TCR_Public/011102.mbx        T R O U B L E D   C O M P A N Y   R E P O R T E R

           Friday, November 2, 2001, Vol. 5, No. 215


ACT MANUFACTURING: Asking Lessors to Stretch & Reduce Payments
AMF BOWLING: U.S. Trustee Balks at Proposed Houlihan Success Fee
ACKERLEY GROUP: Board Approves Merger with Clear Channel Unit
ALTO PALERMO: S&P Junks Senior Unsecured Debt & Credit Ratings
AMERICA WEST: Negative Impact of Sept. 11 Events Felt in Q3

AMES DEPARTMENT: Needs Until Nov. 3 to Prepare & File Schedules
APTIMUS INC: Extends 10.75M Shares Purchase Offer to November 15
ARCH CHEMICALS: Taking Measures to Shape-Up Business Portfolio
ARMSTRONG HOLDINGS: Sues EMC to Recover Postpetition Payment
BETHLEHEM STEEL: Final DIP Financing Hearing Set for November 5

BLOUNT: S&P Raises Concern About Aggressive Financial Profile
COMDISCO: Court Okays Employee Stock Purchase Plan Suspension
CONTINENTAL AIRLINES: Q3 Passenger Revenue Down by 14.9%
CORECOMM LIMITED: Inks Deal to Retire $146MM of 6% Conv. Notes
CRAZY SHIRTS: Big Dog Declines to Match Bid for Assets

DELTA AIR: Voluntary Recovery Programs Cut Involuntary Furloughs
EQUALNET COMMUNICATIONS: UST Moves for Chapter 7 Conversion
EXODUS COMMS: Seeks Court Approval of Postpetition DIP Facility
FEDERAL-MOGUL: Wants Approval of Senior Management Contracts
FRUIT OF THE LOOM: Berkshire to Buy Apparel Business for $835MM

GENESIS HEALTH: J. Hayes Pushes for Appointment of Equity Panel
HERCULES: Strategic Process to Merge or Liquidate Assets Ongoing
IBS INTERACTIVE: Crippen & RCF Disclose Holding In Merged Firm
IVC INDUSTRIES: Inks Deal to Sell Outstanding Stock to Inverness
INTEGRATED HEALTH: NationsBank Secures Adequate Protection

INTERNET COMMERCE: Sells Assets to ICC Speed for $1.1M + Debts
KEYSTONE: Weighing Alternatives for Financial Restructuring
KING PHARMACEUTICALS: S&P Rates Proposed Convertible Issue at BB
MOSLER: Finalizes $28MM Sale Agreement with Diebold
NOVO NETWORKS: Fails to Meet Nasdaq Listing Requirements

PHOENIX RESTAURANT: Begins Reorganization Under Chapter 11
PHOTOCHANNEL INC: Files for Bankruptcy Under Chapter 7
PLAUT AG: Narrow Revenue Stream Prompts S&P to Assign B Rating
POLAROID CORP: Inks Deal to Sell ID Business to PIDS for $32MM
PRINTING ARTS: Case Summary & 40 Largest Unsecured Creditors

QUALITY STORES: Files for Chapter 11 Reorganization in Michigan
ROUGE INDUSTRIES: Negotiations for Additional Financing Underway
SERVICE MERCHANDISE: Provides Adequate Protection to Insurers
SHARED TECHNOLOGIES: Obtains Court Nod to Use Cash Collateral
SITEL CORP: Expects to Achieve Breakeven in Fourth Quarter

SUPERVALU INC: Will Sell $185.5M Notes to Repay Short-Term Debts
TOUCHSTONE SOFTWARE: Product Revenues Plunge 54% in 3rd Quarter
VENCOR INC: Wrestles with IRS Re $6.3 Million Payment Request
VIADOR INC: Nasdaq Delists Shares Effective October 31
WAXMAN INDUSTRIES: Financial Workout Yields Positive Results

WILD OATS: Gets Waiver of Previous Defaults On Credit Facility
WILLIAMS COMMUNICATIONS: Amends Bank Credit Facility Covenant
WINDSWEPT ENVIRONMENTAL: New Financing Needed to Satisfy Debts

             Case Studies in Bankruptcies, Buyouts, and Breakups


ACT MANUFACTURING: Asking Lessors to Stretch & Reduce Payments
ACT Manufacturing, Inc. (Nasdaq: ACTM) reported results for the
third quarter ended September 30, 2001.

For the three months ended September 30, 2001, revenue decreased
39 percent to $225,898,000 compared with $368,515,000 for the
same period in 2000.  For the nine months ended September 30,
2001, revenue increased 19 percent to $1,016,079,000 compared
with $850,573,000 for the same period in the prior year.

Net loss for the three months ended September 30, 2001 was
$24,136,000, compared with net income of $8,200,000 for the same
period in 2000.  For the nine months ended September 30, 2001,
net loss was $27,428,000, compared with net income of
$21,378,000 for the same period in 2000.

The current period results were affected by special charges,
excess capacity costs, and inventory and receivable provisions
of $20.5 million on an after tax basis taken in the third
quarter as a result of the industry downturn.  

For the three months ended September 30, 2001, adjusted net
income, which excludes the after-tax impact of special charges,
excess capacity costs, inventory and receivable provisions
primarily related to discontinued customers, and the
amortization of goodwill and other intangible assets, was
$538,000, compared with $9,595,000 for the same period in 2000.  
For the nine months ended September 30, 2001, adjusted net
income was $12,794,000, compared with $23,245,000 for the same
period in the prior year.

The Company generated positive cash flow for the three months
ended September 30, 2001, which resulted in a reduction of
global bank debt of $42,300,000 and accounts payable of
$54,200,000 during the quarter.

                   Restructuring Actions

The downturn in the global economy has significantly impacted
the Company's operating results.  In response to this slowdown,
management has announced and implemented plans related to
restructuring and consolidating the Company's operations.  The
Company's strategies include facility closures and reallocation
of production, significant reductions in workforce, aggressive
reductions of excess inventory, and discontinuation of certain
customer relationships.  The Company remains committed to
ongoing restructuring actions to align its operations with
industry conditions.

As part of the realignment program, a portion of the Company's
facilities in California and Mexico have been closed and the
Company has adjusted its Texas facility initiative.  In
addition, the Company has consolidated the PCB operations in
Ireland into the England location, leaving the Ireland facility
as a dedicated cable operation.  

During the fourth quarter, the Company will continue to evaluate
its manufacturing facilities to ensure that the production
capacity and workforce will be aligned with the current revenue
run rate and industry environment.  The recorded charge for
facility closures represents the lease payments made in the
current quarter as well as approximately $3.5 million in future
lease payments.

During the third quarter, the Company's production required the
use of only selected production lines. The lease payments
associated with the excess production lines approximated $5.8
million.  The Company is commencing negotiations with the
equipment lessors in an effort to reduce current cash outflow
and restructure lease terms.

During the third quarter, the Company has incurred approximately
$10.5 million in losses due to trade receivable write-offs as a
result of termination of certain customer relationships and
other disputes.  In light of the economic environment, as well
as the potential costs and uncertainties associated with
litigation, the Company has settled a significant portion of
these cases.

During the third quarter, the Company reduced its workforce by
853 employees. These reductions, in addition to actions taken in
the first two quarters of 2001, have resulted in the Company
reducing its workforce from approximately 8,800 at January 1,
2001 to approximately 6,000 at September 30, 2001.  In October
2001, over 1,000 additional employees were terminated to bring
the total workforce to approximately 5,000.  The annualized
savings from these reductions total over $65 million.

During the third quarter, the Company met its working capital
needs primarily through cash generated from operations as well
as domestic and foreign bank borrowings.  

During the third quarter, the Company went into an over advance
position on its collateral-based domestic credit facility.  The
Company was within the applicable borrowing base as of September
30, 2001. The Company also was in an over advance position in
October 2001, however, the Company subsequently reduced its
domestic loan balances within the applicable borrowing base.  As
a result of limitations on available borrowings, the Company
must manage its inventory, shipments, receivables, payments and
other cash flow items to remain within the applicable borrowing
base or obtain alternative bank or other financing arrangements.  

The Company has been in ongoing discussions with its domestic
bank syndicate to obtain required consents and amendments as
well as to address required liquidity as the Company continues
to transition its business in light of evolving industry and
economic conditions.  

Given the Company's full utilization of its domestic credit
facility for its North American operations, the Company is
actively pursuing discussions with the domestic bank syndicate
as well as considering other initiatives to improve its
financial position and meet its liquidity needs. These other
initiatives range from restructuring operating leases and vendor
payment obligations, to pursuing additional foreign credit
facilities, to exploring strategic options such as alternative
financings and divestiture of certain assets.

There are no assurances that the Company will obtain any of the
consents, amendments or liquidity facilities it seeks from its
domestic bank syndicate, alternative sources of liquidity or
other third parties.

In October 2001, the Company further reduced its domestic loan
balance by approximately $27 million from the September 30, 2001

Mr. John A. Pino, President, Chief Executive Officer and
Chairman, said, "This past quarter we were able to generate
positive cash flow from operations and meet the needs of our
customers in a difficult environment.  We continue to manage
customer relations and collections, the supplier base and
payables, inventory levels and our bank and other financing
relationships as we adjust operations and position ourselves to
provide EMS solutions in today's environment.  While the
management task is challenging, we have an experienced team
which has worked through industry downturns in the past.  We are
vigorously addressing near term challenges, and remain
optimistic regarding the long-term prospects for our industry
and company."

ACT Manufacturing, Inc., headquartered in Hudson, Massachusetts,
provides value-added electronics manufacturing services to
original equipment manufacturers in the networking and
telecommunications, high-end computer and industrial and medical
equipment markets.  The Company provides OEMs with complex
printed circuit board assembly primarily utilizing advanced
surface mount technology, electro-mechanical subassembly, total
system assembly and integration, mechanical and molded cable and
harness assembly, and other value-added services.  The Company
has operations in California, Georgia, Massachusetts,
Mississippi, England, France, Ireland, Mexico, Singapore, Taiwan
and Thailand.

AMF BOWLING: U.S. Trustee Balks at Proposed Houlihan Success Fee
W. Clarkson McDow, Jr., the United States Trustee for Region 4,
argues that the compensation arrangement presented to the Court
is unreasonable in the context of the case in which it is being
requested.  Mr. McDow contends that tying transaction fee
compensation to confirmation of a plan of reorganization of AMF
Bowling Worldwide, Inc., without looking at whether the
professional being compensated has had anything whatsoever to do
with the successful confirmation process is unreasonable.  

Mr. McDow states that this is particularly true in this case
where the original plan and disclosure statement were filed on
August 31, 2001 and an amended plan and disclosure statement
were filed on October 4, 2001, both of which predates the entry
of an Order allowing the employment of Houlihan.  Mr. McDow
submits that there is nothing before the Court that suggests
Houlihan has actually had any input into either the plan or its
amendment.  The Houlihan Engagement Letter, as Mr. McDow reads
it, says that Houlihan gets $1,000,000 simply for being there.

As to the monthly fee of $125,000, Mr. McDow says that there is
no indication that this fee will be credited against any fee
ultimately paid to Houlihan. Without this crediting and
corresponding review of the time actually spent by Houlihan each
month, Mr. McDow asserts that this monthly fee is arbitrary and
should not be paid as provided in the Agreement.

Mr. McDow also objects to the request to approve the Houlihan
Application nunc pro tunc to July 2, 2001, the filing date of
the petition. The sole justification contained in the
Application is that, Houlihan Lokey has performed services for
the Committee commencing on July 2, 2001 as it had been in
discussions with the Debtors and their advisors as a result of
the pre-petition work on behalf of the Bondholder Committee.
While it may be true that Houlihan was performing services for
the Bondholder Committee on July 2, 2001, Mr. McDow argues that
no such work was being done for the Official Committee of
Unsecured Creditors because it did not even exist until July 17,
2001, and the Committee itself was not given a retroactive

Furthermore, Mr. McDow relates that the Committee did not enter
into an agreement with Houlihan until July 20, 2001, which is
the earliest that the Court should even consider as the
commencement date for Houlihan's employment. Mr. McDow tells the
Court that the statement by the Committee that Houlihan has been
working on this project for a while does not explain the delay
in the application process and without a reasonable explanation
of the delay, any Order allowing the employment of Houlihan
should be effective on the date it is entered on the Court's

In addition, the Agreement provides liability protection to
anyone who is an "officer, director, employee, agent shareholder
or controlling person" of Houlihan by stating that no such
individuals, "shall be subjected to any personal liability
whatsoever to any person, nor will any such claim be asserted by
or on behalf of any other party to this agreement." Mr. McDow
states that the Agreement further insulates Houlihan from
liability claims by stating, "There shall be no third party
beneficiaries to this Agreement, and neither the Committee nor
any other parties who purport to rely on this Agreement may
assert any claim hereunder against Houlihan Lokey or the Company
in contravention of this paragraph."

In addition, the Agreement contains indemnification language
which does not specifically become inoperative if a claim is
made against Houlihan or its agents, officers, control persons
by the Debtor, by the Committee, by a chapter 7 Trustee, by a
chapter 11 Trustee, or by the U.S. Trustee. Mr. McDow asserts
that the indemnification agreement between the Committee and
Houlihan are not consonant with the employment provisions of the
United States Bankruptcy Code, traditional notions of bankruptcy
professionalism, and bankruptcy & non-bankruptcy public policy.
To the extent that this Agreement relieves Houlihan of any claim
against it by the Debtors and all associated companies, or any
entity claiming through the Debtors, Mr. McDow contends that it
is in reality a waiver of liability which is not favored by the
courts, violates general public policy, and is not in the best
interest of this estate. (AMF Bankruptcy News, Issue No. 10;
Bankruptcy Creditors' Service, Inc., 609/392-0900)    

ACKERLEY GROUP: Board Approves Merger with Clear Channel Unit
Stockholders of The Ackerley Group, Inc. will be receiving a
communication from the Company indicating that the Company's
Board of Directors has approved a merger between The Ackerley
Group, Inc., and a wholly owned subsidiary of Clear Channel
Communications, Inc.

If the merger is completed, stockholders will receive 0.35 of a
share of Clear Channel common stock for each share of Ackerley
ordinary common stock and each share of Ackerley Class B common
stock that is owned. Clear Channel shares are traded on the New
York Stock Exchange under the symbol "CCU." The Ackerley Group
says it expects that the merger generally will be tax-free to
holders of Ackerley common stock for federal income tax purposes
except to the extent holders receive cash instead of fractional
shares of Clear Channel common stock.

