TCR_Public/010920.mbx        T R O U B L E D   C O M P A N Y   R E P O R T E R

         Thursday, September 20, 2001, Vol. 5, No. 184

                          Headlines

360NETWORKS: Mosser Intends to Enforce Mechanic's Liens
AIR CANADA: Cuts Approximately 30% of Flights
AMERICAN AIRLINES: Slashes 20,000 Jobs Due to 20% Schedule Cut
AMERICAN AIRLINES: Moody's Downgrades Debt Ratings
AMERICAN TRANS: Plans to Cut 1,500 Jobs & Flights by 20%

AMERICA WEST: Cuts Flight Schedule By 20% & 2,000 Jobs
AMES DEPARTMENT: Continuing All Workers' Compensation Programs
AUDIO VISUAL: Lenders Extend DIP Facility to December 14
COHO ENERGY: Taps JP Morgan to Explore Options to Raise Capital
CONTINENTAL AIRLINES: Fitch Places BB Rating on Watch Negative

COVAD COMMS: Seeks Approval of Plan Solicitation Procedures
DAIRY MART: Misses $4.5MM Interest Payment on Subordinated Notes
DELTA AIR: Mullin Urges Congress to Aid in Industry Bailout Plan
DELTA AIRLINES: Moody's Lowers Ratings After Last Week's Attacks
FRUIT OF THE LOOM: UST Calls For Scrutiny Of Proposed Lazard Fee

FUTURELINK: US Trustee Appoints Unsecured Creditors Committee
GLOBAL TELESYSTEMS: Bank Group Extends Waiver of Defaults
ICG COMMS: Court Allows Debtor to Reject 18 Telecomms Property
INNOVATIVE CLINICAL: Sells Oncology to Focus On Core Operations
INTEGRATED HEALTH: Westhaven Seeks $3.3M Payment on Washoe Lease

INTERLIANT INC: Over 75% of Noteholders Approve Restructuring
KMART CORPORATION: Sales Decline 0.9% In 3 Months Ended Aug. 1
LAIDLAW INC: Court Approves Cross-Border Protocol Implementation
LEISURE TIME: Andre Hilliou Appointed as New President and CEO
LERNOUT & HAUSPIE: Moves to Sell Certain Assets to Dictaphone

LITTLE SWITZERLAND: Additional Capital Needed to Ensure Survival
MARINER POST-ACUTE: Treatment of Claims Under MHG Amended Plan
METROMEDIA FIBER: Gets Extension on $150 Million Note Facility
NATIONWIDE COMPUTERS: Committee of Unsecured Creditors Appointed
NORTHWEST AIRLINES: Fitch Places BB+ Debt on Watch Negative

OWENS CORNING: Seeks Approval of Hartford Claims Compromise
PACIFIC GAS: Will Assume Amended PPA with Oildale Energy LLC
RELIANCE GROUP: Lays-Out Dynamics of RIC Tax Allocation Pact
SOURCE MEDIA: Pressed to Restructure Balance Sheet By Year-End
SOUTHWEST AIRLINES: Fitch Places Debt Rating on Watch Negative

SUN HEALTHCARE: Buyer Emerges, Saving Neuroflex From Winding-Up
TRANSFINANCIAL: Intends to Liquidate Assets for $14 Million
TRI-NATIONAL: Battles With Senior Care Over Involuntary Petition
TRI-NATIONAL: Senior Care Refutes Debtor's Rejoinder to Petition
UNITED AIRLINES: Will Furlough Around 20,000 Employees

UNITED PETROLEUM: Hires Advisor as Bank Accelerates $23MM Loan
UNIQUE BROADBAND: Downsizes Transmission & Waveguide Divisions
VANGUARD AIRLINES: Weighing Options to Raise Additional Capital
VLASIC FOODS: Court Extends Rule 9027 Removal Period to Nov. 30
WHEELING-PITTSBURGH: Intends to Sell 2 West Virginia Properties

WINSTAR COMMS: Expects eAuction of Excess Assets to Fetch $20MM
WORLD AIRWAYS: Requests Nasdaq Hearing to Review Delisting

* Thacher Proffitt Relocates to 11 West 42nd Street

                          *********

360NETWORKS: Mosser Intends to Enforce Mechanic's Liens
-------------------------------------------------------
Mosser Construction, Inc., a creditor and party-in-interest,
gives its notice of its intention to continue to enforce its
rights as a mechanic's lien claimant in the Chapter cases of
360networks inc.

According to Louis J. Yoppolo, Esq., at Shindler, Neff, Holmes &
Schlageter, in Toledo, Ohio, Mosser has a lien on the Debtors'
real estate located at 1545 Clay Street, Detroit, Michigan.
Mosser rendered services on the Rockey Peanut Company for a
contract amount of $980,528.82.  Since it already received
payment of $636,513.47, Mosser claims a construction lien upon
the real property in the amount of $344,015.35 or the balance.

Mosser is also filing its proof of claim as a secured creditor.
It perfected its mechanic's lien claim after Petition Date.  To
the extent that the mechanic's lien law of the State of Michigan
may require the commencement of an action to continue the
perfection, since the action had not already been commenced
prior to Petition Date, and is stayed by section 362(b) of the
Code, Mosser gives this notice of its intent to preserve its
rights as a secured creditor. (360 Bankruptcy News, Issue No. 7;
Bankruptcy Creditors' Service, Inc., 609/392-0900)    


AIR CANADA: Cuts Approximately 30% of Flights
---------------------------------------------
Air Canada advises its customers of the following in order to
facilitate compliance with the enhanced security measures in
place at Canadian airports:

    * Passengers should arrive no later than two hours prior to
      their departure for domestic flights and no later than
      three hours prior to their departure for transborder and
      international flights. The airline is requesting
      passengers not to arrive any earlier as currently many
      passengers are arriving earlier than these timeframes
      thereby adding to the congestion and slowing down the
      processing of passengers.

    * Passengers are requested to carry photo identification
      regardless of destination. The heightened level of
      security may include the requirement for passengers to
      present photo identification before boarding their flight
      regardless of the destination.

    * Passengers are requested to limit their carry-on baggage
      to one item.

    * Passengers are requested to leave at home all non-
      essential electronic devices (including such items as hair
      dryers and electric razors).

    * Although Air Canada recommends that customers not proceed
      to the airport without reservations, passengers will be
      accommodated on a stand-by basis at the airport if
      possible.

Air Canada plans to operate over 80 percent of its schedule
effective Monday September 17. The carrier had also resumed
domestic and international cargo services.

The airline has operated over 70 percent of its schedule over
the weekend including all international and all U.S. transborder
services with the exception of flights to/from Washington
National Airport which remains closed.

Within Canada, Air Canada is operating Rapidair flights in the
Toronto-Montreal-Ottawa and Vancouver-Calgary-Edmonton
triangles, as well as transcontinental flights serving Canada's
largest cities: Vancouver, Calgary, Edmonton, Winnipeg, Toronto,
Ottawa, Montreal and Halifax.


AMERICAN AIRLINES: Slashes 20,000 Jobs Due to 20% Schedule Cut
--------------------------------------------------------------
American Airlines notified employees that it is forced to reduce
jobs by at least 20,000. The employment losses result from the
airline's 20 percent schedule reduction, the complexity of new
security procedures, and a sharp reduction in passenger traffic
- all creating a state of emergency at American and across the
entire airline industry.

American said employees would learn the specific status of their
jobs in the next few days.

American Chairman and Chief Executive Officer Don Carty said the
day could only be described as 'heartbreaking'.

"This is, without a doubt, the most difficult thing I have had
to do in my two decades at American," said Carty in a letter to
employees. "I have declared a state of emergency at American
Airlines. This declaration is an official recognition that-hard
as it may be to accept-our company's very survival depends on
dramatic change to our operations, our schedule, and worst of
all our staffing levels."

American said staff would be reduced in management and support
staff groups, and all other work groups across the company.
These job cuts will impact American, American Eagle and TWA.

The carrier said it would ordinarily provide some form of
alternative to those who are being impacted. However, except for
certain kinds of leaves, none of the traditional separation
practices, such as early retirements and stand-in-steads, are
financially feasible in light of the current crisis. American
said that, given its current cash crunch, those programs would
actually worsen its financial situation.

American said its mission is to operate a safe and secure
airline while it and the rest of the industry struggles to
survive. In addition to the job cuts, American said it has
identified significant product and service changes - especially
those things that increase the amount of ground contact with
airplanes and that ensure a more dependable operation given the
new security regulations. The company will be announcing those
changes shortly.

"The events of September 11 will forever change our country, our
industry and our company," said Carty.

Carty is in Washington, D.C. to lobby for an airline relief
package, which the industry believes is its only chance to
survive the national tragedy and the financial crisis facing the
industry.

The following figures are the approximate numbers of employees
across AMR Corp.'s airline divisions:

      American Airlines: 106,700

      American Eagle: 12,650

      TWA: 19,000

      Total: 138,350


AMERICAN AIRLINES: Moody's Downgrades Debt Ratings
--------------------------------------------------
Moody's Investors Service lowered the debt ratings of AMR
Corporation and American Airlines, Inc.  The rating actions
reflect the increasing business and financial risks facing the
company in the aftermath of last week's terrorist attacks in the
United States. The ratings remain on review for further possible
downgrade while there is approximately $13.9 billion of debt
securities affected.

Ratings lowered and remaining under review for possible further
downgrade are:

AMR Corporation

                                     To          From

    Senior Unsecured                 Ba2         Baa3

    Industrial Revenue Bonds         Ba2         Baa3

American Airlines, Inc.

    Senior Unsecured                 Ba2         Baa3

    Commercial Paper                 Not Prime   P-3

Enhanced Equipment Trust
Certificates, Series 1999-1,
Class A                              A2          Aa2

Enhanced Equipment Trust
Certificates, Series 1999-1,
Class B                             Baa1         A1

Enhanced Equipment Trust
Certificates, Series 1999-1,
Class C                             Baa3         A2

Enhanced Equipment Trust
Certificates, Series 2001-1,
Class A                             A2           Aa2

Enhanced Equipment Trust
Certificates, Series 2001-1,
Class B                             Baa1         A1

Enhanced Equipment Trust
Certificates, Series 2001-1,
Class C                             Baa3        A3

Enhanced Equipment Trust
Certificates, Series 2001-1,
Class D                             Ba1          Baa2

Enhanced Equipment Trust
Certificates, Series 2001-2,
Class A                             A3           Aa3

Enhanced Equipment Trust
Certificates, Series 2001-2,
Class B                            Baa1          A1

Enhanced Equipment Trust
Certificates, Series 2001-2,
Class C                            Baa3          A3

Enhanced Equipment Trust
Certificates, Series 2001-2,
Class D                            Ba1           Baa2

Equipment Trust Certificates       Baa3          Baa1

Regional Jet Equipment
Trust 2000-1, Notes                Baa1          A1

Regional Jet Equipment
Trust 2000-1, Certificates         Baa2          A2


Industrial Revenue Bonds           Ba2           Baa3

During the days immediately following the attack, the industry
lost significant revenues that will not be recouped, which
Moody's expects that the Company will have to shoulder a  higher
cost burden in connection with increased security measures.

It is also anticipated that intermediate-term business and
leisure travel will decline significantly. These factors will
result in a decline in the operating environment for the
industry, and will further depress its already strained cash and
financial flexibility, Moody's said.

Moreover, the rating agency believes that the ongoing credit
quality of AMR and other U.S. carriers will be weaker despite
possible Federal assistance program.

AMR Corp. and American Airlines are headquartered in Fort Worth,
TX.


AMERICAN TRANS: Plans to Cut 1,500 Jobs & Flights by 20%
--------------------------------------------------------
ATA (American Trans Air, Inc.)(Nasdaq:AMTR) the nation's 10th
largest airline based on passenger revenue miles announced plans
to reduce its flight schedule by 20 percent, retire its entire
fleet of 727-200s by next month, and furlough approximately
1,500 employees.

These actions, which are a direct result of current and
anticipated effects on the demand for air travel caused by last
week's terrorist attacks in New York City and Washington, D.C.,
are being put in place beginning Monday.

"The uncertainty of the U.S. economy and market had already
weakened the airline industry," said John Tague, ATA President
and CEO. "Last week's tragedy has accelerated dramatically this
industry decline."

"The airline industry is going to need an extraordinary effort
from its employees, the business community and the government if
it is to stabilize. It is imperative that the Federal Government
takes significant and immediate decisive action to protect our
nation's aviation system," he added.

"In my roughly 30 years in this business, I have never witnessed
a situation of this magnitude," said George Mikelsons, ATA
Chairman and founder. "Recovery will require extraordinary
efforts by the employees of the industry and, importantly, the
government. I am confident of both."

ATA's flight schedule is being updated continuously and is
available at its website,  http://www.ata.com through its  
reservations system, and through all travel agencies.


AMERICA WEST: Cuts Flight Schedule By 20% & 2,000 Jobs
------------------------------------------------------
America West Airlines (NYSE: AWA) announced that it will reduce
its flight schedule by approximately 20 percent based on
available seat miles, and will also eliminate approximately
2,000 positions in connection with this reduction.  

The moves are in direct response to the current and anticipated
adverse impact on air travel stemming from last week's terrorist
attacks.

"[Tuesday's] announcement is the direct result of the attacks on
New York and Washington, D.C.," said W. Douglas Parker,
chairman, president and chief executive officer.

"Absent immediate intervention by the federal government,
America West Airlines and its 14,000 employees are at risk
because of these tragic occurrences.  We strongly encourage the
administration and congressional leadership to continue to work
cooperatively with the airlines to, without delay, provide the
relief necessary to stabilize the industry."

The airline expects to have the new schedule implemented as
early as Tuesday, September 18.  The workforce reduction will be
accomplished through the combination of attrition, deferred
hiring and select reductions-in-force.

"These actions are particularly distressing after the employees
of America West have worked tirelessly to restore our airline to
normal operating levels over the last few days," added Parker.  
"They have done an excellent job, and America West customers
should know that we are back flying, albeit as a slightly
smaller airline."

Prior to the events of last week, America West Airlines, the
nation's eighth largest carrier, served 92 destinations with
more than 900 daily departures in the U.S., Canada and Mexico.  
America West will announce details of its revised flight
schedule as they become available.


AMES DEPARTMENT: Continuing All Workers' Compensation Programs
--------------------------------------------------------------
In connection with the operation of their business, Ames
Department Stores, Inc. maintain various workers' compensation
programs, insurance policies, and related programs through
several different insurance carriers.  

The Insurance Programs include coverage for claims currently or
potentially involving workers' compensation, automobile,
fiduciary liability, crime, kidnap and ransom, directors' and
officers' liability and securities, general liability, excess
liability, transit, and various property-related liabilities.

By Motion, the Debtors seek authorization to continue the
Workers' Compensation Programs and maintain the Insurance
Policies on an uninterrupted basis, and pay when due in the all
pre-petition premiums, administrative fees, and other pre-
petition obligations to the issuers of Insurance Policies.  To
the extent a premium payment or other costs of the Insurance
Programs relating to a period prior to the Commencement Date is
outstanding, the Debtors seek authority to make such payment.

David S. Lissy, Esq., Ames' Senior Vice President and General
Counsel, discloses that the premiums on the property insurance
policies, including transit and boiler and machinery coverage,
are financed through American Financial Corporation.  As of the
Commencement Date, Mr. Lissy states that approximately
$2,400,000 was owed to AFCO with respect to such financing,
payable in monthly installments of $261,023 with last
installment due on April 1, 2002.  

In addition, Mr. Lissy reveals that the Debtors' directors' and
officers' liability insurance policies are financed through A.I.
Credit Companies.  As of the Commencement Date, Mr. Lissy
relates that approximately $1,100,000 was owed to AICCO with
respect to such financing, payable in monthly installments of
$51,711 with last installment due on March 1, 2003.   

The Debtors estimate that as of the Commencement Date,
approximately an additional $800,000 is owed in respect of the
Insurance Programs, whether paid directly to the Broker or the
Insurance Carriers.

Mr. Lissy reveals that certain of the Insurance Policies contain
deductible amounts for each claim that is submitted or for the
policy as a whole. To the extent a deductible payment or
reimbursement relating to a period prior to the Commencement
Date is outstanding with respect to any Insurance Policy, the
Debtors seek authority, to make such payments in the same manner
as those made prior to Commencement Date.

Mr. Lissy relates that Marsh has paid premiums under the
Insurance Policies and has not collected these amounts from the
Debtors.  If a refund is payable to the Debtors from the
Insurance Carriers, the Debtors believe any amounts received as
a refund belong to Marsh and would not constitute property of
the estates.  

However, in the exercise of utmost caution, the Debtors seek
entry of an order authorizing Marsh to apply any refunds
received against the pre-petition amounts due and outstanding to
Marsh from the Debtors.  The Debtors submit that such an
allowance is both necessary and desirable because:

(1) the continued use of Marsh's services will enable the
    Debtors to realize savings in the procurement of their
    future insurance policies;

(2) the arrangement whereby Marsh extends credit to the Debtors
    in the form of premium payments and only bills them monthly
    provides the Debtors with increased liquidity and stabilized
    payment obligations; and

(3) the use of an insurance broker provides an administrative
    convenience and cost savings to the Debtors in light of the
    large number of policies they hold.

Furthermore, the Debtors believe that any refund amounts owing
to the Debtors would be subject to a valid right of recoupment
held by Marsh.  The Debtors submit that entry of an order
authorizing Marsh to apply its claims against any refunds that
it may receive with respect to the Debtors' pre-petition
insurance payments is in the best interests of the Debtors,
their estates, and their creditors.

Mr. Lissy maintains that it is essential to the continued
operation of the Debtors' business and their efforts to
reorganize that the Insurance Programs be maintained on an
ongoing and uninterrupted basis.  

Mr. Lissy adds that the failure to pay premiums when due may
affect the Debtors' ability to renew the Insurance Policies,
some of which are set to expire as soon as November 1, 2001.  If
the Insurance Policies are allowed to lapse, Mr. Lissy states
that the Debtors could be exposed to substantial liability for
damages resulting to persons and property of the Debtors.

Continued effectiveness of the directors' and officers'
liability policies is necessary to the retention of qualified
and dedicated senior management.

Furthermore, pursuant to the terms of many of their leases, as
well as the guidelines established by the United States Trustee,
the Debtors are obligated to remain current with respect to
certain of their primary insurance policies.

The maintenance of the Workers' Compensation Programs is
indisputably justified, Mr. Lissy states, as applicable state
law mandates this coverage.  Mr. Lissy adds that the risk that
eligible claimants will not receive timely payments with respect
to employment-related injuries could have a devastating effect
on the financial well-being and morale of their employees, and
their willingness to remain in the Debtors' employ.  

Departures by employees at this critical time may result in a
severe disruption of the Debtors' business to the detriment of
all parties in interest.  Mr. Lissy claims that a significant
deterioration in employee morale undoubtedly will have a
substantially adverse impact on the Debtors, the value of their
assets and businesses, and their ability to reorganize.

Moreover, the workers' compensation carriers are in possession
of approximately $45,000,000 in irrevocable letters of credit
and bonds securing the workers' compensation insurance
obligations.  Mr. Lissy contends that failure by the Debtors to
honor workers' compensation obligations would result in the
drawing of these letters of credit in amounts in excess of
outstanding obligations, and would unnecessarily deplete the
assets of the estate.  Mr. Lissy relates that the amounts the
Debtors propose to pay in respect of the Insurance Programs are
minimal in light of the size of the Debtors' estates and the
potential exposure of the Debtors absent insurance coverage.

                         *   *   *

Finding the relief requested is necessary and in the best
interest of the Debtors, their estates and their creditors,
Judge Gerber grants and approves the motion requested by the
Debtors.

