TCR_Public/010911.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, September 11, 2001, Vol. 5, No. 177

                          Headlines

360NETWORKS: Balks At Committee's Proposed Fees for Jefferies
360NETWORKS: Second Quarter Results Expected by End of September
AMERICAN LAWYER: Decline in EBITDA Compels S&P to Drop Ratings
AMERICAN TISSUE: Results Errors Spur S&P to Withdraw Ratings
AMERICAN TISSUE: Files for Chapter 11 Protection in Delaware

AMERICAN TISSUE: Case Summary & 20 Largest Unsecured Creditors
AMES DEPARTMENT: Court Okays Deloitte as Debtors' Consultant
APPLIANCE RECYCLING: Secures Three-Year $10MM Credit Facility
AVADO BRANDS: S&P Junks Ratings Due to Financial Constraints
BRIDGE INFO: Sells CRB Assets to Logical Systems for $105,000

COMDISCO: Agent Banks Seek Exclusion of Non-Debtors from Stay
COVAD COMMS: Plan's Classification & Treatment of Claims
FAMILY WONDER: Case Summary & 20 Largest Unsecured Creditors
FOAMEX INTL: Thomas E. Chorman Appointed as New EVP & CFO
GENESIS HEALTH: Agrees to Extend Bar Date for HCFA to Sept. 27

GLOBAL DIAMOND: Standard Gets Order for Liquidation of SA Unit
HARNISCHFEGER: Battles with Creditanstalt Over $11MM Claims
HAYES LEMMERZ: S&P Places Low-B Ratings on CreditWatch
ICG COMMS: Denver Agrees to Offset Contract Against Tax Duties
IMPERIAL SUGAR: Leases Beet Factories to Michigan Beet Growers

INTEGRATED HEALTH: Court Okays Settlement Pact with SouthTrust
JORDAN INDUSTRIES: S&P Assigns B+ On $110 Million Bank Facility
LAIDLAW INC: Seeks Open-Ended Extension of Lease Decision Period
LA PETITE: S&P Junk Ratings Reflect Weak Operating Performance
LTV CORP: Seeks Court Approval of Revised Financing Agreement

MEDIQ: Court Sets Oct. 25 as Bar Date for Filing Proofs of Claim
METRICOM INC: Nasdaq Delists Securities Effective September 10
MIDWAY AIRLINES: Nasdaq Delists Common Stock Effective Sept. 8
NEWCOR INC.: S&P Assigns D Ratings After Default on Notes
NIAGARA MOHAWK: Negative Capital Balance Pegged at $568.5MM

NIKE: Portland Expo. Bldg. New Venue for Shareholders' Meeting
OWENS CORNING: Seeks Third Extension of Removal Period to May 28
PACIFIC GAS: Seeks Approval of Stipulation with Credit Enhancers
PILLOWTEX CORP: Proposes to Reject Contracts with Alice Mills
PSINET INC: Subsidiary Files for Chapter 11 Protection

PSINET INC: Secures Court Okay to Reject 14 Executory Contracts
RAYTECH: Operating Loss Drops to $3.3 Million In 13-Week Period
RELIANCE GROUP: Rehabilitator Balks at Compensation Protocol
SCHWINN/GT: Receives Mixed Bids for Cycling & Fitness Divisions
SPORTS CLUB: Limited Liquidity Compels S&P to Give Junk Ratings

TAPISTRON INTL: Completes Substantial Sale of Assets
TAPISTRON INTL: Elliston Named New President & CEO
TELSCAPE: Trustee Agrees to Allow ATSI to Manage Teleport Assets
TRANS ENERGY: Working Capital Deficit Drops 6% At End of Q2
U.S.A. FLORAL: Secures Approval to Complete Sale of Florimex

USG CORPORATION: Property Committee Hires Bilzen as Counsel
WARNACO GROUP: Signs-Up Sharretts as Customs Counsel
WASHINGTON GROUP: Raytheon Says Ruling Won't Weigh-Down On Claim
WHEELING-PITTSBURGH: UST Appoints 3rd Amended Noteholders Panel
WINSTAR COMMS: US Trustee Balks At Proposed Professionals' Fees

                          *********

360NETWORKS: Balks At Committee's Proposed Fees for Jefferies
-------------------------------------------------------------
360networks inc. objects to the Committee's proposed retention
of Jefferies & Company, Inc. as investment bankers.  The Debtors
cite similar complaints raised against the application for E&Y
Capital Advisors, and then some.

Alan J. Lipkin, Esq., at Willkie Farr & Gallagher, in New York,
says that the Committee's applications raise two simple
questions:

  (1) Is it appropriate for the Committee's professional fees to
      approach or even exceed $10,000,000 annually when
      unsecured creditors in these cases are unlikely to receive
      any meaningful recoveries?

  (2) Correspondingly, in such circumstances, is it appropriate
      for the Committee's professionals to operate on all
      cylinders without adjusting in any meaningful way for
      unsecured creditors' relative position in these cases?

The obvious answers to these questions are "no", Mr. Lipkin
asserts.  

According to Mr. Lipkin, the Debtors are concerned with the
magnitude of the fees because paying them would divert
available cash from capital expenditures that are vital to the
Debtors' reorganization.

Mr. Lipkin also notes that the proposed retention agreement is
confusing.  "If the agreement is between the Committee and
Jefferies, why does it seek to bind the Debtors?" Mr. Lipkin
asks.  In particular, Mr. Lipkin says, the agreement's
indemnification provisions are objectionable to the extent that
it purports to bind the Debtors:

  (1) The indemnity only relates to one of the Debtors,
      360networks (USA), Inc., and does not explain how the
      indemnity would impact the other Debtors.

  (2) The indemnity would cover any act by the Committee or its
      members, regardless of the nature of such conduct.

  (3) The exclusions to the indemnity for acts of Jefferies or
      other "Indemnified Persons" are far too narrow, even if
      Jefferies' ordinary negligence is included.

  (4) The indemnity purports to cover certain "Information,"
      which is undefined.

  (5) The indemnity unfairly seeks to limit Jefferies'
      proportional liability.

  (5) The indemnity seeks to have Jefferies paid for defending
      actions caused by its own misconduct.

For these reasons, the Debtors ask Judge Gropper to either:

    (a) deny the Committee's applications for orders authorizing
        the Committee to retain and employ E&Y and Jefferies; or

    (b) grant such applications solely on terms consistent with
        these objections.

               Agents of Secured Lenders Also Object

Jefferies' retention is an "unnecessary and unjustifiable
extravagance," according to the Agents for the Secured Lenders.

The Secured Lenders, who have by far the largest economic stake
in these chapter 11 cases, have not even retained investment
bankers.  Now, mere unsecured creditors are asking for one?

Seth Gardner, Esq., at Wachtell, Lipton, Rosen & Katz, in New
York, insists that the services of Jefferies are entirely
duplicative of the services to be provided by E&Y Capital
Advisors.  Moreover, Mr. Gardner tells Judge Gropper, Jefferies
services are also duplicative of the work already undertaken by
Lazard Freres & Co., the Debtors' proposed financial advisor.

Mr. Gardner also asserts that the Jefferies Application reflects
compensation levels only for representation of a debtor or a
committee representing a constituency with a 9 or 10-figure
demonstrable economic stake, not a constituency with at best a
marginal interest in these chapter 11 cases.  "It's not a
surprise that the Committee claims no responsibility in paying
for Jefferies' bills, in view of the magnitude of their
compensation package," Mr. Gardner notes.

The Agents for the Secured Lenders ask Judge Gropper to deny the
Jefferies Application, without prejudice to the right of the
Committee to seek authorization to retain Jefferies in the
future on appropriate terms.

                        Committee Responds

Despite their professed concern over unnecessary expenses,
Norman N. Kinel, Esq., at Sidley Austin Brown & Wood, LLP, in
New York, notes that the Debtors are simultaneously asking the
Court to approve their proposed Bonus and Retention Program.

When viewed in tandem with their objections to the retention by
the Committee of its professionals, Mr. Kinel says, the Debtors'
proposed Bonus and Retention Program can be characterized in two
words: "greed" and "arrogance."

Mr. Kinel asserts that Jefferies and E&Y Capital Advisors have
conducted their activities appropriately, delineating each
firm's respective responsibilities and tasks.  Furthermore, Mr.
Kinel points out that:

  (1) both the Debtors and the Banks have two financial advisors
      whose retentions have not been subject to approval by this
      Court;

  (2) the Debtors have not shown this Court or the Committee the
      terms upon which Lazard Freres and PricewaterhouseCoopers
      are to render services to them;

  (3) Lazard and PricewaterhouseCoopers may have debilitating
      conflicts under the Bankruptcy Code if they represent both
      these U.S. Debtors and their Canadian parent, affiliates
      and the Monitor under the CCAA proceeding; and

  (4) the Committee was advised that Lazard intends to seek a
      "success bonus" in these cases in the amount of
      $10,000,000.

Mr. Kinel further relates that as a condition to its employment,
Jefferies agreed to charge a reduced monthly rate.  The
Committee also agreed that if unsecured creditors received a
distribution in these cases, Jefferies could earn a bonus of 1%
of the value of such a distribution.  It made sense to the
Committee, Mr. Kinel says, that if unsecured creditors do not
receive a distribution in these cases, its investment bankers
should not receive any bonus.

If the Debtors and the Banks believe that any of the fees of the
Committee's professionals are inappropriate, Mr. Kinel
emphasized that there is ample opportunity to raise such
objections at the appropriate time -- at a fee application
hearing.  According to Mr. Kinel, the attempt to establish a cap
on the Committee's professionals' fees is nothing more than an
ill-disguised attempt to quash the Committee and promote the
Debtors' and the Banks' own agenda.

The Committee believes the Debtors' accusations of extravagance
are beneath contempt and entirely irrelevant.

Thus, the Committee asks the Court to overrule the Debtors' and
the Bank's objections and approve the Committee's application to
retain Jefferies. (360 Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)   


360NETWORKS: Second Quarter Results Expected by End of September
----------------------------------------------------------------
360networks expects to file its second quarter 2001 financial
statements and the related management's discussion and analysis
by the end of September 2001.

This delay is due to additional requirements related to the
respective creditor protection and insolvency proceedings.

In compliance with the provisions of the Alternate Information
Guidelines contained in the Ontario Securities Commission Policy
57-603, 360networks is issuing a default status report every two
weeks until the second quarter results are issued.

360networks offers optical network services to
telecommunications and data-centric organizations in North
America. The company's fiber optic network includes terrestrial
segments and undersea cables in North America and South America.

On June 28, 2001, the company and several of its operating
subsidiaries filed for protection under the Companies' Creditors
Arrangement Act (CCAA) in the Supreme Court of British Columbia.
The company's principal U.S. subsidiary, 360networks (USA) inc.
and 22 of its affiliates concurrently filed for protection under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the Southern District of New York. The company has
also instituted insolvency proceedings in Europe.

For more information about 360networks, visit http://www.360.net


AMERICAN LAWYER: Decline in EBITDA Compels S&P to Drop Ratings
--------------------------------------------------------------
Standard & Poor's lowered its ratings on American Lawyer Media
Holdings Inc. and its unit, American Lawyer Media Inc. At the
same time, all ratings are placed on CreditWatch with negative
implications.

                                                 Ratings
     American Lawyer Media Holdings Inc.     To           From

        Corporate credit rating              CCC+         B
        Senior unsecured debt                CCC-         CCC+

     American Lawyer Media Inc.

        Corporate credit rating              CCC+          B
        Senior secured bank loan rating      B-            B+
        Senior unsecured debt                CCC+          B

The rating actions reflect the company's weak operating
performance, thin interest coverage, and limited flexibility.
EBITDA, excluding restructuring charges, declined 29% during the
quarter ended June 30, 2001, due to declining advertising
revenues for the company's publications and lower revenues
related to the licensing of legal content for Internet
distribution.

EBITDA coverage of total interest expense was marginal at about
1.0 times for the twelve months ended June 30, 2001. Coverage of
cash interest was thin at roughly 1.4x for the twelve months
ended June 30, 2001, and the senior discount notes require
mandatory cash interest payments in 2003.

Free cash flow has been negative over the past year, which has
necessitated revolving credit borrowings to fund cash flow
deficits. However, the revolving credit facility was recently
amended to permanently reduce the aggregate revolving commitment
to $29 million, providing minimal additional borrowing capacity.

The company also received a waiver of compliance with certain
bank financial covenants at June 30, 2001. Continued weakness in
operating performance could put pressure on bank debt covenants.
The company plans to discuss with its lenders further amendments
to the revolving credit facility.

During the second quarter of 2001, the company incurred a $1.7
million restructuring charge to reduce operating costs. Standard
& Poor's remains concerned that softening economic and
advertising conditions will continue to have a negative impact
on profitability despite cost reductions.

Standard & Poor's will continue to monitor the company's
business strategies and operating performance for indications
that it can restore its financial health. Failure to
significantly improve profitability over the near term
will likely prompt a further rating review and a possible
downgrade.


AMERICAN TISSUE: Results Errors Spur S&P to Withdraw Ratings
------------------------------------------------------------
Standard & Poor's withdrew its ratings on American Tissue Inc.

                     Ratings Withdrawn

                                                Ratings
American Tissue Inc.                        To            From

   Corporate credit rating                  NR              D
   Senior secured debt                      NR              D


The ratings on American Tissue had been lowered to 'D' on Aug.
22, 2001. The company had defaulted on an obligation to repay an
overadvance of about $25 million under its revolving credit
facility, which also constituted an event of default under its
senior secured notes.

The company disclosed on Sept. 5, 2001, that its financial
statements for the past two fiscal years and the current year
may contain material inaccuracies, and that the chief financial
officer has resigned in connection therewith.


AMERICAN TISSUE: Files for Chapter 11 Protection in Delaware
------------------------------------------------------------
American Tissue Inc. and its domestic subsidiaries, listed
below, filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The company and its subsidiaries made the
filings in the U.S. Bankruptcy Court for the District of
Delaware in Wilmington, Delaware.

Mr. Mehdi Gabayzadeh, the company's President and Chief
Executive Officer cited the overall slowdown in the U.S. economy
and its effect on the pulp and paper industry, including
decreased prices for pulp and paper products, the company's
overburdened debt structure, lack of liquidity and recently
discovered financial inaccuracies as factors contributing to the
filings.

Mr. Gabayzadeh stated: "Filing for Chapter 11 reorganization is
necessary to enable us to immediately address our liquidity and
debt restructuring problems."

In a letter to employees, Mr. Gabayzadeh stated: "We believe
that Chapter 11 reorganization will allow us to restructure our
debt and secure additional financing so that we can continue to
operate our business."

The following companies were part of the bankruptcy filing:

               American Tissue Inc.

               100 Realty Management LLC

               American Tissue Corporation

               American Cellulose Mill Corp.

               American Tissue Mills of Greenwich LLC

               American Tissue Mills of Neenah LLC

               American Tissue Mills of New Hampshire, Inc.

               American Tissue Mills of New York, Inc.

               American Tissue Mills of Oregon, Inc.

               American Tissue Mills of Tennessee LLC

               American Tissue Mills of Wisconsin, Inc.

               Berlin Mills Railway, Inc.

               American Tissue - New Hampshire Electric Inc.

               Calexico Tissue Company LLC

               Coram Realty LLC

               Engineers Road LLC

               Gilpin Realty Corp.,

               Grand LLC

               Hydro of America LLC

               Landfill of America LLC

               Markwood LLC

               Paper of America LLC

               Pulp of America LLC

               Pulp & Paper of America LLC

               Railway of America LLC

               Saratoga Realty LLC

               Tagsons Papers, Inc.

               Unique Financing LLC

Headquartered in Hauppauge, New York, American Tissue Inc. is a
leading integrated manufacturer of tissue products and pulp and
paper in North America, with a comprehensive product line that
includes jumbo tissue rolls for converting and converted tissue
products for end-use.


AMERICAN TISSUE: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Lead Debtor: American Tissue Inc.
             aka Ballantine Inc.  
             aka American Tissue Holdings Inc.

             135 Engineers Road
             Hauppauge, NY 11788

Debtor affiliates filing separate chapter 11 petitions:

             American Tissue Corporation
             American Tissue Mills of Oregon, Inc.
             American Tissue Mills of Nennah LLC
             American Tissue Mills of New Hampshire, Inc.
             American Tissue Mills of Tennessee, LLC
             American Tissue Mills of Wisconsin, Inc.
             American Tissue Mills of New York, Inc.
             American Tissue Mills of Greenwich, LLC
             American Cellulose Mill Corp.
             Calexico Tissue Company LLC
             Coram Realty LLC
             Engineers Road, LLC
             Gilpin Realty Corp.
             Grand LLC
             Markwood LLC
             100 Realty Management LLC
             Pulp & Paper of America LLC
             Saratoga Realty LLC
             Tagsons Papers, Inc.
             Unique Financing LLC
             Hydro of America LLC
             Landfill of America LLC
             Paper of America LLC
             Pulp of America LLC
             Railway of America LLC
             American Tissue- New Hampshire Electric Inc.
             Berlin Mills Railway, Inc.
   
Chapter 11 Petition Date: September 10, 2001

Court: District of Delaware

Bankruptcy Case No.: 01-10370

Debtors' Counsel: Laura Davis Jones, Esq.
                  Pachulski, Stang, Ziehl, Young & Jones P.C.
                  919 North Market Street, 16th Floor
                  P.O. Box 8705
                  Wilmington, DE 19899-8705
                  T: 302-652-4100
                  Email: ljones@pszyj.com

Estimated Assets: More than $100 Million

Estimated Debts: More than $100 Million

Consolidated List of Debtors' 20 Largest Unsecured Creditors:

Entity                        Nature of Claim     Claim Amount
------                        ---------------     ------------
Boise Cascade Paper           Trade               $25,044,340
PO Box 360538M
Pittsburgh, PA 15251

Perry H. Koplik & Sons, Inc.  Trade               $16,837,121
Department 15143
PO Box 1213
Newark, NJ 07101
(212)339-1700

Hershman Recycling Inc.       Trade                $8,591,894
PO Box 3059
Stony Creek, CT 06405
(203)488-0887

Global Petroleum              Trade                $2,285,130
PO Box 3372
Boston, MA 02241-3372
(781)891-4000

CIGNA                         Trade                $1,738,933
c/o Fleet Bank CGLIC
99 Founders Plaza- 3rd Floor
East Hartford, CT 06108

Mandel Resnik & Kaiser P.C.   Trade                $1,729,421
220 East 42nd Street
New York, NY 10017
(212) 573-0000

Kimberly-Clark Forest         Trade                $1,697,782
Products
PO Box 7247-7294
Philadelphia, PA 19170-7284
(807) 825-9859

Alliance Pulp & Paper Co.     Trade                $1,522,210
630 West Germantown Pike
Suite #385
Plymouth Meeting, PA 19462
(610) 940-0800

Schneider National Inc.       Trade                $1,494,015
PO Box 100131
Atlanta, GA 30384-0131
(800) 558-6767

Niagara Mohawk Power Corp.    Trade                $1,272,705
535 Washington Street
Buffalo, NY 14203

Memphis Light Gas & Water     Trade                $1,229,810
PO Box 388
Memphis, TN 38145
(901) 544-6549

Western Express, Inc.         Trade                $1,220,782
PO Box 280958
Nashville, TN 37228
(800) 316-7160

The Fiber Resource Group Inc. Trade                $1,183,005
PO Box 2507
Lynn, MA 01903
(905) 677-3434

Fibre Marketing Group, LLC    Trade                $1,146,096
102 East Main Street
Suite 104A
Stevensville, MD 21666
(410) 604-1550

Nexen Chemicals USA           Trade                $1,119,629
PO Box 843708
Dallas, TX 75284-3708
(713) 876-2269

Pioneer Americas Inc.         Trade                $1,090,636
PO Box 98812
Chicago, IL 60693
(302) 886-4475

TXU Energy Services           Trade                $1,061,252
Account #26858
PO Box 360151
Pittsburgh, PA 15251-6151
(800) 490-5330

Duke Energy Trading & Mrktg   Trade                $1,032,812
PO Box 201204
Houston, TX 77216-1204
(713) 627-5400

New York State Electric & Gas Trade                $1,007,454
PO Box 5550
Ithaca, NY 14852-5550

Wisconsin Electric Power Co.  Trade                  $987,784
PO Box 2089
Milwaukee, WI 53201-2089
(800) 714-7777


AMES DEPARTMENT: Court Okays Deloitte as Debtors' Consultant
------------------------------------------------------------
Ames Department Stores, Inc., et al., sought and obtained
approval from Judge Gerber to employ and retain Deloitte
Consulting LP as their restructuring consultant in connection
with these chapter 11 cases.

David S. Lissy, Esq., Ames' Senior Vice President and General
Counsel, tells the Court that the Company selected Deloitte
because of the firm's knowledge of the Debtors' business and
financial affairs and its expertise in bankruptcy matters of
similar magnitude.  

Mr. Lissy relates that Deloitte have been rendering services to
the Debtors for the past six years during which it has become
familiar with the Debtors' business and affairs and has the
necessary background to assist the Debtors in dealing
effectively with the many needs and challenges of the Debtors
that may arise in these cases.  

Deloitte has served as financial advisor to other troubled
companies including American Rice, Inc., Anchor Glass Container
Corp., Bruno's Inc., Caldor Inc., The Elder-Beerman Stores
Corp., Kuppenheimer Manufacturing, Lechters Inc., LTV Steel
Company, Inc., Purina Mills, Pic 'N Pay Stores, Ltd., Quaker
Coal Co., Stage Stores Inc., and Wolf Camera.   The Debtors
contends that Deloitte's services are necessary to enable the
Debtors to execute their duties.

Specifically, the Debtors turn to Deloitte for:

(1) consulting with management on issues regarding employee
    retention, severance and other compensation benefits;

(2) consulting with management in connection with operating,
    financial, and other business matters relating to its
    ongoing activities;

(3) consulting with management and counsel on the operational
    and financial restructuring of the Debtors' business and in
    the negotiation and development of a plan of reorganization;

(4) consulting with management on cash control and cash
    management, including assistance with the development of the
    Debtors' cash flow projections and DIP financing;

(5) consulting with management on communications with creditors
    and other parties in interest;

(6) consistent with the scope of services set forth herein,
    attending and participating in court appearances before the
    Bankruptcy Court, when necessary;

(7) consulting with management, counsel and other advisors
    concerning matters relevant to the scope of retention under
    Chapter 11;

(8) as agreed to by Deloitte Consulting, rendering such other
    necessary advice and services as the Debtors may require in
    connection with its services to the Debtors;

Holly Felder Etlin, a principal of Deloitte Consulting, asserts
that neither the Firm, nor any of its principals and employees,
has any connection with the Debtors, creditors or any other
parties-in-interest.  Out of an abundance of caution, Ms. Etlin
discloses that:

(1) Deloitte is not employed by and has not been employed by any
    entity other than the Debtors in matters unrelated to these
    cases.