Consummation of the merger will require shareholder approval of
the merger and the merger agreement. A special meeting of
stockholders will be held to consider and vote on the merger

ALTO PALERMO: S&P Junks Senior Unsecured Debt & Credit Ratings
Standard & Poor's lowered its senior unsecured debt and
corporate credit ratings on Alto Palermo S.A. (APSA) to triple-
'C'-plus from single-'B'. The ratings were removed from
CreditWatch, where they placed October 23, 2001. The outlook is

The downgrade follows the recent collapse in shopping mall
retail sales, reflecting poor prospects for the industry in the
medium term. This might further deteriorate APSA's financial
profile and not allow the company to reduce its high exposure to
short-term debt while the credit environment in Argentina
continues to worsen.

APSA is a real estate company that owns, leases, operates,
develops, and acquires shopping centers in Argentina.
Additionally, APSA has developed a credit card operation,
Tarshop, started in late 1998. The ratings on APSA reflect the
inherent volatility of the Argentine real estate sector and the
lack of geographic diversification in APSA's operations. In
addition, given the recession that Argentina has been facing
since 1999, the company's ability to collect has been
deteriorating and might further deteriorate given the further
weakening of retail sales in the last two months.

Although more than 80% of APSA's total debt with third parties
matures in 2005, the remaining share of the debt, characterized
by its very short maturities, poses increasing refinancing risks
given current credit market conditions. These negative factors
are partially offset by the company's strong market position,
the strategic locations of its shopping centers, and the growth
potential for this sector in Argentina in the longer term.

Despite the recession that has been facing the Argentine
economy, various financial measures have slightly improved
although not enough to offset increasing industry risk. Capital
structure is relatively weak given current economic conditions
with debt to capitalization of 40.2% for fiscal 2001 compared to
38.7% in 2000 and 46.5% in 1999.

During January 2001, the company placed a four-year $120 million
bond used mainly to refinance short-term maturities, somewhat
improving the financial profile and lengthening the maturity
schedule. However, this debt bears variable interest rates
linked to highly volatile local reference rates, exposing APSA
to breach of covenants if EBITDA growth does not offset the
growth of interest rates.

EBITDA margins improved to 60.1% in fiscal 2001 from 53.2% in
fiscal 2000, but are still lower than in 1999. The poor
performance of the industry might lead APSA to strongly increase
marketing expenses to maintain attendance to the malls, further
affecting EBITDA. For 2001, EBITDA interest coverage was 2.1x
compared to 2.0x in 2000 and 2.9x in fiscal 1999 mainly due to
the strong increase in interest expenses. Funds from operations
to total debt have improved slightly to 20.5% in 2001 compared
to 18.2% in 1999.

                      Outlook: Negative

The outlook on Alto Palermo mirrors the outlook on the ratings
of the Republic of Argentina, which indicates that those ratings
could be lowered again if political and social tensions
frustrate the government's efforts to keep the fiscal situation
under control. Further capital outflows could cause additional
strain and continue to undermine prospects for growth, as they
severely impair domestic credit. The outlook also reflects the
effects that low consumer confidence, the severe local credit
crunch, and the global economic slowdown, may continue to have
on GDP growth and the fact that the economy shows no signs of

AMERICA WEST: Negative Impact of Sept. 11 Events Felt in Q3
America West Holdings Corporation (NYSE: AWA), parent company of
America West Airlines, Inc. and The Leisure Company, reported a
third quarter net loss of $31.7 million.  For the same period a
year ago, America West reported net income of $1.3 million
including a nonrecurring pretax gain of $8.8 million.

The results include a pre-tax grant of $60 million representing
the initial installment of federal financial assistance
following the September 11 terrorist attacks.  Excluding the
federal grant, the company's net loss for the quarter was $69.2
million, which reflected the adverse impact of operating and
other losses caused by and following the attacks.

On September 11, 2001, immediately following the terrorist
attacks, the Federal Aviation Administration suspended all
commercial airline flights in the United States.  America West
resumed service on September 13 on a limited basis and gradually
ramped up operations over the ensuing days.  The company
cancelled more than 2,000 scheduled flights as a direct result
of the attacks.

"America West's third quarter results were negatively impacted
by the complete shutdown of our nation's airspace following the
terrorist attacks of September 11, and the subsequent sharp
decline in consumer demand for air travel as a result of the
attacks," said W. Douglas Parker, chairman, president and chief
executive officer.  "We are encouraged by signs that the
American people are becoming more comfortable with traveling
again, as our passenger loads continue to improve and outpace
the industry."

For the period July 1 through September 10, 2001, America West's
load factor was 78.0 percent, or 3.0 points above the same
period in 2000.  The company's revenue per available seat mile
(RASM) was 7.33 cents, or 9 percent below the year ago period.  
After the September 11 attacks and through the end of the month,
the airline's load factor was 52.7 percent.  America West's RASM
for this same period was 5.03 cents.

For the last six weeks ended October 27, 2001, weekly load
factors have steadily improved as follows: 44.3 percent, 56.5
percent, 65.1 percent, 69.1 percent, 70.6 percent and 71.0

On September 17, America West announced it would reduce its
flight schedule by approximately 20 percent based on available
seat miles, and would also eliminate approximately 2,000
positions in connection with this reduction through a
combination of attrition, deferred hiring and select reductions-
in-force.  The moves were in direct response to the adverse
impact on air travel stemming from the terrorist attacks.

"The employees of America West worked diligently to restore the
airline's operations in a very difficult environment, while at
the same time implementing heightened security measures for the
safety of our customers," added Parker.  "They deserve credit
for not only reinstating air travel safely, rapidly and
efficiently, but for the outstanding job they've done in
maintaining reliable, consistent service throughout.  The
continued improvement in on-time performance is a testament to
the dedication and commitment of our employees."

For the third quarter through September 10, 2001, as reported to
the Department of Transportation (DOT), America West's on-time
performance improved to 72 percent compared with 66 percent in
the same period of 2000. The percentage of flights cancelled
dropped to 1.9 percent from 4.0 percent, due primarily to a
significant decrease in the number of maintenance-related
cancellations versus the third quarter 2000.

For the entire third quarter, America West posted a 43 percent
year-over-year improvement in mishandled baggage.  As a result
of these improvements, customer complaints to the DOT have
dropped 48 percent.  America West launched a series of customer
service initiatives to enhance its operational performance in
August 2000.

Operating revenues for the quarter were $491.4 million, down 17
percent from the same period in 2000. Revenue passenger miles
were 5.0 billion, down 1.5 percent from third quarter 2000 on a
2.7 percent decrease in capacity. The airline's passenger load
factor was 74 percent in the third quarter 2001.

Passenger yields fell 14 percent to 9.36 cents due to an
industry-wide decline in business travel and aggressive fare
sales since September 11.  The decline in yields caused
passenger revenue per available seat mile (RASM) to decline 13
percent to 6.92 cents.  America West's decline in RASM was less
severe than declines reported by other major airlines.

For the third quarter 2001, operating cost per available seat
mile (CASM) increased 3 percent to 8.66 cents, due to the post-
September 11 suspension of air service, which reduced ASMs
significantly without a commensurate reduction in costs.  
Average fuel price excluding tax for the third quarter 2001 was
81 cents per gallon versus 91 cents in the third quarter of

America West Holdings Corporation is an aviation and travel
services company.  Wholly owned subsidiary America West Airlines
is the nation's eighth largest carrier serving 90 destinations
in the U.S., Canada and Mexico.  The Leisure Company, also a
wholly owned subsidiary, is one of the nation's largest tour

AMES DEPARTMENT: Needs Until Nov. 3 to Prepare & File Schedules
Ames Department Stores, Inc. tells the Court that it will be
impossible to produce comprehensive schedules of their assets
and liabilities, schedules of current income and expenditures,
schedules of executory contracts and unexpired leases, and
statements of financial affairs by November 3, 2001.  By this
Motion, the Debtors ask the Court to further extend the deadline
by which they must prepare and file their Schedules and
Statements to December 17, 2001, without prejudice to requests
for additional time should it become necessary.

While the Debtors have mobilized their employees to work
diligently and expeditiously on the preparation of the
Schedules, Martin J. Beinenstock, Esq., at Weil Gotshal & Manges
LLP, says that the Company's resources are strained.  In view of
the amount of work entailed in completing the Schedules and the
competing demands upon the Debtors' employees to assist in
efforts to stabilize business operations during the initial
post-petition period, the Debtors have not been able to properly
and accurately complete the Schedules to date. (AMES Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-

APTIMUS INC: Extends 10.75M Shares Purchase Offer to November 15
Aptimus, Inc. (Nasdaq: APTM), announced that it has extended its
current Offer to Purchase up to 10,750,000 shares of its common
stock at $0.48 per share until 5:00 p.m., Eastern time, on
Thursday, November 15, 2001.  The extension was provided to
allow shareholders additional time to accept the tender offer.

The Company has filed a Supplement to the Offer to Purchase with
the Securities and Exchange Commission confirming the extension
and containing certain other information concerning the tender
offer that investors may find helpful in evaluating the fairness
of the tender offer.  A copy of the Supplement may be obtained
by contacting the Company's Information Agent, Mellon Investor
Services, L.L.C., at 888-694-4771.  Any questions regarding
the Offer to Purchase may be directed to the Company's
Information Agent.

Aptimus is creating the leading online direct response network.
We provide high volume performance-based customer acquisition
solutions for major consumer marketers.  The Aptimus Network
presents consumers with relevant offers geared to their
immediate interests, allowing marketers to reach consumers with
the right offers when they are most likely to respond. Our
offer presentation serving technology platform enables us to
promote offers contextually via third party web sites across the
Internet. Built on a technology platform that is flexible and
scalable, the Aptimus Network can support millions of users and
hundreds of marketers and Web site partners. Aptimus is
headquartered in Seattle, and is publicly traded on Nasdaq under
the symbol APTM.

ARCH CHEMICALS: Taking Measures to Shape-Up Business Portfolio
Arch Chemicals, Inc. (NYSE:ARJ) announced that results from
continuing operations for the third quarter of 2001 were million
compared to net income of $4.6 million in 2000. Sales of $208.5
million in 2001 were comparable to sales of $208.9 million in
the third quarter of 2000. Excluding special items, segment
operating loss was $4.1 million in 2001 compared to income of
$8.9 million in 2000.

Michael E. Campbell, Arch's Chairman, President and Chief
Executive Officer, commenting on the third quarter operating
results, said, "While our Treatment Products and Other Specialty
Products segments exceeded prior year results, the continued
global softness in the electronics industry has led to a
significant decline in demand in our Microelectronic Materials
businesses, including our joint venture in Japan with FUJIFILM.
Performance Urethanes sales also continued to be adversely
impacted by the slowdown in customer demand. In addition,
results of our HTH Water Products business were negatively
impacted as compared to the prior year due to the timing of the
annual plant maintenance shutdown. Furthermore," he added, "we
wrote off our $1 million investment in Inc., an
Internet-based business-to-distributor-to-business on-line
marketplace for specialty chemical companies, which became
insolvent in the third quarter."

The following compares segment sales and operating income for
the third quarter of 2001 and 2000 (including equity in earnings
of affiliated companies and excluding special items and certain
unallocated expenses of the corporate headquarters):

                 Microelectronic Materials

Microelectronic Materials reported sales of $31.8 million and an
operating loss of $5.0 million for the third quarter of 2001
compared with sales and operating income of $59.9 million and
$3.3 million, respectively, in the third quarter of 2000. $13.5
million of the sales decrease was related to the exit of certain
unprofitable process chemical product lines in conjunction with
the restructuring announced in the fourth quarter of 2000.
Excluding the effect of restructuring, sales were approximately
33% lower principally due to lower photoresist and ancillary
volumes related to the downturn in the electronics industry.
Demand for advanced products remained strong. For example,
polyimides sales were approximately 12% higher than prior year
driven by the growth of our new aqueous developable buffer coat
product. The operating loss as compared to operating income in
the prior year was principally due to the lower sales and lower
profit ($1.4 million) from our joint venture, FUJIFILM Arch.
These were partially offset by lower selling and administrative
expenses due to cost reduction initiatives and lower operating
and depreciation expenses as a result of the restructuring of
the Process Chemicals business.

                   HTH Water Products

HTH Water Products reported sales of $37.9 million and an
operating loss of $6.7 million for the third quarter of 2001
compared with sales and an operating loss of $40.3 million and
$3.3 million, respectively, in 2000, excluding the results of
Superior Pool Products. The 6 percent decrease in sales was
primarily due to lower non-branded calcium hypochlorite volumes
partially offset by higher accessory sales. The decrease in
operating results was due to the lower sales, increased research
and development costs for new product development, and higher
costs due to the timing of the annual plant maintenance
shutdown, which was performed in the third quarter of 2001
compared to the fourth quarter in 2000. In addition, results
were negatively impacted by unfavorable fixed cost absorption
due to the extended shutdown as a result of an inventory
reduction program which was partly offset by the benefit of a
LIFO inventory decrement.

                     Treatment Products

Treatment Products reported sales of $58.8 million and operating
income of $6.1 million for the third quarter of 2001 compared
with sales and operating income of $32.0 million and $4.2
million, respectively, in 2000. The sales and operating income
increases were driven by the inclusion of Hickson's Wood
Protection and Brooks' Personal Care Products businesses.

Personal care and industrial biocides sales were comparable to
prior year in all product lines. Operating income was slightly
lower due to unfavorable fixed cost absorption due to planned
inventory level reductions.

                    Performance Products

Performance Products reported sales of $59.2 million and
operating income of $0.5 million for the third quarter of 2001
compared with sales and operating income of $48.9 million and
$6.5 million, respectively, in 2000. The sales increase was due
to the inclusion of Hickson's Coatings business. The operating
income contribution from the Coatings business was more than
offset by lower results from the Performance Urethanes business.

Performance Urethanes sales were approximately 10 percent lower
principally due to lower contract manufacturing and lower Latin
American volumes, both the result of poor economic conditions,
partially offset by higher propylene glycol volumes. Operating
income was lower as a result of the lower sales, the absence of
income ($2.4 million) related to the BASF contract, which was
completed December 31, 2000, and higher unabsorbed energy and
manufacturing costs due to lower contract manufacturing, partly
offset by the benefit of a LIFO inventory decrement as a result
of reduced inventory levels.

                  Other Specialty Products

Other Specialty Products, which includes Arch's Hydrazine and
Sulfuric Acid businesses, reported sales of $20.8 million and
operating income of $2.5 million for the third quarter of 2001
compared with sales and operating income of $19.2 million and
$0.4 million, respectively, in 2000.

Hydrazine sales increased 53 percent primarily due to higher
propellant revenues associated with the new contract with the
U.S. government. Operating income was higher primarily due to
the higher sales and lower selling and administrative expenses,
partially offset by unrealized losses related to natural gas
futures contracts.