Judge Gerber further orders that:

(1) The Debtors are authorized and empowered to maintain the
    Workers' Compensation Programs and the Insurance Policies
    without interruption, on the same basis, and in accordance
    with the same practices and procedures as were in effect
    prior to the commencement of the Debtors' chapter 11 cases;

(2) The Debtors are authorized to pay, in their discretion, all
    premiums, administrative fees, deductible payments or
    reimbursements, Workers' Compensation Claims, and other pre-
    petition obligations in connection with the Workers'
    Compensation Programs and the Insurance Policies, as
    applicable, to the extent due and payable post-petition,
    whether or not such premiums or amounts relate to the pre-
    petition period or were due prior to the commencement of
    these chapter 11 cases;

(3) Marsh USA, Inc., an insurance broker utilized by the
    Debtors, is authorized to apply any refunds received by it
    from any of the Debtors' Insurance Carriers (as defined in
    the Motion) against any pre-petition amounts due and
    outstanding to Marsh in respect of the Debtors' prepetition
    premium obligations in respect of the Workers' Compensation
    Programs and Insurance Policies;

(4) The Debtors' banks are directed and authorized to process,
    honor, and pay, to the extent of funds on deposit, any and
    all pre-petition checks or wire transfer requests issued by
    the Debtors in respect of any pre-petition obligations with
    respect to the Workers' Compensation Programs, Insurance
    Policies, or Cure Payments prior to, or after, the
    commencement of these chapter 11 cases;

(5) The Debtors are authorized to issue post-petition checks, or
    to effect post-petition fund transfer requests, in
    replacement of any checks or fund transfer requests in
    respect of pre-petition obligations with respect to the
    Workers' Compensation Programs, Insurance Policies, or Cure
    Payments that were dishonored or rejected as of the
    commencement of these chapter 11 cases. (AMES Bankruptcy
    News, Issue No. 4; Bankruptcy Creditors' Service, Inc.,
    609/392-0900)


AUDIO VISUAL: Lenders Extend DIP Facility to December 14
--------------------------------------------------------
Audio Visual Services Corporation(TM) (OTC Bulletin Board: AVSV)
announced that the Company's lenders have extended the term of
its main credit facility to December 14, 2001. In addition to
the extension of the term of the credit facility, the lenders
have agreed to defer interest payments until December 14th.

Certain financial covenant requirements contained in the credit
facility, including the requirement to achieve minimum levels of
EBITDA (Earnings before interest, taxes, depreciation and
amortization) for the twelve months ending September 30, 2001,
have also been waived.

This announcement comes after a period of discussions between
Company representatives, the Company's financial advisor, The
Blackstone Group, L.P., and representatives from the Company's
bank group, lead by The Chase Manhattan Bank. Prior to this
announcement, the Company's main credit facility expired on
October 1, 2001. The Company also maintains a senior $16 million
revolving credit facility that expires on March 31, 2002.

Commenting on the announcement, Robert K. Ellis, Chairman and
Chief Executive Officer of the Company stated, "The extension of
the credit facility reflects the ongoing constructive dialogue
with our bank group and provides the Company further time to
sensibly restructure or refinance its outstanding indebtedness
on a long term basis. The extension will also provide the
Company with additional time to assess the impact of last week's
events on the economy and on the Company's operating business
units."

Audio Visual Services Corporation is a leading provider of
audiovisual equipment rentals, staging services and related
technical support services to hotels, event production
companies, trade associations, convention centers and
corporations in the United States.

In addition to its United States operations, the Company has
operations in Canada, Mexico, the United Kingdom, Belgium, and
the Caribbean. Audio Visual Services Corporation is listed on
the OTC Bulletin Board and trades under the symbol AVSV.

As of end of December 2000, the Company had total liabilities of
$410.6 million and total assets of $409.3 million. Its current
liabilities stood at $401.5 million, and total current assets at
$62.1 million.  The Company had cash of $7.4 million, while its
short-term debts amounted to $365.5 million.


COHO ENERGY: Taps JP Morgan to Explore Options to Raise Capital
---------------------------------------------------------------
Coho Energy Inc. continues to have a high level of indebtedness
following its reorganization.

Its total consolidated indebtedness as of June 30, 2001 was
$316.1 million and the ratio of total consolidated indebtedness
to total capitalization was 84%.

Management believes that forecasted operating revenues, assuming
conservative growth in production and conservative commodity
prices as compared to current commodity prices, and availability
under the credit facility will be sufficient to fund revised
forecasted expenditures through the end of the year 2001.

Interest owed under our senior subordinated notes due 2007, also
referred to as the standby loan, is currently required to be
"paid-in-kind" by increasing the amount of principal outstanding
through the issuance of additional standby loan notes."

Based on its current cash flow projections and existing debt
constraints, management does not believe the forecasted future
capital expenditures will be adequate to provide sufficient
working capital to materially improve its crude oil and natural
gas production above current levels.

The Company has entered into an agreement with JP Morgan, a
division of Chase Securities, to act as its financial advisor in
evaluating various strategic transactions including various
potential recapitalization transactions, the sale of a portion
of the company to provide more available working capital for its
remaining properties or the sale of all of the company.

There can be no assurance that this evaluation will result in
one or more transactions for the company or a significant
portion of its assets. Given the high level of indebtedness, if
the Company elects to pursue any such transactions, there can be
no assurance that, after giving effect to any required repayment
or prepayment of our indebtedness, any significant amount will
be available to provide additional working capital for its
operations or, in the event of a sale of all of its assets, for
distribution to its shareholders.

Its only operating revenues are crude oil and natural gas sales
with crude oil representing approximately 91% of production
revenues and natural gas sales representing approximately 9% of
production revenues during the six months ended June 30, 2001,
compared to 93% from crude oil sales and 7% from natural gas
sales during the same period in 2000.

During the first six months of 2001, production revenues
decreased 12% to $41.1 million as compared to $46.5 million for
the same period in 2000. This decrease was primarily due to a
17% decrease in the price received for crude oil (net of hedging
losses) and a 25% decrease in daily natural gas production,
partially offset by a 4% increase in daily crude oil production
and a 55% increase in the price received for natural gas (net of
hedging losses).

For the three months ended June 30, 2001, production revenues
decreased 14% to $20.5 million as compared to $23.9 million for
the same period in 2000. This decrease was primarily due to a
17% decrease in the price received for crude oil (net of hedging
losses) and a 20% decrease in daily natural gas production,
partially offset by a 3% increase in daily crude oil production
and a 20% increase in the price received for natural gas (net of
hedging losses).

Production revenues for the six months ended June 30, 2001
included crude oil and natural gas hedging losses of $4.4
million ($2.39 per Bbl) and $1.1 million ($1.39 per Mcf),
respectively, as compared to crude oil and natural gas hedging
losses for the six months ended June 30, 2000 of $164,000 ($.09
per Bbl) and $20,000 ($.02 per Mcf), respectively.

Production revenues for the three months ended June 30, 2001
included crude oil and natural gas hedging losses of $2.0
million ($2.10 per Bbl) and $208,000 ($.50 per Mcf),
respectively, as compared to crude oil and natural gas hedging
losses for the three months ended June 30, 2000 of $164,000
($.18 per Bbl) and $20,000 ($.04 per Mcf), respectively.

Due to the factors discussed above, Coho's net earnings for the
six months ended June 30, 2001 were $3.8 million and its net
loss for the three months ended June 30, 2001 was $2.5 million
as compared to a net loss of $16.9 million and $2.3 million,
respectively, for the same periods in 2000.


CONTINENTAL AIRLINES: Fitch Places BB Rating on Watch Negative
--------------------------------------------------------------
In the aftermath of last week's terrorist attacks, Fitch has
placed the debt of Continental Airlines on Rating Watch
Negative, affecting all of its rated debt obligations, including
securitized aircraft transactions.

Continental Airlines, Inc. (current Fitch unsecured debt rating-
-`BB'): Continental has announced plans to furlough 12,000
workers and reduce system capacity by 20%.

In a filing with the SEC, Continental has stated that it will
miss $70 million in scheduled debt service payments on some of
the company's enhanced equipment trust certificates (EETCs).

Under terms of the credit agreement, however, Continental is not
yet in default on these obligations.


COVAD COMMS: Seeks Approval of Plan Solicitation Procedures
-----------------------------------------------------------
On August 27, 2001, Covad Communications Group, Inc. filed its
Disclosure Statement and Plan of Reorganization of and the Court
subsequently set a confirmation hearing on the Plan on November
5, 2001.

By Motion, the Debtor asks the Court to:

A. Establish a Voting Record Date;

B. Establish Procedures with Respect to Confirmation of the
   Plan of Reorganization of the Debtor under Chapter 11 of the
   Bankruptcy Code, as it may be amended from time to time;

C. Approve Solicitation Procedures;

D. Approve the Form of Ballot and Voting Procedures; and

E. Permit the Debtor to File Objections to Claims Deemed to
   Be Informal Proofs of Claim.

Laura Davis Jones, Esq., at Pachulski Stang Ziehl & Jones P.C.
in Wilmington, Delaware, proposes that the Court establish the
date the Disclosure Statement is approved as the record date for
determining which creditors are entitled to vote.  

Furthermore, because of the difficulty in monitoring the
frequent transfers and assignments of claims, the Debtor
requests that if a Transfer/Assignment Notice form prescribed
has not been filed with the Court by the Record Date, then only
the record holder be entitled to vote the applicable transferred
claim to accept or reject the Plan while the unrecorded
transferee would not be entitled to vote the transferred claim.  

In accordance with Bankruptcy Rules, Ms. Jones tells the Court
that the Debtor will mail to all known creditors and equity
security holders a copy of the notice setting forth the Record
Date, the Voting Deadline for the submission of ballots to
accept or reject the Plan, the Objection Deadline, and the time,
date and place for the hearing on the confirmation of the Plan
on or before October 1, 2001.

In addition, the Debtor proposes to publish the Confirmation
Hearing Notice not less that 20 days before the Objection
Deadline, believing that publication of the notice will provide
sufficient notice of the Objection Deadline and the hearing on
the confirmation of the Plan to persons who do not otherwise
receive notice by mail.  

The Debtor also requests that the Court approve the form of the
Confirmation Hearing Notice and deem the notice procedures
adequate.

The Debtor requests that this Court require that all objections
to the Plan be filed with the Court and served on or before
October 26, 2001, to: Brad Godshall of Pachulski, Stang, Ziehl,
Young & Jones P.C. in Los Angeles, CA; Laura Davis Jones of
Pachulski, Stang, Ziehl, Young & Jones, P.C. in Wilmington,
Delaware; Joseph MacMahon of the Office of the United States
Trustee in Wilmington, Delaware.  The Debtor further requests
that:

A. the Court consider only timely filed and served written
   objections,

B. that the Court require all objections to state with
   particularity the grounds for such objection, and

C. that objections not timely filed and served in accordance
   with the provisions of this Motion be overruled.

Ms. Jones informs the Court that the Solicitation Package,
including copies of the Disclosure Statement Order, the
Solicitation Procedures Order, Confirmation Hearing Notice, the
Disclosure Statement, the Plan, and the Ballot, will be mailed
to creditors entitled to vote on the Plan on or before October
1, 200 to be served to:

A. all persons or entities that have filed proofs of claim or
   Transfer/Assignment Notice forms on or before the Record
   Date, except to the extent a claim has been objected to by
   the Debtor and such claim has not been allowed for voting
   purposes or was expunged or disallowed by prior or der of the
   Bankruptcy Court;

B. all persons or entities listed in the Schedules as holding
   liquidated, noncontingent or undisputed claims as of the
   Record Date, except to the extent a claim was objected to by
   the Debtor and not has not been allowed for voting purposes
   or was disallowed or expunged by prior order of the
   Bankruptcy Court;

C. other known creditors against the Debtor, if any, as of the
   Record Date;

D. any parties in interest that have filed a notice in
   accordance with Bankruptcy Rule 2002.

E. the Office of the United States Trustee;

F. the Securities and Exchange Commission; and

G. contract counter-parties

To avoid duplication and reduce expenses, the Debtor proposes
that creditors who have more than one claim should receive only
one Solicitation Package and one ballot for each claim.  Ms.
Jones states that the Solicitation Packages will not be sent to
creditors or equity holders of the Debtor that hold claims or
equity securities that are in a Class that is unimpaired to
avoid significant unnecessary cost.  

These Classes are Class 2A - Secured Claims, Class 2B-Other
Secured Claims, Claim 5 - Contingent Indemnity Claims, Class 8 -
Securities Claims - IPO Allocation and Class 9 - Equity
Interests.  Instead, Ms. Jones asks the Court's approval that
these creditors and equity security holders will be sent the
Confirmation Hearing Notice and the Notice of Non-Voting Status
with Respect to Unimpaired Classes Deemed to Accept the Plan.  
Ms. Jones contends that these creditors and equity security
holders cannot vote on the Plan because their claims or
interests are unimpaired and the class is deemed to have
accepted the Plan, therefore, sending a Solicitation Package
would be confusing and wasteful.  

The Debtor will provide additional materials in the Solicitation
Packages, specifically: (a) if approved by the Court, a letter
from the Debtor recommending acceptance of the Plan, (b) and
such other materials as the Court may direct.

The Debtor anticipates that some of the Solicitation Packages or
Confirmation Hearing Notices may be returned as undeliverable
and seeks the Court's approval for a departure from the strict
notice rule, excusing the Debtor from re-mailing Solicitation
Packages or the Confirmation Hearing Notice to those entities
whose addresses differ from the addresses in the database as of
the Record date.  

The Debtor requests that the Court approve the Solicitation
Package that will be mailed to the stated persons, the notice to
be sent to creditors deemed to have accepted the Plan and the
procedure for distribution of the materials and deem the
Solicitation Package sufficient notice to allow parties to
cast votes on the Plan.

Ms. Jones relates that the Debtor is in the process of
identifying additional members of Class 4 and 6 Claims and
anticipates that it may not have completed this process on or
before October 1, 2001.  The Debtor proposes to serve the
Solicitation Package on newly identified holders of those claims
on October 15, 2001, 21 days prior to the Confirmation Hearing
and 11 days prior to the date ballots must be cast.  

The Debtor further proposes to include with the Solicitation
Packages a Notice of Bar Date previously approved, a proof of
claim form and a notice, advising such creditors desiring to
vote that they must file a proof of claim by October 29, 2001.  
The Debtor submits that such notice is sufficient due to the
previous publication of the Bar Date Notice and the Confirmation
Notice and will give those creditors an additional opportunity
to vote on the Plan.

The Debtor therefore requests approval of the procedure of
serving the Solicitation Packages on later identified creditors
as sufficient notice to those creditors.

The Debtor request approval to mail a ballot to each holder of a
claim in the Voting Classes under the Plan modified to address
the particular needs of these cases.  Ms. Jones states that the
Balloting Agent will customize each Ballot to include the
Creditor's name, address and claim information.

The Debtor proposes that all Ballots must be properly executed,
completed and delivered to the Balloting Agent (a) by first
class mail, in the return envelope provided with each Ballot,
(b) by overnight courier, or (c) by personal delivery so that
they are received by the Balloting Agent no later than November
2, 2001. Ms. Jones assures the Court that the Debtor will
complete the mailing to the currently known creditors by no
later than October 1, 2001 and will complete its mailing to
later identified creditors by no later than October 15, 2001.  
Ms. Jones asks the Court's approval of the solicitation process
after the Court finds that the solicitation period, in
conjunction with the publication of the Confirmation Notice,
should be sufficient time within which creditors can make an
informed decision to accept or reject the Plan.

The Debtor proposes that no Ballot cast by a creditor holding a
claim to which the Debtor has filed an objection on or before
November 1, 2001, shall be counted unless the creditor has filed
a motion seeking temporary allowance of the claim for voting
purposes and the Court grants such Motion.  Notwithstanding the
above stated procedure, the Debtor also proposes these
procedures to determine the voting rights of the Litigation
Plaintiffs in the Pending Litigation:

A. To the extent the Litigation Plaintiffs have not filed proofs
   of claim on or before September 21, 2001, the complaints
   filed or sent to Covad in respect of such Pending Litigation
   shall be treated as informal claims against the Debtor solely
   for the purpose of determining those alleged creditors'
   voting rights;

B. The Debtor shall have until October 10, 2001 to file an
   objection to those informal claims on or for the purposes of
   determining the plaintiffs voting status only and any such
   objection shall not be deemed a waiver of any other objection
   or objections the Debtor may have to the claims of the
   Litigation Plaintiffs, which objections may be raised at a
   later date;

C. Any Litigation Plaintiff shall have until October 20, 2001,
   to file any 3018 Motion; and

D. Any 3018 Motions filed by the Plaintiffs shall be heard by
   the Court prior to the Confirmation Hearing.

The Debtor believes that due to the time constraints in this
case the objection procedures for voting purposes are
appropriate and requests that the Court approve the above
objection procedures for voting purposes as reasonable under the
circumstances and for the purpose stated.  The Debtor proposes
that, for purposes of voting, the amount of a claim used to
tabulate acceptance or rejection of the Plan shall be the lesser
of:

A. the amount set forth on the Ballot received for that
   particular creditor or

B. the following:

    1. the amount set forth as a claim in the Schedules as not
       contingent, unliquidated or disputed;

    2. the amount set forth on a filed proof of claim which has
       been timely filed and has not been objected to,
       disallowed, disqualified, suspended, reduced or estimated
       and temporarily allowed for voting purposes prior to
       computation of the vote on the Plan; or

    3. the amount estimated and temporarily allowed with respect
       to a claim pursuant to an order of this Court.

To the extent authorized by order of the Court in the Securities
Class Action, Debtor also requests that the Representative be
authorized to submit Ballots on behalf of accepting members of
class treatment in such Securities Class Action.  With respect
to Ballots submitted by a creditor, Debtor requests that the
Court direct as follows:

A. any Ballot received after the Voting Deadline, unless the
   Debtor extends the Voting Deadline with respect to such
   Ballot, shall not be counted;

B. any Ballot that is illegible or contains insufficient
   information to permit identification of the creditor shall
   not be counted;

C. any Ballot cast by a person or entity that does not hold a
   claim in a Class that is entitled to vote on the Plan shall
   not be counted;

D. any Ballot which is properly completed, executed and timely
   returned to the Balloting Agent that does not indicate an
   acceptance or rejection of the Plan shall be deemed to be a
   vote to accept the Plan;

E. any Ballot which is returned to the Balloting Agent
   indicating acceptance or rejection of the Plan but which is
   unsigned shall not be counted;

F. whenever a creditor casts more than one Ballot voting the
   same claim prior to the Voting Deadline, only the last timely
   Ballot received by the Balloting Agent shall be counted;

G. if a creditor casts simultaneous duplicative Ballots voted
   inconsistently such Ballots shall count as one vote accepting
   the Plan;

H. each creditor shall be deemed to have voted the full amount
   of its claim;

I. creditors shall not split their vote within a claim, thus
   each creditor shall vote all of its claim within a particular
   class either to accept or reject the Plan;

J. if a single creditor holds disparate claims, that creditor
   must cast a separate Ballot for each such disparate claim and
   each properly cast Ballot shall be counted as an acceptance
   or a rejection of the Plan.

K. any Ballot that partially rejects and partially accepts the
   Plan shall not be counted; and

L. any Ballot received by the Balloting Agent by telecopier,
   facsimile or other electronic communication shall not be
   counted.

Ms. Jones additionally suggests that if no Ballots are cast with
respect to a particular Class, then such Class will be deemed to
have accepted the Plan.

The Debtor believes that the foregoing proposed procedure
provides for a fair and equitable voting process and in
necessary to avoid any confusion resulting from incomplete or
inconsistently executed ballots and will simplify the voting and
tabulation process. (Covad Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 609/392-0900)    


DAIRY MART: Misses $4.5MM Interest Payment on Subordinated Notes
----------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. (AMEX:DMC) announced that it
did not make an interest payment due Monday of approximately
$4.5 million on its 10 1/4% Senior Subordinated Notes due 2004.
There are currently $88.5 million of Senior Subordinated Notes
outstanding.

The missed interest payment does not constitute an event of
default under the bond indenture unless Dairy Mart fails to make
the payment within 30 days of the due date.

Dairy Mart is in active discussion with an ad hoc committee of
bondholders representing a substantial majority of the principal
amount of the bonds, and has advised the committee that the
company is exploring potential financing and strategic
alternatives to address its liquidity shortfall and to maximize
the company's value for its constituencies. There can be no
guarantee that these efforts will be successful or that
additional financing will be obtained.

Dairy Mart Convenience Stores, Inc. owns or operates
approximately 550 retail stores in seven states located in the
Midwest and Southeast. For more information, visit Dairy Mart's
website at http://www.dairymart.com


DELTA AIR: Mullin Urges Congress to Aid in Industry Bailout Plan
----------------------------------------------------------------
Without immediate and significant U.S. government financial
support, most of the airlines that make up the nation's
commercial air transportation system will go bankrupt, Delta Air
Lines (NYSE: DAL) Chairman and CEO Leo F. Mullin told members of
Congress Wednesday.

"We face an enormous problem with potentially devastating
repercussions for our nation's full recovery," said Mullin,
testifying on behalf of the Air Transport Association and its
member airlines before the House Transportation and
Infrastructure Committee. "Under current circumstances and
without immediate financial support from the government, a
number of carriers could be driven to bankruptcy within 60 days
and the future of aviation could be severely threatened."

Mullin asked Congress to help in the development and approval of
a package of transition aid so that, as Transportation Secretary
Norman Mineta said recently, "We do not allow the enemy to win
this war by restricting our freedom of mobility."

Mullin told legislators that the several day shutdown of the
airline industry, the projected long-term reduction in passenger
demand and airline revenues, significantly increased costs.
This, in addition to the consequences from the liability issues
resulting from the events on September 11th, will generate
crushing losses for the industry.

