A signed commitment letter from a financial institution
       which will enable the company to restructure its current
       working capital facilities. The parties are in the midst
       of finalizing several matters associated with the plan,
       therefore, details of the plan will not be made public at
       this time.

"Since 1997, unfair steel imports have pounded our industry.
During this period, we have executed an aggressive cost
containment program to help us weather the storm. This plan,
which will involve all stakeholders and impact every aspect of
costs, dramatically intensifies this effort," said John H.
Walker, company president and chief executive officer.

"I thank the ISU for its commitment to maintaining a steel
industry in the Upper Ohio Valley. I'm encouraged by the
opportunity before us to sustain our company."

The company and the ISU have been discussing additional ways to
reduce costs. To implement a significant portion of the plan,
changes first have to be made to the existing labor agreement.

ISU President Mark Glyptis said the specifics of the agreement
will not be available until after the union's negotiating
committee has had the opportunity to explain the proposal to the
union's membership and the new agreement is ratified by the

The union currently is working under a 15-month contract that is
set to expire Sept. 1, 2002. The ability to reopen the contract
for talks was possible because of a contractual provision for
such discussions if business conditions change.

The parties, in full recognition of deteriorating business
conditions, have been meeting for several weeks to discuss the

Walker and Glyptis said the parties' goals have been to ensure
that the company: regains financial strength and remains
competitive; maintains excellence in product quality and
customer service; provides a high standard of employee wages and
benefits; and continues its existing level of retiree benefits
and pensions.

"Fortunately, the parties have been addressing these issues for
a considerable amount of time. It would have been dangerous not
to. These have been very difficult times that require difficult
decisions. We need to understand that the plan is essential to
the very survival of our company and we will soon explain it to
our members in great detail," Glyptis commented.

Glyptis and Walker agree that, while the company has been able
to survive the turmoil of the steel import crisis, difficult
times continue as steel prices remain depressed and the weakened
economy has resulted in a reduction in steel orders. They said
the restructuring will be vital to the companies survival,
however, additional assistance is needed.

"The current federal investigation into unfair steel imports and
the possibility it will stop such imports is key for the
industry to recover. With our restructuring and government
intervention, we expect to be a much stronger, more competitive
company," Walker commented.

"We also thank our vendors for their cooperation and support of
the plan. Their commitment demonstrates their belief that
Weirton Steel will be a reliable producer for years to come."

Weirton Steel is the eighth-largest U.S.-integrated steel
company. Its products include hot-rolled, cold-rolled,
galvanized and tinplated steel.

WILLCOX & GIBBS: Secured Lender Agrees to Extend DIP Facility
Willcox & Gibbs, Inc. signs an agreement with its current lender
to provide a Debtor in Possession revolving credit facility by
continuing Willcox & Gibbs' existing facility.

This facility has been approved on an interim basis by the
Bankruptcy Court and is subject to final approval. Willcox &
Gibbs will continue during the Chapter 11 case to pay trade
creditors all post-petition obligations as they come due.

On August 6, 2001, Willcox & Gibbs, Inc. and its domestic
subsidiaries WG Apparel, Inc., Leadtec Systems, Inc., W&G Daon,
Inc., Macpherson Meistergram, Inc., and Emtex Leasing
Corporation filed petitions for reorganization under Chapter 11
of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
District of Delaware.

WILLIAMS COMMS: Fitch Concerned About Bank Covenant Compliance
Fitch downgraded Williams Communication Group's senior unsecured
debt rating to `CCC+` from `BB-`, the senior secured debt rating
to `B` from `BB', and the convertible preferred stock to `CCC-'
from `B'. WCG's long-term ratings are also placed on Rating
Watch Negative.

The rating action reflects concerns regarding the company's
exposure to certain covenants in its secured credit facility and
the slower-than-expected rate of EBITDA growth. The company's
strong liquidity position only partly offsets these concerns.

A key consideration in this rating action is the company's
exposure to certain covenant requirements that could lead to
events of default. One covenant of concern requires WCG to
generate proceeds of at least $700 million from the sales of its
Solutions business and ATL investment by Sept. 30, 2001.