Sulfuric Acid sales decreased 23 percent as a result of lower
volumes due to customer operating difficulties and lower pricing
due to unfavorable product mix compared to the prior year.
Operating income was lower primarily due to the lower sales.

                  Discontinued Operations

Income from discontinued operations, net of tax, includes the
results of operations of the Organics division and interest
expense allocated to this business for the month of September.

                      Interest Expense

Interest expense for 2001 increased due to higher debt levels
directly related to the Hickson and Brooks acquisitions,
partially offset by lower effective interest rates and lower
working capital borrowing needs.

                    Nine-Month Results

For the first nine months of 2001, sales were $749.0 million
compared to $719.7 million in 2000. Excluding special items,
segment operating income was $40.8 million compared to $64.3
million in 2000.

                      2001 Outlook

The Company anticipates that results for the fourth quarter of
2001 will be in the range of approximately a $0.45 to $0.55 loss
per share compared to $0.01 earnings per share, excluding
special items reported in the fourth quarter of 2000. The
decrease in expected results, as compared to 2000, is due
primarily to the slowing global economy and its adverse effect
on our customers' end markets, particularly in the
Microelectronics Materials segment.

Sales from the Microelectronics Materials segment, excluding the
discontinued product lines, are expected to be 10 percent to 15
percent lower than the third quarter and approximately 40
percent lower than prior year. For the full-year 2001, earnings
per share from continuing operations, before cumulative effect
of accounting change, are expected to be in the $0.15 to $0.25
range. In addition, EBITDA is expected to be in the $95 million
range and capital spending is expected to be in the $45 million
to $50 million range.

Mr. Campbell concluded, "Although economic conditions show no
signs of improvement in the short-term, we are maintaining our
disciplined approach to shaping our business portfolio in order
to achieve our stated goal of delivering strong top line and
bottom line results. Our tools include cost containment, capital
spending and working capital reduction initiatives, and a
commitment to improve our operating efficiencies and reduce our
debt levels. These, combined with management's focus on
investing in high potential growth areas, will position us well
to capture business opportunities as economic conditions

With sales of approximately $1 billion, Arch Chemicals, Inc.,
(NYSE: ARJ) headquartered in Norwalk, Conn., is a global
specialty chemicals company with leadership positions in four
core segments - Microelectronic Materials, HTH Water Products,
Treatment Products and Performance Products. Arch Chemicals
serves world leaders in these key markets with forward-looking
solutions to meet their chemical needs, employing a global
workforce and manufacturing facilities in North America, South
America, Europe, Asia and Africa. For more information, visit
the company's web site at

As at Sept. 30, 2001, the Company had cash and cash equivalents
amounting to $7.5 million, and accounts receivables totaling
$192.5 million, while its current liabilities reached $404.4

ARMSTRONG HOLDINGS: Sues EMC to Recover Postpetition Payment
Armstrong World Industries, Inc., appearing through Rebecca L.
Booth of the Wilmington firm of Richards Layton & Finger PA,
brings an adversary proceeding against EMC Corporation, saying
that EMC received a preferential transfer of funds from AWI, and
then manufactured false invoices in an attempt to disguise the
transfer as a postpetition transaction.

In or about October of 2000, AW1 received a letter from J. David
Palmer, an account executive at EMC, in which EMC offered to
sell to AWI the software/hardware product package referred to as
the Symmetrix Enterprise Storage Solution. The total discounted
purchase price for the software, hardware, and installation of
the Symmetrix System was approximately $714,145.00. The Offer
Letter stated that the prices quoted therein would remain
available for 30 days.

On or about October 23, 2000, AWI sent Mr. Palmer a letter in
which it ordered from EMC products originally offered to AWI in
the Offer Letter. The total purchase price for the products that
AWI ordered pursuant to the Acceptance Letter was approximately
$680,000.00. In the Acceptance Letter, AW1 indicated to EMC,
"You are authorized to ship the Products on or about October 31,
2000, to the following location.- This order is contingent upon
final Senior Management approvals and such approvals will be
confirmed on or about October 27, 2000.

On or about November 1, 2000, after receiving the requisite
approvals, and in furtherance of the Acceptance Letter, AWI
issued to EMC a purchase order in which AWI sought to purchase
the Symmetrix System. The Purchase Order provided the terms of
purchase including, but not limited to, (i) the products
requested, (ii) the price per product, (iii) the delivery
contact information, (iv) the requested delivery date, (v) the
billing information, and (vi) the freight terms of the

On or about November 15, 2000, EMC delivered the Symmetrix
System to AWI.  On or about, December 13, 2000, after AWI had
received the Symmetrix System, EMC and AWI entered into an
agreement that provided the terms and conditions for use of the
Symmetrix Equipment by AWI. The Terms and Conditions Agreement
provides the terms for, inter alia, the warranty covering the
Symmetrix System, product maintenance of the Symmetrix System,
and indemnification by EMC of AWI under certain conditions.

Because the sales transaction, including AWI's receipt of the
Symmetrix System, between EMC and AWT took place prior to the
Commencement Date, EMC's claim for payment of the purchase price
and sales tax for the Symmetrix System is a claim that arose
prior to the Commencement Date.

                  "Inaccurate, False Invoices"

On or about January 3, 200 1, AWI received an invoice for
approximately $720,800.00, consisting of approximately
$680,000.00 for the Symmetrix System and $40,800.00 for the
applicable sales tax. The EMC Invoice number was 00451753. The
Original EMC Invoice inaccurately characterized the "ship date'
of the Symmetrix System as December 14, 2000.

Subsequent to issuing the Original EMC Invoice, EMC issued
another invoice that purportedly replaced the Original EMC
Invoice and contained a new invoice number, 0041753A. As in the
Original EMC Invoice, the Amended EMC Invoice referenced the
order of the Symmetrix System, and inaccurately provided a "ship
date" of December 14, 2000. By providing inaccurate ship dates
of December 14, 2000 on the Original and Amended EMC Invoices,
EMC characterized falsely the sale of the Symmetrix: System as a
postpetition transaction.

On or about January 16, 2001, and more than one month after the
Commencement Date, AWI employees, relying upon the inaccurate
"ship dates" in the Original and Amended EMC Invoices,
erroneously issued a check in the amount of $720,800.00 in
satisfaction of the amount owed by AWI to EMC for AWI's purchase
of the Symmetrix System.

On or about April 27,2001, counsel for AWI sent EMC a letter
advising EMC that the postpetition payment had been made
erroneously and requesting the immediate return of the Funds.
AWI did not receive a response to the First Advisory Letter.  On
or about May 29, 2001, counsel for AWI sent EMC a second letter,
in which AWT again advised EMC that the postpetition payment was
made in error, requested the immediate return of the funds, and
advised EMC that, pursuant to section 362 of the Bankruptcy
Code, failure to return the funds constitutes a knowing
violation of the automatic stay. On or about June 7, 2001, in
response to the Second Advisory Letter, EMC's corporate
counsel sent AWI's counsel a letter advising that the situation
was under investigation

On or about June 20, 200 1, AWI's counsel received a telephone
call from Steven Sass, an employee of Dun & Bradstreet
Receivable Management Services, indicating that Dun & Bradstreet
was representing EMC in the matter herein and indicating that
EMC would attempt to resolve the matter with AWI. On or about
June 26, 2001, AWI's counsel received a letter from Steven Sass
referring to the telephone conversations with AWI's counsel
regarding the matter and asserting that the transaction between
EMC and AWI was a postpetition transaction.

After repeated telephone calls, the parties have not been able
to reach a consensual resolution of the matter, and, as of the
date hereof, EMC has not returned the Funds to AWI.

            Avoiding the Postpetition Payment as an
        Unauthorized Transfer of Property of AWI's Estate

The postpetition payment was a transfer of property of AWI's
estate which was made to EMC after the commencement of AWI's
chapter 11 case, and was made with respect to AWI's prepetition
obligation. The postpetition payment was not authorized under
the Bankruptcy Code or any order of the Court. Accordingly,
pursuant to the Bankruptcy Code, AWI is entitled to judgment
against EMC avoiding the postpetition payment and directing EMC
to pay to AWI the sum of $720,800.00, plus interest from and
after the date of the transfer of the postpetition payment to
EMC at a rate to be determined by Judge Farnan.

     Disallowing All of EMC's Claims Against AWI's Estate

EMC is the immediate transferee of transfers that are avoidable
under the Bankruptcy Code.  AWI has requested that EMC repay to
AWI the postpetition payment, and EMC has refused to do so. By
this Complaint, AWI requests that EMC repay to AWI the
postpetition payment.

To the extent that the transfer of the postpetition payment is
avoided under section 549 of the Bankruptcy Code, the Bankruptcy
Court should disallow any claims of EMC against AWI's estate
unless and until EMC has paid the amount for which EMC is found

           The Debtor Asks For Sanctions As a Result of
          EMC's Willful Violation of the Automatic Stay

EMC knew of the pendency of AWI's chapter 11 case at the time it
issued the Amended EMC Invoice. EMC issued the Amended EMC
Invoice in an effort to collect, assess, or recover a claim
against AWI that arose before the Commencement Date.

The funds constitute property of AWI's estate. After obtaining
possession of property of AWI's estate and having been advised
that the transfer of the Funds to EMC constituted an
unauthorized and avoidable transfer of property of AWI's estate,
EMC refused to return the funds to AWI. EMC willfully exercised,
and continues to willfully exercise, control over property of
AWI's estate.

EMC's actions in issuing the Amended EMC Invoice and refusing to
return the Funds to AWI constitute willful and knowing
violations of the automatic stay imposed by the Bankruptcy Code.  
Accordingly, AWI is entitled to an award of sanctions,
including, without limitation, the fees and expenses incurred in
connection with this action, against EMC in an amount to be
determined by the Court.

                  The Debtor "Demands" Relief

AWI demands judgment against EMC (i) determining that the
transfer of the Postpetition Payment is voidable under section
549(a) of the Bankruptcy Code, (ii) directing EMC, pursuant to
section 550(a) of the Bankruptcy Code, to pay the Postpetition
Payment to AWI, with interest from and after the date of the
transfer of the Postpetition Payment to EMC at a rate to be
determined by the Court, (iii) disallowing all of EMC's claims
against AWI unless EMC pays to AWI the amount for which EMC is
found liable, (iv) assessing sanctions against EMC for its
willful and knowing violations of the automatic stay, including,
without limitation, directing EMC to pay to AWI the fees and
expenses incurred by AWI in connection with this action.
(Armstrong Bankruptcy News, Issue No. 12; Bankruptcy Creditors'
Service, Inc., 609/392-0900)   

BETHLEHEM STEEL: Final DIP Financing Hearing Set for November 5
Bethlehem Steel Corporation needs a new source of working
capital financing to operate their businesses in chapter 11.  
Without access to new financing, a successful reorganization
will be impossible. Because the Debtors' existing cash on hand
may not be sufficient to fund the completion of their
restructuring process, the Debtors concluded that obtaining a
firm commitment for post-petition financing at the outset of
these cases was necessary and in the best interest of their

Prior to the Petition Date, Bethlehem Steel Corporation obtained
day-to-day working capital from a $340,000,000 receivables sale
and purchase facility among Bethlehem Steel Funding, LLC, a
wholly-owned special purpose non-debtor Bethlehem subsidiary,
Bethlehem, as servicer, Morgan Guaranty Trust Company of New
York, as administrative, structural and collateral agent, and
several financial institutions.  

Under this securitization facility, BSC sells substantially all
of its accounts receivable to Funding each day in exchange for
cash and a subordinated promissory note.  Funding, in turn,
sells an undivided percentage interest in the purchased accounts
receivable to the financial institutions in exchange for cash
payments to Funding, and pledges its retained interest in such
receivables to secure letters of credit issued at Funding's
direction.  At the Petition Date, Funding owns approximately
$300,000,000 of accounts receivable at face and the financial
institutions are owed roughly $212,000,000 plus $50,000,000 on
account of Letters of Credit.

The Debtors propose to borrow new money to cash-out the
Receivables Securitization Facility Lenders and terminate that

Additionally, Bethlehem urgently requires working capital to
continue its operations. The uncertainty concerning BSC's
financial condition has curtailed the BSC Group's availability
of trade credit and acceptable credit terms and limits. A steady
and continual stream of raw materials used to produce steel mill
products is essential to the maintenance and enhancement of the
BSC Group's businesses. Additionally, the BSC Group needs
processors, warehousers and shippers to finish, store and
distribute its products. The potential loss of sales to the BSC
Group's customers would be devastating to it at this critical
juncture. The inability of the BSC Group to obtain sufficient
raw materials or to process and distribute steel mill products
to its customers may result in a permanent and irreplaceable
loss of business to the detriment of the Debtors and all parties
in interest.

Prior to the Petition Date, Jeffrey L. Tanenbaum, Esq., at Weil,
Gotshal & Manges, in New York, tells the Court, the Debtors
surveyed various sources of post-petition financing.  
Ultimately, the Debtors concluded that a debtor-in-possession
financing facility offered by General Electric Capital
Corporation, as the administrative agent for itself and a
syndicate of financial institutions to be arranged by GE
Capital, presented the best option for the preservation of
value.  According to Mr. Tanenbaum, the Debtors came to this
conclusion because GE Capital (i) offered the best post-petition
financing proposal and (ii) has an extensive knowledge, as an
Inventory Lender and Liquidity Provider, of the Bethlehem Steel
Corporation Group.

After engaging in extensive good faith, arm's-length
negotiations with GE Capital, the Debtors accepted GE Capital's
proposal for post-petition financing pursuant to the terms and
conditions set forth in the Revolving Credit and Guarantee
Agreement dated as of October 15, 2001.

                        *     *     *

Finding that the Debtors make their case and need an immediate
source of working capital financing, Judge Lifland authorizes
the Debtors, on an interim basis, pending a Final DIP Financing
Hearing, to obtain letters of credit under the provisions of the
Credit Agreement up to an aggregate of $400,000,000.  At any
time during the term of the Interim Financing, the Debtors are
also authorized to exchange newly issued replacement or "back to
back" letters of credit acceptable to the Funding Agent for cash
delivered by Bethlehem to Funding on the Petition Date to secure
payment of Funding's reimbursement obligations in respect of
undrawn letters of credit.

Judge Lifland will convene the Final DIP Financing Hearing on
the Debtors' motion at 10:00 a.m. on November 5, 2001.  Any
objections to the DIP Financing pact must be filed with the
Court no later than October 31 and served on:

  (i) Attorneys for the Debtors:

      Weil, Gotshal & Manges LLP
      767 Fifth Avenue, New York, New York
      Attn: Jeffrey L. Tanenbaum, Esq. and George A. Davis, Esq.