Passenger demand and associated revenue, Mullin said, is not
expected to return to previously anticipated levels before the
third quarter of 2002. The proposed government support package
is valued at $17.5 billion, based on anticipated revenue
declines and cost increases associated directly with the impact
on the U.S. airline industry from the September 11th attack.

Although a handful of air carriers may be able to survive
without government support, the vast majority of U.S. carriers
have no means of obtaining the necessary cash to support
continued operations, noted Mullin, even within the bounds of a
Chapter 11 bankruptcy proceeding. Already, U.S. air carriers
have taken steps to shrink in size and are expected to announce
the layoff of more than 100,000 employees.

To forestall this, the airline industry is urging Congress to
immediately adopt a package of cash grants and other measures.
Mullin outlined the commercial aviation industry's concept of a
recovery program that would ensure the security, safety, and
stability of this critical industry.

The program is composed of three components. The first addresses
the financial underpinning required to maintain the industry's
capacity to serve. The second relates to the liability issues
arising out of the tragic role cast on aviation in this brutal
attack on America. The third deals with the need to provide
resources for the enhanced aviation security programs which our
nation is undertaking.

Mullin also reminded the House committee members that the U.S.
commercial airline transportation system is vital to the U.S.
economy. During calendar year 2000, U.S. commercial airline
operations generated more than $30 billion in government
revenues. During calendar year 2000, the 1.2 million U.S.
airline employees served approximately 670 million passengers
traveling over 700 billion miles and provided over 25 billion
ton miles of freight delivery.

Although the terrorist attacks dealt a crippling blow to U.S.
commercial airline transportation, Mullin told the Committee
members that, "We are grateful for the opportunity to join you
in the important work of rebuilding from this enormous tragedy,
and just as importantly, the work of restoring our nation's
confidence."

                           *  *  *

Delta Air Lines' cash, cash equivalents and short-term
investments totaled $1.5 billion at June 30, 2001, compared to
$1.6 billion at December 31, 2000. The Company's principal
sources and uses of cash during the six months ended June 30,
2001 are summarized below:

Sources:

.  Borrowed $800 million under our 1997 Bank Credit Agreement.

.  Generated $551 million of cash from operations.

.  Generated $239 million from the sale of short-term
   investments.

.  Issued $151 million in long-term debt for the purchase of
   aircraft at ASA and Comair.

.  Generated $53 million from the sale of priceline common
   stock.

.  Generated $26 million from the sale of flight equipment.
   
Uses:

.  Invested $1.2 billion in flight equipment.

.  Invested $303 million in ground property and equipment.

.  Used $93 million for payments on long-term debt and capital
   lease obligations.

.  Paid $20 million in cash dividends on preferred and common
   stock.

Delta may prepay its long-term debt and repurchase its common
stock from time to time.

As of June 30, 2001, the Company had a negative working capital
position of $3.2 billion, compared to negative working capital
of $2.0 billion at December 31, 2000.

The change in the Company's working capital position during the
six months ended June 30, 2001 was primarily the result of our
$1.5 billion investment in capital assets and lower revenues due
to the slowing U.S. economy and pilot labor issues. The Company
borrowed $800 million under our 1997 Bank Credit Agreement, and
that borrowing is included in current liabilities in the
Company's Consolidated Balance Sheets.

A negative working capital position is normal for the company,
primarily due to our air traffic liability, and does not
indicate a lack of liquidity. "We expect to meet our obligations
as they become due through available cash, short-term
investments and internally generated funds, supplemented as
necessary by borrowings and proceeds from sale and leaseback
transactions," the Company says in its financial statements.

Long-term debt and capital lease obligations (including current
maturities) totaled $6.8 billion at June 30, 2001, compared to
$6.0 billion at December 31, 2000. Shareowners' equity was $5.0
billion at June 30, 2001 and $5.3 billion at December 31, 2000.
Our net debt-to-capital position was 74% at June 30, 2001 and
71% at December 31, 2000.


DELTA AIRLINES: Moody's Lowers Ratings After Last Week's Attacks
----------------------------------------------------------------
Due to the increasing business and financial risks facing the
company after last week's terrorist attacks in the United
States, Moody's Investor's Service lowered the debt ratings of
Delta Air Lines.

The ratings remain on review for further possible downgrade
while there is approximately $12.9 billion of debt securities
affected.

Ratings lowered and remaining under review for possible further
downgrade are:

Delta Air Lines, Inc.:

                                  To      From

Issuer Rating                     Ba2     Baa3

Unsecured notes                   Ba2     Baa3

Industrial Revenue Bonds          Ba2     Baa3
                                  B1      Ba2

Revolving Credit Facility         Ba2     Baa3

Equipment Trust Certificates      Baa3    Baa1

Enhanced Equipment Trust
Certificates, Series 2000-1,
Class A                           A2       Aa2

Enhanced Equipment Trust
Certificates, Series 2000-1,
Class B                           A3       Aa3

Enhanced Equipment Trust
Certificates, Series 2000-1,
Class C                           Baa3     A3

Enhanced Equipment Trust
Certificates, Series 2001-1,
Class A                           A2       Aa2

Shelf registration for
secured                         (P)Baa3   (P)Baa1
and unsecured                    Ba2      (P)Baa3
issuance

Enhanced Equipment Trust
Certificates, Series 2001-1,
Class B                           A3      Aa3

Enhanced Equipment Trust
Certificates, Series 2001-1,
Class C                         Baa2      A2


Moody's believes that last week's events will result in severe
operating and financial burdens for Delta despite the
possibility of Congress intervention to provide some form of
relief to the sector.

Moody's review of Delta's ratings will focus on:

    1) the degree to which future developments will erode the
       industry's revenue outlook or raise its cost structure;

    2) the ability of Delta to protect its relative competitive
       position and restructure its operating model in the face
       of new industry fundamentals;

    3) the cash flow, liquidity and financial flexibility of the
       company over the near term and,

    4) the size and scope of any Congressional assistance
       program.

Moody's stated that in response to the eroding outlook for the
industry, most carriers have announced plans to significantly
reduce their employment levels and flight schedules. Moreover,
it is likely that some carriers to seek bankruptcy protection
during the near term in the absence of an effective government
bail-out plan.

Delta Air Lines, Inc. is headquartered in Atlanta, Georgia.


FRUIT OF THE LOOM: UST Calls For Scrutiny Of Proposed Lazard Fee
----------------------------------------------------------------
Joseph J. McMahon, Jr., Esq., on behalf of the U.S. Trustee for
Region 3, Patricia A. Staiano, comments on Lazard Freres
Reimbursement of Actual and Necessary Expenses Incurred from
April 1, 2001 through April 30, 2001.

Mr. McMahon tells Judge Walsh that Section 330(a)(3) of the Code
provides that, in determining the amount of compensation to be
awarded, the court shall consider the nature, the extent, and
the value of such services, taking into account all relevant
factors, including:

      (A) the time spent on such services;

      (B) the rates charged for such services;

      (C) whether the service was rendered toward the completion
          of, or beneficial at the time at which the service was
          rendered toward the completion of, a case under this
          title;

      (D) whether the services were performed within a
          reasonable amount of time commensurate with the
          complexity, importance, and nature of the problem,
          issue, or task addressed; and

      (E) whether the compensation is reasonable based on the
          customary compensation charged by comparably skilled
          practitioners in cases other than cases under this
          title.

During the interim period covered by the Application, Lazard is
seeking $150,000 for 160.5 hours of work, for a blended rate of
$934.58/hour. Given that a Lazard Director and Vice-President
with a reported 10 and 7 years of business experience,  
respectively, billed approximately 75% of the total request, the
amount of compensation sought warrants scrutiny by the Court.

The UST will continue to monitor Lazard's interim compensation
requests and may object to Lazard's final fee application on
grounds identified in this Comment. (Fruit of the Loom
Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service,
Inc., 609/392-0900)   


FUTURELINK: US Trustee Appoints Unsecured Creditors Committee
-------------------------------------------------------------
The United States Trustee announces that the Official Committee
of Unsecured Creditors has been appointed for the chapter 11
cases of FutureLink Corporation, composed of:

A. Cathy Thacker of RSA Security
   20 Crosby Drive, Bedford, Massachusetts 01730
   Tel: (781) 301-5134

B. Ingram Micro
   1675 Broadway, New York, New York 10019
   Tel: (212) 506-2643

C. Robert Feigen of Benes Brand Imaging
   1840 Mass Ave., Lexington, Massachusetts 024204
   Tel: (781) 674-2327

H. Sharon Kelly
   1441 3rd Ave., #19A, New York, New York 10028

I. Steven W. Oxman of Oxko Corporation
   175 Adm. Cochrane Drive, North Lobby, Annapolis, Maryland
   Tel: (410) 266-1671

J. Nokia, Inc.
   313 Fairchild Drive, Mountain View Connecticut 94043-2215
   Tel: (650) 625-2758

K. Wendy W. Huang of Olen Commercial Realty
   7 Corporate Plaza, Newport Beach, California 92660
   Tel: (949) 719-7211

Subsequently, the Committee submits an application to employ and
retain Olshan Grondman Frome Rosenzweig & Wolosky LLP to
represent it before the Court in FutureLink's chapter 11 cases.


GLOBAL TELESYSTEMS: Bank Group Extends Waiver of Defaults
---------------------------------------------------------
Global TeleSystems, Inc. (GTS) (OTC:GTLS; NASDAQ EUROPE:GTSG;
Frankfurt:GTS) announced that Deutsche Bank, Dresdner Bank and
Bank of America (Bank Group), which are providing financing to
GTS's Global TeleSystems Europe Holdings B.V. subsidiary, have
agreed to further extend the waiver of any defaults under their
facility caused by GTS's election to not make interest payments
on GTS Europe's publicly-traded debt while the company works
toward a debt restructuring plan with bondholders.

The current waiver has now been extended through 24 September
2001. On a going forward basis, GTS will only advise investors
in the event that such waiver, or any future waivers, are not
renewed by the Bank Group. GTS and the Bank Group continue their
discussions, aimed at replacing the current financing agreement
with a longer-term financing facility.


ICG COMMS: Court Allows Debtor to Reject 18 Telecomms Property
--------------------------------------------------------------
Judge Walsh granted the ICG Communications, Inc.'s Motion to
reject 18 leases of commercial real property used for
telecommunications sites.

In their motion, the Debtors said they had determined that the
said sites were no longer necessary to their operations, or in
their best interests to maintain these sites.

By rejecting these leases and/or contracts, the Debtors can
minimize administrative expenses.

The leases which the Debtor seeks to reject are:

    Address               Lessor               Lessee/Debtor
    -------               ------               -------------
1329 Broad Street       Roland Maddalena     ICG NetAhead, Inc.
Suites D & D1           1329 Broad Street
San Luis Obispo, CA     San Luis Obispo, CA

Clear Creek Office Plaza  C. D. Stimson Co.  ICG NetAhead, Inc.
10049 Kitsap Mall Blvd. C/o Metzler Realty Adv.
Suite 202B              700 Fifth Ave., Ste. 6175
Silverdale, WA          Seattle, WA

2918 Colby Avenue       Quintet Investments  ICG NetAhead, Inc.
Suite B101              P. O. Box 5267
Everett, WA             Everett, WA

522 N. Colorado St.     J. R. Halford        ICG NetAhead, Inc.
Suite 116               4101 Bear Mountain Rd.
Kennewick, WA           Chelan, WA

111 SW Columbia         Columbia Square LLC  ICG NetAhead, Inc.
Suite 255               111 SW Columbia, Ste 1380
Portland, OR            Portland, OR

1939 Commerce           F.R.R. Harmon LLC    ICG NetAhead, Inc.
Suite 206               1944 Pacific #900
Tacoma, WA              Tacoma, WA

343 Main Street         Daniel E. Cort       ICG NetAhead, Inc.
Suites 420 & 421        343 E. Main St.,
Stockton, CA            10th Fl.
                         Stockton, CA

10637 N.E. Coxley       Orchard Center LLC   ICG NetAhead, Inc.
Suite 202               c/o OPCMC
Vancouver, WA           1800 SW First Ave.,
                         Ste. 60
                         Portland, OR

3221 N.W. Yeon Avenue   Pacific Realty
                         Assoc.               ICG NetAhead, Inc.
Bldg. D, Davis Ind. Pk. 15350 SW Sequoia
Portland, OR            Pkway
                         #300-WPMC
                         Portland OR

9001-9015 Brittany Way  Liberty Property LP  ICG Equipment Inc.
Suite 9001              65 Valley Stream
Tampa, Fl               Suite 100
                         Malvern PA 19355

101B Patrick Street     Sycon Corporation    ICG NetAhead, Inc.
Suite B                 P. O. Box  1701
Frederick, MD           Rockville, MD

222 High Street         Equity Financial
                         Corp.                ICG NetAhead, Inc.
Suite 212 and 214       222 High Street
Hamilton, OH            Hamilton, OH

286 Genesse Street      Giavonnone Realty Co. ICG NetAhead, Inc.
Suite 1                 284 Genesse St.
Urica, NY               Utica, NY

1160 S. State St.       Vista Enterprise     ICG NetAhead, Inc.
Suite 40                1156 S. State St.
Orem, UT                Orem, UT

625 57th St.            Firstar Facilities   ICG NetAhead, Inc.
Suite 311               1 South Pinckney
Kenosha, WI             Suite 305
                         Madison, WI

550 24th St.            Executive Management ICG NetAhead, Inc.
Suite 205               550 24th St., Ste 103
Ogden, UT               Ogden, UT

15401 Anacapa Rd.       Edward L. Friehoff   ICG NetAhead, Inc.
Suite 2                 c/o Desert Stationers
Victorville, CA         15401 Anacapa Rd.
                         Victorville, CA

(ICG Communications Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)  


INNOVATIVE CLINICAL: Sells Oncology to Focus On Core Operations
---------------------------------------------------------------
Innovative Clinical Solutions Ltd. announced that its Chief
Operating Officer - Clinical Studies, Dr. Adrian Otte, has
tendered his resignation and the Company has accepted his  
resignation.  

Dr. Otte resigned to pursue an opportunity as a senior manager
for a major  pharmaceutical company.  Dr.  Otte's  resignation
was effective September 14, 2001. Gary S.  Gillheeney, the
Company's Chief Financial Officer will serve as interim Chief
Operating  Officer - Clinical Studies until a suitable
replacement for Dr. Otte can be retained.

                      Sale of Oncology

On August 31, 2001, the Company sold certain of its assets,  
specifically its oncology clinical studies (OCS) network of 23
sites across the country.  The Company received $2.5 million in
cash for the OCS network and plans to use that cash to focus on
its core competencies.

Innovative Clinical Solutions, Ltd. (formerly PhyMatrix Corp.)
operates two business lines: pharmaceutical services, including
investigative site management, clinical and outcomes research
and disease management and single-specialty provider network
management. The Company began its operations in 1994 and closed
the initial public offering of its then existing common stock in
January 1996. Its primary strategy was to develop management
networks in specific geographic locations by affiliating with
physicians, medical providers and medical networks.

The Company affiliated with physicians by acquiring their
practices and entering into long-term physician practice
management agreements with the acquired practices and by
managing independent physician associations and specialty care
physician networks through management service organizations in
which the Company had ownership interests.

In order to expand its service offerings and to take advantage
of the higher margins resulting from clinical studies, the
Company acquired Clinical Studies Ltd. in October 1997. By 1998,
the Company had become an integrated medical management company
that provided medical management services to the medical
community, certain ancillary medical services to

As of January 31, 2001, the Company had total current assets of
$21.7 million, while its total current liabilities stood at
$30.4 million. The Company's short-term debts totaled $9.7
million.


INTEGRATED HEALTH: Westhaven Seeks $3.3M Payment on Washoe Lease
----------------------------------------------------------------
Westhaven Reno, LLC seeks to compel Integrated Health Services,
Inc. payment of an Administrative Priority Claim for actual
damages in the approximate amount of $3,310,000 and interest,
plus punitive damages and attorney's and court fees in relation
to rejected lease (the Washoe Lease) for a 129 bed nursing
facility in Sparks, Nevada, known as the Washoe Convalescent
Center.

Movant is an assignee of the lease entered into by Westhaven
Healthcare Partnership (Westhaven) and Horizon Healthcare in
July 1991. IHS 151 assumed Horizon's obligations under the
Lease, as amended, and IHS guaranteed the obligations of IHS 151
under the Lease pursuant to agreements dated December 31, 1997.

By amendment, the term of the Washoe Lease was extended until
June 30, 2004.

On July 18, 2000, Debtors filed their Motion for an Order
Authorizing the Rejection of Eight Unexpired Leases of Non-
Residential Real Property Relating to Certain Skilled Nursing
Facilities, which included the Washoe Lease. Westhaven filed a
limited objection voicing that any rejection should be
conditioned on protective measures to insure an orderly
transition of operations.

While the motion to reject the Washoe Lease was pending,
Westhaven began the due diligence process to find a suitable
management company or operator to replace the Debtors upon
turnover of the Washoe Facility.

In doing so, Westhaven discovered a pattern of acts and
omissions on the part of Debtors, which irreparably
harmed, if not destroyed the value of the Washoe Facility,
especially as an ongoing business enterprise, the Movant tells
the Court.

In particular, the Movant tells the Court that Westhaven
discovered:

      (1) significant and extensive deferred maintenance, pre-
          petition and post-petition, which would require at
          least $300,000 for remedy and repair, and which
          further resulted in lower occupancy and private pay
          rates.

      (2) a history of noncompliance with rules and regulations
          of governmental agencies, which resulted in the
          imposition of civil monetary penalties in the
          approximately amount of $300,000 constituting an
          assessment or encumbrance against the Washoe
          Facility because operations cannot be transferred or
          assumed until these penalties are paid.

      (3) through a central administrative office, Debtors had
          apparently begun diverting new residents from the
          Washoe Facility to other facilities in the vicinity
          under their own operation.

      (4) in the process of winding down the operations of the
          Washoe Facility, Debtors converted supplies, equipment
          and inventory which was legally owned by Westhaven
          under the terms of the Washoe Lease.

      (5) in contravention of covenants in the Washoe Lease and
          the orders of the Court, Debtors closed the Washoe
          Facility, transferred all of the residents or patients
          to their other facilities in the vicinity, and removed
          equipment, supplies and key personnel.

By way of an amended limited objection filed on February 15,
2001, Westhaven advised the Court of the foregoing acts and
omissions, which would effectively preclude anyone from assuming
operations of the Washoe Facility.

The Washoe Lease was subsequently rejected pursuant to the terms
of a stipulation between the parties, approved and entered by
the Court on May 3, 2001. From the filing date until entry of
the stipulation, Debtors had not tendered a postpetition rent
payment, the Movant tells the Court.

The Movant notes that, under the terms of the stipulation,
Debtors paid the administrative rent due but draws the Court's
attention to the term in the Stipulation: "Nothing herein shall
be construed so as to waive, prejudice or impair any claims or
defenses of any of the parties hereto under the [Washoe Lease],
except claims by Westhaven ... for administrative rent, the
amounts of which are liquidated herein."

Accordingly, the movant accuses Debtors of Postpetition Breach
of Lease Agreement as follows:

(1) conversion of supplies and equipment in contravention of
    the terms of the Washoe Lease;

(2) closure of the Washoe Facility and transferring the
    residents to other IHS owned, operated or controlled
    facilities in the area;

(3) abandonment of the Washoe Facility by the Lessee in default
    of the Washoe Lease.

(4) committing waste to the Washoe Facility, both intentionally
    and by their failure to use reasonable care in preserving
    the property.

(5) Negligence in exercising ordinary care so as not to injure
    the leased property entrusted to their care and possession.

(6) Conversion in wrongfully exercising dominion and control
    over the property in denial of and inconsistent with the
    rights of Movant, including but not limited to equipment,
    supplies, inventory and contractual relationships with
    residents of the Washoe Facility, and in committing a
    "taking" of the Washoe Facility by the intentional or
    negligent damage.

(7) with respect to Accounting, Movant is entitled to an
    accounting of all revenue received from patients or
    residents diverted or transferred to other facilities owned
    or operated by Debtors.

Movant asserts that IHS is liable to it for the numerous
breaches of the Washoe Lease pursuant to the terms of its
guaranty, and additionally or alternatively, directly liable for
its own participation in the decision making, intentional and
negligent acts, errors and omissions which proximately caused
substantial damage to Movant.

IHS is directly liable, Movant asserts, on an alter-ego basis,
because IHS exercises actual control over IHS 151 and operates
it and hundreds of other subsidiaries as mere instrumentalities,
tools or conduits through which IHS conducts its business.