(2) Prior to the petition date, Deloitte Consulting performed
    management consulting and financial advisory services for
    the Debtors.  The Debtors do not owe Deloitte Consulting any
    amount for services rendered prior to the petition date.

(3) From time to time, Deloitte Consulting have provided
    services and will likely to continue to do so, to certain
    creditors of the Debtors in matters unrelated to these
    cases.

(4) Deloitte Consulting have or may have provided services to
    provide professional services and may in the future provide
    professional services to certain of the Debtors' creditors,
    other parties in interest in this case and their respective
    attorneys and accountants in matters unrelated to these
    cases.  Deloitte Consulting have client relationships with
    or provide a variety of services to parties in interest in
    matters unrelated to these Chapter 11 Cases, but no single
    relationship represents more than 1% of Deloitte revenues.

(5) Deloitte Consulting has provided, may currently provide, and
    may continue to provide services to certain of the Debtor's
    creditors or other parties in interest in matters unrelated
    to these Chapter 11 cases, including:

    a) certain of the Debtor's current financing sources and
       affiliates, including CIT Group, Citicorp,
       Daimler/Chrysler, Eaton Vance, Fleet Bank, Foothill
       Capital, General Electric Capital Corp, GMAC Business
       Credit, Goldman Sachs, Gordon Brothers, Heller Financial,
       IBJ Whitehall, ING Capital, Kimco Funding LLC, LaSalle
       Business Credit, Mellon Business Credit, National City
       Commercial Finance, Orix Business Credit, Siemens
       Financial Services and TransAmerica Business Credit;

    b) certain of the Debtor's major creditors, including 20th
       Century Fox, Abitibi Consolidated Sales, Bissell Inc.,
       Fisher Price, Footstar, IBM Business Credit, Hasbro,
       HSBC, Mattel, Mead Products, Newell Group, Samsung
       Electronics Corp., Sara Lee, State Street Bank & Trust,
       and Wrangler;

    c) certain of Debtor's Directors affiliates including, CIT
       Group, County Seat Stores, Global Health Sciences,
       Herballife International, and Lamonts Apparel;

    d) the Debtors Bankruptcy Counsel Weil, Gotshal & Manges LLP
       and Togut, Segal & Segal LLP;

    e) some of the Debtor's current financing sources, Citicorp,
       Fleet Bank, ING Capital and Mellon Bank provide financing
       to Deloitte or its individual partners or principals.

(6) The Debtors have been informed that Deloitte has been
    involved in matters unrelated to these cases in which other
    professionals connected with these cases were also involved,
    including Weil, Gotshal & Manges LLP and Togut, Segal &
    Segal LLP.

(7) The Debtors have been informed that Deloitte has provided
    personal tax services in prior years to the current Chief
    Financial Officer.  No services provided to this individual
    were billed to the company.

Ms. Etlin relates that Deloitte is unable to state with
certainty that every client relationship or other connection has
been disclosed due to the size and complexity of both Deloitte
and the Debtors.  In this regard, Ms. Etlin has informed the
Debtors that if Deloitte discovers additional information
required to be disclosed, it will file a supplemental disclosure
with the Court promptly.

Ms. Etlin states that Deloitte consulting intends to charge it
regular hourly rates plus reimbursement for out-of-pocket
expenses.  The current hourly rates by classification are:

      Partners / Directors         $545 to $675 per hour
      Senior Managers              $485 to $545 per hour
      Managers                     $395 to $445 per hour
      Senior Consultants/Staff     $150 to $315 per hour

Ms. Etlin also discloses that the Debtors paid Deloitte
Consulting $30,000 for restructuring services during the 90 days
immediately preceding the petition date. (AMES Bankruptcy News,
Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900)


APPLIANCE RECYCLING: Secures Three-Year $10MM Credit Facility
-------------------------------------------------------------
Appliance Recycling Centers of America, Inc. (OTC BB: ARCI)
secured a three-year, $10,000,000 line of credit with its
current lender that replaced its previous one-year,
$6,000,000 credit line.

The new line of credit, which is priced more favorably than the
prior credit line, will be used primarily to finance inventories
of the Company's growing ApplianceSmart retail operation.

Edward R. (Jack) Cameron, president and chief executive officer,
commented:  "This expanded credit line was necessitated by the
continued growth of our ApplianceSmart business. We have opened
three additional factory outlets thus far in 2001, which are
generating steadily growing retail sales. Our new credit line
also provides us with the resources required for supporting
anticipated future growth. The more favorable terms of our new
credit line in comparison to the previous credit facility also
reflect ARCA's improved operating results and financial
condition."

Through its ApplianceSmart --  http://www.ApplianceSmart.com --  
operation, ARCA is one of the nation's leading retailers of
special-buy household appliances, primarily those manufactured
by Whirlpool Corporation. These special-buy appliances, which
include close-outs, factory overruns and scratch-and-dent units,
typically are not integrated into the manufacturer's normal
distribution channel.   

ApplianceSmart sells these virtually new appliances at a
discount to full retail, offers a 100% money-back guarantee and
provides warranties on parts and labor.

As of August 2001, ApplianceSmart was operating three stores in
the Minneapolis/St. Paul market; two in the Dayton, Ohio,
market; two in the Columbus, Ohio, market; and one in Los
Angeles. ARCA is also one of the largest recyclers of major
household appliances for the energy conservation programs of
electric utilities.


AVADO BRANDS: S&P Junks Ratings Due to Financial Constraints
------------------------------------------------------------
Standard & Poor's lowered its ratings on Avado Brands Inc. and
subsidiary Avado Brands Financing I.

      Avado Brands Inc.                      TO       FROM

       Corporate credit rating              CCC      CCC+
       Senior unsecured debt                CCC      CCC+
       Senior unsecured bank loan           CCC      CCC+
       Subordinated debt                    CC       CCC-

     Avado Brands Financing I

       Preferred stock                      C        CC

The outlook is negative.

The rating action is based on the company's limited near-term
financial flexibility. Avado used the majority of the proceeds
from the sale of its McCormick & Schmick's concept to repay
borrowings of $95.8 million under its credit facility that
matured on Aug. 22, 2001.

As of July 1, 2001, pro forma for the debt repayment and asset
sale, Avado only had $760,000 of cash and cash equivalents on
its balance sheet.

Moreover, McCormick & Schmick's accounted for 23% of Avado's
revenue and 36% of its EBITDA in 2000, and operating performance
at its Don Pablo's and Canyon Caf, concepts remains weak.
Standard & Poor's believes that Avado will need to obtain
additional sources of capital to fund operations and service
debt going forward.

Although management has attempted to improve the operating
performance at Don Pablo's and Canyon Caf,, there is little
assurance that it can succeed in reviving its flagging
restaurant operations. The company's viability is in jeopardy,
reflecting doubts that it will be able to generate sufficient
cash flow to meet its debt obligations over the next 12 months.


BRIDGE INFO: Sells CRB Assets to Logical Systems for $105,000
-------------------------------------------------------------
Bridge Information Systems, Inc., through their counsel Deborah
M. Buell, Esq., at Cleary, Gottlieb, Steen & Hamilton, in New
York, informs the Court that they received the highest and best
offer submitted by Logical Systems, Inc. for the sale of their
assets relating to the CRB Division of Bridge Information
Systems, Inc.

Both parties entered into an Asset Purchase Agreement dated June
20, 2001 wherein Logical shall purchase all of the assets and
business operations related to CRB subject to certain
conditions.

Two parties, Logical and Equidex Incorporated, submitted formal
offers to purchase the Acquired Assets in connection with
Standing Order #5 on or about June 20, 2001.

Logical and Equidex each submitted initial offers to purchase
the Acquired Assets for approximately $100,000 in cash. However,
various contingencies in the Equidex offer materially detracted
from its value in comparison to the Logical offer. Logical
subsequently improved its bid by offering to purchase the
Acquired Assets for approximately $105,000 in cash.

Subsequent to the selection of Logical, but prior to the
execution of the Agreement, Bridge and Logical were informed
that the www.crbindex.com internet domain had been erroneously
included in the Agreement as an Acquired Asset. Since the
exclusion of www.crbindex.com from the base of Acquired Assets:

    (i) requires Logical to incur additional operating costs and
   (ii) gives rise to a potential loss of CRB customers, both

Bridge and Logical agreed to reduce the cash portion of the
purchase price by $15,000.

In light of the foregoing, the Debtors made the determination
that the Offer by Logical of $90,000 represents the Highest and
Best Offer (as defined in Standing Order #5) and now seek to
sell the Acquired Assets pursuant to the Agreement and Standing
Order #5.

Pursuant to the Small Asset Procedure, the Debtors are providing
notice of the Offer to the Pre-petition Lenders, the DIP
Lenders, the Committee, GECC and any known creditor assert a
lien on the Acquired Assets. If no objection to the transaction
described herein is received from the Notified Parties within 10
days after the receipt hereof, the Debtors are authorized to
consummate such transactions without further court approval.

The Debtors assure the Court that they will comply with all
other requirements of Standing Order #5. (Bridge Bankruptcy
News, Issue No. 15; Bankruptcy Creditors' Service, Inc.,
609/392-0900)   


COMDISCO: Agent Banks Seek Exclusion of Non-Debtors from Stay
-------------------------------------------------------------
The Royal Bank of Scotland PLC, Citibank, N.A. and National
Westminster Bank PLC, in their capacity as Agents or Arrangers
under certain Credit Agreements on behalf of the lenders,
objects of Comdisco Inc.'s motion to extend the automatic stay
to non-debtor subsidiaries.

Ann E. Stockman, Esq., at Latham & Watkins, in Chicago,
discloses that prior to the Petition Date, Comdisco and certain
of its debtor and non-debtor affiliates obtained approximately
$1,000,000,000 of credit pursuant to:

    (1) the 364 Day U.S. Credit Agreement, dated December 2000;

    (2) the Fifth Amended and Restated Global Credit Agreement
        (Global Credit Agreement), dated December 1996;

    (3) the Facility Agreement dated June 1991; and

    (4) the 364 Day Facility Agreement, dated December 2000.

Ms. Stockman adds that pursuant to the terms of the Global
Credit Agreement or the Facility Agreement, as the case may be,
certain non-debtor Foreign Subsidiaries executed Multi-currency
Borrower Assumption Agreements and/or Letters of Accession.  

Thus, Ms. Stockman notes, such Foreign Subsidiaries became
additional Borrowers under the Credit Agreements and subject to
the obligations and conditions outlined therein.  Then, as a
result of certain Events of Default, Ms. Stockman says, the
Agents and lenders under the applicable Credit Agreements have
certain default-related rights and remedies against certain of
the Foreign Subsidiaries, including rights of setoff.

The Agents object to the Debtors' attempt to apply the automatic
stay to their non-debtor Foreign Subsidiaries for several
reasons.

First, Ms. Stockman explains, the Court has no jurisdiction over
property of the non-debtor Foreign Subsidiaries or the actions
of creditors against the Foreign Subsidiaries or their property.

Second, Ms. Stockman argues that even if this Court's
jurisdiction could somehow reach the Foreign Subsidiaries, this
Court must still reject the extra-territorial application of the
automatic stay sought in the Motion, because the case law
uniformly establishes the inapplicability of the automatic stay
to creditor actions against non-debtors (whether foreign or
domestic) or their property.

By its very terms, Ms. Stockman contends, the automatic stay of
section 362 applies only to actions against property of the
debtor or property of the debtor's estate.  Courts have
recognized the distinct legal identities of the debtor and its
corporate affiliates and consequently have refused to subject
property of such non-debtors to the automatic stay in the
debtor's bankruptcy case. (Comdisco Bankruptcy News, Issue No.
5; Bankruptcy Creditors' Service, Inc., 609/392-0900)   ***
Comdisco, Inc.


COVAD COMMS: Plan's Classification & Treatment of Claims
--------------------------------------------------------
In accordance with Bankruptcy Code section 1122, the Plan of
Covad Communications Group, Inc. provides for the classification
of ten (10) Classes of Claims and Equity Interests. Section
1122(a) permits a plan to place a claim or an interest in a
particular class only if the claim or interest is substantially
similar to the other claims or interests in that class.  

Covad believes that its classification of Claims and Equity
Interests under the Plan is appropriate and consistent with
applicable law:

Class Description               Treatment
----- -----------               ---------
  N/A  Administrative Expenses   Paid in full in Cash

   1   Priority Claims           Paid in full in Cash

   2A  Secured Note Claims --    Cash equal to 100% of the Claim
       Covad's 1999 Reserve      on the Effective Date through a
       Notes secured by the 1999 release of the 1999 Reserve
       Reserve Note Fund         Note Fund

   2B  Other Secured Claims      Each Holder retains all legal,
                                 equitable and contractual
                                 rights

   3   General Unsecured Claims  Each Holder of a  General
       -- constituting all       Unsecured Claim shall receive
       trade liabilities, claims in full satisfaction of such
       arising from executory    Claim:
       contract and unexpired
       leases not assumed by the  (A) through and in accordance
       Debtor, and any                with the $256,782,701
       litigation claims that do      deposited  in the Note
       not constitute securities      Claim Escrow, which should
       claims                         result in a  distribution
                                      of approximately 19% of
                                      such Claim in Cash

                                  (B) Cash consideration in the
                                      same proportion to the
                                      Allowed  amount of each
                                      such Claim as received by
                                      Noteholders on  Note
                                      Claims paid through the
                                      Note Claim Escrow;

                                  (C) all Holders of General
                                      Unsecured Claims shall
                                      receive a Pro  Rata
                                      interest in the Preferred
                                      Stock in an amount
                                      calculated as follows: The
                                      aggregate Preferred Stock
                                      distributable in the event
                                      the only General
                                      Unsecured  Claims
                                      constitute Note Claims
                                      will have a liquidation
                                      preference of $100,000,000
                                      and will be generally
                                      convertible into 15% of
                                      the Common Stock of Covad
                                      pursuant  to and in
                                      accordance with the
                                      Preferred Stock
                                      Certificate  of
                                      Designation.

   4   Noteholders' Securities   Each Class 4 claim shall be
       Fraud Claims              paid only up to the amount of
                                 available insurance proceeds
                                 and pursuant to the MOU
                                 Settlement, sharing recoveries
                                 with Class 6

   5   Contingent Indemnity      Retain all contractual rights
       Claims -- Claims of an
       officer or director for
       indemnification that
       remains dependent on the
       occurrence of a future
       event that may never occur

   6   Shareholders' Securities  Each Class 6 claim shall be
       Fraud Claims              paid only up to the amount of
                                 available insurance  proceeds
                                 and shall be made only through
                                 the Securities Class  Actions.
                                 Any Holder of a Class 6 Claim
                                 that opts out of the  class
                                 established in the Securities
                                 Class Action shall not  receive
                                 any Distribution in respect of
                                 any Class 6 Claims.   Under the
                                 terms of the Memorandum of
                                 Understanding, the  Holders of
                                 Class 6 Claims shall receive a
                                 Pro Rata portion of  the MOU
                                 Settlement Fund minus that
                                 portion of the  consideration
                                 in the MOU Settlement Fund
                                 distributable to  Holders of
                                 Class 4 Claims.  There shall be
                                 no Distribution on  account of
                                 Class 6 Claims if such court
                                 does not approve the  final
                                 stipulation of settlement.

   7   Laserlink Securities      Each Holder of a Class 7 Claim
       Claims -- Claims relating shall receive in full
       to the purchase of Common satisfaction of such Claim one
       Stock of Covad in         share of Covad Common Stock in
       connection with the Plan  respect of each $100 of Allowed
       of Merger among Covad,    Claim.
       Lightsaber Acquisition
       Company, and
       Laserlink.Net, Inc.,
       including Claims arising
       from the alleged failure
       to register or maintain
       the effectiveness of the
       registration of such
       securities.

   8   IPO Allocation Securities Retain all legal, equitable
       Claims -- covers all      and contractual rights to which
       Claims arising from the   such Claim  entitles the Holder
       purchase of Common Stock  of such Claim.   Covad believes
       of Covad from  January    it has  no liability in respect
       21, 1999 through June 25, of Class 8 Claims and has
       2001                      indemnification rights against
                                 its underwriters that are co-
                                 defendants in this litigation.

   9   Equity Interests          Diluted but otherwise
                                 unimpaired


Covad argues that it is appropriate and necessary to classify
the Securities Claims separate and apart from General Unsecured
Claims because all Securities Claims are subordinated to General
Unsecured Claims pursuant to Bankruptcy Code section 510(b).

In turn, section 510(b) subordinates Claims arising from the
purchase or sale of Common Stock to Securities Claims
relating to the purchase or sale of the Notes.  Covad has
therefore separately classified the Securities Claims arising
from the purchase or sale of Notes (i.e., Class 4 Securities
Claims - Notes) from the various Classes of Securities Claims
arising from the purchase or sale of Common Stock (i.e., Class 6
Securities Claims - Common Stock, Class 7 Securities Claims -
Laserlink, and Class 8 Securities Claims - IPO Allocation.  

In turn, Covad has separately classified the various Classes of
Equity Securities Claims for sound reasons. Specifically, Covad
has separately classified the Securities Claims - IPO Allocation
and left such claims unimpaired, because Covad believes it has
no ultimate liability in respect of such Claims, and the
determination or adjudication of such Claims would threaten to
delay Confirmation (which Covad cannot afford). Covad has
separately classified the Securities Claims - Common Stock
because such Claims are being litigated in a pending class
action of significant magnitude, and Covad was able to reach an
agreement to settle such Claims (through the Memorandum of
Understanding) prior to the commencement of this Chapter 11
Case.

That agreement to settle would not have been practical if Equity
Securities Claims wholly unrelated to such class action were
incorporated into such settlement. (Covad Bankruptcy News, Issue
No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900)   


FAMILY WONDER: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Lead Debtor: Family Wonder Holdings, Inc.
             a/k/a Sega.com, Inc.
             650 Townsend, Suite 650
             San Francisco, CA 94105

Chapter 11 Petition Date: September 10, 2001

Court: District of Delaware

Bankruptcy Case No.: 01-10361

Debtor's Counsel: David B. Stratton, Esq.
                  David M. Fournier, Esq.
                  Pepper Hamilton LLP
                  1201 Market Street,
                  Suite 1600
                  Wilmington, DE 19801

Estimated Assets: $10 million to $100 million

Estimated Debts: $10 million to $100 million

List of Debtors' 20 Largest Unsecured Creditors:

Entity                          Nature of Claim     Claim Amount
------                          ---------------     ------------

Genuity                         Contract            $759,627 est
235 Presidential Way
Woburn, MA 01801           
Contact: Natalie Miller
(T)(781) 865-5390
(F)(781) 865-8820

MarchFirst                      Contract            $756,333.34
255 California St., 10th Fl
San Francisco, CA 94111
Contact: Michael Murphy
(F)(415) 782-6363

Sun Microsystems                Trade Debt          $156,441.92
UBRM 12-175
500 Eldorado Blvd
Broomfiled, CO 80021

@Home                           Contract            $137,892.52
425 Broadway St.
Redwood City, CA 94063

Gunderson Dettmer               Trade Debt          $125,989.75
155 Constitution Drive
Mcolo Park, CA 94025

Harte Hanks                     Trade Debt          $240,000 est
P.O. Box 911913
Dallas, TX 75391-1913

Soberlon                        Trade Debt          $17,000
475 Sansome St
Suite 770
San Francisco, CA 94111

Activislon (SegaSoft)           Contract            $68,421.09
3100 Ocean Park Blvd
Santa Monica, CA 90405

Oracle Corp.                    Contract            $63,465.05
1001 Sunset Blvd.
Rocklin, CA 95765

Etruso                          Contract            $50,000
P.O. Box 901
Road Town
Tortola British VI

Service Concept                 Trade Debt          $43,218.88
563 N. Fairview St
Santa Ana, CA 92703

BFD Productions                 Trade Debt          $28,292.90
1221 S. Casino Center Blvd
Las Vegas, NV 89104

Media Metrix                    Contract            $26,250.00
100 Charles Lindbergh Blvd.
Uniondale, NY 11553

Polaroid Corporation            Trade Debt          $25,000
P.O. Box 450426
Atlanta, GA 31145

Mango                           Trade Debt          $25,000
13018 Woodforest Blvd.
Houston, TX 77015-2775

Shoptok                         Trade Debt          $17,500
370 7th St.
San Francisco, CA 94103

Intermedia Communications       Trade Debt          $17,000
Virginia Manor Road
Bellsville, MD 20705

Tom Grillo                      Contract            $12,000
109 Freeway Avenue
Huckettstown, NJ 07840           

Real Emarketing                 Contract            $10,800
742 Pine St.
San Francisco, CA 94108

Heidrick & Struggles            Contract            $8,260.37
P.O. Box 92227
Chicago, IL 60675


FOAMEX INTL: Thomas E. Chorman Appointed as New EVP & CFO
---------------------------------------------------------
Foamex International Inc. (Nasdaq: FMXI) announced the
appointment of Thomas E. Chorman as Executive Vice President and  
Chief Financial Officer. The announcement was made by President
and Chief Executive Officer, John Televantos.

Chorman joins Foamex from his position as Chief Financial
Officer of Ansell Healthcare, Inc., where he successfully  
spearheaded significant profitability improvement and cash
generation projects. Ansell is a wholly owned subsidiary of
Pacific Dunlop, a global manufacturer of medical and industrial
products. From 1997 to 2000, Chorman was Vice President, Finance
and Chief Financial Officer of Armstrong's Worldwide Floor
Product Operations, where he initiated and directed two major
acquisitions.

Chorman joined The Procter & Gamble Company in 1984 out of
business school, and spent thirteen years with them in financial
positions of increasing responsibility. In his most recent
position as Global Finance Manager and CFO for Corporate New
Ventures, he developed and managed the company's strategic new
product development process. Other assignments at P&G included
CFO for the Pringles and Snacks Division and Controller for P&G
France. Chorman also served as the architect for redesigning
P&G's North American supply chain.

Chorman's innovative work in portfolio management for new
products and supply chain management are now part of the
curriculum at top graduate schools.  He was recently awarded the
International Franz Edelman Award for his work in operations
research management science.

"Tom is an accomplished financial executive whose background
includes international experience for both industrial and
consumer products companies," Televantos noted. "He has
considerable expertise in new business development,
profitability improvement initiatives, cash generation programs,
the supply chain process and acquisitions. I look forward to
Tom's leadership as we execute our strategy of strengthening our
balance sheet and growth through differential cost improvements
and new business development enhanced by prudent acquisitions."

Chorman holds an MBA from Rutgers Graduate School of Management
and an undergraduate degree in Economics from City University of
New York.

Michael D. Carlini, who has been serving since June as Acting
CFO, will continue with the company as Senior Vice President,
Finance and Chief Accounting Officer.

Foamex, headquartered in Linwood, Pennsylvania, is the world's
leading producer of comfort cushioning for bedding, furniture,
carpet cushion and automotive markets. The company also
manufactures high-performance polymers for diverse applications
in the industrial, aerospace, electronics and computer
industries as well as filtration and acoustical applications for
the home.