(ii) Attorneys for General Electric Capital Corporation,
      as Agent under the Credit Agreement:

        Sidley Austin Brown & Wood
        46th Floor, 10 S. Dearborn Street
        Chicago, Illinois 60603
        Attn: Larry J. Nyhan

(iii) Attorneys for Morgan Guaranty Trust Company of New York,
      as administrative agent under the Existing Credit
      Agreement and J.P. Morgan Delaware, as structuring and
      collateral agent under the Existing Credit Agreement:

        Davis Polk & Wardwell
        450 Lexington Avenue
        New York, New York 10017
        Attn: John Fouhey, Esq. and Laureen Bedell, Esq.; and

  (v) the Office of the United States Trustee for the Southern
      District of New York, 33 Whitehall Street, 21st Floor, New
      York, New York 10004. (Bethlehem Bankruptcy News, Issue
      No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)

BLOUNT: S&P Raises Concern About Aggressive Financial Profile
Standard & Poor's placed its ratings on Blount Inc. on
CreditWatch with negative implications, affecting about $855
million in debt and bank credit facilities.

The CreditWatch listing follows the company's announcement that
Blount has signed a letter of intent to sell its Sporting
Equipment Group to Alliant Techsystems Inc. for about $250
million in Alliant common stock. Although exact details of the
transaction are subject to negotiation of a definitive
agreement and necessary governmental approvals, Blount may be
able to monetize the proceeds to help reduce its current onerous
debt burden.

Nevertheless, even if the company is able to reduce debt through
application of potential proceeds, Blount's financial profile
will remain very aggressive. As of June 30, 2001, Blount had
total debt of about $855 million and EBITDA of about $119
million on a last 12-month basis. Although, Blount's balance
sheet is expected to improve due to the transaction, the
company's cash flow is expected to be negatively impacted
because the Sporting Equipment Group accounts for about a third
of the company's EBITDA.

Weak economic conditions and soft outdoor products and forestry
equipment markets continue to negatively affect Blount. In
addition, the company's ammunition business continued to be
impacted by distributor inventory adjustments during the first
six months of 2001. Management has taken actions to address
current market conditions by closing facilities, reducing
capital spending, and eliminating excess overhead. However,
credit protection measures remain stretched, with total debt to
EBITDA of about 7.1 times and interest coverage of about 1.2x as
of June 30, 2001.

Standard & Poor's will continue to monitor the progress of this
potential transaction and management's plan to improve operating
performance. Following the signing of a definitive agreement
between the two companies, Blount's business, operating,
financial, and debt reduction plans will be assessed to
determine the effect on the ratings. If it appears that Blount's
financial profile will not materially improve or that credit
measures will remain below previously expected levels for an
extended period, the ratings will be lowered.

               Ratings Placed On Creditwatch Negative

     Blount Inc.

          Corporate credit rating         B
          Bank loan rating                B
          Senior secured rating           B-
          Subordinated rating             CCC+

COMDISCO: Court Okays Employee Stock Purchase Plan Suspension
The 1998 Employee Stock Purchase Plan, sponsored by the Debtors,
gave eligible employees the chance to buy Comdisco Inc. common
stock at a discount through participation in a payroll deduction
based employee stock purchase plan.  Under the Plan, the funds
allocated to a participant's account through payroll deductions
are at all time property of such respective employee.

George N. Panagakis, Esq., at Skadden, Arps, Slate, Meagher &
Flom, in Chicago, reports that as of September 30, 2001,
approximately 88 employees were enrolled in the Plan, and a
total of around $59,000 had been withheld from those
participants' salaries.  Mr. Panagakis adds that approximately
$9,600 of this amount were payroll deductions processed prior to
the Petition Date.

The Debtors are convinced that suspending the Plan would save
thousands of dollars annually in administrative expenses, in
commissions levied in connection with the Debtors' purchase of
stock on behalf of the participants, and in subsidies provided
by the Debtors in order to provide discounts on stock to the
participants.  Furthermore, Mr. Panagakis tells Judge Barliant,
few employees are interested in continuing to participate in the
Plan because of these chapter 11 cases.  Finally, the Debtors
believe that returning the employee contributions will boost the
morale of the Debtors' workforce and demonstrate the Debtors'
solid commitment to their employees.  Mr. Panagakis notes that
this in turn may lead to increased motivation and commitment on
the part of the Debtors' employees.

Consequently, Mr. Panagakis advises the Court, the Debtors'
board of directors voted unanimously to suspend the Plan
effective June 30, 2001.

According to Mr. Panagakis, it is the Debtors' position that
suspending the Plan is within the ordinary course of business
and therefore does not require court approval.  However, out of
an abundance of caution, the Debtors are seeking Judge
Barliant's ratification of the Board's action.  Moreover,
because $9,600 of the contributions to the Plan were made prior
to the Petition Date, the Debtors also seek authority to
reimburse the amounts contributed by the participants.

The Court finds that the Debtors' requested relief is a
reasonable and valid exercise of the Debtors' business judgment.
Thus, Judge Barliant ratifies and approves the Debtors' action
suspending the Plan.  Judge Barliant also authorizes the Debtors
to reimburse the participants with their respective portions of
the employee contributions. (Comdisco Bankruptcy News, Issue No.
13; Bankruptcy Creditors' Service, Inc., 609/392-0900)    

CONTINENTAL AIRLINES: Q3 Passenger Revenue Down by 14.9%
Continental Airlines (NYSE: CAL) reported third quarter net
income of $3 million.  Net income includes a grant of $243
million ($154 million after tax) pursuant to the Air
Transportation Safety and System Stabilization Act (the
Stabilization Act), and $85 million ($54 million after tax) in
severance and other special charges.  Continental would have
reported a third quarter net loss of $97 million excluding the
Stabilization Act grant and special charges, which compares
favorably to the First Call estimate of $2.25 loss per share.

"Like the American people, Continental is showing incredible
resilience in the face of adversity," said Gordon Bethune,
Continental Airlines' chairman and chief executive officer.  
"Thanks to the dedication and professionalism of our employees,
we are returning to normal operations at an accelerated pace."

Third quarter passenger revenue was $2.1 billion, down 14.9
percent from the same period last year.  Capacity was down 1.6
percent while revenue passenger miles were down 6.5 percent,
resulting in a decrease in load factor of 3.8 points to 73.7
percent.  These declines are largely attributable to the
terrorist attacks of September 11 and the drop in business
traffic experienced throughout the third quarter.

                    Load Factor Recovering

Since the attacks on September 11, Continental has seen load
factors partially recover.  For the first two weeks of October,
Continental reported a domestic load factor of 71.3 percent and
a systemwide load factor of 65.6 percent, which are 18.8 and
13.2 points, respectively, above the load factors reported for
the last two weeks of September 2001.  Comparatively, the
domestic load factor is 1.3 points above, and the systemwide
load factor is 5.2 points below, the same two-week period last
year, on 17 percent less capacity.

                     Yield Remains Weak

Yield during the third quarter declined 10.2 percent, which
together with the third quarter load factor decrease resulted in
revenue per available seat mile (RASM) of 9.33 cents, a 14.3
percent decline compared to the third quarter of 2000.  The
yield decline was principally responsible for the 10.9 point
increase in the company's breakeven passenger load factor for
the third quarter, to 78.3 percent (excluding the Stabilization
Act grant and special charges).

                  RASM Continues to Recover

The company's systemwide RASM deteriorated significantly
following the terrorist attacks, although systemwide RASM
continues to recover from its lows during September.  The
company's systemwide RASM for the period between September 11
and September 30, 2001 was approximately 35 percent lower than
systemwide RASM for the comparable period in 2000, and
systemwide RASM for the period between October 1 and October 14,
2001 was approximately 25 percent lower than systemwide RASM for
the comparable period in 2000.  Load factor and yield on certain
routes, such as the transpacific and transatlantic routes, have
been more adversely affected than load factor and yield on U.S.
domestic or other routes.  The reduced systemwide RASM is the
result of lower load factors following the terrorist attacks, a
worsening of the general economic slowdown that had already been
affecting the company's business prior to the attacks, corporate
travel restrictions imposed by a number of companies in the wake
of the September 11, 2001 attacks, and various fare sales
designed to encourage passengers to travel after the attacks.

        Continental Express Continues Strong Performance

ExpressJet Airlines, a wholly owned subsidiary of Continental
Airlines which does business as Continental Express, grew its
capacity by 10.3 percent during the quarter as compared to the
third quarter of 2000. Continental Express' revenue passenger
miles were up 10.4 percent resulting in an increase in load
factor to 62.9 percent for the third quarter.

                Third Quarter Operating Performance

Continental's third quarter operating performance was good.  
Excluding cancellations due to the attacks and the company's
schedule reduction, the on-time arrival rate for the third
quarter was 81 percent and the completion factor was 99.3

"Continental has been able to work through this challenging time
thanks to the loyalty of our customers and extraordinary efforts
of all of our employees," said Larry Kellner, president of
Continental Airlines. "We're optimistic about our future

Continental continues to work closely with the FAA on a variety
of enhanced security measures both onboard the aircraft and at
the airports. The company was one of the first carriers to
complete installation of secondary cockpit door restraints,
similar to a crossbar or deadbolt, on all of its aircraft, and
is cooperating with federal authorities to place armed federal
air marshals on its flights.  Continental has added multiple
security checkpoint positions in each of its hub cities of
Houston, Cleveland and Newark, and a greater number of customer
bags are electronically or physically searched.  The company's
customers and service suppliers are also subject to additional
random searches and identification checks beyond the security
check points.

Since September 11, Continental has initiated several programs
to encourage customers back to the skies.  The company has
offered various fare sales, including reduced fares for business
travel on most U.S. routes.  The company is also offering double
miles to OnePass frequent flyer members traveling on Continental
between October 2 and November 15, and is allowing members to
apply these miles toward 2002 Elite status.  Continental has
maintained meal service on its flights, and is offering free
inflight video and audio programming to its customers.

Continental also expects to avoid approximately 3,500 of the
12,000 positions eliminated, due to the continued success of the
company's voluntary employee leave and early retirement

Continental continued to receive high praise for outstanding
customer service throughout the third quarter.  Conde Nast
Traveler rated Continental Airlines' premium BusinessFirst
service on transatlantic and pacific routes as the best among
U.S. carriers, and also ranked its first-class service on
domestic routes higher than the top-10 major carriers in its
2001 Business Travel Awards.  In addition, Continental Airlines
received the highest rating for innovative use of information
technology among all airlines, ranking No. 2 out of 500
companies according to CMP Media's prestigious InformationWeek
500 list.

                Third Quarter Financial Results

Continental's cost per available seat mile (CASM) in the third
quarter, excluding the Stabilization Act grant and special
charges, was 2.5 percent lower (2 percent lower holding fuel
rate constant) than the same period last year.  The company has
significantly reduced capacity since the September 11 attacks
and has taken aggressive action to reduce costs in connection
with the capacity reduction and decreased demand and yields.  
However, Continental has not been able to reduce costs as
quickly as it is able to reduce capacity because many of the
company's costs are fixed over the intermediate to longer term.  
Continental expects CASM in the fourth quarter to be 2 to 3
percent higher (6 to 7 percent higher holding fuel rate
constant) as compared to the fourth quarter 2000.

               Continental Ended the Third Quarter
           with $1.2 Billion Cash and Retains in Excess
               of $1 Billion in Unencumbered Assets

Continental ended the third quarter with cash of $1.2 billion.  
Since September 11, 2001, the company and the airline industry
have not generated positive cash flow from operations, although
recently improved traffic has significantly reduced the average
daily negative cash flow from operations. The company's cash
flow from operations remains negative at approximately $4
to $5 million per day down from a high of approximately $30
million per day in the days immediately following the attacks.  
Continental and its subsidiaries anticipate receiving additional
grants under the Stabilization Act of approximately $215
million.  In addition, the company will explore the availability
of financing for its liquidity needs in the private capital
markets, and the Stabilization Act also provides for loan
guarantees. Continental had unencumbered assets with a book
value in excess of $1 billion on September 30, 2001, which could
be pledged in connection with future financings.

During the third quarter, the company took delivery of one
Boeing 767-400ER, one Boeing 767-200ER, five Boeing 737-900s,
and seven Boeing 737-800 aircraft.  ExpressJet took delivery of
nine Embraer regional jets in the third quarter.  As of October
15, 2001, the company had taken a total of 64 jet aircraft out
of service, of which 49 were removed from service during the
third quarter.  Taking into account the new deliveries and the
aircraft taken out of service, the average age of the company's
jet fleet has been reduced to 6.6 years, the youngest in the
industry.  Continental is in discussions with Boeing concerning
the deferral of some of its firm order aircraft, which are
scheduled to be delivered between 2002 and 2005.

Continental Airlines is the fifth largest airline in the U.S.,
offering more than 1,900 departures daily to 122 domestic and 89
international destinations.  Operating hubs in Newark, Houston,
Cleveland and Guam, Continental serves more international cities
than any other U.S. carrier, including extensive service
throughout the Americas, Europe and Asia.

Continental was named the 2001 Airline of the Year by Air
Transport World, as well as the 1996 Airline of the Year, making
it the only carrier to receive this honor twice in five years.  
Continental is in the top quarter of Fortune magazine's "100
Best Companies to Work for in America," and is ranked the
nation's No. 1 airline in customer satisfaction for long and
short-haul flights by Frequent Flyer Magazine and J.D. Power and
Associates. Continental has received numerous awards for its
BusinessFirst premium cabin (Conde Nast Traveler, OAG,
Entrepreneur and SmartMoney magazines), OnePass frequent flyer
program (InsideFlyer's Freddie Awards) and overall operations
and management (Fortune magazine).

CORECOMM LIMITED: Inks Deal to Retire $146MM of 6% Conv. Notes
CoreComm Limited (Nasdaq: COMM), announced that it has signed
binding agreements for transactions that would allow the Company
to retire approximately $146 million, or 88%, of its $164.75
million outstanding 6% Convertible Subordinated Notes.

Under the terms of the binding agreements, if CoreComm
determines to close the transactions, CoreComm will pay each
holder that has signed the agreement a cash payment equal to the
October 1, 2001 interest payment due to such holder, plus an
agreed percentage of equity in CoreComm, in exchange for
retiring their Notes. The agreements terminate on December 15,
2001 if CoreComm has not determined to close the transactions by
that time.

If the agreements terminate, each holder that has signed the
agreement will receive 50% of the October 1, 2001 interest
payment due to such holder. The agreements include a temporary
waiver of interest currently due under the Notes, as well as an
agreement not to take any action with respect to the Notes.
Substantially all of the holders that the Company was able to
contact have signed the agreements.

CoreComm announced that these agreements are part of a larger
program to recapitalize a significant portion of its other debt.
CoreComm's decision whether to close the transactions on the
Notes will be based, in part, on agreements reached with respect
to CoreComm's other debt.