Movant further seeks Punitive Damages and Sanctions on the bases
that Debtors were not only negligent but grossly negligent, that
Debtors commit willful, intentional and malicious acts of waste
and conversion which resulted in extensive damage to Movant's
interest in the property, and most importantly, Debtors' acts
and omissions were committed with apparent disregard for the
Court's orders directing them to perform all obligations under
the Washoe Lease under section 365(d)(5) of the Bankruptcy Code.

Movant asserts that it is entitled to payment of its damages on
an administrative priority basis because the diminution and
destruction of the value of the Washoe Facility and the value of
the converted equipment and supplies are damages resulting from
postpetition acts and omissions in flagrant violation of the
orders of the Court expressly directing the Debtors to perform
all obligations under the Leases and section 365(d)(3) of the
Bankruptcy Code, and because Debtors and their estates have been
significantly and unjustly enriched by the diversion of the
income and revenues from residents transferred to other
facilities and the value of equipment, supplies and other assets
converted to the Debtors' use and benefit.  (Integrated Health
Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service,
Inc., 609/392-0900)   


INTERLIANT INC: Over 75% of Noteholders Approve Restructuring
-------------------------------------------------------------
Interliant, Inc. (Nasdaq:INIT), a leading global application
service provider (ASP), announced progress in its negotiations
with note holders to restructure the debt from a February 2000
7% Convertible Notes issue, which has an aggregate face amount
of $164.8 million.

After discussions with a small number of note holders
representing more than 75 percent of the outstanding principal
value of the Notes, Interliant believes it can achieve a
restructuring of substantially all of its debt represented by
the Notes on or about October 31, 2001.

Interliant also announced that it is in default of the terms of
the Notes and related Indenture due to the fact it did not make
the interest payment due under the Notes within the grace period
that ended September 15, 2001.

However, the note holders with whom Interliant has been
negotiating have agreed not to take any action with respect to
such default until at least October 31.

While there is no assurance that the balance of the note holders
or the Trustee of the Indenture similarly will take no action
regarding such default, Interliant believes they will not, given
the discussions to date with the note holders and the Trustee.

While the negotiations with the bondholders are ongoing, the
company anticipates no impact on its ability to continue with
its operations and execute its business plan while serving its
more than 60,000 customers.

"We believe we have made significant progress towards completing
this restructuring," said Bruce Graham, Interliant's president
and CEO. "We anticipate we will be stronger financially and far
better positioned for continued growth, with considerably
reduced debt, thereby enabling us to carry out our business
plan."

Interliant, Inc. (Nasdaq:INIT) is a leading global application
service provider (ASP) and pioneer in the ASP market.
Interliant's INIT Solutions Suite includes managed messaging,
managed hosting, security, Web hosting (Branded Solutions/OEM
and retail), and professional services.

Interliant, headquartered in Purchase, NY, has forged strategic
alliances with the world's leading software, networking and
hardware manufacturers including Microsoft (Nasdaq:MSFT), Dell
Computer Corporation (Nasdaq:DELL), Oracle Corporation
(Nasdaq:ORCL), Verisign/Network Solutions (Nasdaq:VRSN), IBM
(NYSE:IBM), Sun Microsystems Inc. (Nasdaq:SUNW), and Lotus
Development Corp. For more information about Interliant, visit
http://www.interliant.com


KMART CORPORATION: Sales Decline 0.9% In 3 Months Ended Aug. 1
--------------------------------------------------------------
Kmart's sales decreased 0.9% and increased 0.4% for the 13 and
26 weeks ended August 1, 2001, respectively, versus the same
period of the previous year.  

Comparable store sales increased 1.0% and 1.3% for the 13 and 26
weeks ended August 1, 2001, respectively. Divisions showing
particular strength on a year-to-date basis included pharmacy,
beauty and health care, home entertainment and food and
consumables. The Company opened 12 stores and closed 4 stores
during the 26 weeks ended August 1, 2001.

Net loss for the thirteen weeks ended August 1, 2001, was $(95),
as compared to a net loss of $(448) in the same period of 2000.  
The twenty-six week period ended August 1, 2001 saw a net loss
of $(120), as compared to the net loss of $(426) for the same
period in the year 2000.

                           *   *   *

Fitch has rated Kmart Corporation's proposed $400 million issue
of senior notes `BB+'.

The proceeds of the proposed issue would be used to prepay $260
million of commercial mortgage pass-through certificates, and
the balance to repay borrowings under its credit facilities. The
Rating Outlook is Stable.

The rating reflected the company's weakened operations and
competitive position balanced against the expectation for
improvement as the company makes continued progress in
implementing its strategic initiatives.

Kmart Corporation is a near-$40 billion company that serves
America with more than 2,100 Kmart and Kmart Supercenter retail
outlets and through its e-commerce shopping site
http://www.bluelight.com


LAIDLAW INC: Court Approves Cross-Border Protocol Implementation
----------------------------------------------------------------
Judge Kaplan granted Laidlaw Inc. and its affiliates the final
approval to implement its proposed cross-border insolvency
protocol.

The implementation of the procedural protocol between the New
York Bankruptcy Court and the Ontario Superior court of Justice
in Toronto, Canada, is deemed necessary to address certain
administrative issues expected to arise in coordinating the
insolvency proceedings.  

Together, the insolvency proceedings involve the restructuring
of six affiliated debtors and impact the rights of numerous
creditors and interested parties in the United States, Canada
and other jurisdictions.  

Moreover, Laidlaw Inc., a Canada corporation and the ultimate
parent corporation of the other Debtors, and Laidlaw Investment
Ltd., an Ontario corporation, each a debtor in both the United
States and Canadian cases, may be required in certain instances
to seek relief jointly in this court and the Canadian court.  

As a result, an administrative protocol is required to ensure
that:

        (a) the United States cases and the Canadian cases are
            coordinated to avoid inconsistent, conflicting or
            duplicative activities;

        (b) all parties are adequately informed of key issues in
            both insolvency proceedings;

        (c) the substantive rights of all parties are protected;
            and

        (d) the jurisdictional integrity of each court is
            preserved.

The protocol is designed to achieve these various objectives by
implementing a framework of general principles to address the
basic administrative issues arising out of the cross-border
nature of the insolvency proceedings.  In particular, the
protocol is designed to achieve three goals:

       * First, the protocol is designed to harmonize and
coordinate activities in the insolvency proceedings before the
New York and Canadian courts, thus promoting the orderly and
efficient administration of these proceedings.  Such
coordination is essential and will, among other things, maximize
the efficiency of the insolvency proceedings, reduce costs
associated with them and avoid duplication of effort.

       * Second, the protocol is designed to (a) honor the
integrity and independence of the insolvency Courts and other
courts and tribunals of the United States and Canada, and (b)
promote international cooperation and respect for comity among
the Courts.

       * Finally, by providing for appropriate notice to all key
constituencies of matters arising in both insolvency
proceedings, an opportunity for all parties in interest to be
heard in both courts, and the express preservation of all
parties' substantive rights, the protocol is designed to
facilitate the fair, open and efficient administration of the
insolvency proceedings for the benefit of all of the Debtors'
creditors and parties in interest, wherever located.  To ensure
that the protocol will appropriately resolve the key
administrative issues in the insolvency proceeding, and protect
the rights and interests of all interested parties, the terms of
the protocol were developed jointly by counsel to the Debtors
and counsel to the Canadian debtors.

The principal terms of the protocol are:

        (a) Comity and Independence of the Courts.  The protocol
expressly preserves the independent jurisdiction and sovereignty
of this Court and the Canadian Court.

        (b) Cooperation.  The protocol provides that: (i) the
Debtors and the Committee will cooperate with each other in
coordinating the administration of the United States cases and
the Canadian cases, and subject to overriding principles of
comity and independence, the Courts will use their best efforts
to coordinate activities in the insolvency proceedings.

        (c) Retention and Compensation of Professionals.  The
protocol generally preserves the independent jurisdiction of
each court over the retention and compensation or professionals
in the respective insolvency proceedings.  Under the terms of
the protocol, this Court generally will have sole and exclusive
jurisdiction over the retention and compensation of any
professional retained by the Debtors or the Noteholders'
Committee. Likewise, the protocol provides that the Canadian
court generally will have sole and exclusive jurisdiction over
the retention and compensation of any professional retained by
the Canadian debtors or any committee for activities performed
in connection with the Canadian cases.

        (d) Notice.  Under the protocol, notice of any motion,
application or other pleading or paper filed in the insolvency
proceeding, and notice of any related hearings or other
proceedings mandated by applicable law will be given to: (i) all
creditors and other interested parties in accordance with the
practice of the jurisdiction where the papers are filed or the
proceedings are to occur, and (ii) to the extent not otherwise
entitled to receive notice, counsel to the committee, the United
States trustee, and such other parties as may be designed by
either court.

        (e) Joint Recognition of Stays of Proceedings under the
Bankruptcy Code and the Canadian Companies' Creditors
Arrangement Act Order.  To preserve the Debtors' estates for the
benefit of all stakeholders, the protocol provides that each
Court will extend and enforce the applicable stays of
proceedings established under the laws of the jurisdiction of
the other court.  In particular, the protocol provides that: (i)
this Court will extend and enforce the stay of proceedings and
actions against the Canadian debtors, their directors and their
assets under the CCAA Order sought by the Debtors to determine
that LINC and LIL are entitled to seek relief under the CCAA,
and grant certain other relief necessary to preserve the value
of their estate and business, in the United States to the same
extent that such stay of proceedings and actions is applicable
in Canada, and (ii) the Canadian court will extend and enforce
the stay of proceedings and actions against the Debtors and
their assets under the Bankruptcy Code in Canada to the same
extent that such stay of proceedings and actions is applicable
in the United States to prevent adverse actions against the
assets, rights and holdings of the Debtors in Canada.

        (f) Effectiveness and Modification.  The protocol
provides it (i) will become effective only upon approval by both
this Court and the Canadian court, and (ii) subsequently may be
modified upon approval by both this Court and the Canadian court
after appropriate notice to interested parties.

        (g) Preservation of Rights.  To preserve all parties'
substantive rights in the insolvency proceedings, the protocol
expressly provides that neither the terms of the protocol nor
any actions taken under the terms of the protocol will prejudice
or affect the powers, rights, claims and defenses of the Debtors
or other parties in interest under applicable law, including the
Bankruptcy Code and the CCAA. (Laidlaw Bankruptcy News, Issue
No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900)  


LEISURE TIME: Andre Hilliou Appointed as New President and CEO
--------------------------------------------------------------
Leisure Time Casinos & Resorts, Inc. (OTC Bulletin Board: LTCR)
announced a major step in the reorganization of the Leisure Time
that is currently under Chapter 11 bankruptcy protection.

Mr. Andre' Hilliou was appointed President and CEO of Leisure
Time.   Mr. Hilliou brings over 20 years of experience in the
gaming industry to Leisure Time. He replaces Mr. Alan Johnson
who had previously resigned his positions as a Director and as
the Chairman, President and CEO of Leisure. Mr. Hilliou was
previously appointed a director and Chairman of the Leisure
Time.

At the Board meeting held by teleconference September 4, 2001
Ken Adams and James Hall were appointed to the Board and the
resignations of Richard Sly, Lester Bullock and Gerald Boyle as
directors were accepted.

Ken Adams is the principal in a gaming consulting firm, Ken
Adams and Associates. Formed in 1990, the company specializes in
information, analysis and strategic planning for Native American
Tribes, Casino operations and Gaming manufacturers. He is a
member of the Executive Committee and President of the Downtown
Improvement Association in Reno, Nevada and has served on
several gaming, educational and advisory boards. Mr. Adams is
currently a partner in Johnny Nolan's Casino in Cripple Creek,
Colorado.

James L. Hall graduated from VPI & SU with a BS in Business in
1963. He served in the United States Air Force as a supply and
Services officer where he attained the rank of Captain. Mr. Hall
worked for AT&T and Bell Atlantic for 25 years. His last
position before retirement was Director of Operations for the
Southern Division. Mr. Hall served as a Director and Chairman of
the Audit Committee for American Bingo & Gaming and is currently
President and Director of Southwestern Telco Federal Credit
Union.

>From 1998 through 1999 Mr. Hilliou served as CEO of American
Bingo and Gaming located in South Carolina, and from 1996
through 1997 he was CEO of Aristocrat, Inc. of Reno, NV. From
1986 until 1996 Mr. Hilliou was employed with Showboat, Inc. of
Las Vegas, NV achieving the position of CEO of Showboat
Australia in 1994.

Mr. Hilliou stated, "I look forward to the opportunity to move
Leisure Time into a position of leadership and strength within
the regulated gaming market as well as adding value for our
creditors. We will immediately begin actively seeking licenses
in several key markets where we believe our current array of
games can find immediate market acceptance. We plan on
introducing our superior products in new markets as well as
developing new games which should help Leisure Time obtain a
significantly larger share of the regulated markets."

On March 16, 2001 Leisure Time Casinos & Resorts, Inc. and
Leisure Time Technology, Inc., one of its subsidiaries, filed
with the United States Bankruptcy Court, Northern District of
Georgia, Atlanta Division to seek protection under Chapter 11 of
the Bankruptcy Code. At this time, Leisure Time and its
subsidiary are still under Chapter 11 protection.

Leisure Time is a diversified gaming company that develops,
manufactures and sells multi-game, touchscreen video gaming
machines and software upgrades. Leisure Time also generates
recurring revenue via its recent entrance into the video pulltab
market.


LERNOUT & HAUSPIE: Moves to Sell Certain Assets to Dictaphone
-------------------------------------------------------------
Lernout & Hauspie Speech Products N.V., a world leader in the
development of technologies relating to computerized speech
recognition and production, files a motion to sell certain
assets to Dictaphone Corporation and execution of a license
agreement in conjunction with the foregoing sale.  

The price contemplated for the asset sale is $16,165,000 and, in
addition, the license agreement stipulates that Dictaphone will
pay L&H $3,350,000 for up-front license fees.

Included in the assets to be sold to Dictaphone are the assets
related to PowerScribe, Computer Based Medicine (CBM), &
Clinical Language Understanding (CLU) technologies, and the
rights and title in the Clinical Reporter assets.  Excluded in
the asset sale are the receivables relating to the respective
assets to be sold.

The agreement also stipulates that L&H grant licenses and rights
for Dictaphone to use L&H's intellectual property in MREC Speech
Recognition Engine, MREC Language and Acoustic Model Building
Tools, MREC data, Clinical Reporter Product, ISE and CLU Data.


LITTLE SWITZERLAND: Additional Capital Needed to Ensure Survival
----------------------------------------------------------------
Little Switzerland Inc. has had substantial operating losses in
its recent fiscal years. For the fiscal years ended May 26,
2001, May 27, 2000 and May 29, 1999, the Company's net losses
were approximately $7.6 million, $15.5 million and $11.1
million, respectively.

If the Company is unable to generate sufficient revenue from
operations to cover its costs, its business, financial condition
and results of operations will be materially and adversely
affected.

The Company requires additional capital to finance its growth
and working capital needs. The Company can provide no assurance
that it will obtain additional financing sufficient to meet its
needs on commercially reasonable terms or otherwise.

Little Switzerland's revenues depend upon tourism in the
Caribbean and Alaska. During periods of economic slowdown, fewer
tourists may travel to these destinations and those who do may
make fewer purchases of luxury items. Tourist travel to these
destinations depends upon the development of cruise ship,
airline and hotel operations, the continued attractiveness of
the Caribbean and Alaska compared to other leisure travel
destinations and the efforts of local governments to promote
tourism.

Other factors such as poor weather, airline strikes, political
and economic instability in the Caribbean and the availability
of duty-free shopping could also affect tourism.

Net sales for fiscal 2001 were $56.3 million, an increase of
$1.25 million, or approximately 2.3%, from $55.0 million in
fiscal 2000. Net sales in comparable stores increased $5.9
million, or approximately 11.7% in fiscal 2001, compared to
fiscal 2000.

Gross profit as a percentage of net sales was 43.7% in fiscal
2001 compared to 35.1% for fiscal 2000. In both the current and
the prior year, the Company took write-downs in connection with
slow-moving merchandise. The Company recorded a write-down in
fiscal 2001 of $1.0 million compared to a $1.3 million write-
down in fiscal 2000.

These adjustments were taken to liquidate older, slow-turning
merchandise, which may be sold to a third party liquidator for
immediate cash. Excluding these charges, the gross profit
percentage in fiscal 2001 and fiscal 2000 would have been 45.4%
and 37.5%, respectively.

The Company focused on stabilizing margins in fiscal 2001
through controlled discounting and leveraging marketing tools to
drive traffic into stores. In prior years, the Company relied
heavily on clearance sales to generate cash.

As a result of the above, there was a net loss for fiscal 2001
of $7.6 million compared to a net loss of $15.5 million for
fiscal 2000.


MARINER POST-ACUTE: Treatment of Claims Under MHG Amended Plan
--------------------------------------------------------------
The Plan for Mariner Post-Acute Network, Inc. provides for the
distribution of cash, securities and other property in respect
of certain Classes of Claims as summarized below. No
distributions will be made to holders of Class G MPAN Claims,
Class H Punitive Damage Claims, Class I Securities Litigation
Claims or Class J Equity Interests.

          Description
         /Entitlement
Class    to Vote                 Treatment
-----  ------------              ---------

  A    Priority Non-    Except to the extent that a holder of
       Tax Claims       an Allowed Priority Non-Tax Claim
       Unimpaired.      against any of the Debtors has agreed
       Not entitled     to a different treatment of such Claim,
       to vote          each such holder will receive, in
       (deemed to       full satisfaction of such Claim,
       accept)          Cash in an amount equal to such
                        Claim.

  B    Mortgage         Except to the extent that a holder of a
       Claims           Mortgage Claim against any of the
       (Subclasses B1   Debtors has agreed to a different
       - B9)            treatment of such Claim, each holder
       Impaired.        of a Mortgage Claim will receive,
       Entitled to      in full satisfaction of such Claim,
       Vote             either (i) (i) New Senior Notes in an
                        amount specified in the Plan or (ii)
                        such other treatment as the Court may
                        determine; provided that if the
                        Bankruptcy Court determines that the
                        Allowed amount of such Claim is greater
                        than the amount set forth in the Plan,
                        or the Plan Proponents determine, in the
                        sole discretion, not to provide the
                        treatment dictated by the Court, the
                        Plan Proponents reserve the right to
                        return the Collateral securing such
                        Allowed Mortgage Claim.

  C    Other Secured    Except to the extent that a holder of an
       Claims           Allowed Other Secured Claim against any
       (Subclasses B1   of the Debtors has agreed to a
       - B10)           different treatment of such Claim,
       Impaired.        each holder of an Allowed Other
       Entitled to      Secured Claim will receive, in full
       Vote             satisfaction of such Claim, at the
                        option of the Plan Proponents
                        either (i) the Collateral
                        securing such Allowed Other
                        Secured Claim, (ii) Cash in an
                        amount equal to the amount of such
                        Allowed Other Secured Claim,
                        (iii) a new secured promissory note with
                        the terms specified in the Plan; or (iv)
                        such other treatment as will leave the
                        holder unimpaired according to section
                        1124 of the Bankruptcy Code.

   D   Senior Bank      The Senior Bank Claims shall be deemed
       Claims (and      Allowed in the aggregate amount of
       Intercompany     approximately $440,000,000. Except to
       Claims against   the extent that a holder of an Allowed
       Subsidiary       Senior Bank Claim against any of the
       Debtors)         Debtors has agreed to a different
       Impaired.        treatment of such Claim, each holder
       Entitled to      of a Senior Bank Claim will receive
       Vote.            its Ratable Proportion of
                        (i) Excess Cash, (ii) New Senior Notes
                        in an amount equal to the difference
                        between $100 million and the aggregate
                        amount of Cash distributed on or prior
                        to the Effective Date on account of the
                        Senior Bank Claims (including any Excess
                        Cash distributed on the Effective Date);
                        (iii) the APS Proceeds (which shall
                        constitute a mandatory prepayment on
                        the Senior Bank Claim holders' New
                        Senior Notes); (iv) $48 million in New
                        Subordinated Notes; (v) 80,000 shares
                        of New Common Stock, representing 100%
                        of the New Common Stock to be initially
                        issued by Reorganized MHG (subject to
                        dilution by the issuance of New Common
                        Stock to New Management); and (vi) any
                        distributions otherwise payable to
                        holders of the Subordinated Note Claims
                        to the extent such subordination rights
                        are not waived pursuant to Section 5.5
                        of the Plan.

  E-1  General          Except to the extent that a holder of an
       Unsecured        Allowed General Unsecured Claim against
       Claims           any of the Debtors has agreed to a
       Impaired.        different treatment of such Claim,
       Entitled         each holder of an Allowed General
       to vote.         Unsecured Claim will receive, in full
                        satisfaction of such Claim, its Ratable
                        Proportion, in Cash, of the GeneraL
                        Unsecured Fund, which will consist of
                        the lesser of (a) $7,500,000 or (b) the
                        amount necessary to fund a 5%
                        distribution to holders of Allowed Class
                        E-l Claims and Allowed Class E-2 Claims.