The Company's total liabilities (as of June 30) stand at $905
million, as opposed to its total assets of $762.7 million.


GENESIS HEALTH: Agrees to Extend Bar Date for HCFA to Sept. 27
--------------------------------------------------------------
Pursuant to the Bar Date Order, the Court established December
19, 2000 (the Bar Date) as the last date for any person or
entity, including, without limitation, any governmental unit
other than governmental units filing claims against HRC) to file
a proof of claim against Genesis Health Ventures, Inc. & The
Multicare Companies, Inc.  The Court also established January
29, 2001 as the deadline by any governmental unit to file any
proof of claim against HRC which arose prior to July 31, 2000.

As previously reported, the Health Care Financing
Administration (HCFA), the Department of Health and Human
Services (HHS), and the Department of Justice (DOJ) and the
Debtors continue to negotiate matters relating to, among other
things, the treatment of claims and liabilities of the
Governmental Entities and the Debtors against each other.

Accordingly, the Debtors and the Governmental Entities have
agreed and stipulated on extensions of the Governmental Bar Date
to March 1, 2001, March 14, 2001, April 24, 2001, May 24, 2001,
June 25, 2001, July 25, 2001 and August 27, 2001 respectively.

The Debtors have determined that a conditional extension of the
Bar Date will be helpful in its settlement process with the
Governmental Entities.

Therefore, by way of a Stipulation dated August 27, 2001, the
Debtors and the Governmental Entities stipulate and agree as
follows:

"In the event the Court has not approved the Settlement
Agreement by September 27, 2001, the time by which the
Governmental Entities must file a proof of claim against any of
the Debtors shall be extended through and including September
27, 2O01, at 4:00 p.m. (Eastern Time). If the Court approves the
Settlement Agreement on or before September 27, 2001, the Bar
Date shall be August 27, 2001. The Extended Bar Date applies
with respect to any claims for the benefit of the Governmental
Entities relating in any way to the Medicare program, including
claims of private persons brought on behalf of the Governmental
Entities pursuant to the qui tam provisions of the False Claims
Act, 31 U.S.C. section 3730(b)." (Genesis/Multicare Bankruptcy
News, Issue No. 13; Bankruptcy Creditors' Service, Inc.,
609/392-0900)   


GLOBAL DIAMOND: Standard Gets Order for Liquidation of SA Unit
--------------------------------------------------------------
Global Diamond Resources Inc., announced that Standard Bank of
South Africa applied for and has been granted a final order of
liquidation of Global Diamond Resources (SA) (Pty) Ltd.

Global SA is the wholly owned operating subsidiary company of
Global Diamond Resources Inc.

Global SA owes Standard Bank an amount of approximately ZAR 1.5
million (US$180,000) and Standard Bank has as security a
Notarial bond over the principal plant and equipment owned by
Global SA. The overdraft facility was called in during the last
week of August and the legal action taken on September 6, 2001.

Global will file an urgent appeal to the ruling on the basis
that proper notice was not given to Global SA and that Global SA
was not given an opportunity to respond to the motion.

The major shareholders of Global have agreed to advance funds to
Global that would, at the very least allow for the repayment of
the debt owed to Standard Bank on the basis that the liquidation
order be withdrawn.

                         *   *  *

Global Diamond's liquidity is strained at June 30.  Current
liabilities is pegged at $1,339,988, exceeding its total current
assets of $176,656.  The Company believes that it may require
additional working capital of approximately $500,000 to satisfy
its working capital requirements for the next 12 months.  


HARNISCHFEGER: Battles with Creditanstalt Over $11MM Claims
-----------------------------------------------------------
Harnischfeger Industries, Inc. and Creditanstalt AG are
contending over administrative claims in an aggregate amount of
$11 million asserted by Creditanstalt.  The Beloit Committee
joins in HII's objection to the motion of Creditanstalt for
allowance and payment of the claims.

Creditanstalt a, bank organized and existing under the laws of
the Republic of Austria, previously filed four administrative
claims, which were actually two claims because the two claims
filed against HII (Claim Nos. 9568 and 9570) were identical to
the two filed against Beloit (Claim Nos. 9571 and 9569). These
claims were filed before the Bar Date and the Debtors included
in its Schedules of Assets and Liabilities Contingent and
Unliquidated Claims by Creditanstalt AG in the amount of
15,384,852. These Original Claims arise out of Creditanstalt's
business relationship with Beloit Austria, GmbH, an indirect
subsidiary of both HII and Beloit.

According to Creditanstalt, Claims 9568 (against HII) and 9571
(against Beloit) are related to administrative expense request.
In their Fifth and Sixth Omnibus Objectionst to Claims, the
Debtors objected to Claim Nos. 9570 (against HII) and 9571
(against Beloit). Creditanstalt opposed the Debtors' objections.
In their Seventy-Sixth Omnibus Objection to Claims, the Debtors
objected to Claim Nos. 9568 (Creditanstalt' administrative claim
against HII). Creditanstalt served its response to the Debtors'
Seventy-Sixth Omnibus Claims Objection.

Creditanstalt later filed a motion for allowance of an $11
million administrative claim. At the instruction of the Court at
the hearing of the Original Motion, Creditanstalt filed an
Amended Motion which supersedes the earlier motion. In the
Amended Motion, supported by the declaration of Dr. Walter
Friedrich, an Austrian lawyer, Creditanstalt seeks the allowance
and immediate payment by HII and Beloit of German Mark (DEM)
12,740,000.00 and Austrian Schillings (ATS) 63,602,100.69 as an
administrative expense claim for certain post-petition
obligations of the Debtors. The combined administrative claims
equal $11,458,043.06, Creditanstalt asserts.

The parties argument centers upon:

(1) the merit or lack of merit of the Original Claims;

(2) the scope and basis of the assertion in Creditanstalt's
    motion, which was filed after the Bar Date, and the
    timeliness or untimeliness of the assertion;

(3) whether Creditanstalt's claim is controlled by United States
    law or foreign law and whether it raises genuine, material
    factual disputes.

                Creditanstalt's Amended Motion

      (A) "Factual Background" as related in Creditanstalt's
          Amended Motion:

   (1) The Credit Agreement

In or about March, 1996, Creditanstalt entered into a Credit
Agreement with Beloit (Austria) in an amount of Austrian
Schilling (ATS) 200,000,000.

As security for the Credit Agreement, on March 26, 1996 and
November 19, 1997, HII and Beloit respectively, jointly issued
to Creditanstalt's parent guarantees in the amount of ATS
200,000,000. On January 22 and 28, 1999, HII and Beloit
reaffirmed their commitments to Creditanstalt.

In response to the Debtors' Petition, Creditanstalt froze Beloit
Austria's credit line under the Credit Agreement.

   (2) The Omega Turnkey Project and Post-Petition Guarantees

The Omega Turnkey Project was a DEM 80 million state-of-the-art
hygienic tissue paper facility in Wernshausen, Germany.

During negotiation of the Omega/Beloit Austria Contract, Omega
became concerned about the financial condition of Beloit Austria
and demanded bank guarantees in case of Beloit Austria's
default. It obtained three guarantees totaling DEM 12,740,000
from Creditanstalt.

In order to assure Omega that Beloit Austria would complete the
Omega Contract, Beloit (USA) executed a post-petition
"unconditional" guarantee of performance on July 12, 1999 which
reads:

       "Beloit Corporation hereby unconditionally confirms
        that in the event of an insolvency or bankruptcy of our
        indirect subsidiary, Beloit Austria GmbH, we, the
        Beloit Corporation, shall assume the rights and
        obligations of Beloit Austria GmbH arising out of the
        Agreement executed with you concerning the Supply of a
        Paper Machine and dated February 12, 1999 in accordance
        with the terms and conditions set forth therein."

In the meantime, Harnischfeger had obtained a $750,000,000
debtor-in-possession facility to finance its operations. In
order to reassure Omega that the Debtors would support Beloit
Austria, Beloit (USA) reissued the July 12 Post-Petition
guarantee which Harnischfeger and Beloit (USA) jointly signed on
August 11, 1999, specifically stating that:

       "Harnischfeger Industries, Inc. (HII) joins in this
        letter for the purpose of ensuring that HII will use
        commercially reasonable efforts to cause Beloit to
        perform its obligations under this letter."

(The July 12 and August 11, 1999 letters are hereafter referred
to as "the Post-Petition guarantees.")

   (3) The July 22, 1999 Representations

On July 22, 1999, at a meeting in Austria attended by Beloit
(USA), Debtors' counsel, Beloit Austria and Creditanstalt, the
Debtors told Creditanstalt that they would provide Beloit
Austria with the means necessary to keep Beloit Austria a going
concern and to finance its production if Creditanstalt would
unfreeze the credit line and release ATS 62,300,000.

   (4) The Letter of Comfort

On September 15, 1999, HII confirmed its commitment made on July
22, 1999 to Creditanstalt in the form of a letter to the
Directors of Beloit Austria. In pertinent part, that letter
reads:

       "HII confirms that it is its current strong intention to
        make available such sums as may be necessary for Beloit
        Austria GmbH's working capital requirements and current
        Needs."

The Debtors were aware that this Letter of Comfort was written
for the benefit of Creditanstalt and, together with the
representations made on July 22, 1999, would be relied upon as
such.

Based upon those representations and the Letter of Comfort,
Creditanstalt, as agreed in July 22 meeting, released the credit
line, and thereby enhanced the Debtors' Estate by at least ATS
63,000,000.

   (5) Debtors Strip Beloit Austria of its Assets

Immediately after the release of the credit line, according to
the Omega pleading, the Debtors embarked upon a campaign to
strip Beloit Austria of its assets and actively to interfere
with the financial accounts of Beloit Austria and to direct
Beloit Austria to pay certain bills and to withhold payments on
others exclusively for the Debtors' own benefit. After the
Debtors had succeeded in stripping Beloit Austria of its assets,
on November 19, 1999, Beloit Austria told Omega that the Debtors
had unilaterally decided to halt any support of Beloit Austria,
and on the same day HII publicly confirmed that it was cutting
off all funding of its subsidiaries "to cut costs."

   (6) Beloit Austria's default and Omega's drawdown on the
       Guarantee

As a result of Debtors' withdrawal of finds and their refusal to
support it with adequate finding, Beloit Austria was forced into
liquidation. At or about the end of November, 1999, Dr. Erhard
Hackl, liquidator for Beloit Austria, was compelled to repudiate
Beloit Austria's contract with Omega.

Omega drew down on Creditanstalt's bank guarantees which were
paid on December 7, 1999.

The Third Amended Disclosure Statement for the Plan at p. 190
lists Omega Papier as an outstanding administrative claim, but
it does not list Creditanstalt's subrogation claim or breach of
contract/tort claims. It thus appears that the Debtors have
miscalculated the totality of the administrative claims.

      (B) Creditanstalt's Claims

Creditanstalt asserts 9 claims, accusing as follows:

Claim 1: Breach of the Post-petition Guarantees, the
          Representations Made at the July 22 Meeting and the
          Letter of Comfort

          Creditanstalt is a direct and third party beneficiary
          of the Post-Petition guarantees, the representations
          made at the July 22 meeting and the Letter of Comfort
          and the Debtors breached the terms made in all these.
          Creditanstalt moves for discovery to substantiate
          these claims which are premised upon the Omega
          pleadings and discussions with Dr. Hackl. Claim 1 is
          subject to Austrian law.

Claim 2: Tortious Interference with Contractual Relations

          The Debtors also tortiously interfered with the Credit
          Agreement between Beloit Austria and Creditanstalt.
          Through their systematic, wanton and willful course of
          conduct -- which included theft manipulation of Beloit
          Austria's finances for their benefit; their depriving
          Beloit Austria of finding, essential parts, and
          technical expertise; and their failure to reflect
          accurate accounting credits within the finances of the
          Harnischfeger Group -- the Debtors made it absolutely
          impossible for Beloit Austria to perform its
          obligations, in particular, under the Omega contract,
          Creditanstalt accuses. Creditanstalt claims that it
          has as a result of this been damaged in an amount of
          not less than DEM 12,740,000.00 and ATS 63,602,100.69.
          Claim 2 is subject to Austrian law.

Claim 3: Tortious Interference with Contractual Relations

          The Debtors tortiously interfered with the
          Omega/Beloit Austria contract and the guarantee given
          by Creditanstalt to Omega in Annex II para. 5. of the
          Omega/Beloit Austria contract signed December 2, 1999
          as amended.

          The Debtors knew of the Omega/Beloit Austria contract
          and the guarantees given by Creditanstalt in the
          combined amount of DEM 12,740,000 and through their
          systematic, wanton and willfull course of conduct --
          which included their manipulation of Beloit Austria's
          finances for their benefit; their depriving Beloit
          Austria of funding, essential parts, and technical
          expertise; and their failure to reflect accurate
          accounting credits within the finances of the
          Harnischfeger Group -- made it absolutely impossible
          for Beloit Austria to perform its obligations, in
          particular, under the Omega contract," Creditanstalt
          tells the Court, "Consequently, the Creditanstalt
          guarantees were paid on December 7, 1999 in the full
          amount of DEM 12,740,000.00."

          Thereafter, Debtors' tortious interference continued
          and they created repeated obstacles for Omega to
          mitigate its damages," Creditanstalt goes on, "As a
          result of this further tortious interference, neither
          Beloit Austria nor Creditanstalt has been able to
          claim any overpayment from Omega. By reason thereof,
          Creditanstalt has been damaged in an amount of not
          less than DEM12,740,000.00." Claim 3 is subject to
          Austrian law, Creditanstalt asserts.

Claim 4: Subrogation

          "As a consequence of Beloit Austria's repudiation of
          the Omega Contract, Creditanstalt paid Omega DEM
          12,740,000.00. As a matter of law, Creditanstalt has
          become subrogated to all rights and remedies of Omega
          against the Debtors for their breach of the Post-
          Petition guarantees and their tortious interference
          with the Beloit Austria/Omega Contract." Claim IV is
          subject to German and Austrian law."

Claim 5: Breach of Covenant of Good Faith

          "The actions of the Debtors constitute a breach of the
          covenant of good faith implied in the Credit
          Agreement, the Post-Petition Guarantees, the
          representations made at the July 22 meeting, the
          Letter of Comfort, and in the Omega/Beloit Austria
          Contract together with Creditanstalt's guarantee
          thereof. By reason of the foregoing, Creditanstalt has
          been damaged." "Claim 5 is subject to Austrian law."

Claim 6: Fraud in the Inducement

          "The Debtors fraudulently induced Creditanstalt to
          release the credit line by making false
          representations at the July 22 meeting and by issuing
          the Letter of Comfort and thereby representing that
          the parent companies would ensure completion of the
          Omega/Beloit Austria Contract.

          "However, on information and belief, the Debtors knew
          that they had no intention of performing the
          representations made at the July 22, 1999 meeting and
          the representations made in the Letter of Comfort,
          because, at that time, they were engaged in a scheme
          to loot the subsidiaries of working capital, and also
          to deprive the subsidiaries of parts and support
          necessary to complete their contracts.

          Creditanstalt reasonably relied on the Debtors'
          representations to its detriment." Claim 6 is subject
          to Austrian law.

Claim 7: Negligent Representation

         The Debtors induced Creditanstalt to release credit
         line by making the representations at the July 22
         meeting and issuing the Letter of Comfort. The Debtors
         had a duty to communicate accurate information and knew
         that the representations made at the July 22 meeting
         and in the Letter of Comfort, would be used and relied
         on by Creditanstalt. However, on information and
         belief; the representations were false. In spite of
         that, the Debtors either made the misrepresentations,
         carelessly or negligently, without ascertaining the
         truth of their representations, or Debtors made them
         deliberately. The Debtors knew that, without such
         representations, Creditanstalt would never have
         released the credit line, and they made those
         representations solely in order to induce Creditanstalt
         to unfreeze at least ATS 63,602,100.69 to Beloit
         Austria, which directly or indirectly benefited the
         Debtors. In addition, Debtors knew, or reasonably
         should have known, that they did not have the ability
         to perform their obligation, namely to "... make
         available such sums as may be necessary for Beloit
         Austria's working capital requirements and current
         needs." Creditanstalt reasonably relied on the Debtors'
         representations to its detriment. By reason of the
         foregoing, Creditanstalt has been damaged. Claim 7 is
         subject to Austrian law.

Claim 8: Right of Contribution

        Creditanstalt and the Debtors were under a common burden
        or liability to Omega by their guarantee of Beloit
        Austria's obligations. By virtue of Beloit USA's default
        on its guarantee to Omega to complete the project upon
        Beloit Austria's default, and by reason of Omega's
        consequential drawdown on the Creditanstalt guarantees
        in November, 1999, Creditanstalt was compelled to pay
        more than its share of the common liability. By reason
        of the foregoing, Creditanstalt is entitled to
        contribution from the Debtors as co-obligors in the
        am.unt of not less than DEM 8,493,333.00. Claim 8 is
        subject to Austrian law.

Claim 9: For Conversion

        Following Debtors' Petition, the Debtors caused at least
        $10,000,000.00 and perhaps as much as $23,400,000.00 to
        be transferred from Beloit Austria's books to themselves
        of their designees for their own direct or indirect use
        and/or benefit without meeting formal requirements, such
        as a shareholders' resolution and approval of a duly
        audited annual balance sheet. These transfers
        constituted conversion and were made in violation of
        Austrian law. As a result of these transfers,
        Creditanstalt's ability to obtain relief from Beloit
        Austria has been lost. Claim 9 is subject to Austrian
        law.

      (C) Creditanstalt's Arguments

   (1) Application of Foreign Law

"Austrian law must be applied because Austria was the place of
contracting performance and the location of the subject matter
of the contract," Creditanstalt argues, "and because insofar as
the Debtors were guilty of conversion, the internal affairs of
Beloit Austria are implicated and that must be decided in
accordance with the law of the place of incorporation --
Austria."

Regarding the fraudulent inducement Claims, Creditanstalt
asserts that the following criteria are to be weighed under
Brown v. SAP:

(a) the place where the injured party acted in reliance on the
    representations;

(b) the place the injured party received the representations;

(c) the place where the representations were given;

(d) the domicile, place of incorporation or place of business of
    the injured party;

(e) the place where the tangible subject of the transaction was
    situated; and

(f) the place of induced performance.

"Factors (a), (b), (d), (e) and (f) all support the application
of Austrian law, where both Creditanstalt and Beloit Austria
have their places of business," Creditanstalt asserts, "Even (c)
supports the use of Austrian law because the July 22, 1999
meeting was held in Austria."

For claims involving asset stripping the following criteria are
to be considered under United Rubber v. Great American
Industries 479 F. Supp. 216 (S.D.N.Y. 1979), Creditanstalt
asserts:

(a) the domicile, place of incorporation, andn place of business
    of the injured party;

(b) the place where the stripped assets were located; and

(c) the place where the assets were fraudulently disposed of.

"Here, the Debtors deferred from adequately capitalizing Beloit
Austria, it is alleged that they withdrew liquidity, defaulted
on necessary payments and supplies and they rendered Beloit
Austria incapable of performance. These three criteria also
argue for application of Austrian law. Finally, the Omega
Contract states that it is governed by German law (Section 20)
and the Creditanstalt credit line extended to Beloit Austria is
governed by Austrian law," says Creditanstalt.

Creditanstalt further argues that, because Delaware's conflict
of laws rules are final and exclude renvoi, Brown v. SAP.,
Austrian or German law applies insofar as the Omega/Beloit
Austria contract concerned. "Wisconsin law does not apply to the
Letter of Comfort of September 15, 1999 because that letter was
part and parcel of a contract negotiated and entered into in
Austria at the July 22, 1999 meeting," Creditanstalt argues.

   (2) Contract was made and breached post-petition

Creditanstalt also asserts that it is entitled to administrative
claims because the claims arise out of post-petition
transactions with the Debtors.

   (3) Comparison with Omega Adversary Proceeding

Creditanstalt draws the Court's attention to the adversary
proceeding by Omega against the Debtors, which was settled prior
to trial. (See prior entry at [00601].)

Creditanstalt notes that, in its order denying the Committee's
motion for Judgment on the Pleadings, the Court found that the
Committee's Rule 12(c) motion had to be denied due to a factual
issue as to whether the HII commitment of August 11, 1999
constituted a "hard declaration of support" which is tantamount
to a guarantee. The Court held that not only was there a
conflict in the expert affidavits on German law, but it was not
even clear whether German law applied.

Creditanstalt reminds the Court that it held, in that issue,
that one must examine the facts and circumstances regarding (1)
the Debtors' pre-petition policies and practices; (2) the
Debtors' post-petition policies and practices and (3) the
particulars surrounding the issuance of the commitments. Based
on this, Creditanstalt argues that it is entitled to discovery
at the very least.

Creditanstalt further argues that,

- it is subrogated to the rights of Omega and that the language
   in the August 11 letter, which purports to bar any grant of
   rights to third parties, may be invalid under German law,
   assuming German law applies;

- HII's Letter of Comfort dated September 15, 1999 constitutes a
  guarantee under Austrian law, or at least, it is a question of
  fact under Austrian law whether it constitutes a guarantee;

- Dr. Friedrich, an Austrian lawyer, opines in his Declaration
  accompanying the motion that the language contained in the
  Letter of Comfort constitutes a binding commitment under
  Austrian law, or that at the very least, it would be a  
  question of fact which could be determined only in the context
  of the surrounding circumstances.

   (4) Creditanstalt's Right of Subrogation is preserved

Creditanstalt draws the Court's attention to the Friedrich
Declaration in which Dr. Friedrich opins that under Austrian
law, Creditanstalt's payment to Omega on December 7, 1999
operated as an assignment as a matter of law of the rights Omega
had against the Debtors for their breach. Creditanstalt argues
that because that payment reduces Omega's damages against the
Debtors by the amount of the guarantee, DEM 12,740,000, those
damages reduced did not belong to Omega and Omega's release of
its claims against the Debtors therefore could not preclude
Creditanstalt's claim.

   (5) Creditanstalt Has a Right of Contribution against the
       Debtors

Creditanstalt argues that the Debtors and Creditanstalt were
under a common burden or liability to Omega because the Debtors
guaranteed Beloit Austria's performance of the Omega Complaint
and Creditanstalt gave Omega a separate guarantee.
"Creditanstalt satisfied its guarantee, but the Debtors did not
satisfy their," Creditanstalt further argues, "Under Austrian
law, Creditanstalt is entitled to equalize this joint obligation
with a direct cause of action against the Debtors as con-
obligors."

   (6) All of Creditanstalt's Claims Are Timely

Creditanstalt draws the Court's attention to the filing of its
claims before the Bar Date, the Debtors' Objections and
Creditanstalts' responses. With respect to the assertions made
in its motion, Creditanstalt argues that, because the Omega
Claims and Creditanstalt Claims are substantially similar and
premised upon identical facts, the Debtors should have been put
on notice as to the substance, if not the exact content, of each
of the Claims pled in its Original Motion. Based on this,
Creditanstalt argues that the Debtors will not be prejudiced by
the particularization of the claims in Creditanstalt's Original
Motion.