The second major covenant concern requires that certain other
transactions resulting in net cash proceeds of at least $500
million in aggregate by Dec. 31, 2001, of which at least $150
million must be in the form of additional equity. The equity
component of this requirement is significant - considering the
company's current market capitalization is less than $1 billion
- and would result in significant dilution to its current

The company also faces ongoing EBITDA related covenants.
Resolution of the Rating Watch will require the successful
mitigation of these covenants.

A further consideration in this rating action has been the
slower-than-expected rate of EBITDA growth due in part to slower
overall economic conditions resulting in reduced spending by
telecom providers.

In addition, SBC, with which WCG has a significant relationship,
has experienced delays in receiving Section 271 relief for long
distance service. This has also negatively impacted the
company's results. Prolonged delays on SBC's Section 271
approvals and continued economic slowness will challenge the
company in its efforts to load its network. Slower loading could
result in further EBITDA improvement delays.

However, WCG does have a strong liquidity position as it is
fully funded into 2004. The company also benefits from its fully
completed broadband long distance network. These fundamental
strengths could lead to longer-term credit stabilization or
improvement with the successful meeting of its covenant
requirements and further network loading.

WINSTAR COMMS: Williams Moves to Vacate Interim Utility Order
Williams Communications, LLC asks Judge Farnan to reconsider the
Interim Utilities Order to specifically exclude Williams as a

Williams and Winstar Communications, Inc. entered into a Lease
Agreement on December 17, 1998 that allowed Winstar to use
certain optical fibers of Williams' fiber optic system subject
to lease payments for the use of such fibers.

Ricardo Palacio, at Ashley & Geddes in Wilmington, Delaware,
discloses that Winstar defaulted on its payments due under the
Lease Agreement and Williams exercised its right to cancel and
terminate the Lease Agreement effective April 11, 2001. Upon the
filing of Chapter 11 by Winstar on April 18, 2001, Williams was
in the process of discontinuing Winstar's use of the fibers.

Mr. Palacio contends that Williams is not a regulated public
utility nor does it have monopoly over the ownership or use of
fibers to merit classification as a utility.

Mr. Palacio contends that upon filing of the Utility Motion on
April 8, 2001, the Debtors did not list Williams as a utility.
However, on April 23, Winstar filed a supplemental notice, which
includes Williams as a utility and subject to the Interim
Utilities Order.

Williams denies that it is a utility and denies that it should
be treated as such by Winstar or the Court.

Mr. Palacio asks that Williams be entitled to cease immediately
providing services to the Debtors and immediate payment of all
services rendered post-petition due to the fact that Williams is
not a utility company.

Mr. Palacio claims that under the Lease Agreement, the Debtors
owe Williams scheduled monthly lease payments of $8,498,199 as
well as additional charges for services Williams renders. As of
petition date, the Debtors account was in excess of $39,000,000
representing pre-petition charges. The Debtors failed make
payment amounting to $10,573,322 as of April 16, 2001 and of the
remaining balance of $28,663,845, $25,987,343 was past due.

In light of the magnitude of the costs to be incurred by the
Debtors for Williams' services, Mr. Palacio contends the
Debtors' post-petition financing will not go very far in
adequately protecting Williams.

If, however, the Court should determine that Williams is covered
by the Interim Utilities Order, Mr. Palacio asks the Court
Williams should receive at least the following as adequate

   1. Immediate payment of charges for services from Petition
      date to the hearing date

   2. A deposit of two months average charges or a total of
      $20,000,000 to protect against future non-payments by

   3. Debtors should be required to pay Williams in accordance
      with the payments under the Lease Agreement on the 15th
      day of each month

   4. Debtors should be required to pay Williams for all other
      charges for post-petition services under the Lease
      Agreement on the 15th day of each month

   5. Williams should be allowed to terminate all post-petition
      services under the Lease Agreement if the Debtors fail to
      make any payment due upon 48 hours fax notice to the
      Debtors' counsel (Winstar Bankruptcy News, Issue No. 9;         
      Bankruptcy Creditors' Service, Inc., 609/392-0900)


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

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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

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

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