E-2    Non-MPAN         Except to the extent that a holder of
       Subordinated     an Allowed Non-MPAN Subordinated Note
       Note Claims      Claim has agreed to a different
       Impaired.        treatment of such Claim, each holder
       Entitled         of a Non-MPAN Subordinated Note
       to vote.         Claim will receive, in full
                        satisfaction of such Claim, such
                        holder's Ratable Proportion of the
                        General Unsecured Fund if, but only if,
                        the Plan is accepted by Class E-2 and
                        such holder does not vote to reject the
                        Plan.

   F   United States    Each holder of a United States Claim
       Claims           will, in full satisfaction of such
       Impaired.        Claim, be treated according to the
       Entitled         terms of a settlement agreement, as
       to vote.         contemplated in Section 9.1(c) of the
                        Plan; provided that, if no settlement
                        agreement is reached, under Section 7.7
                        of the Plan the Plan Proponents or
                        Reorganized MHG may seek to have the
                        Bankruptcy Court conclusively estimate
                        and limit such Claims, and will,
                        according to Section 4.7 of the Plan,
                        satisfy such Claims by a distribution of
                        5% of each Allowed Claim if by Final
                        Order of the Court such Claims are
                        determined to be unsecured Claims, or
                        such treatment as is afforded by the
                        Plan to a Secured Claim, Administrative
                        Expense Claim, or cure amount to the
                        extent the United States Claims are
                        determined by Final Order to fall within
                        such Class.

   G   MPAN Claims      MPAN shall neither receive nor retain
       Impaired.        any property or interest in property
       Not entitled     under the Plan on account of any
       to vote.         Claims it may hold against any of the
       (deemed to       Debtors, including without
       reject)          limitation Subordinated Note Claims.

H     Punitive         Each holder of a Punitive Damage Claim
       Damage Claims.   against any Debtor will neither
       Impaired.        receive nor retain any property or
       Not entitled     interest in property under the Plan on
       to vote.         account of such Claim.
       (deemed to
        reject)

   I   Securities       Each holder of a Securities Litigation
       Litigation       Claim against any Debtor will neither
       Claims           receive nor retain any property or
       Impaired.        interest in property under the Plan on
       Not entitled     account of such Claim.
       to vote.
       (deemed to
       reject)

   J   Equity           Each holder of an Equity Interest shall
       Interests        neither receive nor retain any property
       Impaired.        or interest in property under the Plan
       Not entitled     on account of such Equity Interest.
       to vote.
       (deemed to
       reject)
(Mariner Bankruptcy News, Issue No. 18; Bankruptcy Creditors'
Service, Inc., 609/392-0900)  


METROMEDIA FIBER: Gets Extension on $150 Million Note Facility
--------------------------------------------------------------
Metromedia Fiber Network, Inc. (MFN) (Nasdaq: MFNX), the leader
in deployment of optical IP Internet infrastructure within key
metropolitan areas domestically and internationally, announced  
that it has received an extension of the secured note purchase
agreement for the $150 million note facility led by Citicorp,
USA.

As extended, the note purchase agreement will terminate on
October 1, 2001 if the closing has not occurred on or prior to
such date. In connection with the extension the obligations of
the note purchasers to purchase the notes are now subject to the
following additional conditions:

  - The destruction of the World Trade Center on September 11,
2001 and the collapse of the neighboring buildings and market
disruptions as a consequence thereof (and any damage that may
have been caused to the fiber-optic networks of the Company and
its subsidiaries in that area) will not result in a material
adverse effect on the business, assets, results of operations,
financial condition or liabilities of the Company and its
subsidiaries.

  - Subsequent to September 6, 2001 no adverse change in
financial, banking or capital market conditions will have
occurred that, in the judgment of the note purchasers, could
materially impair the ultimate syndication or distribution of
commitments or notes issued under the note purchase agreement or
otherwise render the purchase of the notes inadvisable.

The Company also announced that it has received an extension
until September 19, 2001 of the commitment letter for $235
million of vendor financing and an extension until September 21,
2001 of a commitment from an investor for a $50 million
convertible debt investment.

The Company cannot provide any assurances that it will be able
to consummate any of the financings it is pursuing. Each of the
financings (including the $180 million convertible debt
investment by certain of the Company's affiliates) is contingent
upon the consummation of the other financings. In the event that
the Company does not consummate the financings, it will need to
seek protection under the bankruptcy laws.

In the event that the Company does consummate the financings,
the Company's stockholders will be significantly diluted as a
result of the issuance of equity to the parties providing
financing.

Metromedia Fiber Network, Inc., the leader in deployment of
optical IP Internet infrastructure within key metropolitan areas
domestically and internationally, is revolutionizing the fiber-
optic industry. By offering virtually unlimited, unmetered
metro-area communications capacity at a fixed cost, Metromedia
Fiber Network is eliminating the bandwidth barrier and
redefining the way broadband capacity is sold.

MFN's optical network enables its customers to implement the
latest data, video, Internet and multimedia applications.
Through its subsidiaries AboveNet Communications, Inc., the
architect of the Internet Service Exchange (ISX), PAIX.net,
Inc., the first and leading neutral Internet exchange, and
SiteSmith, a leader in delivering comprehensive Internet
infrastructure managed services, MFN is a leading provider of
Internet connectivity, co-location and managed services
solutions for high-bandwidth and business-critical applications.

The Company offers a world-class network that provides co-
location services and Internet connectivity for content
providers, ISPs and application service providers. Its global
optical Internet uses open peering and "best exit" technology to
deliver fast, scaleable and reliable connections to the
Internet, and improves the Internet experience for end-users.

For more information about Metromedia Fiber Network, please
visit the company's Web site at http://www.mmfn.com


NATIONWIDE COMPUTERS: Committee of Unsecured Creditors Appointed
----------------------------------------------------------------
The United States Trustee appoints the Official Committee of
Unsecured Creditors in the Chapter 11 case of Nationwide
Computers & Electronics, Inc. (pending before the U.S.
Bankruptcy Court for the Southern District of New York), made up
of:

A. John Smallwood of Hitachi America Ltd.
   1855 Dornoch Court, San Diego, California 92154

B. Nick Talisma of Thomson Multimedia, Inc.
   10330 N. Meridian Drive, Indianapolis, Indiana 46290

C. James L. Benedict of Newark Morning Ledger Co.
   One Star-Ledger Plaza, Newark, New Jersey 07102-1200

D. Sakar International
   195 Carter Drive, Edison, New Jersey 08817

E. Merisel America, Inc.
   200 Continental Blvd., El Segundo, California 90245-4510

F. Actech Group, Inc.
   67 Mall Drive, Commack, New York 11725

G. Richard Colefield of Olympus America, Inc.
   2 Corporate Center Drive, Melville, New York 11747

The Committee is represented in the chapter 11 cases by Traub,
Bonacquist & Fox LLP in New York, New York, as its counsel.  In
addition, the Committee retained Davis Graber & Nasberg LLP as
its accountants and financial advisors.


NORTHWEST AIRLINES: Fitch Places BB+ Debt on Watch Negative
-----------------------------------------------------------
In the aftermath of last week's terrorist attacks, Fitch has
placed the debt of Northwest Airlines, Inc. on Rating Watch
Negative. This rating action affected all of its rated debt
obligations, including securitized aircraft transactions.

Northwest Airlines, Inc. (current Fitch unsecured debt rating--
`BB+'): Northwest Airlines faces a similarly difficult cash flow
situation. After drawing on its $1.1 billion credit facility,
the company now has a cash balance of $2.6 billion.

Northwest is in a position to immediately park a large number of
high-cost older aircraft, and the company has already announced
plans to reduce jobs and pull back capacity in response to
slowing business traffic.

Given the large number of new aircraft deliveries that Northwest
is expected to take by 2006, the airline may elect to work with
both Boeing and Airbus to defer the arrival of new aircraft.

                           *  *  *

At June 30, 2001, the Company had cash and cash equivalents of
$1.30 billion and borrowing capacity of $1.12 billion under its
revolving credit facilities, providing total available liquidity
of $2.42 billion.

Net cash provided by operating activities for the six months
ended June 30, 2001 was $259 million, a $431 million decrease
compared with the six months ended June 30, 2000, due primarily
to decreased operational performance.

Investing activities in the six months ended June 30, 2001
consisted primarily of the January sale of 6.7 million shares of
Continental Class A Common Stock held by the Company for $450
million and the subsequent sale of the remaining shares of
Continental Class B Common Stock held by the Company for $132
million, partially offset by the purchase of eight Airbus A319
aircraft, one Boeing 757-200 aircraft, costs to commission
aircraft before entering revenue service, aircraft modifications
and aircraft deposits.

Investing activities in the six months ended June 30, 2000
consisted primarily of the purchase of seven AVRO RJ85 aircraft
and six Airbus A319 aircraft, costs to commission aircraft
before entering revenue service, aircraft modifications and
aircraft deposits, partially offset by the sale of a portion of
the Company's investment in priceline.com

Financing activities in the six months ended June 30, 2001
consisted primarily of the Company's draw in March and
subsequent repayment in May of $1.095 billion under its
revolving credit facilities, the issuance of $300 million of
8.875% unsecured notes due 2006, the financing of eight Airbus
A319 aircraft, seven of which were financed with funds from
pass-through certificates and one with long-term bank debt, and
the payment of debt and capital lease obligations.

Financing activities for the six months ended June 30, 2000
consisted primarily of the sale and leaseback of ten Airbus A319
aircraft and three AVRO RJ85 aircraft and payment of debt and
capital lease obligations.

In addition to the purchased aircraft discussed above, the
Company took delivery of ten Bombardier CRJ200 aircraft during
the six months ended June 30, 2001. These aircraft were financed
with long-term leveraged operating leases provided by the
manufacturer.

In June 2001, the Company completed an offering of $581 million
of pass-through certificates due in 2022 at a blended fixed
coupon rate of 7.18% to finance the acquisition of nine new
Airbus A319 aircraft, three new Boeing 757-300 aircraft and two
new Boeing 747-400 aircraft scheduled to be delivered from
February 2002 through October 2002.

In June 2001, the Company completed an offering of $396 million
of floating rate European Enhanced Equipment Trust Certificates
due in 2013 at a blended floating rate of 60 basis points over
LIBOR (initially set at 4.45%) to finance the acquisition of
nine new Airbus A319 aircraft and five new Airbus A320 aircraft
scheduled to be delivered from November 2001 through July 2002.

The cash proceeds from the two issues of certificates are
invested and held in escrow with a depositary bank and enable
the Company to finance the acquisition of these aircraft through
secured debt financing. If leveraged leases are obtained for
these aircraft, under which the aircraft will be sold and leased
back to Northwest, the pass-through certificates will not be
direct obligations of the Company or Northwest.

The current aircraft delivery schedule provides for the
acquisition of 108 aircraft over the next five years, all with
committed financing.

In the second quarter, the Company completed two long-term
airport bond financings of $136 million and $64 million related
to airport improvements in Minneapolis/St. Paul and Seattle,
respectively. These financings were for periods of 25 and 29
years at fixed rates of 7.27% and 7.49%, respectively, and will
be recorded as other property and equipment and long-term
obligations under capital leases when the funds are drawn for
construction purposes.


OWENS CORNING: Seeks Approval of Hartford Claims Compromise
-----------------------------------------------------------
Owens Corning files a motion for approval of the compromise of
claims with Hartford Steam Boiler Inspection and Insurance
Company.

J. Kate Stickles, Esq., at Saul Ewing LLP in Wilmington,
Delaware discloses that in 1993, the Debtors purchased the
Sierra-at-Tahoe ski resort in California.  Ms. Stickles adds
that the resort utilized three high-speed detachable ski lifts
which posed unacceptable risks of catastrophe.  

In addition, state regulatory agency ordered one of the lifts
closed until appropriate repairs were made.  Ms. Stickles
relates that a specialist employed to examine the problem
recommended the closing of the lifts.  The consultant also
concluded that repairing the lifts is not feasible and that
would have to be replaced.

Ms. Stickles relates that the problems associated with the lifts
caused the resort to suffer significant lost revenue as a result
of the shut down in the middle of the 1996-97 ski season and
incur additional costs associated with the demolishing and
replacement of the lifts.  

As a result of the losses, Ms. Stickles reveals that the Debtors
tendered insurance claims with Hartford and five other insurers
which all denied the Debtors claims.  The Debtors then commenced
Court action against the insurers but the Courts granted summary
judgment in favor of the insurers.  

The Debtors then appealed the decision with the Court of
Appeals, which ruled in favor of the other insurers as well. The
appeal against Hartford is still pending with the Court of
Appeals but the Debtors feel that the Court will likely rule in
favor of the insurer as well.

As a result, in order to avoid further expense in prosecuting
the appeal, the Debtors and Hartford agreed to settle the
appeal.

Under the terms of the settlement, Hartford agreed to pay the
Debtors $40,000 and both sides agreed to waive any claims for
costs related to the Hartford appeal.  The Debtors submits that
the settlement is in the best interests of their estates and
creditors given the uncertainties of continued litigation.
(Owens Corning Bankruptcy News, Issue No. 16; Bankruptcy
Creditors' Service, Inc., 609/392-0900)   


PACIFIC GAS: Will Assume Amended PPA with Oildale Energy LLC
------------------------------------------------------------
Pursuant to an Order of the Court governing the amendment and
assumption of Power Purchase Agreements with QFs, Pacific Gas
and Electric Company gives Notice, dated August 24, 2001 of its
intention to amend and assume, the Power Purchase Agreement of
the Qualifying Facility Oildale Energy, LLC, pursuant to 11
U.S.C. Section 365 and Rules 6006 and 9019 of the Federal Rules
of Bankruptcy Procedure:

Oildale operates a co-generation facility identified by PG&E Log
No. 25C170. Oildale and PG&E are parties to a PPA, which
provides for the purchase of power by PG&E from Gaylord.

Prior to the commencement of its bankruptcy case, PG&E failed to
pay in full the amounts due under the PPA between PG&E and
Oildale, Inc., resulting in pre-petition claims for payment to
Oildale in the amount of $10,515,842.81 (the Pre-Petition
Payables).

PG&E now proposes to enter into an Agreement to assume the PPA
on terms including but not limited to:

      (1) PG&E's increase of the amounts payable to Oildale to
$11,015,842.81 (the "Payables"), excluding interest thereon, in
consideration of various waivers set forth in the Assumption
Agreement, including Oildale's waiver of:

        (a) its right to assert claims to recover "pecuniary
            loss" damages in connection with assumption of the
            PPA pursuant to Bankruptcy Code section
            365(b)(1)(B);

        (b) any right to assert claims from any alleged breach
            of the PPA arising from non-payment by PG&E prior to
            the Effective Date of this Agreement, including but
            not limited to claims arising from Oildale's
            asserted force majeure claim; and

        (c) its right to assert claims to receive the difference
            between the market price and the contract price for
            energy and capacity delivered to PG&E from and after
            April 6, 2001 through August 31, 2001, the effective
            date that PG&E assumes the PPA, pursuant to
            Bankruptcy Code sections 365 and 503(b); and

    (2) PG&E' s payment of:

       (a) $2,203,168.56 to Oildale, within five business days
           following the later of (i) the Term Commencement Date
           or (ii) the date on which Oildale's option to
           terminate the Assumption Agreement under Section 1.3
           thereof expires or is waived in writing by Oildale
           (the "Option End Date"); and

       (b) $220,316.86 on the thirtieth day of each month
           beginning with the first full month following the
           later of the Term Commencement Date and the Option
           End bate until the Cure Amount is paid in full.
           (Pacific Gas Bankruptcy News, Issue No. 13;         
           Bankruptcy Creditors' Service, Inc., 609/392-0900)    


RELIANCE GROUP: Lays-Out Dynamics of RIC Tax Allocation Pact
------------------------------------------------------------
Andrew N. Berg, Huey-Fun Lee and Vadim Mahmoudov, on behalf of
Reliance Group Holdings, Inc., explain to the Bankruptcy Court
how the Tax Allocation Agreement between RIC and RGH works and
relates details about the series of payments for the tax year
2000.  

The Agreement provides that RIC calculates its federal income
tax liability on a stand-alone basis- i.e. as if RIC were not
part of a consolidated group with RGH.  RIC then makes tax
payments to RGH as if RGH were the IRS for periods in which RIC
has a stand-alone federal income tax liability.  

RIC is entitled to refunds from RGH for periods in which RIC
would have been entitled to refunds from the IRS on a stand-
alone basis.

Generally, a corporation with a calendar year as its taxable
year is required to make quarterly estimated income tax payments
to the IRS with respect to each taxable year on April 15, June
15, September 15, and December 15.  

Pursuant to the Agreement, RIC was required to make quarterly
estimated income tax payments to RGH (instead of the IRS) with
respect to each taxable year.  Over the years, RIC generally
computed the quarterly estimated income tax payments payable by
RIC to RGH on the basis of estimated tax information for the
full taxable year available as of the date of the estimated tax
payment.  As a result, certain significant events, for example
loss reserve strengthening in the aggregate of approximately
$815,300,000, which occurred during the year 2000 subsequent to
the dates of the payments discussed herein, were not taken into
account in determining the payments discussed herein.

As of January 1, 2001, RGH owed RIC $203,747,000 under the
Agreement.  During the first quarter of 2000, RIC generated
significant income through sales of stock in Symbol Technology
and anticipated a significant amount of additional income on the
account of the imminent sale of the Reliance Surety business.

Consequently, RIC was expected to owe to RGH under the Agreement
an amount far in excess of the $203,747,000 outstanding tax
receivable from RGH.  For that reason, RGH retained the tax
refund of $45,651,000 it received from the IRS on April 3, 2000.

On June 23, 2000, based upon information available at that time,
RIC estimated that its tax liability under the Agreement
exceeded the $203,747,000 outstanding tax receivable from RGH by
more than $50,000,000.  Accordingly, on June 23, 2000, RGH
offset RIC's $203,747,000 tax receivable from RGH against RIC's
estimated federal income tax sharing liability under the
Agreement and received a $50,000,000 cash payment from RIC.

On June 23, 2000, the IRS sent RGH a notice of tax due of
$17,764,000 against the RGH consolidated tax group.  Since tax
projections at that time continued to show a tax liability for
RIC at year end, RIC paid to RGH $26,383,000, which was RIC's
liability (computed on a stand-alone basis) as a result of the
adjustments contained in the IRS assessment.  This payment was
made on July 12, 2000.  RGH immediately paid $17,764,000 to the
IRS.

In mid-August, 2000, and in late October, 2000, RIC strengthened
its loss reserves by $484,900,000 with respect to its second
quarter operations and in the amount of $330,400,000 to its
third quarter operations, respectively.  

As a result of the loss reserve strengthenings, RIC is now
projected to have a taxable loss for the year 2000 and RIC will
as a result have a tax receivable from RGH of approximately
$268,000,000 as of December 31, 2000. (Reliance Bankruptcy News,
Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900)     


SOURCE MEDIA: Pressed to Restructure Balance Sheet By Year-End
--------------------------------------------------------------
Monetary revenues of Source Media Inc. decreased 34% to $3.1
million for the three months ended June 30, 2001 from $4.6
million for the same period in 2000.

The decrease was primarily driven by $1.3 million of decreased
advertising sales, advertising services and systems management
sales primarily due to the Company's exiting the FOB advertising
and internet advertising businesses and $0.4 million of
decreased information services revenue from the same period in
the prior year.

These decreases were partially offset by $0.2 million of
increased revenue from new content product sales over the same
period in 2000.

Monetary revenues decreased 26% to $6.8 million for the six
months ended June 30, 2001 from $9.1 million for the same period
of 2000. This decreased is primarily due to decreases of $2.0
million in advertising sales, advertising services and systems
management sales primarily due to the same causes as listed
above, plus decreased revenue of $0.7 million in information
services offset by an increase of $0.4 million in revenue from
new content product sales over the same period in 2000.

Source Media continues to experience substantial operating
losses and net losses as a result of its efforts to develop,
deploy and support its IT Network business and to develop,
conduct trials and commercially launch its Interactive TV
business. The Company has reported both an operating loss and a
net loss each year since inception, including an operating loss
of $3.3 million and a net loss attributable to common
stockholders of $11.4 million for the six months ended June 30,
2001.

As of June 30, 2001, Source Media had an accumulated deficit of
$224 million and had used cumulative net cash in operations of
$120.5 million; $5.0 million of cash was used in operating
activities for the six months ended June 30, 2001. The
difference at June 30, 2001 between the accumulated deficit and
cumulative net cash used in operations reflects nonmonetary
charges.