   (7) Alternatively, Creditanstalt Should Be Granted Leave to
       Amend Its Administrative Claim

Based on the reasons mentioned above, Creditanstalt argues that
the claims asserted in its motion are not time-barred. Should
the Court find it necessary to do so, Creditanstalt suggests
that the Court, under Bankruptcy Rule 7015 and Federal Rule of
Civil Procedure 15, allow Creditanstalt's claim to be amended.

        HII's Objection, Joined By the Beloit Committee

HII points out that the claims filed before the Bar Date (the
Original Claims) contained no explanation to support
Creditanstalt's assertion that they were entitled to
administrative priority but simply stated that they were based
on "breach of contract". Moreover, the Original Claims were
based on alleged breaches of contract, but since no contract was
ever created between HII and Creditanstalt, the Original Claims
fail.

With respect to Creditanstalt's motion, as amended, HII tells
the Court that it went far beyond the scope of the Original
Claims by adding a number of new claims, counts I to IX (the
Additional Claims). Each of the Additional Claims is asserted
for the first time in the motion, which was filed more than two
months after the administrative claims bar date, HII notes, thus
each Additional Claim is time barred.

(I) About Creditanstalt's Original Claims, HII argues that they
    do not establish a right to payment of an administrative
    expense on the following bases:

    (A) HII's September 15, 1999 Letter is Not a Contract

        HII argues that, whether under the laws of Wisconsin or
        Austria, this letter gives Creditanstalt no contractual
        rights because HII's statement concerning its "current
        strong intention to make available to Beloit Austria
        GmbH such sums as may be necessary for Beloit Austria
        GmbH's working capital requirements and current needs"
        is not sufficient to form any contractual obligations.
        HII notes that, in this letter, it does not agree to do
        anything but simply makes a statement concerning its
        intent.

    (B) Even If the September 15 Letter Was a Contract It Would
        Give No Rights to Creditanstalt

        HII tells the Court that the letter was sent by HII to
        Beloit Austria, not Creditanstalt, so Creditanstalt was
        not a party to that contract and has no standing to
        bring claim for an alleged breach.

        Nor does Creditanstalt qualify as a third-party
        beneficiary under any applicable law, HII contends.
        Under Wisconsin law, HII notes, a party may only bring
        an action as a third party beneficiary if it can show
        "that the parties to the contract intentionally entered
        into their agreement directly and primarily for his [the
        third party's] benefit."

        The result would be the same under Austrian law, HII
        argues, because under Austrian law, the party purporting
        to be a third party beneficiary must show, on the basis
        of the contract, that it was intended to "mainly be to
        the benefit of the third party."

        In the current issue, HII notes, neither Creditanstalt
        nor Beloit Austria's credit facility are even mentioned
        in the letter; to the contrary, the latter's specific
        references to Beloit Austria's "working capital" makes
        clear the letter was directed to Beloit Austria's
        general business needs, and not specifically concerned
        with Creditanstalt.

    (C) The August 11, 1999 Letter To Omega Provides No Basis
        For Creditanstalt's Administrative Claim

        HII cites a number of reasons:

        (1) This Letter Does Not Create Any Obligation On The
            Part Of HII

            HII tells the Court that although the declaration of
            Dr. Walter Freidrich, an Austrian lawyer and
            Creditanstalt's sole foreign law expert, contains a
            choice of law provision, designating German law,
            Creditanstalt has not submitted any evidence
            regarding the applicable German law. The affidavit
            of  Dr. Walter Freidrich, HII points out, does not
            even address the legal effect of the HII language
            used in the August 11 letter.

            HII notes that Dr. Freidrich does address the issue
            of Creditanstalt's purported right to be subrogated
            to any rights Omega may have had under the August 11
            letter, he does not address what rights those may be
            (under either German or Austrian law).

            HII tells the Court that it was to avoid exactly
            this type of expensive litigation that it chose to
            settle the Omega litigation. HII did not see any
            need to include Creditanstalt in these settlement
            negotiations, because Creditanstalt asserted only
            contract claims that could be defeated without the
            need for expensive and protracted litigation. Now,
            HII complains, Creditanstalt's effort to change the
            very nature of its claims after the Omega settlement
            had already been reached would force HII to engage
            in exactly this type of litigation and deprive HII
            of much of the benefit of the $l,000,000 settlement
            payment it made to Omega.

            HII argues that the language it used in the August
            11 letter is "not a conventional guarantee under
            American jurisprudence." Neither does this language
            constitute a guarantee under the laws of Germany or
            Austria, HII contends.

            German law, HII notes, recognizes that parent
            companies make different types of statement to
            creditors of its subsidiaries. To support this, HII
            presents to the Court the Declaration of Dr. Kolja
            von Bismarck. Dr. Bismarck advises that German law
            divides these statement into two types: "hard" and
            "soft" letters of comfort.

            Under German law, a "hard" letter of comfort is
            considered a contract while a "soft" letter is not.
            In order for a letter to be a "hard" letter of
            comfort, and therefore a binding contract, it must
            include a specific description of what the parent is
            promising to do, such as undertaking an express
            obligation to provide a subsidiary with sufficient
            funds to meet its obligations. HII did not do this.
            To the contrary, HII's statement in the letter
            conspicuously avoids assuming any specific
            obligation to support Beloit Austria, as would be
            required in a "hard" letter of comfort.

            The effect of the HII language included in the
            August 11 letter, HII tells Judge Walsh, is to make
            it nothing more than a non-binding "soft" letter of
            comfort, which can not form the basis of a claim.
            Austrian law leads to the same result, draws Judge
            Walsh's attention to the Spiegelfeld Declaration.

        (2) The Letter Specifically Disclaims Any Third Party
            Rights

            But even if the August 11 letter did form some sort
            of contract between HII and Omega, it could still
            not form the basis of a claim by Creditanstalt, HII
            argues, as HII joined in the August 11 letter for
            the limited purpose of stating that it would "use
            commercially reasonable means" to "cause Beloit to
            perform its obligations under this letter" but under
            applicable German law, Beloit had no obligation to
            Creditanstalt.

            Moreover, in the August 11 letter, Beloit
            specifically stated that "this letter is intended
            for [Omega's] benefit only and does not serve to
            grant any third party rights, irrespective of the
            legal basis therefore."

            Under applicable German law this language is
            sufficient to defeat any subrogation claim brought
            by Creditanstalt, HII asserts, drawing upon the
            expert advice of Dr. Bismarck. Although German law
            would ordinarily provide for the transfer of Omega's
            rights under the August 11 letter to Creditanstalt,
            as a result of Creditanstalt's payments to Omega,
            that transfer was defeated here, because Beloit and
            Omega expressly agreed that it would not occur, Dr.
            Bismarck advises.

            Creditanstalt attempts to avoid this result by
            arguing that under section 354a of the German
            Commercial Code "it is not possible to exclude the
            transferability of an obligation among merchants as
            the August 11 letter purports to do." Creditanstalt
            argues that this "leads to the inference that a
            subrogation or contribution claim - which is a
            transfer of an obligation by operation of law -
            cannot be subbrogated by the parties."

            HII tells Judge Walsh that Creditanstalt's argument
            is  supported only by the opinion of Dr. Freidrich,
            an Austrian lawyer not licenced to practice in
            Germany and this argument is wrong under German law,
            because under German law the "no third party rights"
            language of the August 11 letter bars any
            subrogation or contribution claim by Creditanstalt.

        (3) Any Subrogation Right Would Be Restricted to a
            General Unsecurd Claim

            Because Creditanstalt's legal obligation to Omega
            existed long before the August 11, 1999 letter was
            written, even if Creditanstalt did have some sort of
            subrogation claim against HII or Beloit, that
            subrogation would arise out of the Debtors' pre-
            petition contractual obligations, HII argues. This
            would mean any such subrogation claim would be
            properly characterized as a general unsecured claim,
            not an administrative expense.

(II) Creditanstalt's Additional Claims, HII reiterates, Are Time
     Barred.

     Absent a showing of excusable neglect, a creditor may not
     pursue a claim that it failed to raise prior to the bar
     date.

     HII tells the Court that Creditanstalt has not even
     attempted to show that its failure to assert these claims
     in a timely manner was the result of excusable neglect.
     Creditanstalt argues that Omega's complaint was sufficient
     to put HH and Beloit on notice of these claims, and so no
     harm comes from Creditanstalt's failure to include these
     claims in its timely filed claims.

     This argument, HII tells Judge Walsh, makes Creditanstalt's
     failure to assert their alleged tort claims even more
     inexcusable because Creditanstalt was clearly aware of the
     Omega complaint, and the claims included therein but they
     chose to assert only breach of contract claims against
     either HIT or Beloit.

     Although the Debtors may have been aware that Omega was
     asserting these tort claims, they could not know that
     Creditanstalt would choose to assert similar claims.
     Indeed, a reasonable conclusion would be that Creditanstalt
     had made a decision not to assert similar tort based
     claims. Because no showing of excusable neglect has been
     made, all claims raised for the first time in
     Creditanstalt's April 18, 2001 Motion are barred, HII
     asserts.

     HII accuses Creditanstalt of attempting to slip its time
     barred claim through the back door, by attempting to amend
     its Original Claims. Although bankruptcy courts will
     generally allow a claimant to amend a claim even after a
     bar date has passed, this is not allowed when the
     "amendment" seeks to add a new cause of action.

     "Amendments after the bar date are to be scrutinized very
     closely to insure that the amendment is in fact genuine and
     not an entirely new claim" as in re W.T. Grant Co., 53 B.R.
     417, 422 (Bankr. S.D.N.Y. 1985). Any other result would
     destroy the very purpose of the bar date, which is to
     establish a date certain on which the Debtor knows what
     claims it is facing, HII asserts.

     "It is only now, on the eve of HII's emergence, that
     Creditanstalt has attempted to assert this new cause of
     action," HII tells the Court, "If Creditanstalt were
     allowed to succeed in this tactic both HII and Beloit would
     be severely prejudiced. They would be forced to engage in
     protracted (and expensive) discovery at a time when HII is
     attempting to move forward as a reorganized entity, and
     Beloit is attempting to distribute the maximum amount
     possible to its creditors." (Harnischfeger Bankruptcy News,
     Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-
     0900)


HAYES LEMMERZ: S&P Places Low-B Ratings on CreditWatch
------------------------------------------------------
Standard & Poor's placed its ratings on Hayes Lemmerz
International Inc. on CreditWatch with negative implications.

         Ratings Placed On CreditWatch Negative

                                       Rating
     Hayes Lemmerz International Inc.
        Corporate credit rating         B+
        Senior secured debt rating      B+
        Senior unsecured debt rating    B-
        Subordinated debt rating        B-

The company's debt as of April 30, 2001, totaled about $2.0
billion.

The CreditWatch placement follows the announcement that Hayes
will restate certain historical financial statements to correct
accounting errors and to write down the value of impaired
assets. As a result, the company's earnings and operating
performance during recent quarters was weaker than previously
reported.

In addition, the need to restate financial statements has led to
bank financial covenant violations and delayed the release of
Hayes' second quarter financial results.

The accounting errors led to the understatement of net losses of
at least $14.7 million and $5.0 million during fiscal 2000 and
the first quarter of fiscal 2001, respectively. EBITDA was
overstated by at least $21 million and $9 million during the
same periods. About half of the errors occurred at one
of Hayes' manufacturing plants, which has had recurring
operating difficulties. The errors resulted from the failure
within certain areas of the company to comply with proper
accounting procedures.

The asset valuation write down relates to the company's
Petersburg, Mich. plant, which Hayes has previously announced it
intends to close. The write down will increase Hayes' first
quarter 2001 net loss by $22.1 million.

Hayes' investigation of the accounting errors is continuing. The
actual amount of the restatement has not been definitively
determined and could be higher than the estimated amounts.

The bank covenant violations and the company's delay in
replacing its expired accounts receivable securitization (which
had $119 million outstanding on April 30, 2001), reduces the
company's available liquidity amid current difficult industry
conditions. Hayes is in discussions with its lenders to resolve
its non-compliance with financial covenants.

Reduced automotive production, ongoing pricing pressure, and the
uncertain outlook for the U.S. economy present near-term
challenges for the company.

Standard & Poor's will meet with management to review the extent
of the accounting errors and to evaluate the company's
corrective action plans. The ratings on Hayes could be lowered
if it appears the company's operating performance will be weaker
or if liquidity will be more constrained than previously
expected.


ICG COMMS: Denver Agrees to Offset Contract Against Tax Duties
--------------------------------------------------------------
ICG Communications, Inc. and the City and County of
Denver submit a second stipulation agreeing that Denver may
offset the prepetition contract liability against the
prepetition tax liability, and the postpetition contract
liability against the postpetition tax liability.  

After that, Denver will pay to the Debtors the difference
between the postpetition contract liability and the postpetition
tax liability of $430,570.96 in satisfaction of any amounts
Denver owes for services provided by the Debtors through and
including June 2001. (ICG Communications Bankruptcy News, Issue
No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900)  


IMPERIAL SUGAR: Leases Beet Factories to Michigan Beet Growers
--------------------------------------------------------------
Imperial Sugar Company and Michigan Sugar Company ask Judge
Robinson to likewise approve their entry into (i) an agreement
with Michigan Sugar Beet Growers, Inc., for an interim lease of
Michigan Sugar's four beet-processing factories for the 2001
processing season, or until a related sale of Michigan Sugar to
the Michigan Sugar Beet Growers is consummated, and (ii) related
management and marketing agreements.

MSC currently operates four of the Debtors' nine sugar beet
processing factories.  These factories operate on a seasonal
basis, running continuous operations during the five-month sugar
beet harvested processing season, but idle or operated at a
reduced capacity during the remainder of the year.  

Sugar processed at MSC's factories currently is marketed under
the Debtors' Pioneer and Peninsular brands or sold to customers
in the customers' private label packaging.

                   The Michigan Factories Lease

Following commencement of this case, Imperial and MSC entered
into an agreement with the Michigan Cooperative, subject to
approval of the Court and Harris Trust and Savings Bank as agent
for the Debtors' senior secured lenders, pursuant to which the
Michigan Cooperative will lease MSC's four factories for the
2001 processing season, or until a related sale of MSC to the
Michigan Cooperative is consummated, pursuant to a lease
agreement.

The principal terms of the proposed lease are:

   (a) Term: October 1, 2001 through February 28, 2002 or end of
       2001 crop campaign, whichever is later, or until a
       related sale of MSC to the Michigan Cooperative is  
       consummated.

   (b) Rent and Related Fees: Lease, marketing, and management
       fee equal to $4.00 per ton of beets delivered by members
       of the Michigan Cooperative for the 2001 processing
       season, payable monthly commencing October 31, 2001.

   (c) Ownership of Sugar Beets: The lease and related
       agreements provide that the Michigan Cooperative will be
       the sole and exclusive owner of all sugar beets harvested
       during the 2001 campaign and all refined sugar and
       byproducts produced from those sugar beets. The Debtors
       will not take title to any sugar beets harvested during
       the 2001 campaign or have any obligation to pay beet
       growers for any beets delivered.  In addition to the
       transactions contemplated by this Motion, Imperial and
       the Michigan Cooperative also have entered into a letter
       of intent which envisions the sale of MSC and the
       Michigan factories to the Michigan Cooperative, subject
       to negotiation of definitive documents and the obtaining
       of required approvals. These efforts are separate from
       the proposed transactions and are not the subject of the
       Motion.

   (d) Repair and Maintenance: Actual repair and maintenance
       expenses incurred during the inter-campaign which began
       on March 22, 2001 are the responsibility of the Michigan
       Cooperative. MSC will continue to be responsible for all
       repair and maintenance items incurred prior to March 22,
       2001, except to the extent incurred in connection with
       the 2001 crop campaign.

   (e) Capital Expenditure: Imperial, MSC, and the Michigan
       Cooperative will jointly determine both the need for
       capital expenditures and the party who should be
       responsible for the expenditure.

   (f) Indemnification: If the Michigan Cooperative causes
       injury or damage to another party, it will indemnify,
       defend, and hold harmless Imperial from any loss,
       attorney's fees, court costs, or other costs or claims
       arising from use of the leasehold premises. The Michigan
       Cooperative also agrees to indemnify Imperial and various
       affiliated persons and entities for any liability arising
       out of the deposit, spill, discharge, or release of
       hazardous substances during the term of the lease, the
       Michigan Cooperative's use of the premises, or the
       Michigan Cooperative's failure to comply with
       environmental laws. Imperial and MSC has agreed to
       indemnify the Michigan Cooperative and certain affiliated
       parties for any liability related to the deposit, spill,
       discharge, or other release of hazardous substances
       during MSC's use of the premises or from MSC's failure to
       provide information, or make submissions required to
       comply with applicable environmental laws.

       (g) Insurance: The Michigan Cooperative will maintain
           public liability insurance for the leasehold premises
           and conduct of the Michigan Cooperative's business.
           Such insurance will name Imperial as an additional
           insured for up to $2,000,000 for death and bodily
           injury and $ 1,000,000 for property damage. The
           Michigan Cooperative additionally will maintain
           insurance on any of its personal property stored or
           used on the premises.

       (h) Representations and Warranties: The Michigan
           Cooperative represents and warrants, among other
           customary terms, that it will comply with all federal
           and state regulations and guidelines with respect to
           use of the premises and will not create any public or
           private nuisance and will not permit any hazardous
           substances to be brought onto, kept, or manufactured
           on the leasehold premises and will bear all
           responsibility for costs associated with compliance
           with laws regulating the use, generation, storage,
           transportation, or disposal of hazardous substances.

       (i) Arbitration: All unresolved disputes after mediation
           will be resolved by binding arbitration under the
           American Arbitration Association's Commercial
           Arbitration Rules.

       (j) Assignability: Permitted only with consent of
           landlord.

                Management and Marketing Agreements

Subject to Judge Robinson's approval and of Harris, as agent,
Imperial also has entered into agreements with the Michigan
Cooperative to provide the Michigan Cooperative with management
and marketing support during the term of the proposed lease and
beyond if a proposed sale of the factories to the Michigan
Cooperative is approved and consummated.

       (a) The Factory Management Agreement's terms are:

             (i) Retroactive to May 15, 2001 through February
                 28, 2002 or, if later, the end of the 2001 crop
                 campaign.

             (ii) Management Fee: The combined lease, marketing,
                  and management fee are as payable under
                  Michigan factories lease as discussed above.

            (iii) Resolution of Disputes. Disputes under the
                  management agreement will be resolved under
                  the Commercial Arbitration Rules of the
                  American Arbitration Association at a
                  proceeding to be held in Chicago, Illinois.

       (b) The Marketing Agreement's terms are:

             (i) Term: October 1, 2001 through September 30,
                 2002 or October 1, 2011, if the Michigan
                 factories are sold to the Michigan Cooperative.

            (ii) Marketing Fee: The combined lease, marketing,
                 and management fee are payable under the
                 Michigan factories lease as discussed above.

           (iii) Responsibilities of Marketer: Imperial will
                 have exclusive authority to market sugar and
                 sugar by-products produced at the leased
                 Michigan factories during the 2001 crop season
                 and will provide such services in a prudent
                 manner consistent with generally accepted
                 standards of refined sugar and sugar byproduct
                 marketing, sales, and distribution business,
                 including, without limitation:

                   (a) to maintain and operate a customer
                       tracking system, sales management
                       information system, and sales order
                       processing system,

                   (b) provide traffic services, transportation
                       management services, customer services,    
                       order entry services, credit management,
                       distribution services, and warehouse
                       management services,

                   (c) maintain a comprehensive marketing plan;

                   (d) take actions necessary to comply with
                       applicable laws; and

                   (e) submit monthly reports to the growers.

Imperial will be responsible for determining the numbers and
qualifications of employees needed for such services and will be
responsible for recruiting, hiring, supervising, training,
promoting, assigning, and discharging employees needed to
perform services. All employees retained by Imperial in its
capacity as marketer win be employees of Imperial, except as
otherwise determined under the terms of the marketing agreement.

                   (f) Relationship of the Parties: The
                       relationship of the parties under the
                       Marketing Agreement is that of
                       independent contractor to contracting
                       party.

                   (g) Marketing Standards: Imperial will
                       consult with and advise the Michigan
                       Cooperative on a marketing strategy. Each
                       August, Imperial will present a proposed
                       marketing plan for the coming year for
                       consultation. Imperial will undertake to
                       obtain a competitive price for all sugar
                       sold and if not sold by September 30,
                       2002, help store and market the balance.
                       Sugar may not be sold at a price which is
                       less than the forfeiture rate on
                       Commodity Credit Corporation loans
                       without the express consent of the
                       Michigan Cooperative.

                   (h) Ownership of Product: All product will be
                       owned by the Michigan Cooperative.

                   (i) Limitation of Liability, Imperial will be
                       liable to the Michigan Cooperative only
                       for acts or omissions in bad faith or for
                       acts or omissions in disregard of a
                       substantial risk of harm of risk to the
                       Michigan Cooperative where such risk was
                       known by Imperial and where such risk was
                       a gross deviation from conduct that a
                       reasonable person would have exercised in
                       the same situation.

                   (j) Indemnification of the Michigan
                       Cooperative. Notwithstanding the
                       immediately preceding paragraph, Imperial
                       will indemnify the Michigan Cooperative
                       and certain affiliated parties from any
                       claims, causes of action or liability to
                       any person incurred by the growers as a
                       result of Imperial's operation of the
                       Michigan Cooperative's business at the
                       four MSC factories. Imperial has the
                       obligation to defend the indemnified
                       parties in the any such action.

                   (k) Labels. Sugar marketed under the
                       marketing agreement will be marketed
                       under one or more of Imperial's
                       trademarked labels or the private label
                       of customers.

                   (l) Choice of Law. Michigan Resolution of
                       Disputes. Disputes under the management
                       agreement will be resolved under the
                       Commercial Arbitration Rules of the
                       American Arbitration Association at a
                       proceeding to be held in Chicago,
                       Illinois.

In support of their request, the Debtors advise Judge Robinson
that the proposed lease of MSC's beet processing factories to
the Michigan Cooperative and entry by Imperial and the Michigan
Cooperation into related management and marketing agreements are
a continuation of the Debtors' efforts to rationalize capacity,
reduce cash flow volatility and operating risks, and shift the
focus of the Debtors functions to high-value-added functions
such as marketing and distribution.  

Lease of the Michigan facilities and entry into the related
agreements will benefit the Debtors by limiting the risk the
Debtors currently assume when they purchase and take title to
sugar beets for processing, thus reducing cash flow volatility,
and will also permit the Debtors to reduce their December 2001
revolver borrowings by at least $60 million since the Debtors
will not have obligations to purchase any 2001 beet deliveries
in Michigan.  