Thomas Gravina, Chief Operating Officer, stated: "Over the last
several months, we have engaged in a significant effort to
improve the overall operations and profitability of the Company.
The success of these initiatives has been shown in the rapid
improvement in the Company's financial results so far this year.
We expect this progress to continue during the remainder of the
year and going forward.

"Now that the Company has begun to demonstrate more clearly the
success of its business plan, it is the appropriate time to
initiate a program to reduce the Company's overall level of
debt. The agreements signed with holders of the Convertible
Notes represent the first step in this process, and negotiations
with other debt holders have already commenced.

"In addition, the Company has benefited from the current
interest rate environment and recently locked in a rate of 6.84%
on its Bank Facilities for a six month period."

The Company also announced that it would be releasing its third
quarter results on or about November 14, 2001.

CRAZY SHIRTS: Big Dog Declines to Match Bid for Assets
Big Dog Holdings Inc. (Nasdaq:BDOG) --  
a developer, marketer and retailer of branded, lifestyle
consumer products, reported the financial results for the third
quarter ended Sept. 30, 2001.

On Sept. 10, the company announced its agreement to buy Crazy
Shirts Inc., a Honolulu-based retailer of T-shirts and casual
sportswear currently operating in bankruptcy. However, with
Crazy Shirts' focus on Hawaii and other tourist destinations,
its store chain was severely negatively impacted by the
subsequent September 11 tragedy, as the drop-off in air travel
to Hawaii and tourism in general caused already declining
company sales to further fall.

Accordingly, Big Dogs withdrew its original offer but continued
to pursue the purchase through negotiation to reduce the
purchase price. However, in a recently concluded bankruptcy
court hearing and resulting auction, another company overbid Big
Dogs and ultimately paid more for Crazy Shirts than the
approximately $9.2 million price that Big Dogs had agreed to pay
before the events of September 11. Big Dogs did not believe the
investment in Crazy Shirts prudent at that level and declined to
match the bid.

Commented Feshbach: "We simply did not see the value at the
levels the bidding eventually reached for a company that was
already in bankruptcy and under tremendous pressure as a result
of the events of September 11th. The sharp drop in tourism made
the requirements for turning around Crazy Shirts' business that
more expensive and risky.

"We believe there are a number of more promising acquisition
opportunities in the current market on which we can spend our
resources, and we will continue to explore them in order to
increase growth and profitability."

Big Dogs also announced that it was successful in recently
closing a new three-year, $30 million credit facility with Wells
Fargo Retail Finance. This new facility was put in place to help
finance the Crazy Shirts acquisition and will provide greater
borrowing flexibility to the company and makes it better
positioned to capitalize on new growth opportunities.

Big Dog Holdings Inc. develops, markets and retails a branded,
lifestyle collection of unique, high-quality, popular-priced
consumer products, including activewear, casual sportswear,
accessories and gifts. The BIG DOGS brand image is one of
quality, fun and a sense of humor. The BIG DOGS brand is
designed to appeal to people of all ages and demographics,
particularly baby boomers and their kids, big and tall
customers, and pet owners.

The company is in the process of extending its brand equity
through selective licensing, cross promotions and the building
of an Internet enterprise for its market. In addition to its 201
retail stores, Big Dogs markets its products through its
catalog, better wholesale accounts and Internet sales.

DELTA AIR: Voluntary Recovery Programs Cut Involuntary Furloughs
Delta Air Lines' (NYSE: DAL) Chairman and Chief Executive
Officer Leo Mullin announced results of the company's recent
efforts to reduce employee headcount by 13,000.

Eleven thousand Delta employees have selected one of Delta's
voluntary recovery programs, which includes leaves of absence,
severance and a special early retirement package.  Two thousand
employees will be impacted by involuntary programs.  That number
includes 1,700 pilots, whose job reductions are governed by a
collective bargaining agreement.

Based on the 13,000 job cuts originally announced, Delta
employees selecting voluntary programs represented 85 percent of
that goal, minimizing the impact of involuntary furloughs.  
Recovery plans were put in place after the events of September
11 resulted in unprecedented reductions in passenger demand in
the aviation industry.  Delta earlier announced systemwide
capacity reductions, cutting scheduled operations by
approximately 16 percent, to be effective November 1.

In a memo to Delta employees, Mullin said, "This response
exceeds our most optimistic expectations. In the face of the
most serious crisis the airline industry has ever faced, Delta
launched a companywide recovery plan just over a month ago. This
plan was designed to stem our losses and better prepare Delta
for the industry's most challenging crisis to date."

"While any job reduction process is difficult," Mullin said,
"the positive news today is that the collective pain of these
reductions at Delta will be far below what had been expected.
Yet the path ahead for Delta Air Lines remains demanding as we
work to win back the confidence of our customers while making
the right decisions about the future of our airline."

EQUALNET COMMUNICATIONS: UST Moves for Chapter 7 Conversion
The U.S. Trustee acting in Equalnet Communications Corp.'s
chapter 11 case is asking a bankruptcy court to convert the
proceeding to a chapter 7 liquidation, according to Dow Jones

In a motion filed yesterday with the U.S. Bankruptcy Court in
Houston, the trustee requested an order to convert the case
because of Equalnet's failure to file a reorganization plan and
disclosure statement. The filing argued that an unreasonable
delay in the case has been prejudicial to creditors.

The trustee also asserted that the long-distance telephone
company hasn't requested an extension of the time in which it
could file a plan. A plan and disclosure statement were due to
be filed on December 7, 2000. A hearing on the proposed
conversion will only be scheduled if any entities file written
responses or objections to the motion by November 5.

Separately, the unsecured creditors' trust of Equalnet has
agreed to extend the company's use of the trust's cash
collateral through November 30. Equalnet received bankruptcy
court approval in May to use the trust's cash collateral.
Houston-based Equalnet Communications filed for chapter 11
bankruptcy protection on August 9, listing assets of $20.2
million and debts of $22.6 million. (ABI World, October 31,

EXODUS COMMS: Seeks Court Approval of Postpetition DIP Facility
Exodus Communications, Inc. requires a source of financing in
order to address cash-flow needs and to reassure their vendors,
customers, employees, and other constituents of their liquidity
and financial viability on a going-forward basis.  Without
access to new post-petition financing, the Debtors will have no
ability to borrow cash which may be needed in the future to pay
their operating expenses.  

Because of their current financial condition, and the
commencement of their Chapter 11 Cases, the Debtors can't obtain
post-petition financing on an unsecured basis.  While the
Debtors have so far enjoyed sufficient liquidity to fund their
business operations since the commencement of these cases, they
know they'll require availability of post-petition credit to
assure their vendors, customers and employees of the Debtors'
long-term viability and the availability of such credit as may
be required to fund the Debtors' operations and reorganization
cases in the future.

The Debtors have determined, in the exercise of their sound
business judgment, that they require a $200,000,000 post-
petition credit facility.  Following extensive negotiations with
General Electric Capital Corporation, the Debtors and GECC have
hammered-out the terms of a facility whereby GECC will provide
up to $200,000,000 of revolving, post-petition, senior secured
DIP financing.

Thus, the Debtors request:

  A. authorization to obtain post-petition secured financing and
     other financial accommodations, up to an aggregate
     principal amount not to exceed $200,000,000 on
     substantially the terms set forth in the Senior Secured,
     Super-priority Debtor-in-Possession Credit Agreement to be
     entered into among certain of the Debtors, General Electric
     Capital Corporation, and a syndicate of lenders; and such
     other ancillary documents related thereto and at any time
     executed in connection therewith;

  B. authorization to use the proceeds of the DIP Facility
     for the purposes set forth in the DIP Loan Documents
     including working capital and general corporate purposes,
     subject to the limitations set forth in the Order;

  C. authority to grant the DIP Lenders first priority senior
     security interests in substantially all of the Debtors'
     presently owned and after-acquired property, other than
     Chapter 5 causes of action and proceeds thereof, to secure
     the Debtors' obligations under the DIP Loan Documents, as
     set forth in greater detail in the Order and the DIP Loan
     Documents, subject only to prior perfected liens held by
     third parties, liens and encumbrances permitted in the DIP
     Loan Agreement, and the Carve-Out;

  D. a grant of super-priority claim status to the DIP Lenders
     senior to any and all administrative expenses of every
     kind other than the Carve-Out;

  E. modification of the automatic stay in certain respects in
     connection with the DIP Financing; and

  F. authority to implement any cash management practices
     required by the DIP Loan Agreement.

Exodus Chairman and Chief Executive Officer L. William Krause
makes three representations to GECC in connection with the DIP

      (A) revenues from June 30, 2001 through October 31, 2001,
          have fallen by approximately $260,000,000 from
          annualized norms;

      (B) projected October 2001 revenues are approximately
          $63,000,000 less than would have been expected; and

      (C) 22 IDCs are EBITDA positive, measured on a monthly and
          independent basis.

Mark S. Chehi, Esq., at Skadden Arps Slate Meagher & Flom LLP,
in Wilmington, Delaware informs the Court that prior to
executing the DIP Loan Agreement, the Debtors, together with
their financial advisors, Lazard Freres & Co. LLC, solicited
proposals for post-petition financing from potential lenders.
Although nine institutions and interested parties signed
confidentiality agreements, Mr. Chehi relates that the Debtors
received expressions of interest and/or proposals from only two
parties other than the DIP Lenders. The proposal from the Agent
on behalf of the DIP Lenders provided the most favorable terms
and was the only proposal that could be negotiated and finalized
quickly enough to meet the Debtors' cash needs. Mr. Chehi
submits that the terms of the proposed DIP Financing are the
best available terms offered to the Debtors and no other
financing proposals or expressions of interest by third parties
met the expedited timeframe required by the Debtors.

Mr. Chehi contends that the DIP Credit Facility should be
approved in all respects as the terms and provisions of the DIP
Loan Documents have been negotiated at arms' length and in good
faith. Additionally, the terms and provisions of the DIP Loan
Documents are fair and reasonable under the circumstances and
reflect the most favorable terms upon which the Debtors could
obtain needed post-petition financing. Mr. Chehi tells the Court
that the Debtors do not seek to prime the liens of any secured
creditor, and the DIP Loan Documents expressly provide that the
priority and validity of such liens are unaffected by the
approval of the DIP Credit Facility. The DIP Credit Facility
will enable the Debtors to:

      (1) avoid any disruption of the Debtors' operations that
          might be caused by lack of credit,

      (2) maintain the continuity of their operations, and

      (3) maximize the value of their business and properties.

In addition, the availability of credit under the proposed DIP
Credit Facility should instill confidence in customers and
vendors, and encourage them to continue to extend credit to the
Debtors that will lead to a successful reorganization as
contemplated by chapter 11 of the Bankruptcy Code.

Accordingly, the Debtors believe that approval of the proposed
DIP Credit Facility is in the best interests of their estates,
their creditors and all parties in interest, and that the Court
should therefore grant the Motion and authorize the Debtors to
enter into the DIP Loan Agreement and other DIP Loan

Jesse H. Austin, III, Esq., at Paul, Hastings, Janofsky & Walker
LLP, in Atlanta, Georgia, and Leslie A. Plaskon, Esq., in the
Firm's Stamford, Connecticut, offices represents GECC in the
Debtors' chapter 11 cases. (Exodus Bankruptcy News, Issue No. 4;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

FEDERAL-MOGUL: Wants Approval of Senior Management Contracts
Federal-Mogul Corporation is party to pre-petition employment
contracts with Chief Executive Officer Frank Macher and
President & Chief Operating Officer Charles McClure entered into
in January 2001. The hiring of Messrs. Macher and McClure by
Debtors represented the culmination of a comprehensive executive
search effort undertaken by its Board of Directors spanning over
three months duration and costing approximately $900,000. The
Debtors and these respective officers negotiated the agreements
at arms-length and the Boards of Directors, exercising its
business judgment, resolved to approve their terms and

In addition, the Debtors have recently agreed upon the terms and
conditions for the employment of Mr. Joseph P. Felicelli as
Senior Vice President of the Debtors' Worldwide Aftermarket
Operations. Mr. Felicelli was hired in contemplation of the
bankruptcy filing and his services on behalf of the Debtors are
scheduled to commence on October 8, 2001. The Debtors have
agreed with Mr. Felicelli that the Debtors will assume the pre-
petition employment contract, subject to Court approval, as a
pre-condition to the commencement of Mr. Felicelli's services.

In light of the comprehensive nature of such officers' services,
the Debtors files a motion requesting approval to assume these
employment agreements.

Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young & Jones,
P.C., in Wilmington, Delaware relates that each of the
employment agreements vests discretion in the Compensation
Committee of Debtors' Board of Directors to determine the
performance component of the particular officer's bonus
compensation going forward, and, in the case of Messrs. Macher
and McClure, adjustments in base salary.

Ms. Jones contends that there is a clear and compelling need to
provide assurance to the Debtors' senior management personnel
that all of their employment benefits will remain intact and be
honored during the bankruptcy case. With respect to Messrs.
Macher and McClure, who are the Debtors' CEO and President/COO,
respectively, are the two individuals recruited by the Debtors'
to undertake overall responsibility for the Debtors' day-to-day
operations, management policy and financial affairs. Similarly,
Mr. Felicelli was hired at significant cost to the Debtors and
will undertake responsibility for the Debtors' critical
aftermarket operations. Ms. Jones submits that the Debtors paid
substantial amounts of compensation to Messrs. Macher and
McClure upon execution of their employment agreements, the
benefit of which will be lost in the absence of their continued
employment. In addition, each of these individuals is highly
qualified, highly experienced in the automotive parts industry,
and well-positioned to lead the Debtors' reorganization efforts.

Given the importance of the key personnel to the Debtors'
operations and reorganization effort, Ms. Jones says that this
Court should approve the Key Employee Retention Plan. The
Debtors have determined that the costs associated with adoption
of the Employee Retention Plan, including the Stay Bonuses and
Performance Bonuses, are more than justified by the benefits
that are expected to be realized by maintaining morale and
discouraging resignations among the Debtors' few remaining
employees, as well as providing an incentive for them to assist
vigorously in the Debtors' efforts.

Ms. Jones contends that the proposed Employee Retention Plan
will enable the Debtors to retain the knowledge, experience and
loyalty of the employees who are crucial to the Debtors' chapter
11 efforts. If these employees were to leave their current jobs
at this early stage in Debtors' chapter 11 cases, Ms. Jones
believes that it is virtually assured that the Debtors would not
be able to attract replacement employees of comparable
experience and knowledge, or (Federal-Mogul Bankruptcy News,
Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900)

FRUIT OF THE LOOM: Berkshire to Buy Apparel Business for $835MM
Fruit of the Loom, Ltd. (OTC Bulletin Board: FTLAQ), Fruit of
the Loom, Inc. and Berkshire Hathaway Inc. (BRK.A, BRK.B)
announced that they and certain of their respective subsidiaries
have executed a definitive agreement for New FOL Inc., a
Berkshire subsidiary, to acquire substantially all of the
Company's basic apparel business operations at a purchase price
of $835 million in cash, subject to adjustments.  