The Company did not make its interest payment of $5.3 million
due on May 1, 2001, triggering a default on its Notes. As a
result of its continued default on the Notes, the indenture
trustee of the Notes declared the entire unpaid principal amount
of the Notes in the amount of $88.5 million and all accrued
interest due and payable immediately.

Accordingly, the entire face amount of the outstanding Notes has
become a current liability. The Company has engaged financial
advisors to help it evaluate strategic alternatives, including
possible merger, sale of assets and restructuring its balance
sheet.

Source Media is cooperating with the holders of the Notes who
have formed an informal committee as the Company works through
this process.

Source Media indicates that it will continue to incur
significant operating losses through 2002. In addition, the
Company will be required to make additional capital
contributions to SourceSuite to continue its operations. Since
the indenture trustee has accelerated the Notes, the consent of
the holders of the Notes is required for the Company to use the
proceeds from a sale of all or part of its Liberate shares.

On August 13, 2001, the unofficial committee of the holders of
the Notes and the Company agreed in principle that the Company
would sell its 886,000 shares of Liberate common stock over the
next few months.

The proceeds of the sale, with the exception of $2 million, are
to be placed into an escrow account for the benefit of the
Company and the Note holders, on terms subject to further
discussion. The funds that are not placed into the escrow
account will be added to the cash available to the Company to
fund its activities and for investment in SourceSuite.

The Company and Insight have determined to commit aggregate
financing to SourceSuite of $1.6 million ($0.8 million each), to
be advanced in increments through the balance of 2001.

Source Media says it believes its current capital resources will
be sufficient to fund  aggregate capital expenditures and
working capital requirements, including operating losses,
through December 2001 as it evaluates its strategic
alternatives.

If it is unable to successfully restructure its balance sheet
prior to December 31, 2001, it may be very difficult for the
Company to obtain sufficient additional funding to continue
operations. In particular, in such event, the Company would have
to have the agreement of its Note holders to obtain additional
funds from the escrow. There is no assurance that the holders of
the Notes will agree to release any escrowed funds or take any
other steps with a view toward continuing Company operations.

If Source Media merges, sells a significant portion of its
assets, raises additional funds through the issuance of equity
or convertible debt securities, or reachs an agreement to
restructure its balance sheet with the holder of its Notes, the
percentage ownership of its existing stockholders will be
reduced significantly or eliminated.

In order to consummate a merger, sale or financing transaction
or to restructure its balance sheet the Company must satisfy its
obligations to the holders of the Notes in a manner agreeable to
them. The holders of the Notes, as Source Media's senior
creditors, have significant influence in the restructuring
process and may seek to use this leverage to obtain a
significant ownership interest in the Company.

There can be no assurances that Source Media will be successful
in these efforts or come to an agreement on any plan of
restructuring with the holders of the Notes or that the Company
will be able to restructure its balance sheet on terms
acceptable to Source Media, or at all.


SOUTHWEST AIRLINES: Fitch Places Debt Rating on Watch Negative
--------------------------------------------------------------
In the aftermath of last week's terrorist attacks, Fitch has
placed the debt of Southwest Airlines Co. on Rating Watch
Negative. This rating action affects all rated debt obligations,
including securitized aircraft transactions of Southwest
Airlines.

Southwest Airlines Co. (current Fitch unsecured debt rating- -
`A'): Southwest enters this crisis in a position of relative
financial strength. While the revenue impact of the current
situation will be no less severe for Southwest, the company has
enjoyed EBITDAR margins of 28% over the last twelve months, and
should have an adequate cash buffer to survive a protracted
fall-off in revenues.

Given its low cost structure and the high percentage of owned
Boeing 737 aircraft in its fleet, Southwest should be able to
take steps to reduce capacity quickly. Its high-productivity,
low-cost strategy, however, will be seriously challenged by
operational inefficiencies at the nation's airports resulting
from heightened security measures.


SUN HEALTHCARE: Buyer Emerges, Saving Neuroflex From Winding-Up
---------------------------------------------------------------
NeuroFlex, Inc. was formed as a subsidiary of SunDance
Rehabilitation in early 1999, primarily through an asset
acquisition of Trestles Healthcare, Inc. and Restorative
Medical, Inc., and certain patent rights held by John Kenney on
February 1, 1999.

NeuroFlex is in the business of manufacturing, marketing,
selling and distributing orthotic products, providing orthotic
braces for more chronic joint and spinal problems related to
immobility or neurological underlying disease states.

                      Previous Motion

Previously, to stop the substantial and persistent losses that
NeuroFlex was suffering as a result of continued business
operations, Sun Healthcare Group, Inc. filed a motion seeking
authorization to sell the assets or wind up the business
operations of NeuroFlex, Inc. in accordance with section 363(b)
of the Bankruptcy Code.

NeuroFlex had experienced poor performance historically and
amassed nearly two years worth of inventory. Over the near term,
NeuroFlex had incurred negative EBITDA of $593,148 for the year
to date period ending May 30, 2001. NeuroFlex will also enter an
additional bad debt expense of roughly $200,000 during 2001.

Furthermore, NeuroFlex is currently awaiting the results of an
updated evaluation of its accounts receivable, which it believes
will show additional bad debt expenses of approximately $200,000
to $500,000.

Moreover, NeuroFlex's business was further weakened when, on
January 1, 2001, the federal government reduced the fee screens
for most orthotic devices. Due to the fact that approximately
50% of NeuroFlex's sales are subject to Medicare reimbursement,
such rate reductions have a significant impact on NeuroFlex's
business.

The result was an overall reimbursement rate cut of
approximately 15% for NeuroFlex's Medicare business, which at
times exceeded 40% for specific NeuroFlex products. Although
NeuroFlex could attempt to obtain special and/or higher screen
coding classifications for its products, any such attempt would
incur significant legal costs and would carry no guarantee of
success.

The Debtors were prepared for a wind up of the NeuroFlex
business which would entail a closure of operations with a
subsequent orderly sale of NeuroFlex' s assets, primarily
patents and inventory because the Debtors had not yet been able
to identify a purchaser and it does not make good business sense
to continue to incur substantial losses each month while
conducting an ongoing search for a prospective purchaser.

In fact, the Debtors believe that given NeuroFlex's poor
performance and the need for a substantial infusion of capital
to turn around the business, it is unlikely that NeuroFlex has
any substantial going concern value.

The Debtors previously approached their primary medical supplier
regarding a sale of the NeuroFlex business operations. It
expressed no serious interest.

To avoid prematurely winding up the affairs of NeuroFlex, the
Debtors will entertain offers for the purchase of the business
operations, and will explore whether certain regional suppliers
of orthotic products that are purchasers of NeuroFlex's product
may be interested in such an acquisition. In addition, the
Debtors propose to market a sale of NeuroFlex further, by
publication in The Wall Street Journal (National Editiofl)
and/or in an appropriate trade journal with national
distribution.

If a party contacts the Debtors expressing an interest in
purchasing the NeuroFlex business operations, the Debtors will
file a subsequent motion seeking the Court's approval of any
such sale, subject to higher and better offers, pursuant to
section 363 of the Bankruptcy Code.

In the event that no prospective purchaser is identified after
such marketing and publication, the Debtors do not believe that
it makes good business sense to incur ongoing losses which have
averaged in excess of $100,000 in negative EBITDA monthly during
the 2001 calendar year.

The Debtors will then Wind Up the NeuroFlex business operations.
Any proceeds from such a Wind Up will be segregated for the
benefit of the creditors of NeuroFlex or otherwise, used in
connection with a plan of reorganization that satisfies the
provisions of section 1129 of the Bankruptcy Code.

             Buyer Emerged and Amended Motion Filed

Neuroflex was saved from a winding-up when a Buyer (John Kenney,
an individual, Trestles Healthcare, Inc., and Restorative
Medical, Inc.) emerged for the purchase of the Assets in
exchange for a settlement and release of claims filed against
the Debtors.

Buyer has filed claims with the Court in the Neuroflex's
bankruptcy case which cumulatively total approximately
$4,950,000.

Buyer has also filed a claim in the related bankruptcy case of
SunDance Rehabilitation Corporation for approximately $166,000.
These Claims arise from (1) a certain Purchase and Sale
Agreement executed by Buyer and Seller which contained certain
requirements relating to the payment to Buyer of specified earn-
out amounts based on Seller's financial performance; and (2) a
purchase by SunDance of certain products from THI. The amounts
sought in the Claims are disputed by Seller and SunDance.

The parties desire to compromise and settle the Claims against
Seller and SunDance by selling the assets of Seller (less those
specified) to Buyer or its designee in exchange for release of
the Claims of Buyer against Seller and SunDance.

Buyer and Seller (NeuroFlex, Inc.) entered into a Settlement and
Asset Purchase Agreement on July 31, 2001, which provides for
the transfer of Purchased Assets to Buyer free and clear of any
claim, lien, encumbrance, or interest of any other party or
person.

In consideration of the premises and the mutual covenants of the
parties, the parties agreed as follows:

   (I) Purchase of Assets and Assumption of Liabilities

On the Closing Date, Seller will sell, assign, transfer, grant,
bargain, deliver and convey to Buyer in accordance with joint
written direction of Buyer to be submitted to Seller prior to
the Closing Date, the following assets:

(1) Patents and Property Rights;

(2) the Trademarks;

(3) the "Kentucky Assets" comprising of all dies, molds,
    equipment, and fixtures in Seller's Brandenburg, Kentucky
    facility or otherwise controlled by Seller elsewhere; and

(4) the Remaining Assets, to the extent owned by Seller and
    located other than at Seller's corporate offices:

    (a) finished goods, inventory and supplies;

    (b) machinery and equipment, including all of the computer
        equipment;

    (c) office furniture, office supplies and office equipment
        (including the phone system located at the Mission Viejo
        location) which are located other than at Seller's
        corporate offices;

    (d) all of Seller's right, title and interest in and to all
        fixtures and leasehold improvements;

    (e) Seller's accounts receivable arising from a date of
        service on or prior to the Closing Date (the "Accounts")
        that remain uncollected as of July 16, 2001 (the "Cutoff
        Date"), provided, however, that,

       -- except as otherwise provided below, Seller shall
          continue to receive 100% of all collections on the
          Accounts through the later to occur of (x) July 31,
          2001 or (y) $77,000.00 which shall represent the
          approximate amount of the Reimbursed Expenses, such
          date being referred to as the "Reimbursement Date");

       -- except as otherwise provided below, in the event that
          the Reimbursement Date is prior to September 30, 2001,
          Seller shall be entitled from the Reimbursement Date
          through September 30, 2001, to receive from Buyer or
          its designee 60% of collections on the Accounts;

       -- except as otherwise provided below, after October 1,
          2001, Seller shall be entitled to receive from Buyer
          or its designee 50% of collections on the Accounts.
          The amounts collected on the Accounts will be referred
          to as the "Receivables Proceeds."

       -- Notwithstanding the foregoing, Seller shall not be
          entitled to receive any collections on the Accounts
          after it has received from and after the Cutoff Date
          the sum of $275,000.00 plus the Reimbursed Expenses.

       -- The Reimbursed Expenses shall consist of the sum of

          (i)   the salaries and benefits paid by Seller up to
                two Seller employees to assist in Accounts
                collection;

          (ii)  Proclaim costs incurred in collection efforts at
                the rate of $16.00 per claim;

          (iii) the Mission Viejo rent paid pursuant to the
                Asset Purchase Agreement to a date no later than
                October 31, 2001;

          (iv)  the amount of the Diane Landrath-Schmidt
                severance payment paid by Seller; and

          (v)   any and all costs associated with an assumption
                and assignment of any Medicare and/or Medicaid
                Provider Agreement as set forth in the Asset
                Purchase Agreement.

         In the event that the Reimbursed Expenses exceed
         $77,000.00, Seller shall be entitled to additional
         reimbursement equal to such excess. In the event that
         Seller does not receive the sum of $275,000.00 plus the
         Reimbursed Expenses by December 31, 2001, Seller shall
         have the right, in its sole discretion, to either
         receive an accounting from Buyer or conduct an audit of
         Buyer's records; provided, however, that such actions
         shall be taken at Seller's sole costs and such costs
         shall not constitute Reimbursed Expenses. The parties
         acknowledge and agree that any accounts receivable
         generated by the Business on or after the Closing Date
         shall be the sole and exclusive property of Buyer and
         are not affected by or relevant to the operation of
         this provision.

     (f) telephone numbers, websites, copies of business records
         and files, customer lists, and promotional materials;

     (g) the "Intangible Assets" including product
         specifications, drawings, and prototypes and intangible
         items, copyrights, copyright applications and
         registrations, service marks, software and firmware,
         know-how and any and all other common law or similar
         rights of ownership or use, whether foreign or domestic
         and all intellectual property rights related to the
         Business;

     (h) all rights under all contracts, leases, licenses,
         permits and other agreements relating to the Business
         other than leases related to Excluded Assets, including
         without limitation, all Seller's provider numbers for
         Medicare, Medicaid, and other governmental or
         regulatory programs pursuant to the limitations set
         forth in the Agreement, and the real estate lease dated
         January 1, 1999 between Ruth Ackerman, as landlord, and
         Seller, as tenant, with respect to Seller's location in
         Brandenburg, Kentucky;

     (i) all regulatory filings, including Food and Drug
         Administration ("FDA") filings, and device
         registrations filed by Seller prior to the Closing
         Date; and

     (j) subject to the provision as described in (e) above, all
         cash, funds in deposit accounts, or proceeds in any
         other form attributable to sales or dispositions of any
         item constituting Purchased Assets which occur on or
         after the date hereof.

The Purchased Assets include all such assets, wherever located
and whether or not reflected on Seller's balance sheet.

It is understood and agreed that Buyer shall not purchase those
assets of Seller which are subject to true leases from third
parties, the Mission Viejo Lease (as defined below), the
conference room table located at the Mission Viejo facility, and
certain computer equipment (the "Excluded Assets"), as set forth
on Exhibit B to the Agreement.

   * Excluded Assets Period:

Notwithstanding the foregoing, after Closing, Seller shall pay
the rent and otherwise maintain in effect all leases on the
Excluded Assets for the period requested by Buyer; provided,
however, that the period shall not exceed 90 days following the
Closing Date (the "Excluded Assets Period"). During the Excluded
Assets Period, Buyer and Seller shall have possession and use of
the Excluded Assets.

Buyer shall be required to maintain the same in good condition
and repair, ordinary wear and tear excepted, and to fulfill the
obligations imposed on the tenant under the leases related to
the Excluded Assets (other than payment of the rent due) for the
Excluded Assets Period. Seller may reject any leases related to
the Excluded Assets in its bankruptcy case after the expiration
of the Excluded Assets Period. Irrespective of the transfer of
the Patents to Buyer herein, any affiliate of the Seller and Sun
Health Care Group, Inc. shall retain the right to use and/or
sell the inventory purchased in the ordinary course of business
consistent with past practices from the Seller prior to the July
16, 2001.

   * Mission Viejo Lease

Seller shall continue to pay the rent and otherwise maintain in
effect the real estate lease on Seller's office in Mission
Viejo, California until the first to occur of (1) 90 days from
the Closing Date; or (2) Seller's discontinuation of
participation in collection of the Accounts (the "Mission Viejo
Lease Period").

During that period, THI and Seller shall have possession and use
of the leased property which is the subject of the Mission Viejo
Lease and shall be required to maintain the same in accordance
with the terms of the Mission Viejo Lease and comply with the
obligations imposed on the tenant (other than payment of the
rent due). THI and Seller will use their commercially reasonable
efforts to obtain a termination of the Mission Viejo Lease in
exchange for entry by THI in a new lease with the Mission Viejo
Lease landlord for a shorter time period on a smaller space.

   * Liabilities

Subject to any express assumption of liability, Buyer is not
assuming or agreeing to discharge any obligations or liabilities
of Seller arising before or after the Closing Date with respect
to the Business, the Purchased Assets, the Excluded Assets or
otherwise, whether accrued or contingent or due or not due,
which shall be and remain the sole obligations and liabilities
of Seller to pay and discharge.

   * Provider Agreements

Seller shall assist Buyer in the completion of a Form 855S,
change of ownership application. Seller shall use its
commercially reasonable efforts to effectuate an assumption and
assignment of the Medicare and Medicaid Provider Agreements to
THI; provided, however, that it shall not be a condition to
closing that Seller has assumed and assigned such Provider
Agreements.

In the event Seller assumes and assigns the Medicare Provider
Agreement, Seller shall obtain written acknowledgement from
Medicare whereby Buyer is released from all successor liability
for overpayment liability arising on or before the Closing Date.

Notwithstanding anything to the contrary contained in the
Agreement, Seller shall have no obligation to assume and assign
its Medicaid Provider Agreements to THI unless prior to the
Closing Date (i) it is able to secure from the applicable
Medicaid agencies a written agreement confirming that the
assignment and assumption of such Medicaid Provider Agreements
will not elevate the priority of any claims which Medicaid may
have against Seller or impose any successor liability on Buyer,
(ii) Seller shall have no obligation to transfer its Medicare
Provider Agreements unless Seller is able to obtain a written
agreement from the Center for Medicare and Medicaid Services
(formerly, the Health Care Financing Administration) confirming
that the assignment and assumption of such Medicare Provider
Agreements will not elevate the priority of any claims which
Medicare may have against Seller or impose any successor
liability on Buyer, and (iii) the cost to Seller of securing
such Medicaid and Medicare Provider Agreements and any cure
amount arising from any default relating to assumption and
assignment of such Provider Numbers has been paid by Buyer.

Consistently, Seller shall be entitled to withhold from receipts
on the Accounts all sums necessary to cure any default relating
to assumption and assignment of the Provider Numbers; provided,
however, that Buyer's consent shall be required to exceed a
cumulative sum of $25,000.00. If Buyer does not so consent,
Seller shall be entitled to instead reject the subject Provider
Number or Numbers in its bankruptcy case. Notwithstanding
anything to the contrary contained in the Agreement, if the
Medicare Provider Agreement or any Medicaid Provider agreement
is not assumed and assigned to Buyer, Seller shall be entitled
to reject such Provider Agreement.

   (II) Closing

The closing of this transaction shall take place at 10:00 A.M.
on the eleventh day following the entry of an order of approval
by the Court (not then subject to appeal or motion to stay the
order or otherwise modification or amendment), subject to higher
and better offers.

Notwithstanding this, in the event that the Closing has not
occurred by August 1, 2001, and this Agreement has not been
terminated by Buyer or Seller, Buyer shall have the right on
written notice to Seller delivered on or prior to August 9,
2001, to take possession of the Purchased Assets and the
Business, and access to the Excluded Assets as provided in the
Agreement, on August 10, 2001 (the "Operations Transfer Date")
and Seller shall have the right to cease all operations of the
Business as of the Operations Transfer Date and, in such event,
Seller shall incur no further expenses related to the Business
at the close of business on August 9, 2001.

In the event Buyer exercises these rights, then all references
to the Closing Date shall be replaced with references to the
Operations Transfer Date.

   (III) Settlement

As settlement of the Claims, Seller shall transfer to Buyer and
Buyer shall take and accept from Seller: (a) on the Closing
Date, the Purchased Assets; and (b) from and after the Closing
Date, the Receivables Proceeds to which Buyer is entitled.

The amount of the Receivables Proceeds being held by Seller on
the Closing Date shall be delivered to Buyer by wire transfer to
a bank account designated by Buyer at Closing in immediately
available funds. Subsequently collected Receivables Proceeds
shall be similarly delivered to Buyer weekly or within 3
business days of receipt by Seller or any affiliate of Seller of
sums in the cumulative amount of in excess of $l0,000.

Seller shall deliver at Closing to Buyer a copy of all bids
received by Seller for purchase of any of the Purchased Assets.
(Sun Healthcare Bankruptcy News, Issue No. 23; Bankruptcy
Creditors' Service, Inc., 609/392-0900)   


TRANSFINANCIAL: Intends to Liquidate Assets for $14 Million
-----------------------------------------------------------
TransFinancial Holdings, Inc. (AMEX:TFH), a holding company with
continuing operations in financial services, reported that the
Board of Directors of the company has adopted a plan to
liquidate the company.

In conjunction with the decision to liquidate, a definitive
agreement was signed for the sale of the financial services
businesses and certain related assets for $14 million.

The Board of Directors of TFH has unanimously approved this
transaction and related liquidation and will recommend such to
the TFH shareholders. These proposals are subject to approval by
a majority of outstanding TFH shares at a meeting to be held
after preparation and mailing of proxy material.

Bill Cox, Chairman and CEO, stated, "The costs related to the
debt incurred in closing the transportation businesses, as well
as the recurring costs associated with a public company were key
factors in the board determination that liquidation was in the
best interest of the shareholders."