The agreements also allow Imperial to capitalize on its
significant expertise in high value-added areas such as
marketing and management where the Michigan Cooperative lacks
experience.  For the farming community in Michigan, the
agreements also ensure that the factories will be able to
continue to operate under circumstances where economics
otherwise might dictate that they be closed for one or more
seasons because of low prices for refined sugar.

Imperial assures Judge Robinson that the terms of the lease and
related agreements are reasonable, fair, and customary for
similar agreements in the industry.  The terms were negotiated
at arms' length between parties with considerable knowledge of
both the sugar industry in general and the Michigan sugar beet
market in particular.  The single-season nature of these
arrangements enable Imperial to revisit and adjust its
arrangements with respect to the Michigan factories if the
need arises.

             Judge Robinson Conditions Her Approval

Judge Robinson grants the requested approval, but conditions it
upon a requirement that the Michigan Cooperative obtain
financing commitments for the lease year in an amount sufficient
to meet its obligations under the agreements, or otherwise
provide "reasonable assurance" to the Debtors, in a form
"reasonably acceptable" to the Debtors' Bank Group as described
in the Plan, of its ability to perform and satisfy all
obligations under the Agreements.  She further directs that the
Bank Group's acceptance of the form of the Michigan
Cooperative's assurance shall not be unreasonably withheld.

Each guaranty issued by any of the Debtors with respect to the
Michigan Industrial Revenue Bonds will remain in full force and
effect according to its original terms, and no rights granted
under the documents giving rise to or governing the Michigan
IDBs will be abrogated or impaired in any way as a result of
entry of this Order or consummation of the transactions
contemplated under the Agreements.

It is a condition to closing of the Agreements that the Debtors
shall have obtained a legal opinion from counsel, who is
acceptable to the indenture trustee for the holders of Michigan
IDBs, which provides, in form and substance acceptable to the
Michigan Indenture Trustee:

  (a) that all such bonds and interest generated thereupon, will
      continue to be tax exempt and will not be subject to the
      alternative minimum tax as a result of entry into the
      Agreements, and

  (b) that the entry into the Agreements will not result in
      violation of the Michigan statutes under which such bonds
      were issued.

Following the closing date under the Agreements. Judge Robinson
orders that it shall be an obligation of both the Debtors
(including MSC and Imperial) and the Michigan Cooperative to
timely provide the Michigan Indenture Trustee with quarterly,
internally prepared financial statements and annual audited
financial statements for their respective operations in the form
and manner required under the Michigan IDB documents.

With respect to the Michigan IDBs, the terms and conditions
of the Michigan IDB documents shall continue to govern any
assumption and/or assignment of the Michigan IDBs in connection
with an assignment. sale or lease of MSC or any of its
facilities (including, without limitation, the lease pursuant to
the Agreements) and such assumption and/or assignment shall be
permitted only to the extent provided under the Michigan IDB
documents.

Following any assignment, sale or lease of MSC or any of its
facilities (including, without limitation, lease pursuant to the
Agreements), Imperial shall remain obligated under the
guaranties it previously granted of MSC's obligations in respect
to the Michigan IDBs in accordance with the terms of such
guaranties.

Notwithstanding consummation of the transaction contemplated by
the Agreements, MSC, Imperial, and any other obligor of the
obligations and liabilities under the Michigan IDB documents,
shall each remain obligated for its respective obligations and
liabilities thereunder, and the Michigan IDBs remain enforceable
and in full force and effect.

Judge Robinson further ordered that the proceeds of the
agreements to Imperial were subject to the liens and
encumbrances of the Bank Group and are those parties'
collateral, to secure the Debtors' obligations under the Senior
Credit Agreement, as amended, and the DIP facility, and the
terms and conditions of these agreements, or affect the Bank
Group's liens pending a sale of the Michigan facilities.
(Imperial Sugar Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)  


INTEGRATED HEALTH: Court Okays Settlement Pact with SouthTrust
--------------------------------------------------------------
Integrated Health Services, Inc. and SouthTrust Bank have
disagreed as to the value of six of the Debtors' Facilities that
secure a mortgage loan in the principal amount of $53 million by
SouthTrust, as well as to a host of issues relating to
SouthTrust's alleged entitlement to adequate protection.

On June 12, 2001, the Court "so ordered" a stipulated discovery
and trial schedule, pursuant to which a hearing on both the
Valuation Motion and the Adequate Protection Motion was
scheduled for August 10, 2001.

By a separate Order dated June 12, 2001, the Court, with the
consent of the parties, scheduled a mediation before Judge Erwin
I. Katzon to explore the possibility of settling the entire
controversy. In accordance with the June 12, 2001 Orders, the
parties exchanged discovery requests, including document
requests, interrogatories and expert appraisals of the
Facilities.

Pursuant to a separate mediation procedural order issued by
Judge Katz, the parties exchanged settlement offers and
presented position papers to Judge Katz. Mediation before Judge
Katz ultimately led to the formation of a mutually acceptable
compromise, which received the Court's blessing. The Settlement
is summarized as follows:

(1) The settlement provides for the transfer of the Borrowers'
    fee interest in the Facilities, free and clear of all liens
    and claims (other than SouthTrust's existing mortgages), to
    a nominee of SouthTrust or its participant in the SouthTrust
    Loan, National Health Investors, Inc., which will
    simultaneously lease back the Facilities to Acquisition
    pursuant to a New Lease.

(2) The New Lease will provide for an Initial Term of 66 months
    and an option to renew for a term of 36 months (the Renewal
    Term). During the Initial Term, Acquisition will pay rent
    consisting of

     (a) Monthly Rent in the amount of $213,669, commencing on
         September 1, 2001 ; and

     (b) Quarterly Rent in the amount of $128,201, commencing
         on December 1, 2001. The aggregate annual rent under
         the New Lease is estimated at no less than $2 million
         below the annual debt service that would be owed by
         the Borrowers under the SouthTrust Loan.

(3) As consideration for operating the Facilities, Acquisition
    will be entitled to management fees consisting of (i) a
    Monthly Management Fee of 4% of the Facilities' net revenue,
    payable on a monthly basis and calculated from the
    immediately preceding month's operations, with the first
    payment due on October 1, 2001; and (ii) if the Quarterly
    Rent has been paid for the same quarter, an additional
    payment equal to 1% of the Facilities' net revenue, payable
    in arrears on a quarterly basis, with first payment due on
    December 1, 2001.

(4) A portion of the Facilities' net revenue will also be
    allocated for capital expenditures. All excess revenues will
    be divided between Acquisition and the Lenders as indicated
    in the Term Sheet.

(5) After the expiration of the Initial Term, rent during the
    36-month renewal term will be fixed at fair market value
    determined at the time of renewal, but shall in no event be
    less than the rent during the Initial Term. The parties will
    attempt to agree to the rent amount among themselves, but if
    they are unable to do so, each will appoint an appraiser who
    is familiar with Texas nursing home rents, and the two
    appraisers will appoint a third appraiser who will set the
    rent.

(6) During the Initial Term, the Acquisition shall have the
    exclusive option to purchase the Facilities for the
    principal amount now owed to SouthTrust ($51,280,431.74).
    Acquisition shall also have a right of first refusal in the
    event that the Lenders receive an arm's length offer to
    purchase the Facilities or an offer to purchase the Lenders'
    debt position at any time during the Initial Term.

(7) The Lenders agree not to sell the Facilities or their debt
    position for the next 3 years.

(8) In the event the Facilities are generating insufficient
    revenue to pay the both the Monthly Management Fee and the
    Quarterly Management Fee, the Debtors have the right to
    terminate the New Lease on 90 days' notice without any
    further penalties or liabilities, except for the transition
    obligations referenced in the Term Sheet.

The Debtors tell Judge Walrath that the proposed settlement
fully and finally resolves, on fair and reasonable terms, the
disputed legal and factual issues, the litigation of which
undoubtedly would be both costly and time-consuming.

Having analyzed the merits of the parties' respective positions
on the Adequate Protection Motion and the Valuation Motion, and
the likely risks and expenses attendant to litigating the
numerous issues emanating from this dispute, the Debtors have
determined that entering into a settlement in accordance with
the Term Sheet is a more favorable course of action.

The Debtors believe that such settlement is in the best interest
of the Debtors, their estates, their creditors, and all parties
in interest.

Specifically, the Debtors note that the proposed settlement
affords the Debtors the equivalent of a reduction in their
monthly payments to SouthTrust, while allowing the Debtors to
retain possession and operate the Facilities with an economic
incentive to improve their performance and hopefully ride the
tide of a healthcare market rebound. The Debtors believe the
monthly revenues will support the reduced monthly fee and allow
it to receive a market-rate management fee. The transaction will
also eliminate mortgage debt from the Debtors' balance sheets.

The settlement gives the Debtors the flexibility to either
purchase the Facilities if their value returns or give them back
to SouthTrust if their value deteriorates. The settlement also
protects the Debtors in the event that SouthTrust decides to get
out of its investment by giving the Debtors valuable rights of
first refusal.

The settlement also allows the Debtors to resolve thorny
disputed legal and factual issues, and the incurrence of
additional time and expense that would accompany a litigated
resolution.

Based upon all the reasons, the Debtors believe that the
proposed settlement is an eminently fair and reasonable
compromise. (Integrated Health Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)   


JORDAN INDUSTRIES: S&P Assigns B+ On $110 Million Bank Facility
---------------------------------------------------------------
Standard & Poor's assigned its single-'B'-plus rating to Jordan
Industries Inc.'s new $110 million senior secured bank credit
facility due 2006.

     Jordan Industries Inc.                        Rating

       $100 million senior secured bank loan       B+

           Rating Affirmed, Outlook Revised to Negative

     Jordan Industries Inc.                        Rating
      
       Corporate credit rating                     B
       Senior unsecured debt rating                B
       Subordinated debt rating                    CCC+

In addition, Standard & Poor's revised its outlook on Jordan to
negative from stable.

The ratings on the company were simultaneously affirmed.

At June 30, 2001, debt at Jordan's restricted subsidiaries was
about $528 million.

The rating actions reflect continued softness in many of
Jordan's subsidiaries, and the company's willingness to pursue
debt-financed acquisitions during this period of challenging
market conditions, which has further eroded very modest credit
protection measures and liquidity.

The ratings reflect Jordan's very aggressive financial policy
and financial profile, tempered by fair niche positions within
its restricted subsidiaries. Deerfield, Ill.-based Jordan is a
closely held company with a portfolio of business units serving
consumer, industrial, specialty printing and labeling, specialty
plastic, automotive, and information technology markets.

The firm's business units generally have leading positions in
niche, modestly cyclical, and highly fragmented markets. Capital
investment requirements are limited. Most units, however, have
limited growth prospects and face significant pricing pressures.
The business strategy is acquisition driven. Transactions are
typically modest to moderate in size and can be "tuck-in",
complementing existing operations, or strategic, forming new
legs.

For the first six months of 2001, EBITDA declined by about 40%.
As a result, EBITDA to cash interest was thin, at about 1.3
times, while total debt to EBITDA over 9.0x. Although the
company was able to improve its working capital management, cash
flow from operations was modestly negative in the first half of
2001.

Liquidity benefits from Jordan's ownership in its unrestricted
subsidiary, Kinetek Inc., discrete business units that could be
sold, about $15 million in cash, and sufficient availability
under its new bank credit facility. Nonetheless, financial
flexibility is modest, reflecting a heavy debt burden and
increasing term risk, with Jordan's $214 million 11.75% senior
subordinated notes becoming cash pay in October 2002.

Jordan has publicly stated that should its EBITDA and cash flow
generation continue through 2002 at levels experienced in the
first half of 2001, it would barely generate sufficient cash to
cover its interest payments. Although liquidity is limited,
Jordan purchased four companies through July 2001 for about
$10.5 million. In the near term, EBITDA to interest is
expected to remain in the vulnerable 1x area.

                       Outlook: Negative

Failure to stabilize operations and improve financial
flexibility could lead to a ratings downgrade in the near term.

                       
LAIDLAW INC: Seeks Open-Ended Extension of Lease Decision Period
----------------------------------------------------------------
Laidlaw Inc. and its affiliates are tenants under 5 unexpired
nonresidential real property leases for office space and
operational facilities.

Thus, the Debtors ask Judge Kaplan to extend the deadline to
assume or reject each of the Leases through and including the
date on which their Plan of Reorganization is confirmed.

The deadline technically expired on August 27, 2001.  On that
same day, the Debtors raced to the Courthouse for a bridge order
extending the assumption-rejection period until the Court can
hold a hearing (if that's even necessary) and make a final
determination on the Extension Motion.

Garry M. Graber, Esq., at Hodgson Russ, in Buffalo, New York,
relates that since the Petition Date, the Debtors have been
focusing their efforts on completing the smooth transition to
operations in chapter 11.  Because they were so busy, Mr. Graber
says, the Debtors were unable to:

    (a) evaluate the Leases thoroughly,

    (b) determine which of the Leases will contribute to the
        Debtors' restructuring efforts, or

    (c) solicit the views of the Creditors' Committee, the Bank
        Group, the Noteholders' Committee and other
        constituencies regarding the appropriate treatment of
        each Lease.

The Debtors were given 60 days from the filing of these cases to
determine which leases they want to assume or reject.  But given
the importance of the Leases to the Debtors' ongoing operations,
Mr. Graber says, it would be impossible for the Debtors to make
a decision on such a short period of time.  Mr. Graber reminds
the Court that there are a lot of issues that the Debtors must
consider and resolve in deciding whether to assume, assume and
assign, or reject each of the Leases.

The Debtors contend that it would be more prudent to wait until
the Confirmation Date before they make final assumption or
rejection decisions.

If the Court will deny the relief requested, Mr. Graber warns,
the Debtors might be at risk of prematurely assuming Leases
which would later prove to be useless or rejecting Leases which
would have been critical to their reorganization efforts.

On the other hand, Mr. Graber notes, that if Judge Kaplan will
rule favorably, the Debtors promise speed up all evaluations,
determinations and negotiations necessary to assume, assume and
assign, or reject each of the Leases.  While that process is not
yet complete, Mr. Graber assures the Court that the Debtors will
continue to perform all of their obligations arising under the
Leases in a timely fashion, including payment of all post-
petition rent due.

Thus, Mr. Graber asserts that granting this motion will not
prejudice the Lessors under these Leases:

      Location                            Lessor
      --------                            ------
1) 181 Bay Street              BCE Place (Wellington) Limited
   Toronto, Ontario            c/o Brookfield Development Corp.
                               P.O. Box 746 Toronto, Canada

2) Office Space, London        Decade Corporation
                               252 Pall Mall Street, Suite 303
                               London, Canada

3) 1108 Derwent Way            Grosvenor Int'1 Holding Ltd.
   Annacis Business Park       777 Hornby Street
   New Westminster, BC         19th Floor Vancouver BC Canada

4) 3255 North Service Road     Knaul, Marie
   Burlington, Ontario         c/o 417 Parliament Street
                               Toronto, Canada

5) 12301 Wilshire Blvd.        Mutual Life Insurance Co. of NY
   Suite 301                   c/o Ardent Realty Ltd.   
                               Partnership
   Los Angeles, California     19712 MacArthur Blvd., Ste. 200
                               Irvine, California 92612
(Laidlaw Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Service, Inc., 609/392-0900)  


LA PETITE: S&P Junk Ratings Reflect Weak Operating Performance
--------------------------------------------------------------
Standard & Poor's lowered its corporate credit and senior
secured ratings on La Petite Academy Inc. to triple-'C'-plus
from single-'B', and its senior unsecured rating to triple-'C'-
minus from single-'B'-minus. The senior unsecured rating is
lowered three notches rather than two, considering the
substantial amount of secured debt and Standard & Poor's
increasing concern with the asset value of the child-care firm.

At the same time, the ratings are placed on CreditWatch with
negative implications.

About $207 million of debt and bank loans are affected.

The rating downgrade reflects the company's weak operating
performance, and diminished operating and financial flexibility.

Overland Park, Kan.-based La Petite is the second-largest chain
provider of preschool education and child care in the U.S.,
operating about 750 centers nationwide. However, the company has
been unable to achieve the operating improvements necessary for
it to contend with the heavy debt burden associated with its
recapitalization in 1998.

The company announced that it is in default of certain financial
covenants contained in its senior secured bank agreement. Absent
external funding, or a dramatic improvement in working capital,
the company will be unable to meet an upcoming interest payment
due on November 15, 2001.

La Petite is expected to pursue a waiver of its financial
covenant violations and amendments on its bank loan.
Furthermore, the company has hired Chanin Capital Partners LLC
to assess strategic alternatives, including a financial
restructuring of the company.

The CreditWatch listing incorporates the possibility that the
ratings could be lowered further, if La Petite is unsuccessful
in its efforts to improve its financial flexibility.


LTV CORP: Seeks Court Approval of Revised Financing Agreement
-------------------------------------------------------------
Bennett J. Murphy of the Los Angeles firm of Hennigan, Bennett &
Dorman, acting as Special Litigation and Financing Counsel for
The LTV Corporation, Frederic L. Ragucci of the New York firm of
Schulte Roth & Zabel LLP, as counsel for Abelco Finance LLC,
lender and Collateral Agent, and CIT Group/Business Credit,
Inc., as lender and Administrative Agent, and Lindsee P.
Granfield of the New York firm of Cleary, Gottlieb Steen &
Hamilton, as counsel for Abbey national Treasury Services plc,
as lender and Syndication Agent, join each of Lisa G. Beckerman
of the new York firm of Akin Gump Strauss Hauer & Feld LLP, as
counsel for the Official Committee of Noteholders, and Ron
Francis of the Pittsburgh firm of Reed Smith as counsel for the
Official Committee of Trade Creditors, in a Stipulation seeking
Judge Bodoh's approval of a First Amendment to the Financing
Agreement dated April 2, 2001.

The Debtors entered into and the Court by its Order approved the
Debtors' Motion for Order Approving Post-Petition Financing and
Related Relief, and Granting Security Interests and
Superpriority Claims entered on March 20, 2001, effectuating a
Financing Agreement dated as of April 2, 2001, with
Group/Business Credit, Inc., the Administrative Agent, and
Abbey National Treasury Services plc as the Syndication Agent,
whereby the Lenders agreed to provide up to $100,000,000 of
debtor-in-possession financing to the Debtors.

The Debtors have advised the Agents that EBITDA reported by VP
Buildings for the period ending June 30, 2001, did not meet the
level specified in Section 7.03(b) of the Financing Agreement
for such period, thereby giving rise to an Event of Default
under section 9.01(c) of the Financing Agreement.

The Required Lenders have agreed to waive this default and
modify the Financing Agreement pursuant to the terms in the
First Amendment to Financing Agreement.  In consideration for
certain of the modifications to the Financing Agreement and the
waiver contained in the Amendment, the Debtors have agreed to
pay the Administrative Agent for the benefit of the Lenders a
$200,000 amendment fee and to pay all reasonable costs and
expenses of the Agents incurred in connection with the
Amendment.

The Debtors and other parties stipulate that the terms of the
Amendment are "fair and reasonable" and the approval of the
Amendment is in the best interests of the Debtors and their
estates. (LTV Bankruptcy News, Issue No. 14; Bankruptcy
Creditors' Service, Inc., 609/392-00900)


MEDIQ: Court Sets Oct. 25 as Bar Date for Filing Proofs of Claim
----------------------------------------------------------------
                 UNITED STATES BANKRUPTCY COURT
                       DISTRICT OF DELAWARE

_______________________________x
In re:                         :  Chapter 11     
MEDIQ INCORPORATED, et al.,    :  Case No.: 01-252 (MFW)      
             Debtors,          :  Jointly Administered
_______________________________x

            
           NOTICE OF BAR DATE TO FILE PROOFS OF CLAIM
           __________________________________________

     PLEASE TAKE NOTICE that the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court") has
entered an Order establishing October 25, 2001 (the "Bar Date"),
as the last date to file proofs of claim for the purpose of
asserting claims against any of the debtors in the above-
captioned cases (the "Debtors") that arose before January 24,
2001 (the "Petition Date") and that have not yet been paid.
        
     PLEASE TAKE FURTHER NOTICE that if you own or hold any of
the Debtors' stock or other equity securities, you need not file
a proof on interest solely on account of your ownership interest
or possession of such equity securities.
       
     PLEASE TAKE FURTHER NOTICE that the deadline to submit a
rejection damages claim arising from the Debtors' rejection
during these chapter 11 cases of an executory contract or
unexpired lease has been set by previous order of the bankruptcy
court.  Any other claims arising before the Petition Date
respecting any leases or contracts of the Debtors must be filed
by the Bar Date.
   
     PLEASE TAKE FURTHER NOTICE that you should not file a proof
of claim if you do not have a claim against any of the Debtors.  
Moreover, the Debtors of their attorneys cannot tell you whether
you have such a claim or whether you should file a proof of
claim.

     PLEASE TAKE FURTHER NOTICE that if you decide to file a
proof of claim, you must complete a proof of claim from the
deliver it by mail, hand delivery or overnight courier, together
with any supporting documentation for your claim to the Claims
Agent appointed by the Bankruptcy Court at the following
address:

             MEDIQ INCORPORATED, et al.
             c/o THE ALTMAN GROUP, INC.
             60 East 42nd Street, Suite 1241
             New York, New York 10165
             (212) 681-9600

     PLEASE TAKE FURTHER NOTICE that if you wish to assert
claims against more than one Debtor, you must file a separate
proof of claim in the case of each Debtor against which you
believe you hold a claim.  You may request additional proof of
claim forms from the Claims Agent at telephone number (212) 681-
9600.

     PLEASE TAKE FURTHER NOTICE that each signed original proof
of claim form must be ACTUALLY RECEIVED by the Claims Agent on
or before 4:00 p.m. (EST) on the Bar Date.  The Claims Agent
shall reject any facsimile or electronic submissions.

     PLEASE TAKE FURTHER NOTICE that if you are required to
submit a proof of claim to preserve your claim against any of
the Debtors and the Claims Agent does not actually receive your
original proof of claim in the manner described above on or
before the Bar Date or other applicable deadline,  you shall be
forever barred from asserting any such claim against any of the
Debtors or their successors or assigns, and you will be barred
from receiving any distribution made during these chapter 11
cases by the Debtors to their creditors.

DECHERT                         RICHARDS, LAYTON & FINGER, P.A.
30 Rockefeller Plaza            One Rodney Square, 9th Floor
New York, NY 10112              Wilmington, DE 19899
Attn:  Joel H. Levitin, Esq.    Attn:  Mark D. Collings, Esq.

    Co-Counsel for the Debtors and Debtors-in-Possession


METRICOM INC: Nasdaq Delists Securities Effective September 10
--------------------------------------------------------------
Metricom Inc. (Nasdaq:MCOQE), a company that provided high-speed
wireless data services, announced that it has been notified by
Nasdaq that its securities would be delisted from The Nasdaq
Stock Market effective as of the opening of business on Monday,
September 10, 2001.