The purchase price is subject to significant reduction for
certain liabilities as well as adjustment upward or downward
depending on working capital levels. New FOL will assume the
ordinary course post-petition liabilities and certain specified
pre-petition liabilities of the business.

Warren E. Buffett, Chairman of Berkshire Hathaway, said, "We've
agreed to buy Fruit of the Loom for two major reasons:  the
strength of the brand and the managerial talent of John

John B. Holland, Chief Operating Officer of Fruit of the Loom,
said, "Fruit is excited to become part of the Berkshire Hathaway
family of companies.  Berkshire's acquisition will complete the
Company's tremendous operational turnaround and pave the way for
emergence from Chapter 11."

The Company is currently operating as a debtor-in-possession
pursuant to its Chapter 11 bankruptcy filing currently pending
before the United States Bankruptcy Court for the District of

As contemplated by the Purchase Agreement, the Company will seek
approval of the Bankruptcy Court to conduct an auction whereby
higher and better offers to purchase the business may be
considered.  The closing under the Purchase Agreement will be
effectuated pursuant to an amendment to, and confirmation of,
the Company's Joint Plan of Reorganization and is subject to
completion of the auction, and other conditions set forth in the
Purchase Agreement.  The proceeds from the sale will be
distributed to creditors pursuant to the Company's plan of
reorganization and under the oversight and procedures of the
Bankruptcy Court.

The Company's decision to enter into the Purchase Agreement is
supported by the Unofficial Secured Bank Steering Committee, the
Steering Committee of the Informal Committee of Senior Secured
Noteholders, and the Official Committee of Unsecured Creditors
of the Company.

Fruit of the Loom and Berkshire presently expect the closing to
occur in the first quarter of 2002.

GENESIS HEALTH: J. Hayes Pushes for Appointment of Equity Panel
James J. Hayes again tells the Court that a Genesis Health
Ventures, Inc. equity shareholders committee should be

Mr. Hayes cites Paragraph 1102(a)(2) of the Bankruptcy Code
which provides for the appointment of an equity shareholders
committee and the attendant selection of counsel to ensure the
protection of shareholder property in proceedings where
creditors could unfairly benefit from reorganization plans that
eliminate the property ownership of the shareholders.

Mr. Hayes also draws the Court's attention to the Fifth
Amendment to the U.S. Constitution which provides that no person
can he deprived of life, liberty or property without due process
of law. In a bankruptcy, Mr. Hayes asserts, both the creditors
and shareholders have property interests and the Constitutional
amendments require that shareholders and creditors be provided
equal due process.

In the Genesis bankruptcy Mr. Hayes criticizes that,

      -- no equity shareholders committee was appointed nor were
shareholders notified that the Genesis reorganization was
proceeding without shareholder representation but shareholders
were notified only after debtors and creditors negotiated a
reorganization plan that eliminated shareholders' property
ownership, Mr. Hayes voices.

      -- the debtors estate paid for the costs of an Unsecured
Creditors Committee, including the fees of counsel for more than
a year to represent unsecured creditors in negotiations leading
to formulation of a reorganization plan but shareholders were
denied a committee of equity shareholders.

      -- the failure of the parties to appoint a shareholders
committee at the same time and with similar resources as the
Unsecured Creditors Committee denied shareholders the due
process required by the Constitution.

      -- the lack of shareholder representation allowed
fundamental flaws in the debtors valuation to go undetected.
Similar fundamental flaws in calculating creditor recoveries
create the situation where the Genesis Senior Creditors could
receive $100 million more than their claim. Such a windfall is
contrary to the Fair and Equitable provisions contained in
subsection 1129(b)(2) and illustrates how denial of
representation to one class could lead to the unjust enrichment
of another class.

      -- cases which do not provide the shareholders ownership
or other compensation in the reorganized company constitute a
taking. Here the shareholders of Genesis suffered a taking in
being required to give up all their equity in a profitable
enterprise that shows great promise for future growth and
prosperity without any compensation.

Mr. Hayes is well aware that valuation of the new Genesis stock
was a key issue at the August 28, 2001 Hearing.

All the valuations are flawed by the misapplication of standard
valuation techniques that caused a significant undervaluation of
the new Genesis stock price, Mr. Hayes alleges. In the view of
Mr. Hayes, the Becklean valuation is the most fundamentally
sound but it provides only a minimum valuation.

Without an equity committee, the shareholders did not have the
resources for the expense of a front line investment banking
firm which at least could have illuminated the problems in
valuing a unique company like Genesis, Mr. Hayes tells the .

Mr. Hayes notes that debtors argued the value of the new Genesis
would be the sum of Warherg's valuation of old Genesis and CSFWs
valuation of Multicare but Mr. Hayes believes this explanation
is certainly not how investors in the market would value the new
Genesis. "Investors - who would not even be aware of the  
separate cash flow streams of the old Genesis and Multicare -
would make their investment decisions on the cash flows and
prospects for the new Genesis," Mr. Hayes says, "The valuations
of Warberg and CSFB are not relevant to the problem of valuing
the new Genesis and should be disregarded."

"Genesis which combines a nursing home business with an
institutional pharmacy business is a truly unique company," Mr.
Hayes opines, "None of the experts identified a single
comparable company trading in the market that could he evaluated
to show what multiples investors would pay for the cash flows
from this unique combination of businesses." Mr. Hayes notes
that, Michael Walker, the founder and president of Genesis, has
long had the vision of creating a unique company to serve a new
industry, the eldercare industry and the interest of Genesis
management in purchasing the APS pharmacy business shows its
continuing focus on building a superior elder care company.

Mr. Hayes asserts that the valuation of unique and high
potential company like the new Genesis is by its nature a
speculative endeavor and best left to the multitude of investors
in the market. However, alternative valuations that erroneously
assume that the new Genesis is merely the sum of lowly valued
parts is clearly incorrect and substantially undervalues the new
Genesis, Mr. Hayes tells the Court. This undervaluation provides
a huge windfall io the Senior Lenders at the expense of the
Unsecured Creditors and Subordinated Debenture Holders who are
recovering but a small fraction of their claims and Common
Equity Holders whose property rights are being extinguished, Mr.
Hayes alleges.

Mr. Hayes tells the Court that fortunately, there are innovative
financial techniques that could solve this difficult valuation
problem. The Senior lenders, for example, could be required to
give options on their new Genesis stock with the strike price
set to provide them 100% of their claim plus a normal investment
increase, Mr. Hayes suggests.

Mr. Hayes expects that the alleged unfairness caused by the
undervaluation of Genesis will be a key issue in the appeal by
Chareles Grimes. It is therefore the appropriate time, Mr. Hayes
concludes, for the Court to order the appointment of a committee
of equity security holders so that the shareholders are at least
adequately represented in the appeal. (Genesis/Multicare
Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service,
Inc., 609/392-0900)   

HERCULES: Strategic Process to Merge or Liquidate Assets Ongoing
Hercules Incorporated (NYSE:HPC) reported a loss for the third
quarter ending September 30, 2001 of $71 million, compared to
earnings of $75 million for the same period in 2000. The recent
period results include a $45 million nonrecurring charge related
to the cost reduction program announced on June 28, 2001. The
2000 results include a nonrecurring net gain associated with the
sale of the Company's Food Gums business.

Earnings for the third quarter 2001, excluding the $45 million
restructuring charge noted above and other nonrecurring items
and with taxes computed at a statutory tax rate, were $2
million. This compares to third quarter 2000 earnings, excluding
nonrecurring items and with taxes computed at a statutory tax
rate, of $14 million.

The Company reported third quarter net sales of $637 million.
Excluding divested businesses, net sales declined 6% versus 3Q
2000 and were flat with the second quarter 2001.

Excluding divested businesses and nonrecurring items, the
Company reported recurring profit from operations of $71
million, 14% lower than the same period last year, but up 19%
from 2Q 2001.

Dr. William H. Joyce, Chairman and Chief Executive Officer,
said, "Although recent events have increased uncertainty in the
markets we serve, we have not seen a significant impact in our
businesses. Despite these uncertainties, we continue to drive
for improved performance through cost reduction and work process
redesign. We are committed to achieve $100 million in annual,
recurring cost savings by the end of the second quarter 2002. It
is our intention to continue this program beyond the second
quarter 2002."

Dr. Joyce added, "While this program will drive better
performance at Hercules for customers and shareholders, it is
not without pain to employees. Despite the pain, our employees
have made good progress. At the end of the third quarter 2001,
we reduced our fixed cost structure by approximately $35 million
on an annual, recurring run rate basis. We expect to be at $60
million of annual run rate savings by the end of 2001."

The cost reduction program is being implemented while the
Company's strategic process to merge or sell the Company or its
businesses continues.

Interest and debt expense and preferred security distributions
were $61 million, a $6 million decrease from the second quarter
2001, as a result of divestiture proceeds reducing total debt.
The Company was in compliance with its debt covenants on
September 30, 2001.

Capital spending in the third quarter 2001 was $13 million.
Year-to-date 2001 capital spending was $56 million.

                    Segment Results

In the Process Chemicals Segment (Pulp and Paper, BetzDearborn),
net sales in the third quarter were down 6% while profit from
operations increased 7% versus the same quarter 2000. Net sales
increased 1% and profit from operations increased 20% versus the
second quarter 2001.

Net sales and profit from operations in the Pulp and Paper
Division declined in the third quarter compared to the same
period last year reflecting weak overall global demand in the
paper industry. Compared to the third quarter 2000, profit from
operations was largely impacted by lower volumes partially
offset by lower overhead costs. Net sales were flat and profit
from operations increased significantly compared to 2Q 2001.
Volumes declined 2% compared to the third quarter 2000.

Third quarter 2001 net sales in BetzDearborn declined slightly
compared to 3Q 2000 and increased slightly over 2Q 2001.
BetzDearborn reported profit from operations in the third
quarter that exceeded results from both the same quarter 2000
and the second quarter 2001. Profit from operations was flat in
3Q 2001 versus 3Q 2000 excluding a provision for bad debt taken
last year. Volumes increased 5% compared to the third quarter

In the Functional Products Segment (Aqualon), excluding divested
businesses, sales in the third quarter were down 5% and profit
from operations declined 10% compared to the same quarter 2000.
In the third quarter, net sales decreased 5% and profit from
operations decreased 11% compared to the second quarter 2001.
Compared to the third quarter last year, profit from operations
was largely impacted by unfavorable unit fixed cost absorption
due to lower production levels partially offset by lower
overhead costs. Volumes were down 2% compared to the third
quarter 2000.

In the Chemical Specialties Segment (FiberVisions, Rosins &
Terpenes), excluding divested businesses, net sales in the third
quarter declined 8% and profit from operations increased 133%
compared to the third quarter 2000. Third quarter net sales were
up 3% and profit from operations was flat compared with the
second quarter 2001.

Third quarter 2001 net sales in FiberVisions declined compared
to 3Q 2000 and 2Q 2001, driven, in part, by pass through to
customers of lower raw material costs. Profit from operations in
the third quarter increased versus 3Q 2000 and 2Q 2001, impacted
by lower raw material costs. Third quarter volumes were down 1%
versus the same quarter 2000.

Net sales and profit from operations in Rosins and Terpenes
declined versus the third quarter 2000 primarily driven by lower
volumes reflecting soft demand. Third quarter 2001 volumes were
down 14% compared with the third quarter 2000.

                       2002 Outlook

Dr. Joyce said, "The Company is currently developing its 2002
business plan, which will be complete in December. However,
substantial progress is already being made to improve and
streamline our work processes, lower costs and improve our
service and relationships with customers.

"If the current portfolio of businesses is maintained, and if
relatively stable market demand and margins are achieved, the
Company anticipates earnings before interest, taxes,
depreciation and amortization (EBITDA), excluding nonrecurring
items, to be over $550 million in 2002. Capital spending is
forecast to be approximately $60 million."

The Company will maintain its practice of not providing
quarterly earnings guidance.

Hercules manufactures and markets chemical specialties globally
for making a variety of products for home, office and industrial
markets. For more information, visit the Hercules website at

IBS INTERACTIVE: Crippen & RCF Disclose Holding In Merged Firm
On March 1, 2000, Mr. Roy E. Crippen III acquired beneficial
ownership of 399,369 shares of the common stock of IBS
Interactive as a result of a merger between Digital Fusion, Inc.
and IBS Interactive, together with 150,000 shares purchasable by
exercise of options granted to Crippen.

Immediately thereafter Mr. Crippen transferred the 399,369
shares of common stock to R.C.F. Company Limited Partnership in
exchange for partnership units. RCF is the managing general
partner of the Partnership, Roy E. Crippen III is the sole
limited partner of the Partnership and the director, officer,
and sole shareholder of RCF.  Mr. Crippen's total holdings
represent a 10.5% share in the total outstanding common stock of
IBS Interactive.  The shares attributed to RCF represtent 8.4%
of the outstanding common stock shares of the Company.

Mr. Crippen and RCF acquired beneficial ownership of an
additional 53,100 shares of common stock during November 2000,
an additional 47,600 shares of common stock during December
2000, an additional 74,700 shares of common stock during August
2001, and an additional 27,000 shares of common stock during
September 2001 as a result of purchases made by the Partnership
out of working capital. As of October 1, 2001, Mr. Crippen's
beneficial holdings include 150,000 purchasable shares, of which
103,125 are exercisable within 60 days.

Mr. Crippen acquired the shares for investment and transferred
399,369 shares of common stock to the Partnership solely for tax
planning purposes. The Partnership acquired an additional
202,400 shares for investment purposes.

As to Crippen: Mr. Crippen, as director, officer, and sole
shareholder of RCF, the general partner of the Partnership, has
the right to receive and direct the receipt of dividends from,
and proceeds from the sale of, the common stock. He also has the
right to receive proceeds from the sale of such securities as a
limited partner of the Partnership.

As to RCF: RCF, which is the general partner of the Partnership,
and is controlled by Roy E. Crippen III, has the right to
receive and to direct the receipt of dividends from, and
proceeds from the sale of, the common stock.

IVC INDUSTRIES: Inks Deal to Sell Outstanding Stock to Inverness
For the year ended July 31, 2001, IVC Industries, Inc. continued
to experience losses from its operations in the amount of
$5,909,000. These losses are attributable to an overall softness
in the market for herbal and nutritional products, resulting in
significantly reduced sales levels for the Company.