Under the plan of liquidation, the company will sell all of its
assets, and after paying off its debts and setting aside
required reserves, will distribute the remaining proceeds as one
or more "liquidating dividends" within the next several months.
The preliminary estimates of the total distribution under the
plan range from $1.50 to $2.00 per share.

TransFinancial Holdings concentrates on its financial services
and industrial technology operations. The company's Universal
Premium Acceptance unit finances premiums for buyers of
commercial property and casualty insurance, allowing customers
more time to pay for insurance.

TransFinancial's Presis, a start-up, is developing ways to
process dry powder particles for use in paint and ink
production. In 2000 TransFinancial shut down its trucking
businesses, Crouse Cartage and Specialized Transport,
which had accounted for 95% of the company's sales. Both Crouse,
which was losing money, and Specialized, which had its insurance
canceled, are being liquidated.


TRI-NATIONAL: Battles With Senior Care Over Involuntary Petition
----------------------------------------------------------------
Tri-National Development Corp. (OTCBB:TNAV) announced that on
Sept. 12, 2001 it filed an answer to the involuntary bankruptcy
petition filed by Senior Care Industries Inc. (OTCBB:SENC) on
Aug. 23, 2001.

Tri-National asserts in its answer that Senior Care filed the
petition in bad faith, knowing that several of the alleged
creditors were not creditors of Tri-National, and the company is
also asking for a judgment against Senior Care for costs,
attorney fees and punitive damages.

Michael Sunstein, president and chief executive officer, said,
"This latest filing by Senior Care continues a pattern of
misrepresentations and underhanded actions taken to interfere
with the business and activities of Tri-National, to the
detriment of both our creditors and shareholders. We have
retained Colin Wied, a top San Diego attorney and past president
of the State Bar of California and San Diego County Bar
Associations with 35 years of law experience and vast bankruptcy
knowledge, to pursue this matter on our behalf. We intend to
take aggressive action to defend ourselves and to maximize our
opportunities to emerge successfully from this difficult time.
This answer to their filing is the first salvo in that effort."

"The company continues to work together with a number of highly
respected and well funded industry partners to create a
comprehensive strategic plan -- a plan that we believe will
serve to take us from our present state to the realization of
the value of our numerous significant real estate assets. Such a
plan, if successful, will result in the payment of all creditors
and significantly reward our longstanding and patient
shareholders, whose continued support we greatly appreciate. We
look forward to announcing our progress in this effort in the
near future," Mr. Sunstein said.

Tri-National Development Corp. is an international real estate
development, sales and management company.


TRI-NATIONAL: Senior Care Refutes Debtor's Rejoinder to Petition
----------------------------------------------------------------
Senior Care Industries Inc. (OTCBB:SENC) announced that answers
filed in San Diego Superior Court by Tri-National Development
Corp. (OTCBB:TNAV) in response to an involuntary bankruptcy
petition were false and unfounded.

Although Michael Sunstein, president of Tri-National, asserted
that Senior Care filed the petition in bad faith, Richard Mata,
counsel to Senior Care, was quick to correct Sunstein's
allegations, stating that creditors of Tri-National acted
together to file the petition and that many other creditors had
contacted him to inquire about joining with the other co-
petitioners.

Attorney Mata explained that the petition had been filed to
protect Tri-National's shareholders from levies by judgment
creditors. He noted that Tri-National's most recent annual
report showed more than $10 million in judgment creditors and
another $11.5 million in bondholders whose claims are
delinquent. One judgment creditor had gotten a state court
receiver to take control of Tri-National's assets only in June
and this could have resulted in the company's assets being lost
to a few, unless Tri-National is forced into bankruptcy by
either its creditors or its shareholders.

Bob Coberly, Senior Care's vice president in charge of
development, stated that during April, May and June of this
year, "Senior Care loaned Tri-National more than $150,000.

"These funds were used to pay certain Tri-National employee
salaries, rent on the Tri-National office in San Diego, and to
pay Tri-National utilities and telephone bills. To claim Senior
Care is not a creditor is ludicrous," Coberly observed.

"We have been working very hard with the management of one of
Tri-National's largest judgment creditors, Capital Trust Inc.
(NYSE:CT), to resolve a judgment that has grown from $8 million
to in excess of $9 million in just the last year," Coberly
explained. "Capital Trust could seize the assets because of its
judgment and leave the shareholders and other creditors with
nothing, unless Tri-National is forced into bankruptcy," Coberly
went on to say.

"This attempt to discredit Senior Care's efforts in the
Bankruptcy Court as well as in the court of public opinion, may
do nothing more than create uncertainty with the public and undo
what is left of Tri-National," said Coberly. "Our job now is to
bring in new management to Tri-National, develop properties that
never have been developed, to pay off people that never have
been paid off, and to finally give Tri-National shareholders a
pattern for progress that will make us all proud."

"Unlike Tri-National," Coberly noted, "Senior Care has no such
massive debt burdens, is free of judgments, and is free to
continue its work to complete the process of providing financing
to develop the properties, which Senior Care's subsidiary
purchased from Tri-National's subsidiaries in Baja California
earlier this year."

Senior Care is presently developing 223 single family senior
"smart homes" near Palm Springs, Calif. and 55 town houses in
Las Vegas. The land for both of these developments was purchased
by Senior Care recently. Sales of Senior Care's Evergreen Manor
II condominium project in Los Angeles have been brisk according
to management. All Senior Care properties are developed for the
senior market.

Presently, the company has lined up land and has the plans to
develop more than 2,000 homes in the Southwestern United States.
Senior Care's "smart home" technology now being used in the
project near Palm Springs will also be utilized in its Baja
California development projects, within a one hour drive of San
Diego.

Baja California offers a year-round climate that averages 75
degrees Fahrenheit. Additionally, Baja California offers the
amenities available from its oceanfront location including
fishing, sailing, swimming, surfing, other water sports,
oceanfront golf and a competitive advantage as an alternative to
Senior Care's desert community development offering a choice for
seniors.

Although Michael Sunstein, president of Tri-National, asserted
that Senior Care filed the petition in bad faith, Richard Mata,
counsel to Senior Care, was quick to correct Sunstein's
allegations, stating that creditors of Tri-National acted
together to file the petition and that many other creditors had
contacted him to inquire about joining with the other co-
petitioners.

Attorney Mata explained that the petition had been filed to
protect Tri-National's shareholders from levies by judgment
creditors. He noted that Tri-National's most recent annual
report showed more than $10 million in judgment creditors and
another $11.5 million in bondholders whose claims are
delinquent.

One judgment creditor had gotten a state court receiver to take
control of Tri-National's assets only in June and this could
have resulted in the company's assets being lost to a few,
unless Tri-National is forced into bankruptcy by either its
creditors or its shareholders.

Bob Coberly, Senior Care's vice president in charge of
development, stated that during April, May and June of this
year, "Senior Care loaned Tri-National more than $150,000.

"These funds were used to pay certain Tri-National employee
salaries, rent on the Tri-National office in San Diego, and to
pay Tri-National utilities and telephone bills. To claim Senior
Care is not a creditor is ludicrous," Coberly observed.

"We have been working very hard with the management of one of
Tri-National's largest judgment creditors, Capital Trust Inc.
(NYSE:CT), to resolve a judgment that has grown from $8 million
to in excess of $9 million in just the last year," Coberly
explained. "Capital Trust could seize the assets because of its
judgment and leave the shareholders and other creditors with
nothing, unless Tri-National is forced into bankruptcy," Coberly
went on to say.

"This attempt to discredit Senior Care's efforts in the
Bankruptcy Court as well as in the court of public opinion, may
do nothing more than create uncertainty with the public and undo
what is left of Tri-National," said Coberly. "Our job now is to
bring in new management to Tri-National, develop properties that
never have been developed, to pay off people that never have
been paid off, and to finally give Tri-National shareholders a
pattern for progress that will make us all proud."

"Unlike Tri-National," Coberly noted, "Senior Care has no such
massive debt burdens, is free of judgments, and is free to
continue its work to complete the process of providing financing
to develop the properties, which Senior Care's subsidiary
purchased from Tri-National's subsidiaries in Baja California
earlier this year."

Senior Care is presently developing 223 single family senior
"smart homes" near Palm Springs, Calif. and 55 town houses in
Las Vegas. The land for both of these developments was purchased
by Senior Care recently. Sales of Senior Care's Evergreen Manor
II condominium project in Los Angeles have been brisk according
to management. All Senior Care properties are developed for the
senior market.

Presently, the company has lined up land and has the plans to
develop more than 2,000 homes in the Southwestern United States.
Senior Care's "smart home" technology now being used in the
project near Palm Springs will also be utilized in its Baja
California development projects, within a one hour drive of San
Diego.

Baja California offers a year-round climate that averages 75
degrees Fahrenheit. Additionally, Baja California offers the
amenities available from its oceanfront location including
fishing, sailing, swimming, surfing, other water sports,
oceanfront golf and a competitive advantage as an alternative to
Senior Care's desert community development offering a choice for
seniors.


UNITED AIRLINES: Will Furlough Around 20,000 Employees
------------------------------------------------------
In response to reduced flight schedules in the wake of the
September 11 terrorist attacks, United Airlines, a unit of UAL
Corporation (NYSE: UAL), announced that it will furlough
approximately 20,000 employees. The furloughs will affect all
work groups of the company and will begin as soon as
practicable.

"These actions are extremely painful ones, but they are
absolutely critical to maintaining our ability to continue
operating and meeting the needs of our customers over the near
term," said James E. Goodwin, United's chairman and chief
executive officer. "The entire industry is being severely
affected by the consequences of September 11 -- consequences
that have added to the tragic events of that day and put the
financial health of our industry in jeopardy."

Goodwin added: "While we continue to focus our attention on
assisting the families of our passengers and employees who were
victims of last Tuesday's attack, we must also focus on saving
our company. We simply have no choice but to step up to the
realities of this extraordinarily critical time and take drastic
measures to preserve our viability and operations."

As previously announced, United's flight schedule has been
reduced by 20 percent to approximately 1,900 daily flights.

Separately, United is also working alongside other North
American carriers and officials from the Administration as well
as members of the U.S. Congress on a relief package to address
the unprecedented loss to the industry that directly resulted
from last week's terrorist attack, as well as resulting
liability issues that could force the industry into bankruptcy.

"Without this relief, the viability of the nation's air
transportation system is in doubt. It is as serious and
straightforward as that," said Goodwin. "As this nation
continues to recover from this horrific act of war and as it
continues to focus on minimizing the impact on the national
economy, the airline industry's contributions to the U.S. gross
domestic product and its ability to connect business and
communities across the globe will be critical."


UNITED PETROLEUM: Hires Advisor as Bank Accelerates $23MM Loan
--------------------------------------------------------------
On September 7, 2001, United Petroleum Corporation received
notice from Hamilton Bank, the holder of the Company's $23
million institutional loan, that the bank had accelerated the
maturity of that loan.

The Company is discussing means of repaying the loan with the
bank, and has engaged Gulf Atlantic Capital Corporation to
advise the Company regarding its strategic alternatives.         

Convenience store chain United Petroleum once was an operator of
oil wells.

The company once planned to move into the entertainment
industry, but abandoned that move and filed for Chapter 11. F.S.
Convenience Stores bought the company in 1999 and adopted its
name. The new United Petroleum operates some 90 convenience
stores under the Farm Store name in Florida and holds a 10%
stake in Farm Stores Grocery, which has about 110 drive-through
grocery stores.

The company plans to buy more convenience stores in New York,
Mississippi, Alabama, and Arkansas. Former Farm Stores CEO Joe
Bared and his wife own 48% of United Petroleum; Infinity
Investors owns about 35%.


UNIQUE BROADBAND: Downsizes Transmission & Waveguide Divisions
--------------------------------------------------------------
Unique Broadband Systems, Inc. (CDNX: UBS) announced that it has
completed the initial stage of its restructuring plan.

Under such plan, which is designed to focus the Company on its
core competencies and to significantly reduce operating costs,
the Company reduced the size of its transmission and waveguide
divisions, refocused the R&D department on a narrower, more
clearly defined assortment of products, reduced its operations
in Denmark and sold its Russian office.

The restructuring has resulted in the elimination of 68
positions in Canada, Denmark and Russia, representing a 40%
decrease in total employment. The Company will realize a
reduction in operating costs for fiscal 2002 of approximately
$14.4 million, representing a 50% savings over operating costs
incurred in fiscal 2001.

"In my view, the Company has achieved its initial goals of
refocusing its operations and significantly reducing overhead,"
said Patrick Lavelle, interim President and CEO of UBS. "We will
continue to look at other ways to preserve cash, while we
examine all opportunities to improve shareholder value."

Unique Broadband Systems, Inc. (UBS) designs, develops and
manufactures high-speed fixed and mobile wireless solutions
based on OFDM technology. UBS has offices in Canada, Denmark,
the UK and Italy.


VANGUARD AIRLINES: Weighing Options to Raise Additional Capital
---------------------------------------------------------------
Vanguard Airlines Inc. operates a value-priced, medium-to-long
haul passenger airline with a hub in Kansas City, Missouri.

Since October 2000, the Company has reconfigured its route
system to operate longer haul routes, commencing service with
low frequencies in new markets. The Company's costs have
increased as a result of transition expense and the perceived
need to commence new longer-haul markets with low frequency
service.

The Company expects such impact to lessen as it increases
frequencies in its new markets. Also, revenues derived from new
routes generally build over a period of time. Revenues and
expenses were further impacted in the second quarter as a result
of the Company's transition to Sabre as its host reservations
system.

This transition disrupted the Company's normal reservation
activity resulting in a reduction in sales, required training of
all reservations and customer service personnel on the Sabre
system, resulting in an increase in training and payroll costs,
and caused temporary reservations and passenger handling
inefficiencies, resulting in passenger inconvenience, lost
revenues and higher costs.

As of the end of June 2001, the Company's reservations
operations had returned to normal levels and substantially all
the Company's reservations and customer service personnel had
been trained on Sabre. Costs in the second quarter of 2001 were
further impacted by the Company's introduction of MD-80 aircraft
into its fleet. Transition cost items included training expense
and acquisition of equipment.

During 1999 and 2000, the Company focused its growth on
Chicago's Midway Airport, creating a small hub at Midway. Before
revenues on the routes could build to profitable levels, the
Company's traffic levels on certain routes were adversely
impacted by the introduction of service and aggressive fare
actions by several competitors.

The Company determined it was unlikely to achieve profitable
operations at Midway due to these actions and, in 2000,
undertook a comprehensive review of its strategic alternatives.
As a result of this review, the Company determined to refocus
its route strategy on operating medium-to-long haul routes that
connect through a hub in Kansas City.

Although no assurance can be provided that profitability will be
achieved or sustained, management believes the Company can
profitably operate a hub at Kansas City for several reasons, the
most significant of which are (i) the Company's cost structure
is less than the cost structure of most airlines providing
medium-to-long-haul service and (ii) Kansas City is a strong
business market that is not dominated by a single airline.
Among other route changes, during 2000, the Company discontinued
service from Chicago Midway to Minneapolis, Pittsburgh and
Cincinnati, while adding service from Kansas City to New Orleans
in July, Los Angeles in October, New York-LaGuardia in October,
and Austin, Texas in December.

In March 2001, the Company discontinued service from Kansas City
to Minneapolis. In April 2001, the Company added service from
Kansas City to San Francisco and Las Vegas.

The Company requires additional debt or equity financing to fund
ongoing operations in 2001. The Company is seeking to raise
additional capital; however, there can be no assurance that such
capital can be obtained. The inability to secure additional
funding could have a material adverse effect on the Company,
including the possibility that the Company could have to cease
operations.

The Company has begun several initiatives designed to increase
its average fare levels, including modest fare increases,
tighter control over inventory levels at discounted fares, and
improved marketing to business travelers, including to travel
agencies.

The Company contracted with Sabre Holdings Corporation to
provide the Company's computerized reservation and check-in
system for a period of five years, and transitioned its
reservation system to Sabre in April 2001.

In addition to one-time transition costs, the transition to the
Sabre system and the accompanying changes in other systems have
resulted in a material increase in ongoing reservations and
booking expense. Management believes this ongoing increase has
been more than offset by an increase in sales due, in part, to
the Sabre system providing the Company's flights improved
display on travel agency reservation systems. Tickets sold
through travel agencies as a percentage of sales increased
roughly 40% from May to July 2001.

In August 2001, the Company instituted a fare sale for fall
travel. As of July 25, 2001, the Company operates eight leased
Boeing 737-200 jet aircraft and three leased Boeing MD-80 jet
aircraft.

The Company is returning certain of its 737-200 aircraft to the
respective lessors and has committed to lease a total of eight
used MD-80 series jet aircraft with remaining deliveries
scheduled in 2001 and 2002.

The Company intends to lease additional MD-80 series jet
aircraft. The lease costs on the MD-80 series aircraft are
approximately one-third higher than the lease costs on the
Company's 737-200 aircraft.

However, in the Company's configuration, most of the MD-80
series aircraft will seat 10% more passengers and include a
business class cabin. Moreover, the MD-80 series aircraft are
generally newer aircraft and are expected to have greater
reliability and lower annual maintenance expense.
  
Three/six months ended June 30, 2001 compared to the three/six
months ended June 30, 2000:

For the six months ended June 30, 2001, the Company realized a
net loss of $22.4 million as compared with a net loss of $10.3
million for the six months ended June 30, 2000. Operating
revenue decreased 14%, or $9.4 million, for 6MO 2001 compared
with 6MO 2000, while operating expenses decreased 4%, or $3.1
million. Other expense increased $5.8 million because of the
$4.1 million expense incurred as a part of the accounting
treatment of the VAC transaction.

For the quarter ended June 30, 2001 Vanguard realized a net loss
of $10.9 million compared with a net loss of $2.7 million for
the quarter ended June 30, 2000. Operating revenue decreased
20%, or $7.5 million, for 2Q 2001 compared with 2Q 2000, while
operating expenses decreased 11%, or $4.3 million. Other expense
increased $5.0 million during the same period.

The Company's results for 6MO 2001 reflect a significant
increase (56%) in the Company's average length of haul (the
average length of a passenger's flight) resulting from the
reconfiguration of its route system to longer-haul flying from a
Kansas City hub. The Company's scope of operations (as measured
by ASMs) increased less than 1% between the periods despite a
35% decrease in flight departures, attributable to the
transition to longer-haul flying.

The Company's revenue passenger miles (RPMs) increased 10%,
resulting in an increase in load factor of 10%, or an average of
66.5% for 6MO 2001 compared to a 60.7% load factor for 6MO 2000.
Operating expense per ASM declined 5%. This unit cost
improvement was more than offset by a 22% decline in yield
mainly attributable to the longer haul flying and to an increase
in discount fares resulting, in part, from the Company's
entering new markets, and general decreases in passenger demand
for air travel in 6MO 2001 resulting, management believes, from
general passenger concerns over a soft economy.

For 2Q 2001 the Company's revenue passenger miles (RPMs)
increased 6%, while its average fleet size dropped 13% to 12.8
aircraft and available seat miles (ASMs) decreased by 11% for 2Q
2001. This resulted in a 19% increase in the Company's load
factor to an average of 73% for 2Q 2001 from 62% for 2Q 2000.

                      Operating Revenues

Total operating revenues decreased 14% to $56.7 million for 6MO
2001 from $66.1 million for 6MO 2000 and decreased 20% to $30.2
million for 2Q 2001 from $37.6 million for 2Q 2000. A 10%
increase in the Company's load factor for 6MO 2001 was more than
offset by a 22% decline in yield for 6MO 2001.

During 6MO 2001, the Company's average length of haul increased
56%, which more than offset a 21% increase in average fares and
resulted in lower yields. Much of the Company's load factor
improvement occurred in the second quarter, which posted a 19%
increase in load factor in 2Q 2001 as compared to 2Q 2000.

Fare levels (and yields) were impacted during 6MO 2001 and 2Q
2001 as a result of the Company's efforts to stimulate traffic.
The Company's traffic levels had declined significantly in
January in part as a result, management believes, of general
uncertainty over the domestic economy, as well as passengers
booking away from the Company due to a decline in the Company's
operational performance in December 2000.

Although the Company implemented significant yield improvement
initiatives in 2Q 2001, the effect of such initiatives was
dampened in 2Q 2001 by the continued carrying of passengers who
booked seats in 1Q 2001 and the conversion to Sabre, which
disrupted the Company's reservations activity, resulting in lost
sales, for approximately 60 days following the transition.

Although the industry has recently experienced widespread fare
discounting, the Company has been able to continue many of its
yield improvement initiatives.