This notification follows Metricom's withdrawal of its request
for a hearing before a Nasdaq Listing Qualifications Panel to
consider the delisting determination previously made by the
Nasdaq staff.

Trading in Metricom's common stock has been suspended since July
2, 2001, following its announcement that it had filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. The
Company anticipates that its securities may be quoted on the
Pink Sheets following delisting from The Nasdaq Stock Market.


MIDWAY AIRLINES: Nasdaq Delists Common Stock Effective Sept. 8
--------------------------------------------------------------
Midway Airlines Corporation announced that due to its August
13th filing for reorganization under Chapter 11 of the U.S.
Bankruptcy Code, it no longer complies with the requirements for
the continued listing of its common stock (MDWYQ) on the Nasdaq
National Market.

The common stock will therefore be delisted from trading
effective September 8, 2001. Trading on the stock has
been halted since the August 13th reorganization filing.

Due to the uncertainties surrounding the value of the common
stock post-reorganization, the company has no plans to list the
securities for trading on another exchange at this time.
However, independent brokers may seek to create a market for the
company's common stock in over-the-counter markets such as the
OTC Bulletin Board(R) or the Pink Sheets(R), although the
company is not currently aware of any efforts to do so. Market
makers do not need the company's cooperation to make a market in
its securities.


NEWCOR INC.: S&P Assigns D Ratings After Default on Notes
---------------------------------------------------------
Standard & Poor's today lowered its corporate credit rating on
Newcor Inc. to 'D' from triple-'C' and its subordinated debt
rating on the company to 'D' from double-'C'. At the same time,
the ratings are removed from CreditWatch, where they were placed
on August 30, 2001.

The rating actions follow Newcor's failure to make the Sept. 4,
2001, semi-annual interest payment on its 9.875% senior
subordinated notes due 2008. The company indicated that it would
explore alternatives to access funds to meet its interest
obligations, but did not specify what those alternatives might
be.

Cash flow generation is expected to remain very weak
given the depressed near-term outlook for its key markets. It is
therefore problematic that the company could effect a
recapitalization without material impairment for bondholders.

Newcor is a manufacturer of precision-machined components and
assemblies; molded rubber and plastic products; and specialty
equipment for the automotive, medium- and heavy-duty truck, and
agricultural vehicle markets. Demand in all of Newcor's end
markets has declined during the past year. The heavy-duty truck
and agricultural equipment markets have experienced an
especially steep decline, and no material recovery is expected
in the near term.

Industry pressures translated into a 30% decrease in sales for
the first six months of 2001, compared with the same period the
previous year, and a 71% decline in operating income. Debt to
EBITDA, on a 12-month rolling average, stands at 16.9 times, up
from 5.0x for the same period the previous year, and leverage
will remain very aggressive until markets recover.


NIAGARA MOHAWK: Negative Capital Balance Pegged at $568.5MM
-----------------------------------------------------------
Niagara Mohawk Holdings, Inc.'s loss for the second quarter of
2001 was $80.0 million, as compared with a loss of $19.7 million
for the second quarter of 2000.  

The loss for the second quarter of 2001 includes a charge of
$44.0 million due to the recognition of an impairment charge of
its entire investment in Telergy, Inc., a development stage
telecommunications company, as a result of Holdings' assessment
of its investment in Telergy, Inc..

The loss for the second quarter of 2000 includes extraordinary
charges related to the early repayment of debt of $0.9 million.
According to the Company second quarter results for 2001, as
compared with the second quarter of 2000, were negatively
impacted by the following items:

  * Niagara Mohawk's exposure to higher natural gas prices in
its purchased power portfolio of $16.1 million, principally
because restructured contracts with IPPs began indexing to
natural gas prices in July 2000. Fuel and purchased power costs
were also higher because of an indexed contract with an IPP not
part of the MRA. Niagara Mohawk has taken steps to hedge against
further volatility in natural gas prices, largely by purchasing
NYMEX gas futures contracts through August 2001, which marks the
end of the fixed price period in Niagara Mohawk's multi-year
regulatory agreement.

   * Changes in the percentage allocation of federal income
taxes in the second quarter 2001 as compared to the same period
in 2000 of $22.6 million. The effective tax rate will differ
from the statutory rate primarily due to the flow-through of
certain tax benefits or liabilities as required by the PSC.

   * Lower subsidiary earnings of 3 cents per share primarily as
a result of market-to-market losses on the trading portion of
Niagara Mohawk Energy's portfolio.

No auction incentive was recorded in the second quarter 2001 and
an auction incentive of $6.0 million was recorded in the second
quarter 2000.

A reduction in regulated electric revenues by $2.7 million as a
result of the implementation of Niagara Mohawk's third phase of
rate reductions in September 2000 under Power Choice.

Second quarter results have been positively impacted by the
following items:

   * Lower interest expense of approximately $10.0 million due
to the repayment of debt during 2000 and 2001.

   * Receipt of multi state tax refunds from a previously owned
subsidiary of $3.9 million related to tax periods prior to 1995.

The increase in GRT credits received by Niagara Mohawk of $5.2
million due to an increase in the customers in Niagara Mohawk's
service territory that participate in New York State's Power for
Jobs program.

                       Liquidity

At June 30, 2001, Holdings and Niagara Mohawk's principal
sources of liquidity included cash and cash equivalents of
$169.2 million and $82.7 million, respectively, and accounts
receivable of $307.3 million and $264.4 million, respectively.

Holdings and Niagara Mohawk have a negative working capital
balance of $426.5 million and $568.5 million, respectively,
primarily due to long-term debt due within one year of $418.1
million at Niagara Mohawk and short-term debt of $5.0 million.

Ordinarily, construction related short-term borrowings are
refunded with long-term securities on a periodic basis. This
approach generally results in a working capital deficit.

Working capital deficits may also be a result of the seasonal
nature of Niagara Mohawk's operations as well as the timing of
differences between the collection of customer receivables and
the payments of fuel and purchased power costs.

Although the Company's total current assets of $698.8 million is
way below its total current liabilities of $1.12 billion,
Niagara Mohawk believes it has sufficient cash flow and
borrowing capacity to fund such deficits as necessary in the
near term.


NIKE: Portland Expo. Bldg. New Venue for Shareholders' Meeting
--------------------------------------------------------------
Nike Inc. has changed the location of the NIKE, Inc. annual
meeting of shareholders.  The date and time are the same.

The meeting will be held at the Portland Exposition Building,
239 Park Avenue, Portland, Maine 04102, on Monday, September 17,
2001 at 1:00 P.M. Eastern Time.  

The doors will open for registration at 12:00 noon. Shareholders
must present an admission ticket enclosed in the Proxy
Statement.


OWENS CORNING: Seeks Third Extension of Removal Period to May 28
----------------------------------------------------------------
Owens Corning asks the Court to extend the deadline by which
they must decide whether to remove any prepetition lawsuits to
the District of Delaware to May 28, 2002.

J. Kate Stickles, Esq., at Saul Ewing LLP, of Wilmington,
Delaware contends that the Debtors have not had much opportunity
to evaluate and determine which actions to remove. She reveals
that the Debtors and their counsel also have to manage and
maintain their business operations while administering these
chapter 11 cases. Without the requested extension, the Debtors
could make removal decisions that might prove disadvantageous to
the estates.

Ms. Stickles asserts that none of the Debtors' adversaries will
be prejudiced by the requested time extension, as each
individual action is stayed by the operation of section 362 of
the Bankruptcy Code. Lastly, she argues that if the Debtors seek
to remove any of the individual actions, any party to that
action may seek to have it remanded. (Owens Corning Bankruptcy
News, Issue No. 16; Bankruptcy Creditors' Service, Inc.,
609/392-0900)


PACIFIC GAS: Seeks Approval of Stipulation with Credit Enhancers
----------------------------------------------------------------
In order to preserve favorable bond financing with tax-exempt
status related to Pollution Control Revenue Bonds, commenced
pre-petition, and in light of the constraint on Pacific Gas and
Electric Company after the chapter 11 petition from reimbursing
either the Letter of Credit Issuing Banks or MBIA Insurance
Corporation (the issuer of a financial guaranty insurance policy
- the PC Bond Insurance Policy) for payments they have made
pursuant to the several post-petition draws by the Bond Trustee,
PG&E seeks the Court's approval of a Stipulation with various
Credit Enhancers.

      Background and Mechanics of Subject Bond Issuances

  (1) Revenue Bonds and Credit Enhanced Revenue Bonds

The California Pollution Control Financing Authority, a public
instrumentality and political subdivision of the State of
California was the Issuer of Revenue Bonds pursuant to various
separate trust indentures between the Issuer and Bankers Trust
Company as the Bond Trustee and various corresponding loan
agreements between the Issuer and PG&E.

As of the petition date, the Issuer had issued and outstanding
15 series of its revenue bonds in aggregate principal amount of
approximately $1.69 billion. As of the date of the motion, 11
series of such revenue bonds remain outstanding in the aggregate
principal amount of approximately $1.24 billion. Five of these
11 series are credit-enhanced revenue bonds (the Credit Enhanced
PC Bonds) in the aggregate principal amount of approximately
$814 million.

The Issuer loaned the proceeds from the sale of each series of
Credit Enhanced PC Bonds to PG&E for the purpose of financing or
refinancing the acquisition and/or construction of certain
pollution control, sewage disposal and/or solid waste disposal
facilities of PG&E located within the State of California.
Pursuant to the Bond Loan Agreements, PG&E agreed, among other
things, to repay the Bond Loans at the times and in the amounts
necessary to enable the Issuer to make full and timely payment
of (i) the principal of, (ii) premium, if any, and (iii)
interest on, each series of Credit Enhanced PC Bonds when due
and to pay the purchase price of any Credit Enhanced PC Bonds
tendered for purchase by PG&E in accordance with the terms of
the applicable Indenture.

Pursuant to the terms of each of the Indentures, the Issuer
assigned to the Bond Trustee, for the benefit of the holders of
the respective series of Credit Enhanced PC Bonds, certain of
the Issuer's rights under the various Loan Agreements, including
the Issuer's right under the Loan Agreements to receive the
above-mentioned payments from PG&E.

In this manner, the Issuer acted solely as a conduit, loaning
the proceeds from the sale of the Credit Enhanced PC Bonds to
PG&E and assigning its right to receive repayment of such loans
to the Bond Trustee as security for the Credit Enhanced PC Bonds
and to provide funds for the full payment of the respective
Credit Enhanced PC Bonds.

The Credit Enhanced PC Bonds are special limited obligations of
the Issuer payable exclusively out of the trust estates under
each of the Indentures. None of the Credit Enhanced PC Bonds
constitute a debt or liability, or a pledge of the faith, credit
or taxing power of the Issuer, the State of California or any of
its instrumentalities or political subdivisions. Rather, each
series of Credit Enhanced PC Bonds is a limited obligation of
the Issuer payable solely from the revenues derived by the
Issuer from PG&E pursuant to the terms of the related Loan
Agreement to the extent pledged by the Issuer to the Bond
Trustee under the terms of the applicable Indenture, and from
certain other funds pledged and assigned as part of the trust
estates under the applicable Indentures.

  (2) Letter of Credit Backed PC Bonds

With respect to each series of Credit Enhanced PC Bonds other
than the 96A Bonds (collectively, the "Letter of Credit Backed
PC Bonds"), PG&E entered into a reimbursement agreement (each, a
"Letter of Credit Reimbursement Agreement") with a bank (each, a
"Letter of Credit Issuing Bank") and certain banking or other
financial institutions (each, a "Bank"), pursuant to which the
Letter of Credit Issuing Bank issued its irrevocable letter of
credit to the Bond Trustee, for the account of PG&E, to provide
for the payment of the principal of and interest on the related
series of Letter of Credit Backed PC Bonds and to support the
payment of the purchase price of any Letter of Credit Backed PC
Bonds tendered for purchase in accordance with the terms of the
applicable Indenture. Under the terms of each Letter of Credit
Reimbursement Agreement, PG&E is obligated to reimburse the
Letter of Credit Issuing Bank for all amounts drawn on the
related Letter of Credit.

Each Letter of Credit was issued in an initial stated amount
equal to the sum of

   (i)  the aggregate outstanding principal amount of the
        related series of Letter of Credit Backed PC Bonds (the
        "Principal Portion"), plus

   (ii) an amount equal to the amount of accrued interest on the
        outstanding principal amount of the related series of
        Letter of Credit Backed PC Bonds at an assumed maximum
        annual rate for a specified period of days as set forth
        in the Letter of Credit (the "Interest Portion").

The Stated Amount of each Letter of Credit is reduced by the
amount of each drawing paid thereunder, subject to the provision
that

(a) with respect to amounts drawn for the payment of scheduled
    interest on the related Letter of Credit Backed PC Bonds,
    the Interest Portion of the Stated Amount is automatically
    reinstated unless the Letter of Credit Issuing Bank gives
    notice to the contrary to the Bond Trustee in accordance
    with the terms of the applicable the Letter of Credit, and

(b) with respect to amounts drawn to pay the purchase price of
    Letter of Credit Backed PC Bonds, the amount so drawn is
    subject to reinstatement upon the terms set forth in the
    applicable Letter of Credit.

Under the terms of each of the Indentures pursuant to which each
series of Letter of Credit Backed PC Bonds were issued, each
regularly scheduled payment of the principal of, or interest on,
the Letter of Credit Backed PC Bonds is made from moneys drawn
by the Bond Trustee under the related Letter of Credit. The
obligation of PG&E to repay the loan under the Loan Agreement is
deemed satisfied to the extent of any corresponding payment made
by the Letter of Credit Issuing Bank under the terms of the
Letter of Credit.

With respect to each such drawing, PG&E is then obligated under
the applicable Letter of Credit Reimbursement Agreement to
reimburse the Letter of Credit Issuing Bank for the amount of
such drawing. Only if the Letter of Credit Issuing Bank
dishonors a drawing, or there is no Letter of Credit then in
effect, is the Bond Trustee authorized under the terms of the
Indenture to collect Bond Loan payments under the respective
Loan Agreement and apply such funds to the payment of the
principal of, or interest on, the related Letter of Credit
Backed PC Bonds.

Accordingly, with respect to each series of Letter of Credit
Backed PC Bonds for which the related Letter of Credit remains
outstanding, all payments of the principal of, and interest on,
the Letter of Credit Backed PC Bonds have been fully and timely
made when due from draws made by the respective Bond Trustee on
the respective Letter of Credit in accordance with the terms of
such Letter of Credit and the related Indenture.

  (3) The MBIA-Enhanced 96A Bonds

In connection with the 96A Bonds, PG&E entered into a
reimbursement and indemnity agreement with MBIA Insurance
Corporation pursuant to which MBIA issued its financial guaranty
insurance policy (the "PC Bond Insurance Policy") insuring the
full payment of regularly scheduled principal of and interest
(but not premium) on the 96A Bonds.

The PC Bond Insurance Policy unconditionally and irrevocably
guarantees:

(a) the full and complete payment to the Bond Trustee of an
    amount equal to the principal of and interest on the MBIA
    Insured PC Bonds as such payments shall become due but
    unpaid (except that in the event of any acceleration of the
    due date of such principal by redemption or other reason,
    other than any mandatory sinking fund payment or mandatory
    redemption upon the occurrence of a determination of
    taxability of the 96A Bonds, the payments guarantee by the
    PC Bond Insurance Policy shall be made in such amounts and
    at such times as if there had not been any such
    acceleration); and

(b) the reimbursement of any such payment which is subsequently
    recovered from any owner of 96A Bonds pursuant to a final
    judgment by a court of competent jurisdiction that such
    payment constitutes an avoidable preference to such owner
    within the meaning of any applicable bankruptcy law.

Under the terms of the MBIA Reimbursement Agreement, PG&E is
obligated to reimburse MBIA for all payments made by MBIA to the
Bond Trustee under the PC Bond Insurance Policy and to indemnify
MBIA against certain liabilities, costs and expenses that it may
sustain in connection with the 96A Bonds.

  (4) Tax-Exempt Status of Credit Enhanced PC Bonds

All of the Credit Enhanced PC Bonds (i.e., both the Letter of
Credit Backed PC Bonds and the 96A Bonds) were sold in the
capital markets on the basis that, assuming PG&E continues to
comply with certain covenants contained in the Loan Agreements
and certain related documents (collectively, the "PC Bond
Documents") and with certain exceptions, interest on such series
of Credit Enhanced PC Bonds would not be includable in the gross
income of the holders for federal income tax purposes or
California personal income taxes.

The tax-exempt status of the Credit Enhanced PC Bonds has
allowed such bonds to be issued at favorable interest rates,
thus allowing PG&E to finance certain of its capital
improvements and other qualified costs at rates substantially
below comparable conventional taxable financing alternatives
available to PG&E.

Based on the tax-exempt status of the Credit Enhanced PC Bonds,
their credit enhancement and their commensurate credit rating,
the Credit Enhanced PC Bonds currently accrue interest at the
average blended interest rate of only 3.66% per annum,
calculated as of August 8, 2001, shortly before the filing of
this Motion.

In the event that any of the Credit Enhanced PC Bonds were to be
redeemed in accordance with the terms of their respective
Indentures, it may not be possible under current law to reissue
such bonds on a tax-exempt basis.

PG&E desires to keep the Credit Enhanced PC Bonds outstanding in
order to preserve the substantial benefits of such tax-exempt
financing.

        Post-Petition Status and Necessity for the Relief

Since the Petition Date, all of the Credit Enhanced PC Bonds
have remained outstanding, and each scheduled interest payment
due has been fully and timely made by the Bond Trustee through
the use of draws made on the respective Letters of Credit or
payments made under the PC Bond Insurance Policy issued by MBIA.
However, consistent with its duties as a Chapter 11 debtor in
possession, PG&E has not reimbursed either the Letter of Credit
Issuing Banks or MBIA for any of the payments.

Following each such drawing by the Bond Trustee in May, June,
July and August 2001, each of the Letter of Credit Issuing Banks
has allowed the Interest Portion of its respective Letter of
Credit to automatically reinstate in accordance with the terms.

The next interest draw on the Letters of Credit will be on or
about September 4, 2001, and each Letter of Credit Issuing Bank
thereafter has until on or about September 10, 2001 to decide
whether to give notice to the Bond Trustee that such Letter of
Credit Issuing Bank's Letter of Credit will not be reinstated or
to stay silent and permit an automatic reinstatement.

Each of the Letter of Credit Issuing Banks and MBIA claim that
they have the right upon the passage of time, or the giving of
notice, or both,

(a) to declare a default under its respective Reimbursement
    Agreement,

(b) to notify the Bond Trustee of such default, and

(c) to direct the Bond Trustee to call an Event of Default under
    the terms of the respective Indenture and to declare the
    respective series of Credit Enhanced PC Bonds immediately
    due and payable.

Thus, PG&E cannot take for granted the continued benefits of the
tax-exempt financing:

    -- In the case of the Letter of Credit Backed PC Bonds, the
Bond Trustee would, in accordance with the terms of the
respective Indentures and the respective Letters of Credit, draw
upon the respective Letters of Credit, and apply such drawn
funds to the full payment and cancellation of the related
outstanding Letter of Credit Backed PC Bonds, with the end
result that this tax-preferred financing would no longer be
outstanding, and

    -- In the case of the 96A Bonds, the Bond Trustee may make
demand upon PG&E for the full outstanding amount of the 96A
Bonds and, because PG&E could not honor such demand as a Chapter
11 debtor in possession, may then draw on the PC Bond Insurance
Policy from time to time to the extent of the regularly
scheduled amounts specified in the PC Bond Insurance Policy.

During the first several months of the PG&E Chapter 11 case, the
Letter of Credit Issuing Banks and MBIA (the Credit Enhancers)
refrained from taking the actions described above. However, they
have indicated to PG&E that they required some type of comfort
agreement with PG&E that would need to be approved by the
Bankruptcy Court if they were to consider any further such
restraint.

For the past several weeks, PG&E and the Credit Enhancers have
engaged in discussions, culminating in the proposed Stipulation.

              Summary of Terms of Stipulation

The principal terms of the Stipulation are summarized as
follows:

Term No. 1:

Any post-Petition interest drawings under the Letters of Credit
shall result in allowed claims against PG&E and its bankruptcy
estate in favor of the applicable Letter of Credit Issuing
Banks.

Similarly, any post-petition interest payments on the PC Bond
Insurance Policy shall result in allowed claims against PG&E and
its bankruptcy estate in favor of MBIA.

In addition, to the extent provided for under the applicable
Reimbursement Agreements or any Agreement To Extend The Letter
of Credit that is entered into pursuant to the Stipulation, the
fees and expenses of the Letter of Credit Issuing Banks, the
Banks and MBIA (including, to the extent incurred post-petition
in connection with this Chapter 11 case, the fees and expenses
of unrelated third-party professionals' retained by the Letter
of Credit Issuing Banks, the Banks and MBIA) will result in
allowed claims, to the extent that the fees and expenses of the
professionals of the Letter of Credit Issuing Banks and the
Banks were incurred for services that were not duplicative of
the services of third party professionals of the Letter of
Credit Issuing Banks, and provided further that PG&E and any
other parties in interest reserve the right to object to all
professional fees and expenses on the grounds of reasonableness.

The Stipulation and order will be without prejudice to:

(a) claimant's right or ability to argue that the allowed claims
    constitute administrative expense claims under Sections
    503(b) and 507(a)(l) of the Bankruptcy Code, or

(b) PG&E's and any other party in interest's right or ability to
    oppose any such argument.

While the Stipulation provides for the allowance of the
specified claims, it does not provide for the payment of the
claims, and, absent further Court order, PG&E will not be making
any payment on account of such allowed claims.

Explanation of Term No. 1:

The Letter of Credit Issuing Banks and MBIA believe it fair and
appropriate that they have the comfort of knowing now that they
will have allowed claims for any post-petition payments they
make to the Bond Trustee on account of draws for interest, as
well as for various fees and expenses incurred by them.

Term No. 2:

PG&E will pay, on a current basis, the fees and reasonable out-
of-pocket expenses of the remarketing agents, the credit rating
agencies, the tender agents and the Bond Trustee associated with
the maintenance of the Credit Enhanced PC Bonds as set forth on
Schedule 1 to the Stipulation, to the extent such fees and
reasonable out-of-pocket expenses are payable in accordance with
the terms of the applicable underlying agreements and are
incurred with respect to the post-petition period.

Explanation of Term No. 2:

These fees and expenses are necessary for keeping the Credit-
Enhanced PC Bonds outstanding and for taking the minimum steps
to maintain a market for them.

Term No. 3:

At any time there is an "Event of Default" under the applicable
Reimbursement Agreements, the Letter of Credit Issuing Banks and
MBIA have the continuing right, pursuant to the applicable
Reimbursement Agreement and Indenture, to notify the Bond
Trustee of the occurrence or existence of one or more "Events of
Default" under the applicable Reimbursement Agreements and to
direct the Bond Trustee to declare an "Event of Default" under
such Indenture, notwithstanding their failure to exercise such
right at any time.