At April 30, 2001, the Company was not in compliance with the
minimum tangible net worth covenant contained in the Company's
loan and security agreement with Congress Financial Corporation,
a subsidiary of First Union Corporation. On June 13, 2001, the
Company entered into an amended loan and security agreement with

Under the amended agreement, Congress waived the event of
default existing as of April 30, 2001, and the rate of interest
was increased from rates ranging from the prime rate plus .75% -
1% to an amended rate of the prime rate plus 3%, increasing to
5% in the event of termination or non-renewal of the loan, or if
an event of default occurs. The amended agreement also provides
for a $500,000 permanent special reserve, an amendment fee of
$50,000, and requires the Company to maintain revised minimum
tangible net worth amounts.

IVC has been pursuing, among other initiatives; i) obtaining
alternative sources of financing, ii) seeking additional sales
opportunities within its core business, iii) seeking new sales
opportunities through non-traditional channels of distribution,
iv) reducing expenses to a level that would provide the Company
with sufficient cash flows to meet its obligations, v)
merger or sale of the Company, and/or vi) a combination of any
of the foregoing.

On September 21, 2001, the Company signed a non-binding letter
of intent with Inverness Medical Innovations, Inc. for
Innovations to acquire all of the outstanding stock of the
Company. As contemplated by the letter of intent, each
shareholder of the Company would receive from Innovations $2.50
cash for each share of the Company's common stock held by such
shareholder, except that certain of the Company's principal
shareholders will receive either cash, restricted shares of
common stock of Innovations or a combination thereof, valued at
$2.50 for each share of the Company's common stock held by such

Innovations is a majority-owned subsidiary of Inverness Medical
Technology, Inc. Inverness has agreed to be acquired by Johnson
& Johnson. As part of the pending acquisition by Johnson &
Johnson, Inverness plans to restructure its operations so that
its women's health, nutritional supplements and clinical
diagnostics businesses are held by Innovations. Innovations will
then be split-off from Inverness as a separate, publicly-owned
company based in Waltham, Massachusetts.

The acquisition of IVC Industries by Innovations is subject to a
number of conditions, including negotiation of a definitive
acquisition agreement, approval by Innovations' and the
Company's boards of directors, approval by the Company's
shareholders, modification of loan agreements with the Company's
principal lender, satisfactory due diligence, and completion of
the pending split-off of Innovations and merger of Inverness
with Johnson & Johnson. The letter of intent is non-binding, and
there can be no assurance that the Company will be able to reach
a definitive agreement with Innovations, or that even if it does
enter into a definitive agreement with Innovations, that
Innovations will complete the acquisition of the Company or that
it will acquire the Company on the terms described in the letter
of intent.

Four shareholders of the Company holding approximately 42% of
the Company's outstanding common stock have entered into voting
agreements with Innovations. The voting agreements require these
shareholders to vote all of the shares of the Company common
stock they own in favor of the acquisition of the Company by
Innovations and against any competing proposal. The voting
agreements expire on January 19, 2002 if the Company and
Innovations have not entered into a definitive acquisition
agreement by that date.

IVC indicates that if it cannot achieve any of the foregoing, it
may need to modify its business objectives or reduce or cease
certain or all of its operations.

INTEGRATED HEALTH: NationsBank Secures Adequate Protection
Debtor Magnolia Group, Inc. is indebted to Bank of America, N.A.
f/k/a NationsBank, N.A. and in arrears on two promissory notes
evidencing loans made by the Bank to Magnolia prior to the
Petition Date,

The First Note, evidencing a $700,000.00 loan made in 1993, is
secured by the Magnolia Mortgage which grants the Bank a lien on
and security interest in a parcel of land (the Magnolia

The Second Note, evidencing a $1,840,000.00 loan made in 1998,
is secured by two different mortgages between the Bank, as
mortgagee, and two other entities, as mortgagors: (i) the first
such mortgage is between the Bank, as mortgagee, and Debtor
Inman Nursing Facilities, Inc. as mortgagor (the Inman Mortgage)
which grants the Bank a lien on and security interest in a
parcel of land (the Inman Property) and (ii) the second such
mortgage between the Bank, as mortgagee, and C.W. Johnson
Intermediate Care Facility, Inc., as mortgagor, (the Johnson
Mortgage) which grants the Bank a lien on and security interest
in a parcel of land (the Johnson Property).

On April 11, 2001, the First Note matured and the remaining
balance on the First Note and the related Loan Documents became
due and owing in full.

As of July 11, 2001, Debtor Magnolia Group, Inc. was indebted to
the Bank:

    (1) on the First Note in the amount of $381,419.95,
        consisting of principal in the amount of $346,084.71,
        accrued and unpaid interest in the amount of $20,754.47,
        late fees and other charges in the amount of $14,580.77,
        plus legal fees and other fees and charges;

    (2) on the Second Note in the amount of $1,765,415.91,
        consisting of principal in the amount of $l,661,347.60,
        accrued and unpaid interest in the amount of $97,468.82,
        late fees and other charges in the amount of $6,599.49,
        plus legal lees and other fees and charges.

Also, as of July 11, 2001, the Debtors were in arrears on the
First Note in the amount of $381,419.95, plus legal fees and
other fees and charges, and in arrears on the Second Note in the
amount of $ 151,761.25, plus legal fees and other fees and
charges. The Past-Due indebtedness represents an aggregate of
$396,131.22 of principal and $137,049.98 in interest and other
fees under the Notes. The daily interest accrual due under the
Notes is $83.64 per day on the First Note and $392.26 per day on
the Second Note. The monthly interest, excluding other fees and
monthly principal payments, due under the Notes is approximately
$2,592.84 per month on the First Note and $12,160.06 per month
on the Second Note.

Based on these, the Bank filed a timely proof of claim in the
IHS bankruptcy cases and currently holds a secured claim against
Magno1ia in the principal amount of $2,146,835.86, plus legal
fees and other fees and charges due under the Notes, the
Mortgages, the UCC Filings made by the Bank, the Loan Documents
and any other related loan documents (the Magnolia
Indebtedness). In addition, the Bank holds a secured claim
against Inman in the amount of $1,765,415.91, plus legal fees
and other fees and charges due under the Notes, the Mortgages,
the UCC Filings, the Loan Documents and any other related loan
documents (the Inman Indebtedness).

The Secured Claim is now past-due and fully payable. The Secured
Claim of the Bank is properly perfected and secured by the
Bank's Collateral as evidenced by the Notes, the Mortgages, the
UCC Filings and the Loan Documents.

The Bank filed a Motion for relief from the Automatic Stay to
Foreclose on Collateral Securing Claim Or, in the Alternative,
for Order Compelling Debtors to Provide Adequate Protection. The
Debtors filed a Response to the Motion for the Automatic Stay
or, in the Alternative, for Adequate Protection.

The Bank and the Debtors desire to resolve the issues raised by
the Motion and Response and to provide the Bank with adequate
protection on account of its Secured Claim and security
interests in the Bank's Collateral.

Accordingly, the parties stipulate and agree, among other

(A) Debtors' Right to Use the Bank's Collateral:

  Pursuant to Section 363(e), the Debtors' right to use the
  Bank's Collateral is limited by and conditioned upon the terms
  and restrictions granting adequate protection to the Bank as
  set forth in the stipulation.

(B) Cure Payment:

  Within 5 business days of the entry of this Stipulated Order,
  the Debtors shall make a payment to the Bank in the amount of
  $182,126.17, plus $475.90 per day for each day after August 5,
  2001 that the payment is not made, which represents a payment
  of $30,000 of the Past-Due Principal (to be applied to the
  Notes at the Bank's discretion) and a payment of the entire
  Past-Due interest.

(C) Adequate Protection Payments:

  The Debtors shall make monthly adequate protection payments to
  the Bank on or before each 5th day of each month in the amount
  of $15,000.00 on account of the Notes, representing the
  interest payments at the non-default rate under the Notes.

(D) Adequate Protection of the Bank's Collateral:

  Any and all obligations of the Debtors arising under this
  Stipulation and Order or the Loan Documents, including without
  limitation the Secured Claim and other further obligations
  under the Loan Documents, shall be and are secured by properly
  perfected liens in any and all of the Bank's Collateral,
  whether now owed or hereafter acquired or proceeds thereof.
  The Bank may, but is neither required nor obligated to, file
  appropriate financing statements in the relevant jurisdictions
  and the Debtors shall cooperate with the Bank and execute all
  documents at the request of the Bank in connection with this,
  provided, however, the Bank's failure to file such financing
  statements shall not effect in any way the validity, priority
  and extent of its security interests as set forth in the

(E) Notice of Termination or Alteration of Operations:

  The Debtors shall provide to the Bank notice of any intended
  or unintended termination or alteration in the operations of
  the facilities and/or businesses currently located at any of
  the Properties (a Change in Direction). Notice of a Change in
  Direction shall be made to the Bank pursuant to this
  Stipulation and Order at least 30 days prior to any
  commencement, implementation or effectiveness of such Change
  in Direction (the Notice Period); provided, however, that the
  Debtors obligation to provide notice will not apply in
  circumstances where an involuntary Change in Direction occurs
  and, instead, upon the occurrence or notice of the probability
  of such an involuntary Change in Direction the Debtors shall
  immediately provide notice to the Bank pursuant to the
  provisions in the stipulation. No Change in Direction shall
  commence until after the termination of the Notice Period,
  unless otherwise ordered by the Court during the Notice Period
  and/or upon the occurrence of a Change in Direction, the
  parties consent to submit for hearing the Bank's Motion to the
  Court on an expedited basis to be scheduled as soon as the
  Court's calendar permits. (Integrated Health Bankruptcy News,
  Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-

INTERNET COMMERCE: Sells Assets to ICC Speed for $1.1M + Debts
Internet Commerce & Communications (ICCX) and ICC Speed Cell,
LLC announced that ICC Speed Cell has purchased the assets of
ICCX for $1.1 million plus assumed liabilities.  ICCX, which is
currently operating under protection of Chapter 11-bankruptcy
code, will use the proceeds to reduce its debt.

"The purchase by ICC Speed Cell reassures our customers that
they are being served by a company that is on solid footing, and
that our employees have the opportunity to remain in place to
serve them, under the leadership of a great management team,"
stated Douglas Hanson, Chairman and CEO of ICCX. Hanson also
announced that he is stepping down from the company in
conjunction with its purchase by ICC Speed Cell.

"ICCX's former management team, led by Doug Hanson, has done a
great job in responding to the marketplace and refocusing the
company on the SME (small and medium-sized enterprises) market,"
stated Ron Pitcock, President & CEO of ICC Speed Cell.  "Our
immediate mission will be to concentrate on strengthening the
core services we offer to our customers and providing them with
the best possible choice of partners to be entrusted with
providing their e-business services."

ICC Speed Cell, LLC is a unit of Texas-based Speed Cell
Communications, LLC, which delivers high speed Internet service
to commercial and residential customers primarily through fixed
wireless network technology.  The purchase of ICCX will also
enhance the connectivity and web services options available to
customers of Speed Cell.

"ICCX has a terrific suite of web development, web-hosting and
connectivity offerings.  More importantly, it has a great team
of talented and dedicated employees who have endured uncertain
times in order to take care of their customers.  We are looking
forward to working together with them to build a great future
for our customers and our company," Pitcock said.

Pitcock is a 27-year veteran in broadband communications,
including cable television, telephone and wireless
telecommunications platforms.  He founded and served as
President of Denver-based High Speed Access Corp.  He is also
co-founder of Speed Cell Communications, LLC and serves on the
board of Integra5, a voice messaging system that runs on
interactive television platforms.  "To be successful, it's
vitally important for a company to provide the communications
technology and the Internet tools that will best meet the
customer's needs in a simple, efficient, reliable and cost
effective way. [Wednes]day, we took a major step in creating a
company that will achieve that goal better than anyone else in
the marketplace," he said.

Internet Commerce & Communications (ICCX) was created through
the acquisition of Internet Communications Corporation, a
network management company, by Rocky Mountain Internet (RMI), in
November 2000.  RMI was a regional Internet services provider
that began operation in 1994, as Spectrum Online.  ICCX focuses
on fully integrated solutions for small and medium-sized
enterprises (SME's).  ICC Speed Cell will continue to specialize
in e-business applications, including high-speed Internet
connectivity using a variety of wire-line and wireless
technologies; web services, including development and hosting;
network services, such as Virtual Private Networks; and other
telecommunications services.  

KEYSTONE: Weighing Alternatives for Financial Restructuring
Keystone Consolidated Industries, Inc. (NYSE: KES) announced the
appointment by the board of directors of David L. Cheek as
president and chief operating officer of Keystone in addition to
his current duties as president of Keystone Steel and Wire, a
division of the Company.  

The board of directors also considered alternatives for
restructuring the Company's debt and equity interests and
authorized management, with the assistance of its advisors,
Gleacher & Company LLC, to pursue discussions with the creditors
of the Company to facilitate the development of a consensual
restructuring plan for the Company.

Keystone Consolidated Industries, Inc. is headquartered in
Dallas, Texas. The company is a leading manufacturer and
distributor of fencing and wire products, carbon steel rod,
industrial wire, nails and construction products for the
agricultural, industrial, construction, original equipment
markets and the retail consumer.  Keystone is traded on the New
York Stock Exchange under the symbol KES.

KING PHARMACEUTICALS: S&P Rates Proposed Convertible Issue at BB
Standard & Poor's assigned a double-'B' rating to King
Pharmaceuticals Inc.'s proposed $300 million unsecured
unsubordinated convertible debentures due November 15, 2021. The
convertible debentures will be guaranteed by King
Pharmaceuticals' domestic subsidiaries on an unsecured
unsubordinated basis.

The convertible debentures are to be issued under Rule 144a. At
the same time, Standard & Poor's affirmed its double-'B'-plus
corporate credit and senior secured debt ratings, as well as its
double-'B'-minus subordinated debt rating on King

The ratings on King Pharmaceuticals reflect the continued
success of company's lead product, the cardiovascular drug
Altace, as well as the company's increasing sales diversity,
growing financial flexibility, and improved financial profile,
offset by the risks inherent in a growth-by-acquisition business

Bristol, Tennessee-based King Pharmaceuticals continues to focus
on acquiring and increasing the sales of pharmaceuticals that
have been underpromoted by their prior owners. The company has
had particular success with Altace, an antihypertensive
treatment acquired in late 1998. As the company's lead product,
sales of Altace continue to benefit from the drug's unique
indication that it reduces the risk of stroke, heart attack, and
death from cardiovascular causes in high-risk patients over 55.
Altace sales also benefited from increased marketing support
from the company and a relaunch of the product in November 2000
by comarketing partner, American Home Products, while, at the
same time, patent expirations of several of its competitors have
caused rival companies to reduce promotion in the sector. Altace
is patented through 2008.