The Company follows a strict refund policy whereby a majority of
its fares are non-refundable. When forfeited, these fares are
recognized in passenger revenue. In conjunction with its
conversion to Sabre reservations system in April 2001, the
Company revised its fare rules applicable to certain passengers
who do not complete their scheduled itinerary. As a result of
this change, the Company no longer allows unused non-refundable
fares to be applied as a credit against future travel if the
change is not requested before the reserved flight date.

As of the effective date of these fare rules, the Company
recognizes revenue for unused non-refundable tickets in the
month in which the "no show" occurs. Revenues from expiration of
nonrefundable tickets totaled $4.7 million in 6MO 2001 compared
with $5.2 million for 6MO 2000. In 2Q 2001, these revenues
totaled $2.5 million compared with $2.2 million for 2Q 2000.

Other revenues consist of service fees from passengers who
change flight reservations on nonrefundable fares, charter
revenue, liquor sales, and mail and cargo revenues. Service fees
declined to $1.6 million in 6MO 2001 from $2.6 million for 1Q
2000, of which $0.8 million occurred during 2Q 2001, largely due
to the Company's change in fare rules to restrict rebooking of
nonrefundable fares.

As a result of the Company's operating losses and limited
financial resources, the Company's independent auditors have
expressed a "going concern" qualification on the Company's
financial statements for the year ended December 31, 2000. The
Company had a working capital deficiency and stockholders'
deficit at June 30, 2001 of approximately $41 million and $25
million, respectively.

The Company requires additional debt or equity financing to fund
ongoing operations in 2001. The Company is seeking to raise
additional capital; however, there can be no assurance that such
capital can be obtained. The inability to secure additional
funding could have a material adverse effect on the Company,
including the possibility that the Company could have to cease
operations.

Since inception, the Company has financed its operations and met
its capital expenditure requirements primarily with proceeds
from public and private sales of equity and debt securities.
Prior to 2001, such financings have been made possible by two
principal stockholders, The Hambrecht 1980 Revocable Trust and
the J. F. Shea Company (together, the "H/S Investors").

During the twelve months ended December 31, 2000, the H/S
Investors invested $11.5 million in the Company. In the first
six months of 2001, Vanguard Acquisition Company ("VAC") became
a principal stockholder through its investment in $3.75 million
of equity securities and $3.5 million of demand notes. On July
12, 2001, these demand notes were exchanged for 17,500,000
shares of common stock. VAC currently holds approximately 37% of
the Company's issued and outstanding voting securities.

The Company continues actions designed to achieve long-term
profitability and improve its capital resources. Management's
strategy to achieve long-term profitability includes building
connecting traffic at its Kansas City hub through strategic
routes, increasing yields through improved revenue management
processes and automation, improving customer service, adding new
cities to increase connecting opportunities, increasing efforts
to attract and retain price-sensitive business travelers and
continuing cost savings programs. There can be no assurance that
such efforts will be successful.

Nearly all of the Company's advance ticket sales are charged to
credit cards. The Company provides collateral to secure a bank,
which processes the Company's VISA and MasterCard transactions
and pays the related receivable.

The amount of required collateral varies in direct relation to
the Company's air traffic liability: as ticket sales and air
traffic liability increase, the Company must either provide
additional collateral satisfactory to the bank or allow cash to
be held by the bank as collateral. Currently, the Company has
provided letters of credit from the H/S Investors in the
aggregate amount of $4.0 million and a surety bond in the amount
of $6.0 million to secure the bank.

The bank's exposure (as computed under the credit card
processing agreement) has exceeded the available security from
time to time, which has resulted in the bank holding cash as
additional collateral.

In March 2001, the Company's $8.0 million surety bond provided
as additional collateral to secure the Company's credit card
processor expired and was renewed for an unspecified term
subject to a 90-day cancellation clause. The bond was terminated
in July 2001 per order of the State of Nebraska, which had
instituted liquidation proceedings against the issuer.

On July 6, 2001, the Company replaced this bond with a $6.0
million surety bond from a different issuer with a one-year term
and a 90-day cancellation clause. This $6.0 million bond is
subject to reduction after certain targets for capital infusions
to the Company have been reached.

In the first and second quarters of 2001, the Company negotiated
lease deferral agreements with certain of its aircraft lessors.
As of June 30, 2001, the Company had issued approximately $9.0
million of long-term debt to satisfy amounts payable to these
lessors, net of $1.0 million of accounts receivable for
reimbursement of certain maintenance expenses.

Additionally, the Company issued a note for approximately $1.0
million to a lessor to satisfy its obligations for the condition
of an aircraft at return. Repayment of these loans, including
interest at 10%, generally was scheduled to commence in July
2001 with maturities varying to December 2002. To date, the
Company has not made the payments required under these loans,
scheduled for July and August 2001.

The Company has received notices of default from certain of its
lessors with whom lease deferral agreements had been reached.
The Company is negotiating revised repayment terms with these
lessors, and continues to negotiate a lease deferral agreement
with another aircraft lessor with whom an agreement was not
reached in the first half of 2001, payments to whom are in
arrears.

On April 12, 2001, the Company entered into an Aircraft Spare
Parts Support Agreement with an aircraft components supply
company under which the Supplier would allow the Company to have
access to up to $2.0 million of spare parts inventory for the
Company's Boeing MD-80 aircraft.

The Company pays a monthly fee for this access and is
responsible for replacement of any parts used. As of June 30,
2001, the Company has received approximately $1.6 million of
parts under this agreement.

On February 14, 2001, the H/S Investors agreed to renew for a
two-year period the letters of credit securing a portion of the
funds held by the Company's credit card processor. In
consideration for the establishment of the letters of credit,
the Company issued to the H/S Investors warrants to purchase up
to an aggregate of 4,000,000 shares of common stock at an
exercise price of $1.17. Upon execution of the letter of credit,
the Company 800,000 of the warrants immediately vested.

In May 2001 another 2,624,238 warrants vested. The remaining
warrants will vest over the remaining term of the letters of
credit depending on the amount of exposure.

On March 9, 2001, the Company issued 162,500 shares of a new
issue of Series C Convertible Preferred Stock to VAC, a
subsidiary of Pegasus Aviation, in exchange for a capital
investment of $3.25 million. The Series C Convertible Preferred
Stock has a liquidation preference of $20 per share, subject to
annual accretion over three years, and is convertible into
common stock at a price of $1.25 per share of common stock. On
April 9, 2001, the Company issued an additional 25,000 shares of
Series C Preferred Stock to VAC in exchange for a further
capital investment of $0.5 million.

On April 30, 2001, the Company executed a term sheet providing
for certain investors to purchase up to 37.5 million shares of
the Company's common stock for an aggregate purchase price of
$7.5 million or $0.20 per share of common stock and to loan up
to the purchase price of the common stock to the Company in
advance of the closing of the equity transaction. One condition
to the investors' obligation to close the transaction was the
modification of the repricing provisions contained in certain
warrants and the Company's Series A Preferred Stock and Series B
Preferred Stock, which warrants and preferred stock were held by
investors committing to take a minority share of the new
investment.

In May, 2001, VAC (who committed to provide the majority of the
new investment) provided bridge loans totaling $3.5 million to
the Company in the form of a demand note bearing interest at an
annual rate of 9%. Other investors provided an additional $1.0
million in demand notes on June 21, 2001 with interest at an
annual rate of 9%. On July 12, 2001, these demand notes were
applied to the purchase of common stock (the "VAC Transaction")
at which time the $4.5 million of demand notes, plus $5,249 of
accrued interest, were exchanged for 22,526,249 shares of common
stock.

At closing, the holders of the Company's outstanding shares of
Series B Preferred Stock and Series C Preferred Stock waived
certain anti-dilution rights and modified the antidilution
provisions of the Repriced Warrants with the result that the
exercise price of warrants to purchase approximately 13.6
million shares of common stock, held by two of the Company's
principal investors, was adjusted to $0.50 per share.

Absent the agreement of these holders to such modification, the
exercise price of the Repriced Warrants would have adjusted to
$.20 pursuant to the terms of the antidilution provisions
contained in such warrants. An additional 2,500,000 shares of
common stock, reserved for issuance to certain financial
advisors to the Company in exchange for the cancellation of $0.5
million of fees owed to them, have not been issued pending
possible restructuring of this portion of the investment.

The Company will record an extraordinary loss on the
extinguishment of the related payable to the extent the fair
value of the equity instruments issued exceeds the $0.5 million
payable on the date of issuance.

The net proceeds from the foregoing capital transactions were
added to the Company's working capital and used to fund the
Company's operating cash requirements and to fund security
deposits on aircraft leased to the Company. As stated above, the
Company is seeking additional capital; however, there can be no
assurance that such capital can be obtained. The inability to
secure additional funding could have a material adverse effect
on the Company, including the possibility that the Company could
have to cease operations.

In July 2001, the Company was notified by Airlines Reporting
Corporation (ARC) that its Letter of Credit securing cash
transactions was under-funded according to ARC's cash reserve
requirements. The Company has been requested to increase the
Letter of Credit by approximately $0.9 million. In addition, the
Company was notified in July 2001 by one of its credit card
processors not secured by the $10.0 million facility that its
collateral balance was under-funded. The Company has been
requested to provide additional cash collateral of approximately
$0.2 million. The Company is negotiating the timing and final
amounts of these reserve requirements.

The Company expects to expend approximately $5.0 million on
various capital expenditures in 2001, which are primarily
related to improvements to aircraft, increased aircraft parts
inventory levels, additional heavy ground equipment and
improvements to its computer systems, including the Company's
switch to Sabre as its host reservations system. As of June 30
2001, approximately $1.8 million of such capital expenditures
had been incurred.

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


VLASIC FOODS: Court Extends Rule 9027 Removal Period to Nov. 30
---------------------------------------------------------------
Judge Walrath extended the time period within which Vlasic Foods
International, Inc. and its debtor-affiliates may remove actions
through the longer of:

   (a) November 2, 2001, or

   (b) 30 days after entry of an order terminating the automatic
       stay with respect to any particular action sought to be
       removed. (Vlasic Foods Bankruptcy News, Issue No. 11;
       Bankruptcy Creditors' Service, Inc., 609/392-0900)


WHEELING-PITTSBURGH: Intends to Sell 2 West Virginia Properties
---------------------------------------------------------------
Wheeling-Pittsburgh Steel Corp. owns two pieces of property in
Brooke County, West Virginia:

  * a hilltop property along Green's Run Road near Beech Bottom,
    West Virginia, and

  * some riverfront property in Beech Bottom, West Virginia.

WPC listed these properties for sale in 1999 and has actively
sought to sell them.

The Green's Run property consists of three parcels of
undeveloped land along Green's Run Road in Brooke County.  These
parcels contain approximately 159 acres, 200 acres and 94 acres,
for a combined total of 453 acres.  

Harry Bruner, a land developer from Caldwell, Ohio, recently
inspected the property and offered $420,000 for all three
parcels.  This price is higher than the average value unit of
similar properties sold in a 10-mile radius, and higher than the
estimated value determined by a licensed appraiser.

The Riverfront property sits at the northern limit of the
Village of Beech Bottom.  The property was purchased in the
1920s and 1930s.  The parcel consists of a 2.014 acre parcel
fronting along WV State Route 2 and a 22.349 acre parcel
fronting the Ohio River, for a combined total of 24.363 acres of
land.  The property is covered by twelve feet of coal mine
tailings, which restricts development to very light structures
and diminishes its utility and desirability.  

Further, the water supply to the property is limited and it
cannot support heavy development.  Delaware North Companies has
offered $475,000 for the Riverfront property, and intends to use
the property as a staging area for a dog kennel facility for its
Wheeling Downs Dog Racing Track.  

The proposed price is higher than the unit value of comparable
river frontage and higher than the estimated value determined by
a licensed appraiser.

WPC says it no longer has any business purpose for this land,
had marketed the properties for sale since 1999, and had not
received any adequate offers until recently.  The sales will be
made in good faith, after reasonable marketing efforts, and at
prices above the appraised values and higher than unit prices
paid in sales of comparable lands.

WPC therefore urges Judge Bodoh to approve these sales promptly,
saying they are in the best interest of WPC's estate.

       The Unsecured Noteholders Committee Doesn't Consent

The Official Committee of Unsecured Noteholders, appearing
through Lee D. Powar of the Cleveland firm of Hahn Loeser &
Parks LLP, tells Judge Bodoh that, under the terms of the
Settlement and Release Agreement with the Noteholders, WPC
cannot, without the prior consent of the Committee, lend or
otherwise make available to WPSC the proceeds from the
disposition of any of its assets.  

The Committee says it doesn't consent to the proposed sales if
the proceeds are to be used for steel company operations.  
Accordingly, the Committee asks Judge Bodoh to approve the sales
conditioned upon application of the proceeds of the sales as:

   (a) one-seventh of the net proceeds shall be utilized to
       permanently pay down the obligations under the Term Loans
       held by Citicorp USA, Inc., and

   (b) six-sevenths of the net proceeds must be retained by WPC,
       or used solely for WPC purposes.

This would mean no money for WPSC.  The Noteholders also ask
that the Debtors be required to demonstrate to the Noteholders
Committee and other parties in interest, prior to any use of the
sale proceeds by WPC, that such use is reasonable and
appropriate. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 10;
Bankruptcy Creditors' Service, Inc., 609/392-0900)  


WINSTAR COMMS: Expects eAuction of Excess Assets to Fetch $20MM
---------------------------------------------------------------
Prior to the filing of Chapter 11 cases, Winstar Communications,
Inc. engaged Accenture to conduct an assessment of the Debtors'
supply management processes.  The initiative resulted in a
number of negotiations, including the sale of surplus equipment
no longer necessary for the ongoing operations of the Debtors'
business.

By this motion, the Debtors seek authority from the Court to
retain Accenture and seek Court approval of excess equipment
sales of inventory through Accenture's eAuction process.

Edwin J. Harron, Esq., at Young Conaway Stargatt & Taylor, LLP
in Wilmington, Delaware states that Accenture's proposed
eAuction holds a number of advantages over a traditional auction
as it can maximize the number of buyer participants by reducing
the cost and complexity of participation and as a result,
increasing market liquidity.  Mr. Harron adds that the proposed
eAuction also creates a competitive selling environment by
allowing prices to move freely to adjust to current supply &
demand conditions.

The Debtors believe that the use of the eAuction process, which
is expected to net over $20,000,000 for the Debtors, will result
in higher selling prices at lower costs.

An Arrangement Letter sets forth the terms & conditions on which
Accenture will provide assistance for the sale of inventory:

a) The scope of the project will be cataloging the consumable
    and asset inventory available for immediate liquidation
    through various methods, identifying potential buyers and
    preparing for and executing a single forward auction event;

b) Accenture will receive an 8% fee of total payment received
    from the first eAuction & other inventory liquidation
    efforts but in no event more than $1 million.

c) After the conduct of the eAuction, Accenture will invoice
    the buyers.  Upon receipt of the payment from the buyers,
    Accenture will advise the Debtors, who will be responsible
    for picking, packing & shipping the purchased items, and for
    executing any quality or delivery guarantees offered to
    buyers.  Upon confirmation of delivery, Accenture will remit
    the payments to the Debtors, net of Accenture's fees.

d) Accenture will work jointly with the Debtors in reducing
    existing inventory levels by selling total excess inventory
    through Accenture's eAuction channel.

The Debtors believe that the sale of inventory by Accenture will
benefit their estates by realizing substantial amounts of cash
from dormant assets and has determined that such sale would be
in the best interest of their estates.  They also believe that
Accenture is well qualified to assist the Debtors in realizing
the greatest return from the sale of inventory.

The Debtors seek to employ Accenture to liquidate the their
excess inventory as follows:

a) Auction Assessment - identifying specific items to be sold
    as excess inventory, assess the feasibility of the eAuction
    to the Debtors' inventory reduction requirements and to
    estimate size of the total opportunity

b) Auction Execution - establishing auction strategy, preparing
    bidders & host for the event & conducting the event.
    Accenture will provide forward auction services to the
    Debtors, host the forward auctions, provide training to
    authorized representative of buyers, provided software,
    hardware & technical assistance needed to host the forward
    auction. (Winstar Bankruptcy News, Issue No. 11; Bankruptcy
    Creditors' Service, Inc., 609/392-0900)   


WORLD AIRWAYS: Requests Nasdaq Hearing to Review Delisting
----------------------------------------------------------
World Airways, Inc. plans to request a hearing before a Nasdaq
Listing Qualifications Panel to ask for continued listing of the
Company's stock on the Nasdaq SmallCap Market.

World Airways announced on June 22, 2001, that it had been
notified by Nasdaq that its common stock had not maintained a
closing bid price of $1.00 for 30 consecutive trading days as
required by a Nasdaq SmallCap Market rule. According to Nasdaq,
World Airways needed to meet the $1.00 price requirements within
90 days (by September 18, 2001) or it would be subject to
delisting from the Nasdaq SmallCap Market.

The delisting of the Company's stock will be delayed pending the
outcome of the hearing.

Hollis Harris, World Airways Chairman and CEO said, "We believe
we can make a strong case that our business is on solid footing
and our financial results will show improvement. We continue to
focus on placing our aircraft in profitable operations, and have
taken a number of actions to reduce costs and make our
operations more efficient."

"We look forward to continued support of the Air Mobility
Command contract, an important military airlift program, which
should generate the same or higher revenues in the coming year
as it did this past year," he added. "In addition, we have
received several new contracts recently, including the
placement of two additional cargo aircraft with a current
customer from Sept 17 through year-end, as well as a six month
cargo contract with the military, which will begin October 1,
2001. For the longer term, we're well-positioned to pursue the
Air Force/Boeing BC-17X Program, a new Department of Defense
contract involving the operation of a commercial
version of the military's C-17 aircraft."

He added, "World Airways was successful in retaining its market
listing a year ago, after we had requested a hearing, and we are
hopeful that our stock will remain listed on the Nasdaq SmallCap
Market."

Utilizing a well-maintained fleet of international range, wide-
body aircraft, World Airways has an enviable record of safety,
reliability and customer service spanning 53 years.

The Company is a U.S. certificated air carrier providing
customized transportation services for major international
passenger and cargo carriers, the United States military and
international leisure tour operators. Recognized for its modern
aircraft, flexibility and ability to provide superior service,
World Airways meets the needs of businesses and governments
around the globe.


* Thacher Proffitt Relocates to 11 West 42nd Street
---------------------------------------------------
Thacher Proffitt & Wood is relocating its New York City office,
formerly at Two World Trade Center, to 11 West 42nd Street.  The
law firm said that the first of its approximately 300 New York
City employees will be moving in tomorrow, with the remainder
moving in over the next few days.

All of the Firm's employees survived the attack on the World
Trade Center last week.

Omer S.J. "Jack" Williams, Managing Partner, said, "On behalf of
the Firm, I want to thank all the brave men and women who risked
or lost their lives in the rescue efforts following last week's
terrorist attacks. Our gratitude is immeasurable for their many
acts of assistance to members of our staff.

"Now that all of our employees are accounted for and safe, our
first priority is continuing to serve our clients. We have been
working quickly to have all systems in New York City up and
running in as short an amount of time as possible to serve our
clients without interruption." Mr. Williams said that the firm's
White Plains, N.Y., Jersey City, N.J., Washington, D.C., and
Mexico City offices provided seamless backup services to clients
during the past week.

"Despite the logistical challenges of relocation and the
emotional challenges of survival and loss, our client work
continues in full force," Mr. Williams continued. "We have
received tremendous support from other law firms, clients and
friends, allowing us to continue our practice during this
difficult time. We have ten structured finance transactions on
schedule to close by the end of the month, several complex real
estate transactions moving forward, and a variety of litigation
matters underway. Last week, we also provided our publicly
traded clients with guidance on SEC regulations with regard to
share repurchase programs as a hedge against market volatility.
It is certainly true that work is a great healer, and we embrace
these ongoing projects."

Mr. Williams concluded, "While our new office space is the
foundation of our rebuilding effort and very reassuring news, we
are very much aware that others have suffered grievous loss. All
of us at Thacher Proffitt & Wood want to express our heartfelt
condolences to friends, colleagues, and individuals everywhere
who have lost a loved one."

Thacher Proffitt & Wood advises domestic and global clients in
the areas of corporate and financial institutions law,
structured finance, cross-border transactions, global finance,
real estate, insurance, admiralty and ship finance, litigation
and dispute resolution, e-Business, technology and intellectual
property, taxation, trusts and estates, bankruptcy,
reorganizations and restructurings.

Founded in 1848, the Firm has approximately 200 lawyers located
in New York (including White Plains), New Jersey, Washington,
D.C., and in its Mexican affiliate office, Thacher Proffitt &
Wood, S.C.

                          *********

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

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

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

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

                          *********

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

Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Bernadette de Roda, 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
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers.  Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.

The TCR subscription rate is $575 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each.  For subscription information, contact Christopher
Beard at 301/951-6400.

                     *** End of Transmission ***