In addition, so long as a Letter of Credit Issuing Bank is not
reimbursed in full for drawings honored by such Letter of Credit
Issuing Bank under the Letter of Credit issued by it, such
Letter of Credit Issuing Bank shall have, among other things,
the continuing right (pursuant to the respective Letter of
Credit Reimbursement Agreement, Letter of Credit and the
Indenture) to notify the Bond Trustee of such failure to be
reimbursed in full and to state that the amount available to be
drawn under the Letter of Credit to pay interest on such Credit
Enhanced PC Bonds has not been reinstated, notwithstanding the
failure of the Letter of Credit Bank to exercise such right at
any time.

Finally, the Letter of Credit Issuing Banks and the Banks have
the continuing right to refuse to extend the terms of the
Letters of Credit upon their respective maturities. At the same
time, however, upon terms mutually acceptable to PG&E and the
respective Letter of Credit Issuing Banks and the Banks, the
terms of one or more of the Letters of Credit may be extended to
the extent permitted under the terms of the existing documents
pertaining to the Credit Enhanced PC Bonds.

Explanation of Term No. 3:

These points merely restate the existing provisions of the
Reimbursement Agreements and do not confer any new rights on
anyone. The Letter of Credit Issuing Banks and MBIA merely
wanted to confirm that in entering into the Stipulation, they
were not intending to affect these bedrock provisions of the
Reimbursement Agreements.

Term No. 4:

PG&E's previous entry into the amendments to the Reimbursement
Agreement with Deutsche Bank AG as the Letter of Credit Issuing
Bank and with the Banks parties thereto (the "DB Reimbursement
Agreement"), (the "Prior Amendments"), is ratified and approved.
Further, PG&E consents to the form of future amendments to the
DB Reimbursement Agreement, substantially in the same form as
the Prior Amendments, which address allocation issues among
Deutsche Bank AG and the Banks that are parties to the DB
Reimbursement Agreement; provided, however, that with the
approval of PG&E and the other parties to the DB Reimbursement
Agreement, any one or more of such future amendments may reflect
an extension of time that is different than the extension
contained in the Prior Amendments.

PG&E also consents to the form of Agreement to Extend the Letter
of Credit and the related form of amendment to the applicable
Letters of Credit, both attached as Exhibit C to the
Stipulation, with respect to the extension of the term of the
Letters of Credit. PG&E is authorized, but not required, to
execute any such amendments in substantially the form of
Exhibits B or C to the Stipulation from time to time without
further order of the Court.

Explanation of Term No. 4:

The Letter of Credit Issuing Banks reasonably want to amend the
applicable Letter of Credit Reimbursement Agreements to take
into account the reality that the dollar amount of the aggregate
liabilities of the Letter of Credit Issuing Banks and the Banks
under the Letters of Credit increase each month that the Letter
of Credit Issuing Banks allow an automatic reinstatement to take
place, thus increasing the overall exposure of the Letter of
Credit Issuing Banks because PG&E has not been reimbursing any
of the Letter of Credit Issuing Banks for the Bond Trustee's
monthly interest draws since the first post-petition draw in May
2001.

Similarly, PG&E wants the ability to facilitate the extension of
the Letters of Credit so long as PG&E deems an extension
desirable, since extensions of the Letters of Credit will or may
be necessary from time to time to keep the Credit Enhanced PC
Bonds in place and outstanding.

                      *   *   *

The form of Agreement to Extend the Letter of Credit
contemplates that the periodic commitment fee for the applicable
extension term may be different than that prior to the extension
term, and will only be determined by the parties at the time any
such Extension Agreement is entered into, and any such periodic
commitment fee under any such Extension Agreement shall
constitute an allowed claim pursuant to the provisions of
Paragraph 4 of the Stipulation as summarized under "Term No. 1,"
Accordingly, PG&E, in seeking the Court's authorization to enter
into any future Extension Agreement as part of the Stipulation,
is also seeking authorization to agree upon the applicable
periodic commitment fee for the extension term at the time such
Extension Agreement is entered into. PG&E represents that this
is reasonable because commitment fees for material extension
terms of letters of credit are functionally equivalent to
commitment fees for a new letter of credit, and are typically
determined based on market factors at the time such extension is
entered into.

Further, PG&E says that the Court and parties in interest need
not be concerned based on other provisions of the Stipulation:
first, if the Motion is granted, PG&E will have the authority
but not the obligation to enter into any Extension Agreement;
and second, although the periodic commitment fee agreed to in
any Extension Agreement will be an allowed claim pursuant to the
Stipulation, it, like the other claims allowed pursuant to the
Stipulation, will be paid by the estate on a current basis
absent a further Court order.

PG&E submits that the Stipulation should be approved because
there is little hope or prospect of keeping the tax-exempt
Credit Enhanced PC Bonds outstanding without approval of the
Stipulation.

The Debtor is aware that arguably no concession has virtually
been made in the Stipulation. PG&E is also mindful that so long
as the subject Letters of Credit are reinstated, the Bond
Trustee's monthly drawings thereunder are used to fund interest
payments on the Letter of Credit Backed PC Bonds, and most of
the payments made under MBIA's PC Bond Insurance Policy during
the term thereof are used for a similar purpose, and post-
petition interest is generally disallowed under Section
502(b)(2) of the Bankruptcy Code, subject to limited exceptions.

Thus, an argument could also be made that the claims of the
Letter of Credit Issuing Banks under the Letter of Credit
Reimbursement Agreements (and MBIA under the MBIA Reimbursement
Agreement) in respect of draws that are utilized to fund post-
petition interest payments should similarly be disallowed, PG&E
notes.

For two reasons PG&E does not believe this argument should carry
the day and stand as an obstacle to approval of the Stipulation.

First, by analogy to the "independence principle" in letter of
credit law (viz., that the obligations of the issuing bank to
the beneficiary and of the account party to the issuing bank are
separate and independent from any rights, obligations, claims or
defenses of the beneficiary and account party vis-a-vis each
other), the issuing bank's rights and claims against the account
party under the reimbursement agreement should be separate and
independent from the beneficiary's use of the draws under the
letter of credit. Thus, the fact that the Bond Trustee uses the
monthly draws under the Letters of Credit and the MBIA
Reimbursement Agreement to pay interest to the bondholders
arguably should not affect the allowability of the honoring
Banks' or MBIA's claims under their respective reimbursement
agreements.

Second, here the advantage and benefit of the Credit Enhanced PC
Bonds are sufficiently great that the allowance issue should not
become an impediment to the Stipulation. This is particularly
true since PG&E has repeatedly announced its intent to propound
a full payment plan of reorganization, which ultimately should
provide for and allow for the payment of all interest due on the
Credit Enhanced PC Bonds to the extent not previously paid in
full.

Certain of the Credit Enhancers have indicated that unless the
Stipulation is presented to and approved by the Court before
September 10, 2001, they may proceed to take the actions
described in the preceding paragraph.  Similarly, some of the
Letter of Credit Issuing Banks have also have indicated that
they in all likelihood will decline to allow the automatic
reinstatement of their respective Letters of Credit following
the September 2001 drawing, which would result in a similar
acceleration of the Letter of Credit Backed PC Bonds, unless the
Stipulation is timely heard and approved by the Court.

Because such actions by the Letter of Credit Issuing Banks
and/or MBIA could result in the loss to PG&E and its estate of
the significant benefits of the tax-exempt financing afforded by
the respective Credit Enhanced PC Bonds, PG&E has determined
that it is in the best interests of PG&E and its estate to enter
into the Stipulation and to seek the Court's approval of the
Stipulation on or before September 7.

For all the reasons cited, PG&E requests that the Court grant
the Motion, thereby approving the terms of the Stipulation that
PG&E provisionally entered into with the Letter of Credit
Issuing Banks and MBIA. (Pacific Gas Bankruptcy News, Issue No.
13; Bankruptcy Creditors' Service, Inc., 609/392-0900)    


PILLOWTEX CORP: Proposes to Reject Contracts with Alice Mills
-------------------------------------------------------------
In September 2000, Pillowtex Corporation entered into a
Settlement Agreement and General Release with Alice Mills, Inc.,
which resolved certain disputes relating to, and modified, 3
contracts between Fieldcrest Cannon and Alice Mills for the
purchase of fabric.  

Pursuant to these Contracts, the Debtors are obligated to
purchase no fewer than 2,851,934 yards of polyester/cotton
fabric from Alice Mills in equal monthly quantities over a 9-
month period starting September 2000.  

The Debtors are required to pay for the fabric in 9 equal
monthly installments.  The total price for all of the fabric
under the Contracts is $2,773,884.98.

But Eric D. Schwartz, Esq., at Morris, Nichols, Arsht & Tunnell,
in Wilmington, Delaware, says the fabric to be purchased under
the Contracts is no longer needed for the Debtors' businesses.
Thus, Mr. Schwartz argues, the rejection of the Contracts will
ensure that no administrative expense liability to Alice Mills
is incurred.  So, the Debtors ask the Court for authority to
reject these fabric purchase Contracts with Alice Mills.
(Pillowtex Bankruptcy News, Issue No. 12; Bankruptcy Creditors'
Service, Inc., 609/392-0900)    


PSINET INC: Subsidiary Files for Chapter 11 Protection  
------------------------------------------------------
PSINet Inc. (OTC BB: PSIXE) announced that its wholly-owned
subsidiary, PSINet Consulting Solutions Holdings, Inc. (formerly
Metamor Worldwide, Inc.), has signed a definitive agreement with
CIBER, Inc. (NYSE:CBR), pursuant to which CIBER will acquire two
subsidiaries of PSINet Consulting Solutions Holdings -- Metamor
Industry Solutions, Inc., and Metamor Government Services Inc.

These entities are engaged in the public sector IT service
market. The proposed purchase is subject to a number of
conditions, including obtaining a Bankruptcy Court order
authorizing the sale of the subsidiaries free and clear of all
liens, claims and encumbrances.

PSINet Consulting Solutions Holdings, Inc., the parent company
of the entities being sold in this transaction, filed Monday for
protection under Chapter 11 of the U.S. Bankruptcy Code. Neither
of the entities being acquired by CIBER in this transaction nor
any other subsidiary of PSINet Consulting Solutions Holdings,
Inc. is included in Monday's bankruptcy filing.

Concurrent with its Chapter 11 filing, PSINet Consulting
Solutions Holdings, Inc. filed a motion with the United States
Bankruptcy Court seeking approval of this transaction with CIBER
pursuant to Section 363 of the U.S. Bankruptcy Code.

Lazard is acting as financial advisor to PSINet Consulting
Solutions Holdings Inc. on this transaction.

Headquartered in Ashburn, Va., PSINet Inc. is a provider of
Internet and IT solutions, offering hosting solutions, and a
full suite of retail and whole sale Internet services through
wholly owned PSINet subsidiaries.


PSINET INC: Secures Court Okay to Reject 14 Executory Contracts
---------------------------------------------------------------
PSINet, Inc. sought and obtained the Court's approval to reject
14 executory contracts because, in the Debtors' business
judgment, none of these Contracts and Leases constitutes a
source of value for the Debtors' estates. The Debtors have
determined that it is in their best interest to avoid accruing
any potential further obligations under the Contracts and
Leases.

With respect to each of the Contracts or Leases, the Debtors
have delivered to the respective counter-party a notice letter,
indicating that, as of the date of the letter (the Notice Date),
the Debtors would cease payment under the Contract or Lease,
that the Debtors would not expect further performance from the
counterparty under the Contract or Lease, and that the Debtors
would seek to reject the Contracts or Lease.

Seven of the leases are office equipment leases, one is a
vehicle lease and the other 6 are as follows:

     Contracting Party      Type of Agreement
     -----------------      -----------------
     MCI Worldcom           Gateway Services Agreement,
     Communications, Inc.   dated Jan 15, 2001

     Cisco Systems, Inc.    GeoTel System Agreement
                            Dated September 30, 1999

     Robertson Marketing    Agreement for Catalogue Promotional
     Group                  Program, dated June 4, 1999

     MCI Telecom. Corp.     MCI Special Customer Arrangement
                            Effective November 6, 1996

     Cable & Wireless       North Pacific Cable Indefeasible
     Limited Company        Right of Use Agreement
     International Digital  dated September 29, 1998
     Communications, Inc.

     Pacific Telecom        North Pacific Cable Indefeasible
     Cable, Inc.            Right of Use Agreement,
                            dated June 30, 1998
(PSINet Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)     


RAYTECH: Operating Loss Drops to $3.3 Million In 13-Week Period
---------------------------------------------------------------
In April 2001 Raytech Corporation emerged from the protection of
Bankruptcy Court under Chapter 11 of Title 11 of the United
States Code.  Raytech Corporation had been under the Chapter 11
protection since May 1989.

The Company has determined that the most meaningful presentation
of financial information would be to provide comparative
analysis of the financial performance for the Successor Company
for the period April 3, 2001 through July 1, 2001 compared to
the predecessor financial information for the period April 3,
2000 to July 2, 2000.

Raytech Corporation recorded a net loss for the period from
April 3, 2001 to July 1, 2001 of $2.4 million as compared to a
net loss of $7.064 billion for the thirteen-week period ended
July 2, 2000.  

In the thirteen-week period ended July 2, 2000 the Company
recorded certain charges and related liabilities based on
estimated asbestos-related personal injury liabilities of $6.760
billion, estimated Government's claim for certain environmental
liabilities of $431.8 million and estimated liabilities for
Raymark pension plans of $16 million. These were designated as
Liabilities Subject to Compromise.  

Effective April 2, 2001, the Company recorded certain
adjustments relating to the emergence from bankruptcy.  

The Liabilities Subject to Compromise have been settled with the
third party creditors in exchange for 90% of the common stock of
Raytech Corporation valued at $142.5 million, a cash payment of
$2.5 million, the assumption of certain pension plan obligations
of Raymark Corporation and certain future tax benefits,
resulting in an extraordinary gain on debt discharge for the one
day, April 2, 2001, of $6.928 billion.  

Worldwide net sales for the period from April 3, 2001 to July 1,
2001 of $50.6 million were less than the recorded sales of $61.1
million for the thirteen-week-period ended July 2, 2000, a
reduction of 17%.  The lower sales reflect the economic effects
of the poor economy in the United States and the reduced demand
from the automobile original equipment manufacturers.  Certain
competitive issues have also caused a reduction in sales.

The Company recorded an operating loss of $3.3 million for the
period April 3, 2001 to July 1, 2001, which compares to $7.2
billion loss for the thirteen-week period ended July 2, 2000.
Raytech Corporation has taken certain steps to address the
decreased operating profit, including reductions in both the
hourly and salaried work force, wage reduction and new hire
containment programs and a stronger focus on reducing material
costs.


RELIANCE GROUP: Rehabilitator Balks at Compensation Protocol
------------------------------------------------------------
Jeffrey B. Rotwitt, Esq., John J. Ehlinger, Jr., Esq., and
Lawrence Tabas, Esq., of Obermayer, Rebmann, counsel for M.
Diane Koken, Insurance Commissioner of Pennsylvania, file an
objection to Reliance Group Holdings, Inc.'s motion to establish
an interim compensation protocol.

Before proceeding, the attorneys remind Judge Gonzalez that the
filing of this objection is not and should not be deemed consent
by the Insurance Commissioner and the Rehabilitator to this
Court's jurisdiction.  Moreover, the filing of this objection is
not and should not be deemed a waiver of the sovereign immunity
of the state of Pennsylvania, the Insurance Commissioner and/or
the Rehabilitator.

The attorneys state that the Constructive Trust Action was
commenced prior to the filing of the Debtors' bankruptcy cases.
Its goal is to recover $95,651,000 that is currently being held
by RGH in trust for RIC and its policyholders. The Debtors have
conceded that the $95,651,000, which is the subject of the
Constructive Trust Action, is the only liquid asset of their
estates. Thus, in order to pay the compensation and
reimbursement of expenses of professionals that have been
retained in their cases, RGH would necessarily have to make
payments from the $95,651,000 that rightfully belongs to RIC and
its policyholders.

The Debtors should not be allowed to pay professionals with
funds that are not property of the Debtors' estates. Until this
Court or the Commonwealth Court decides the merits of the
Constructive Trust Action, it would be inappropriate for the
professionals to be paid out of funds that the Rehabilitator
asserts belong to RIC and its policyholders. The attorneys
assert that all of the elements of a constructive or resulting
trust are present so that the Rehabilitator's claims to the
$95,651,000 are valid and legitimate.

Many courts have held that administrative claimants cannot look
to encumbered property as a source of payment of their interim
fees.

In TriCounty, 91 B.R. at 550, the secured creditor claimed a
security interest in the debtor's real property and cash on
hand, the most likely source of attorney compensation. Although
the debtor's plan stated that litigation would be necessary to
determine the existence of any security interest in the estate's
personal property, the TriCounty court held that this fell far
short of establishing that such collateral was unencumbered.
Therefore, the court denied the debtor's request for interim
fees and expenses.  Similarly, here, the Rehabilitator asserts
that the $95,651,000 is being wrongfully held by RGH in trust
for RIC and its policyholders, and this property is not property
of the Debtors' estates. Unless the Debtors can prove, without
resort to litigation, that they have liquid assets from which to
pay professionals, other than the $95,651,000, which belongs to
RIC, the Compensation Motion should be denied in its entirety.

The Debtors seek the entry of an order approving the
Compensation Motion in accordance with the standing General
Order of the Bankruptcy Court for the Southern District of New
York signed on January 24, 2000 by former Chief Judge Tina L.
Brozman.  While in some cases, it may be appropriate to allow
payment of compensation and reimbursement of expenses of
professionals on a monthly basis, it is not appropriate here.
The Standing Order certainly does not give the Debtors carte
blanche to pay professionals upon the mere filing of a motion
with this Court, without any demonstration that the payments are
appropriate under the circumstances of the individual case.  
Instead, a variety of courts have held that debtors bear the
burden of proving that procedures for payment of compensation
and reimbursement of expenses to professionals that are similar
in scope to the Compensation Motion are necessary and
appropriate.

Courts carefully scrutinize debtors' motions, which allow for
payment of compensation and reimbursement of expenses to
professionals prior to the filing of formal interim fee
applications as contemplated by Sec. 331 of the Bankruptcy Code.

Generally, professionals that are retained pursuant to Sec. 327
of the Bankruptcy Code must file an application for
compensation, which is subject to a noticed hearing, prior to
allowance and payment of fees.

While the Court has allowed professionals to be paid their
compensation and expenses prior to the filing of interim fee
applications, none of those cases involved situations where the
debtors sought to pay professionals out of funds, the ownership
of which was hotly disputed. Here, the Rehabilitator has made
claims upon the funds at issue, which, if successful, would
result in the Debtors likely having insufficient assets of their
own to satisfy such payments.

The Standing Order was not designed to allow all debtors in
large Chapter 11 bankruptcy cases to seek monthly compensation
and reimbursement of expenses for its professionals. Such a
determination must be made on a case-by-case basis.  Given the
facts of this case, it is clear that the Compensation Motion is
wholly inappropriate, and RIC and its policyholders would be
severely prejudiced if the Debtors were allowed to pay
professionals out of the $95,651,000.

Furthermore, to the extent that the Debtors' counsel, Debevoise
& Plimpton, and their accountants, Deloitte & Touche, were paid
pre-petition retainers with funds that belong to RIC and are the
subject of the Constructive Trust Action, the Rehabilitator
requests that such retainers be placed in a separate escrow
account pending the outcome of the Constructive Trust Action.

A decision on the Compensation Motion should be deferred to
allow the Debtors and the Rehabilitator an opportunity to
present memoranda of law to this Court on the various issues
that are implicated thereby. The Debtors request that this Court
waive the requirement of a memorandum of law in support of the
Compensation Motion because they claim that there are no novel
issues of law presented by the Compensation Motion. However,
this claim is inaccurate. In light of the fact that (1) the
Standing Order is in derogation of the express provisions of
Sec. 331 of the Bankruptcy Code; (2) there are no reported
opinions in this Circuit which have addressed the interplay of
the Standing Order with Sec. 331 of the Bankruptcy Code; and (3)
the Debtors seek to pay professionals out of funds that the
Rehabilitator asserts are being held in either a constructive or
resulting trust for RIC and its policyholders, there are clearly
several novel issues of law presented herein.  RGH and the
Rehabilitator will require time to prepare memoranda of law to
address such issues.

RGH cannot satisfy the burden of proving that the Compensation
Motion is necessary here, where there is a pending dispute over
the ownership of the asset from which the compensation will be
paid. The Debtors have long been aware of the Rehabilitator's
claim to the $95,651,000. The Rehabilitator's claim that the
$95,651,000 belongs to RIC is good and sufficient reason for the
denial of the Compensation Motion.

Based upon all of the foregoing, the Rehabilitator argues, the
Bankruptcy Court should defer a decision on the Interim
Compensation Protocol until after there has been a resolution of
the Constructive Trust Action or, in the alternative, after the
Court decides the Dismissal Motion at which time the issues can
be revisited by the Court and all parties. (Reliance Bankruptcy
News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-
0900)     


SCHWINN/GT: Receives Mixed Bids for Cycling & Fitness Divisions
---------------------------------------------------------------
Schwinn/GT Corp. said it has informed the Court that it has
received bids from Direct Focus, Inc. (Nasdaq: DFXI) and Pacific
Cycle LLC in connection with the upcoming Court-supervised
auction that is scheduled to take place on Monday, September 10,
2001.

Schwinn stated that the Court-approved "stalking horse" bid from
Huffy is currently valued at approximately $59.4 million based
on a valuation as of August 31, 2001. The Company has received a
conforming bid from Pacific Cycle LLC valued at approximately
$64.4 million using the same August 31 valuation.

The Company also said it has received a non-conforming bid of
approximately $133 million from Direct Focus, Inc. and Pacific
Cycle LLC encompassing both the cycling and fitness divisions.

In Friday's hearing the Court set forth the procedures for the
auction, which will take place on Monday, September 10, 2001.
The Court indicated that it will initially consider conforming
bids for the cycling division. Once the Cycling Division auction
has been completed it will then consider non-conforming bids for
other assets.

Schwinn/GT filed voluntary petitions for reorganization under
Chapter 11 on July 16, 2001, in the United States Bankruptcy
Court for the District of Colorado in Denver.


SPORTS CLUB: Limited Liquidity Compels S&P to Give Junk Ratings
---------------------------------------------------------------
Standard & Poor's lowered its ratings on The Sports Club Co.
Inc.  The ratings remain on CreditWatch with negative
implications where they were placed on Dec. 19, 2000.

    Ratings Lowered & Remaining on CreditWatch Negative

                                              Ratings
     The Sports Club Co. Inc.             To           From

        Corporate credit rating           CCC          B-
        Senior secured debt               CCC          B-

The downgrade reflects the company's severe financial risk and
its extremely limited liquidity, which are further compounded by
ongoing operating challenges that are undermining cash flow
growth. The company's very thin coverage ratios reflect its
expansion program, club openings, and operating issues at a
number of the newer clubs. Continued pressure on financial
performance is expected in the near term, given the meaningful
number of immature clubs in the company's small portfolio.
Furthermore, high growth-related capital expenditures relative
to the company's cash flow base have resulted in free cash flow
deficits, high debt leverage, and extremely constrained
financial flexibility.

The Sports Club operates seven upscale health and fitness clubs
primarily under The Sports Club/LA brand. The company's mature
clubs include The Sports Club located in Los Angeles, Irvine,
Calif. and Las Vegas, Nev., and the Reebok Sports Club in New
York, N.Y. In 2000, The Sports Club opened three Sports Club/LA
facilities, located in Rockefeller Center and on the Upper East
Side in New York City, as well as Washington D.C. The company's
Boston, Mass. and San Francisco, Calif. clubs complete the
development pipeline. Higher initiation fees and monthly
membership dues than those charged by most other sports and
fitness clubs help reinforce the brand's exclusive image.

Expansion addresses some of the company's main vulnerabilities,
namely its small portfolio and limited geographic diversity.
However, operating performance is under pressure given that it
takes about two years for a new club to reach profitability.

For the twelve months ended June 30, 2001, EBITDA was less than
$5 million compared with about $7.5 million for the fiscal year
ended 2000. EBITDA plus rent expense coverage of interest plus
rent expense is fractional, at less than 1.0 times (x). EBITDA
margins are low, due to the number of immature clubs that have
yet to generate relatively meaningful, stable cash flow. The
company generates negative free cash flow, although deficits
could narrow as a result of scaled back capital expenditures.

At June 30, 2001, total debt outstanding was level with previous
year's levels, and the company had $8.8 million of borrowing
capacity under its $15 million credit facility and cash balances
of $5.6 million. Financial flexibility is extremely constrained,
despite the renewed credit agreement and the amended lease
agreements with Millennium Entertainment Partners that provide
for additional landlord contributions totaling $16.5 million.
Alternative sources of financing are likely to be required to
meet the company's liquidity needs over the next year.

The ratings will remain on CreditWatch while Standard & Poor's
determines the company's ability to meet its financial
obligations and implement plans to address immediate liquidity
and operating issues.


TAPISTRON INTL: Completes Substantial Sale of Assets
----------------------------------------------------
Tapistron International Inc. on August 31, 2001, sold
substantially all of its assets, including all of its patents,
trademarks, trade names, and other intellectual property, to CYP
Technologies, LLC pursuant to the terms of an Asset Purchase
Agreement signed by the parties on June 29, 2001, and as
approved by Order of the U.S. Bankruptcy Court for the Eastern
District of Tennessee on August 24, 2001.

The total purchase price paid at closing was $2,141,686.16.

It's not spinning a yarn to say that Tapistron International
develops and acquires proprietary textile technologies and
commercializes them globally. Its computerized yarn placement
(CYP) machine produces tufted carpets and rugs in a large
variety of patterns, colors, and textures.

Touted as being faster than conventional weaving looms and
tufting machines, CYP technology quickly changes patterns,
color, texture, and density combinations. The machines are made
at the company's facility in Georgia.

North America accounts for about 80% of sales. After stitching
together a reorganization plan, Tapistron emerged from Chapter
11 protection in 1998.


TAPISTRON INTL: Elliston Named New President & CEO
--------------------------------------------------
Bruce C. Elliston was unanimously elected as Tapistron
International's President and Chief Executive Officer on August
17, 2001, following Mr. Hardeman's resignation.

Mr. Elliston formerly served as the Company's Executive Vice
President and Secretary. He resigned both positions to serve as
the Company's President and CEO. Henry Christopher was
unanimously elected as the Company's Secretary on August 17,
2001, to fill the vacancy in the office created by Mr.
Elliston's resignation. Mr. Christopher also serves on the
Company's Board of Directors.

Rodney C. Hardeman, Jr. resigned as the Company's Chief
Executive Officer and as a Board Member by letter addressed to
the Board of Directors dated August 17, 2001, and effective
as of the 17th. His letter explained that his resignation was
"to pursue interests which I see are in the best interests of
Tapistron, its' staff and shareholders."


TELSCAPE: Trustee Agrees to Allow ATSI to Manage Teleport Assets
----------------------------------------------------------------
ATSI Communications Inc. (AMEX:AI) announced that in
anticipation of finalizing the sale of the Telscape Houston-
based Teleport assets, ATSI and the Bankruptcy Trustee have
signed an Interim Operating Agreement, allowing ATSI to manage
the facilities, invoice customers and otherwise maintain service
for Telscape's Houston-based Teleport customers.

The Interim Operating Agreement is subject to Bankruptcy Court
approval.

ATSI Communications Inc. is an emerging international carrier
serving the rapidly expanding niche markets in and between Latin
America and the United States, primarily Mexico.

The Company's borderless strategy includes the deployment of a
"next generation" network for more efficient and cost effective
service offerings of domestic and international voice, data and
Internet. ATSI has clear advantages over the competition through
its corporate framework consisting of unique licenses,
interconnection and service agreements, network footprint, and
extensive retail distribution.

ATSI's Internet software subsidiary, GlobalSCAPE Inc. --  
http://www.globalscape.com-- is recognized as a leader in the  
development, marketing and support of award-winning content and
file management solutions and collaborative peer-to-peer
technologies.


TRANS ENERGY: Working Capital Deficit Drops 6% At End of Q2
-----------------------------------------------------------
Trans Energy Inc.'s total revenues for the three months ended
June 30, 2001 increased 86% when compared with the second
quarter of 2000.  For the six months ended June 30, 2001, total
revenues increased 76% compared to the first half of 2000.

The increase during the 2001 periods is primarily due to higher
gas sales and higher oil and gas prices.  Cost of oil and gas
for the second quarter and first half of 2001 increased 179% and
80%, respectively, from the second quarter and first half of
2000 due to increased sales, land lease expenses and increased
gas prices to the Company.  

Selling, general and administrative expenses for the second
quarter and first half of 2001 declined 56% and 64%,
respectively, when compared to the second quarter and first half
of 2000 primarily attributed to a decrease in staff and fewer
stock issuances for services.

The Company's net loss for the second quarter and first half of
2001 was $277,133 and $449,707, respectively, compared to
$642,440 and $1,307,227 for the same 2000 period.  This  
decrease in the Company's net loss for the 2001 periods is
primarily attributed to the  increase in revenues and the
decreases in selling, general and administrative expenses.

Historically, the Company's working capital needs have been
satisfied through its operating  revenues and from borrowed
funds.  At June 30, 2001, the Company had a working capital  
deficit of $4,834,347 compared to a deficit of $4,550,117 at
December 31, 2000. This 6% decline in working capital is
primarily attributed to the increases in trade accounts payable
(17%), accrued expenses (21%), and related party payables (48%),
and was partially offset by the 148% increase in accounts
receivable and the 15% decrease in the current portion of
notes payable.

As of June 30, 2001, the Company had total assets of $4,380,335
and total stockholders' deficit of $1,289,142, compared to total
assets of $4,299,654 and total stockholders' deficit of $985,635
at December 31, 2000.


U.S.A. FLORAL: Secures Approval to Complete Sale of Florimex
------------------------------------------------------------
Floral Products, Inc. received Bankruptcy Court approval to
complete the sale of its International Division (Florimex) to
affiliates of ACON Investments, LLC, a Washington, D.C.-based
private equity firm, for EURO 33,535,000 (approximately $29
million) and the assumption of certain debt.

The International Division (Florimex) includes all of the
Company's operations in Europe, Africa, Asia and Latin America
and represents substantially all of U.S.A. Floral Products'
remaining assets.

On August 6, 2001, Judge Mary F. Walrath of the U. S. Bankruptcy
Court for the District of Delaware signed an order setting dates
and approving bidding procedures in connection with the proposed
sale of the Company's International Division (Florimex). Among
other things, the order set forth a procedure for submitting
higher and better offers for the purchase of the International
Division (Florimex) through an auction sale on September 4,
2001.

The two bidders participating in that auction were ACON and
Deutsche Beteiligungs AG, a European private equity firm, which,
on July 20, 2001, had entered into an agreement with the Company
to purchase the International Division (Florimex), subject to
the auction process and Bankruptcy Court approval. On September
5, 2001, following the court-ordered auction, the Bankruptcy
Court held a hearing in which it determined that ACON had
submitted the highest and best bid. In connection therewith, a
proposed sale order will be submitted to the Bankruptcy Court
for its approval.

According to Dwight Ferguson, President of the International
Division (Florimex), "ACON's purchase of Florimex should be
considered good news to our employees, customers, and suppliers.
ACON's investment will significantly reduce our indebtedness and
provide the financing for future worldwide growth initiatives.
The operations of Florimex continue to be self-sustaining and
our lenders have been both helpful and supportive throughout the
period of negotiations with various potential purchasers. We
expect to receive Bankruptcy Court approval shortly for the sale
to ACON and, subject to satisfaction of certain customary
closing conditions, we expect to be in a position to complete
the sale of Florimex by the end of the quarter."

ACON is an international private equity investment firm, which
manages investments in the United States, Europe and Latin
America. ACON was founded in 1995 and manages partnerships with
approximately $440 million under management. ACON's partnerships
typically include sophisticated institutional investors from the
U.S., Europe and Latin America. Among its activities, ACON is
affiliated with Texas Pacific Group (TPG). TPG manages over $5.7
billion worldwide.

ACON typically utilizes a thematic investment approach to
identify investments at times of inflection points. ACON's
investment philosophy is to identify opportunities in industries
with attractive dynamics and to pursue those opportunities in
partnership with established management teams.

On April 2, 2001, the Company and 16 of its U.S. subsidiaries
voluntarily filed for protection under Chapter 11 of the United
States Bankruptcy Code in the U.S. Bankruptcy Court for the
District of Delaware. An additional U.S. subsidiary later filed
for bankruptcy protection.

On May 7, U.S.A. Floral Products completed the sale of its then-
remaining North American operations, including the assets of its
Miami and West Coast Bouquet operations and of its Import
operations, and the stock of its Canadian subsidiary, Florimex
Canada. In total, the Company received approximately $19.8
million from the sales of these North American operations for
the benefit of the estate.

As in the case of proceeds from the sales of its North American
operations, the Company anticipates that all proceeds from the
sale of the International Division (Florimex) will be
distributed to creditors and that no proceeds will be available
for distribution to its shareholders.

Legg Mason Wood Walker, Incorporated and Freyberg Close Brothers
GmbH served as financial advisors to U.S.A. Floral Products in
connection with the sale of the International Division
(Florimex).


USG CORPORATION: Property Committee Hires Bilzen as Counsel
-----------------------------------------------------------
The Official Committee of Asbestos Property Damage of USG
Corporation asks for the Court's permission to employ the Miami,
Florida lawfirm of Bilzen Sumberg Dunn Baena Price & Axelrod,
LLP.

Martin Dies, Esq., as counsel and designee for the Catholic
Archdiocese of New Orleans and Chairman of the Committee
explains the Property Damage Committee represents the interests
of the asbestos property damage claimants in the consolidated
cases. He states that during the administration of the
Consolidated Cases, the Property Damage Committee will need the
advice and representation of counsel. At a July 13 PD Committee
meeting, the members chose Bilzen as its counsel to represent it
in all matters during the pendancy of the Consolidated Cases.

The PD Committee wishes to employ Bilzen to perform professional
services such as:

     - providing the PD Committee with legal advice with respect
       to its rights, duties and powers in the Consolidated
       Cases;

     - assisting the PD Committee in investigating acts,
       conduct, assets, liabilities and financial condition of
       the Debtors, the operation of the Debtors' businesses and
       the desirability of the continuance of such businesses
       and any other matter relevant to the Consolidated Cases
       or to the formation of a plan;

     - preparing pleadings and applications as may be necessary
       in furtherance of the Committee's interest and
       objectives;

     - participating in formulating a plan or plans of
       reorganization;

     - assisting the PD Committee in considering and requesting
       the appointment of a trustee or examiner or conversion,
       should such action(s) become necessary;

     - consulting with the Debtors, their counsel and the United
       States Trustee concerning the administration of this
       estate;

     - representing the PD Committee in hearings and other
       judicial proceedings; and

     - performing such other legal services as may required and
       as are deemed to be in the best interests of the PD
       Committee and the constituency which it represents.

Mr. Dies goes on to say Bilzen's restructuring and bankruptcy
group has extensive experience with routine and complex in-court
and out-of-court reorganizations, with emphasis on creditors'
rights, corporate, banking and financial matters. Also, Bilzen
currently represents the Official Committee of Asbestos Property
Damage Claimants in the pending W.R. Grace & Co., et al case.
The PD Committee is convinced that Bilzer possesses the
necessary expertise to represent it.

Mr. Dies says, subject to the approval of this Court, Bilzen
will be compensated according to their respective customary
hourly rates. Also the PD Committee will apply for the Court's
allowance of interim compensation and for reimbursement of
expenses.

Bilzen Partner Mindy A. Mora, Esq., confirms that, based upon
conflict searches, no attorney in her firm, nor any member,
counsel, associate or paralegal of Bilzen have any connections
with the Debtors, any of the top 50 Debtors' creditors, the
United States Trustee, or any person employed in the office of
the United States Trustee as required by rule 2014(a) of the
Federal Rules of Bankruptcy Procedure. She closes by saying
neither she, nor Bilzen, has or will represent any other entity
in connection with these cases. (USG Bankruptcy News, Issue No.
7; Bankruptcy Creditors' Service, Inc., 609/392-0900)


WARNACO GROUP: Signs-Up Sharretts as Customs Counsel
----------------------------------------------------
The Warnaco Group, Inc. seeks authority to employ Sharretts,
Paley, Carter & Blauvelt, P.C., as special customs and
international trade counsel, nunc pro tunc to the Petition Date.

Warnaco Vice-President Stanley P. Silverstein says they need a
counsel with experience in customs and international trade
matters.  And, Sharretts -- who has served as special customs
counsel in many complex bankruptcy cases and represented Warnaco
and certain of its subsidiaries in connection with their customs
and international trade matters for the last 20 years -- fits
the bill.  There is no doubt that Sharretts is well qualified to
act as the Debtors' special customs and international trade
counsel since the firm is already intimately familiar with the
Debtors and their import and export activities throughout the
world, Mr. Silverstein contends.

According to Mr. Silverstein, the Debtors paid Sharretts
$674,431.34 for services rendered from April 2000 to June 2001.
Sharretts has also advised the Debtors that the Firm holds a
$52,881.33 pre-petition claim for legal services rendered to the
Debtors.

Mr. Silverstein explains that Sharretts was retained as an
ordinary course professional on June 2001.  Sharretts has
advised the Debtors that its monthly fees and expenses for each
of the months of June, July and August 2001 exceed the $20,000
monthly cap and will likely exceed the cap for most of the
months going forward as well.  The delay in seeking retention,
Mr. Silverstein says, was due to Sharretts working with the
Debtors to arrive at the least burdensome arrangement for the
Debtors' estates when applying for allowance of compensation and
reimbursement of expenses.

The Debtors will depend on Sharretts for these services:

   (a) defending administrative penalty claims asserted by the
       United States Customs Service against the Debtors;

   (b) providing day-to-day advice regarding the classification,
       marking, importation and valuation of imported
       merchandise;

   (c) responding to inquiries for information issued by various
       customs services;

   (d) preparation of various submissions to the customs service
       regarding the proper appraised value of imported
       merchandise;

   (e) reviewing the Debtors' activities to ensure that they are
       in compliance with customs regulations;

   (f) filing claims for refunds of duties and similar charges,
       as required;

   (g) acting as liaison between the Debtors and customs
       services in the United States and abroad;

   (h) assisting in the preparation for and conducting of
       compliance assessment reviews conducted by the United
       States Customs Service;

   (i) assisting in the preparation and filing of certificates
       required by the Caribbean Basin Incentive Program;

   (j) providing information regarding the marking, value,
       classification and entry requirements for textiles in
       countries throughout the world; and

   (k) providing other advice and services relating to the
       Debtors' customs and international trade matters as the
       Debtors may request from time to time.

Sharretts will charge the Debtors for its legal services on an
hourly basis in accordance with its ordinary and customary
rates:

    (i) $300 for all attorneys; and

   (ii) $110 for legal assistants and support staff.

According to Mr. Silverstein, Sharretts has advised Warnacothat
it is currently owed fees and expenses for services:

                     Amount          Period
                     ------          ------
                   $33,266.68         June
                   $28,212.76         July
                   still unknown     August

Instead of complying with the monthly compensation procedures,
Mr. Silverstein says, Sharretts proposes to serve monthly
statements for payment of 80% of fees and 100% of expenses
incurred in connection with services rendered from the Petition
Date to July 31, 2001, on or before September 20, 2001, and from
August 1, 2001 to September 30, 2001, on or before October 20,
2001, on all core parties-in-interest.

Gail T. Cumins, a member of Sharretts, assures the Court that
his Firm, its members, counsel and associates:

    (i) do not have any connection or relationship with the
        Debtors, their principal creditors and parties in
        interest, their respective attorneys and accountants, or
        the Office of the United States Trustee, and

   (ii) do not hold or represent an interest adverse to the
        Debtors' estates with respect to the matters on which
        SPC&B is to be employed.

Ms. Cumins explains that Sharretts has represented, and may in
the future represent, certain parties-in-interest, but only in
matters wholly unrelated to the Debtors.  For example, Ms.
Cumins says, Sharretts represents Polo Ralph Lauren in
connection with its customs and international trade matters.  
However, in the event other material connections are found to
exist that would require disclosure, Ms. Cumins notes, Sharretts
reserves the right to and will promptly submit a supplemental
affidavit. (Warnaco Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)  


WASHINGTON GROUP: Raytheon Says Ruling Won't Weigh-Down On Claim
----------------------------------------------------------------
Raytheon Company (NYSE: RTN) said that the ruling by the
Bankruptcy Court in Reno will have no affect on Raytheon's
ability to pursue its claims against Washington Group
International (WGI).

"In bankruptcy, a debtor has the right to reject or assume
executory contracts -- those that have remaining obligations --
such as the stock purchase agreement. To no one's surprise, WGI
elected to reject this contract," said Neal E. Minahan,
Raytheon's senior vice president and general counsel. Minahan
said that WGI's rejection of the stock purchase agreement
constitutes a breach of the contract.

Raytheon has filed a proof of claim to recover more than $900
million in damages against WGI. WGI's rejection of the stock
purchase agreement has no affect on Raytheon's claims.

"What is important is that yesterday's ruling has no financial
impact whatsoever on Raytheon. It does not represent a
rescission of the sale of its former engineering and
construction business," Minahan added.

The next major event in the bankruptcy proceeding is the
hearings to determine whether WGI's most recent plan of
reorganization can be confirmed. These hearings are currently
scheduled to begin September 13 and continue into October.

Raytheon filed its objections to the plan yesterday. Those
papers were filed under seal because the papers refer to certain
documents that WGI has designated as "confidential." Raytheon is
attempting to have these documents disclosed to the public so
that the full story can be told.

With headquarters in Lexington, Mass., Raytheon Company is a
global technology leader in defense, government and commercial
electronics, and business and special mission aircraft.


WHEELING-PITTSBURGH: UST Appoints 3rd Amended Noteholders Panel
---------------------------------------------------------------
Donald M. Robiner, the United States Trustee for Ohio/Michigan
Region 9, advises the Court that after resignations and new
appointments to the Official Committee of Unsecured Noteholders
of Wheeling-Pittsburgh Steel Corp., these Noteholders now serve
on the Committee:

                     Bank One, N.A., as Indenture Trustee
                      c/o Jeffrey A. Ayres
                      100 East Broad Street, 8th Floor
                      Columbus, Ohio 43271-0181
                      (614) 248-2566
                      (Temporary Chairperson)

                      Stonehill Capital Management LLC
                      c/o John Motulsky
                      126 East 56th Street, 9th Floor
                      New York, New York 10022
                      (212) 739-7474

                      Merrill Lynch Investment Managers
                      c/o Warren Hymson
                      800 Scudders Mill Road
                      Plainsboro, New Jersey 08536
                      (609) 282-3733

                      Colonial Management
                      c/o Thomas LaPointe
                      One Financial Center
                      Boston, Massachusetts 02111
                      (617) 722-3733

                      Highland Capital Management, L.P.
                      c/o Wesley Olfers
                      13455 Noel Road, Suite 1300
                      Dallas, Texas 75240
                      (972) 233-4300

Accordingly, Credit Suisse Asset Management and General
Reinsurance/New England Asset Management, no longer serve on the
Noteholders' Committee. (Wheeling-Pittsburgh Bankruptcy News,
Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900)  


WINSTAR COMMS: US Trustee Balks At Proposed Professionals' Fees
----------------------------------------------------------------
Patricia A. Staiano, the United States Trustee for Region III,
objects to Winstar Communications, Inc.'s motion to retain
certain legal and accounting professionals employed in their
ordinary course of business.

Paying 25 professionals up to $50,000 per month and $200,000 per
firm during the pendency of these cases is too much, Ms. Staiano
says, computing that some $3.6 million per year could leak out
of the estates without giving the court, the creditors or the US
Trustee an opportunity to review such payments.

According to Ms. Staiano, a number of these "ordinary course
professionals" are prominent law firms handling the Debtors'
commercial litigation, which is outside the ordinary course of
the Debtors' telecommunications business. Another law firm, she
says, allegedly handles "structured finance" matters that, being
financial, are pertinent to these bankruptcy cases and outside
the ordinary course of business. Furthermore, Ms. Staiano
argues, Section 327 of the Bankruptcy Code applies only to
lawyers. One of the "ordinary course professionals" the Debtors
seek to retain, Deloitte & Touche, is an accounting firm.

Ms. Staiano requests that the Debtors be permitted to retain any
professionals without submission of formal retention
applications and formal fee applications, only on the following
conditions:

(a) Employment should be limited to professionals truly
    rendering services in the ordinary course of the Debtors'
    business.

(b) The amounts payable to any professional should be capped
    substantially lower than those proposed by the Debtors, with
    the professionals required to file applications for all fees
    and disbursements if such caps are exceeded at any time
    during the pendency of these cases. Additionally, any such
    professional should be required to submit its invoices
    periodically to the Notice Parties and such Parties should
    be given reasonable amount of time to object to such
    disbursements.

(c) The aggregate cap on payments to all such professionals
    should be reduced substantially to reflect (i) the smaller
    number of "ordinary course professionals" retained and
    (ii) the reduced monthly cap on payments to such
    professional. (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.

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Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to  
conferences@bankrupt.com.  

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

For copies of court documents filed in the District of Delaware,  
please contact Vito at Parcels, Inc., at 302-658-9911. For  
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &  
Consulting at 207/791-2852.

                          *********

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

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

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

This material is copyrighted and any commercial use, resale or
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