Although Altace still represents more than 30% of King
Pharmaceuticals' annual sales, acquisitions and the growth of
other acquired products have enabled the company to broaden its
product portfolio and lessen its dependence on Altace. Levoxyl,
a thryroid drug obtained from the company's acquisition of Jones
Pharmaceutical in 2000, has become a key sales contributor, as
it continues to take market share from the market leader,

The sales success of King's products has enabled the company to
aggressively repay debt incurred in the acquisition of Altace.
Indeed, the company has reduced debt by over $190 million in the
last 12 months and was able to fund its latest product
acquisition, four products from Bristol-Myers Squibb for $285
million, without incurring additional debt. Nevertheless, the
company will generally remain reliant on further acquisitions to
expand its product portfolio, given that it does not have a
significant internal research and development program.

                         Outlook: Stable

King Pharmaceuticals plans to continue to grow its sales force
and marketing infrastructure in order to support its broadening
portfolio. The company has considerable financial flexibility to
continue to pursue its product acquisition strategy at the
current ratings level.

MOSLER: Finalizes $28MM Sale Agreement with Diebold
Diebold, Incorporated (NYSE: DBD) announced it has finalized a
deal to purchase select properties and operations of Mosler,
Incorporated in the United States and Canada, including physical
and electronic security assets, currency processing equipment,
certain service and support activities, and related properties
of Mosler for approximately $28 million.

The agreement includes the purchase of all intellectual
property, the central monitoring station in Cedar Rapids, Iowa,
security product design and tooling, existing service inventory
and certain real estate with an expected net book value
approximating the purchase price.  When fully integrated these
assets could add up to $100 million per year to Diebold revenue.

Mosler, Incorporated was a leading integrator of physical and
electronic security systems, monitoring services, support and
maintenance, offering a comprehensive line of electronic and
physical security systems to secure physical premises, manage
access, monitor events and process currency.  Mosler tailored
its solutions to financial institutions, government facilities
and a wide range of commercial and industrial market segments.  
Company officials recently announced that Mosler would cease
operations and file for Chapter 11 bankruptcy.

Diebold, Incorporated is a global leader in providing integrated
self-service delivery systems and services.  Diebold employs
more than 12,000 associates with representation in more than 80
countries worldwide and headquarters in North Canton, Ohio, USA.  
Diebold reported revenue of $1.7 billion in 2000 and is publicly
traded on the New York Stock Exchange under the symbol 'DBD.'  
For more information, visit the company's Web site at

NOVO NETWORKS: Fails to Meet Nasdaq Listing Requirements
Novo Networks, Inc. (Nasdaq:NVNW) announced that it received a
Staff Determination from The Nasdaq Stock Market on October 24,
2001 indicating the Company's failure to comply with the
exchange's public interest and residual equity interest
requirements, as set forth under Marketplace Rules 4450(f) and
4330 (a)(3), and that its securities are therefore subject to
delisting from the Nasdaq National Market system on
November 1, 2001, unless the Company appeals the determination.

As previously disclosed, the Company has been in discussions
with Nasdaq regarding the continued listing of its securities
since July 30, 2001.

Yesterday the Company filed a notice of appeal and requested a
hearing before a Nasdaq Listing Qualifications Panel to review
the Staff Determination, which will temporarily stay delisting
of the Company's securities pending the Panel's decision, which
should occur within 45 days. There is no assurance the Panel
will grant the Company's request for continued listing. Should
the Company's securities cease to trade on Nasdaq, the Company
believes that an alternative trading venue will be available and
is investigating such alternatives.

PHOENIX RESTAURANT: Begins Reorganization Under Chapter 11
Phoenix Restaurant Group, Inc. (OTC Bulletin Board: PRGP)
reported that certain creditors in Florida had filed a petition
for involuntary bankruptcy under Chapter 7 of the U.S.
Bankruptcy Code against the Company.  In cooperation with those
creditors, the Company changed the venue of that case to the
U.S. Bankruptcy Court of the Middle District of Tennessee.  

In addition, the Company filed a petition on October 31, 2001
with the Court to convert the Chapter 7 filing to a voluntary
Chapter 11 reorganization along with a motion to include various
subsidiaries of the Company in the reorganization.  This filing
will allow the Company to operate its business and serve its
customers while it finalizes a plan of reorganization.  

The Company also noted it has executed a commitment letter for
debtor-in-possession financing for $3.5 million as part of the
plan of reorganization.

"The Company is pleased that it has arranged debtor-in-
possession (DIP) financing which will facilitate the
reorganization process," said President W. Craig Barber.  
"During this transition, we expect to conduct business as usual.  
We look forward to the support of our vendors, employees and
other stakeholders as we proceed."

Barber added,  "When Bob Langford, our Chairman and CEO, and I
joined the Company a year ago, we understood the challenges
faced by the Company, including significant issues with
leadership, operational execution and capital structure.  At
that time, the Company had losses in each of its last four
fiscal years and its current liabilities exceeded current assets
by over $80 million.  In addition, the Company's auditors had
questioned the Company's ability to continue as a going concern
in each of the last four fiscal years."

Barber continued, "During the last year, we have focused on
building strong leadership to provide the operational execution
necessary for our respective concepts to compete in their
markets.  As a result, the Company's Black-eyed Pea concept has
experienced a significant turnaround from the 12% decline in
comparable store sales for fiscal 2000.  Comparable store sales
in fiscal 2001 declined 11% in the first quarter, declined 5% in
the second quarter and increased .2% in the third quarter.  In
addition, the comparable store sales of the Company's Denny's
restaurants increased 2.9% in the third fiscal quarter of 2001."

"We believe this reorganization will not only help us continue
the progress we have made in strengthening leadership and
operational execution, but ultimately will provide the
opportunity to continue and enhance the positive momentum in our
restaurant operations.  We have confidence in our brands and
their strength.  We believe our restaurant operations have
outstanding prospects for the future, including growth in core

The Company stated that during the reorganization process,
employees will be paid in the usual manner and vendors will be
paid for post-petition purchases of goods and services in the
ordinary course of business.  Barber added, "We anticipate that
the vast majority of vendors will recognize the value of doing
business with us on a long-term basis."

Chairman and CEO Bob Langford added, "We are committed to
maintain the quality of the dining experience in our
restaurants.  Our dedicated employees will continue to provide
superior service in the delivery of our flavorful food as we
continue the enhancements to our brands that began last year."

The Company (formerly DenAmerica Corp.) is the owner and
operator of the Black-eyed Pea concept and one of the largest
franchisees of Denny's restaurants.  The Company currently owns
and operates 92 casual dining and family restaurants in 10
states.  The Company operates 48 Black-eyed Pea restaurants
primarily located in Texas.  The Company also operates 44
Denny's restaurants located primarily in Texas and Florida.  The
Company owns the Black-eyed Pea brand and operates the Denny's
restaurants under the terms of franchise agreements.

PHOTOCHANNEL INC: Files for Bankruptcy Under Chapter 7
PhotoChannel Networks Inc. (CDNX: PNI; OTC-BB: PHCHF), a global
digital imaging network company, announces that it's subsidiary,
PhotoChannel, Inc, has filed for Bankruptcy, under Chapter 7
with the United States Bankruptcy Court.

"Unfortunately, like many recent B2C ventures,
PhotoChannel, Inc. was unable to deliver sufficient revenues
from it's direct to consumer online photofinishing service",
stated Mr. Peter Scarth, CEO & Chairman of PhotoChannel Networks

PhotoChannel Networks Inc. has embarked on a new direction
through the networking of retailers in the photofinishing

"The retailer has always been key to the success of the photo
industry", stated Mr. Peter Fitzgerald, Director of PhotoChannel
Networks Inc. "Going direct to the consumer was a misjudgment
made by many companies during the recent mania.
PhotoChannel is aggressively moving in a direction that puts the
retailer's interests first - they know how to serve the consumer
best. The PhotoChannel Network will assist photo retailers in
creating new and exciting products for their customers."

PhotoChannel is a technology producer and integrated provider of
services enabling retailers and other members of the
PhotoChannel Network to meet the needs of their film and digital
photography customers.

The Company has created and manages the PhotoChannel Network
environment whose focus is delivering photo e-processing orders
from origination to fulfillment under the control of the
originating retailer. Additional information is available at

PLAUT AG: Narrow Revenue Stream Prompts S&P to Assign B Rating
Standard & Poor's assigned its single-'B' long-term corporate
credit rating to Austria-based Plaut AG. The outlook is stable.

The rating is supported by Plaut's niche position in the IT
service market, its long-term relationship with software
producer SAP AG, and its proportion of recurring revenues. The
rating is constrained by Plaut's narrow revenue stream, its low
profitability track record, and diversification challenges
in an increasingly competitive industry.

Plaut's revenues reached EUR300 million ($275) in 2000. The
company has generated very low margins in recent years, at a
time when the industry cycle was favorable. Furthermore, the
revenue streams are narrow, produced mainly through ERP
(Enterprise Resource Planning) projects within Europe. The
company will be challenged by recent initiatives to broaden its
service portfolio in areas such as E-business and strategy

Plaut is a minor player in a growing market where competition is
increasing. It faces larger companies such as Cap Gemini S.A.
(A-/Stable/--), International Business Machines Corp.
(A+/Stable/A-1), and Accenture, which all have critical mass and
a better geographical spread. Plaut has been operational for
more than 50 years and has a niche position in IT services and
consulting in Europe. Cooperating with SAP from 1982 onward
allowed Plaut to enter the emerging ERP market early on. The
rating finds some support from the recurring revenues base,
which accounts for about 10% of turnover.

Plaut generated low operating profitability in 2000. EBITDA
margins of about 4%, combined with high working capital needs,
have had a negative impact on cashflow generation. Funds from
operations (FFO) represented about 28% of lease-adjusted net
debt in 2000. In 2001, FFO to net debt is projected to reach
about 20%. Lease-adjusted EBITDA to net interest coverage
reached about 2.7 times in 2000. The company's financial
flexibility is limited, due to a strong drop in the share price,
low levels of cash in hand, and utilized bank lines. Plaut
intends to issue a bond in order to refinance bank loans that
are due in 2002.

                      Outlook Stable

The company's niche position in the ERP market in Europe
supports the rating, and expected cost-cutting measures, as well
as working capital control, provide additional room for comfort.
The current rating, however, does not allow for any further debt
increase or cash acquisition.

POLAROID CORP: Inks Deal to Sell ID Business to PIDS for $32MM
Under the terms of an Asset Purchase Agreement dated October 9,
2001, PIDS Holdings, Inc., agrees to buy substantially all of
the Assets used in operating Polaroid Corporation's I.D.
Business, free and clear of all liens, claims, interests and
encumbrances, and the Debtors agree to assume and assign certain
Designated Contracts to PIDS Holdings.

Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
in Wilmington, Delaware, assures the Court that the Debtors and
PIDS Holdings negotiated the Agreement at arm's length and in
good faith, following thorough consideration of all possible
alternatives by the Debtors.  Furthermore, the Debtors believe
that the price to be received from the Asset Sale, subject to
the ability of interested parties to submit overbids at the
Auction for the Assets, will result in the highest and best
value for their estates, creditors and interest holders.

The Debtors assert that the consideration offered by PIDS
Holdings is fair and reasonable.  Thus, the Debtors ask Judge
Walsh to approve this asset purchase agreement with PIDS
Holdings. (Polaroid Bankruptcy News, Issue No. 3; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

PRINTING ARTS: Case Summary & 40 Largest Unsecured Creditors
Lead Debtor: Printing Arts America, Inc.
             19 Old King's Highway South
             Suite 2A
             Darien, CT 06820

Chapter 11 Petition Date: November 1, 2001

Court: District of Delaware

Bankruptcy Case No.: 01-11072

Judge: Mary F. Walrath

Debtor affiliates filing separate chapter 11 petitions:

    Entity                               Case No.
    ------                               --------
    KACL Holdings, Inc.                  01-11074
    Abbey Press, Inc.                    01-11076
    ACL Acquisition Company, Inc.        01-11077
    Aim Press, Inc.                      01-11078
    Classic Printing, Inc.               01-11079
    George Lithograph Company            01-11080
    Kenneth H. Oaks, Ltd.                01-11081
    New England Bay State Press and
    Printing, Ltd.                       01-11082
    Original Impressions, Inc.           01-11084
    Printing Arts Chicago, Inc.          01-11085
    Printing Arts Dallas/Ft. Worth, Inc. 01-11086
    Printing Arts Houston, Inc.          01-11087
    S&S Graphics, Inc.                   01-11088

Debtors' Counsel: Teresa K.D. Currier, Esq.
                  Klett Rooney Lieber & Schorling
                  The Brandywine Building
                  1000 West Street, Suite 1410
                  Wilmington, Delaware 19801
                  (302) 552-4200


                  William H. Schorling, Esq.
                  Klett Rooney Lieber & Schorling
                  Two Logan Square
                  12th Floor
                  18th & Arch Streets
                  Philadelphia, PA 19103-2756
                  (215) 567-7500

Estimated Assets: more than $100 million

Estimated Debts: more than $100 million

Debtors' 40 Largest Consolidated Unsecured Creditors:

Entity                       Nature Of Claim     Claim Amount
------                       ---------------     ------------
BNY Capital Partners, L.P.   Bond                 $11,500,000
Paul J. Echausse
One Wall Street, 18th Floor
New York 10286

The 1818 Mezzanine Fund,     Bond                  $9,500,000
Joe Donlan
c/o Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005

Exeter Venture Lenders,      Bond                  $2,000,000
Kirk Bergquist
10 East 53rd Street,
32nd Floor
New York, NY 10022

Exeter Equity Partners,      Bond                  $2,000,000
Kirk Bergquist
10 East 53rd Street,
32nd Floor
New York, NY 10022

Expedx                       Trade                 $1,388,073
Steven Dunn
50 E. River Center Blvd.
Covington, KY 41011

Spicers Paper                Trade                   $731,639
Anthony Kennedy
30108 Eigenbrodt Way
PO Box 61000
San Francisco, CA 94161-2854

Frank Parsons Paper          Trade                   $357,558
PO Box 64346
Baltimore, MD 21264

Pitman                       Trade                   $303,830
Eileen Mezo
721 Union Blvd.
Totulna, NJ 07512

WWF Paper                    Trade                   $299,092
Credit Manager
2 Bala Plaza
Bala Cynwyd, PA 19004

Unisource Paper              Trade                   $298,603
Chris Gilmartin
6600 Governors Lake Pkwy.
Norcross, GA 30071

Paul, Weiss, Rifkind,        Trade                   $291,277
Wharton & Garrison
Michael Gertzman
1285 Avenue of the Americas
New York, NY 10019

BRW Paper                    Trade                   $285,213
John Hansen
14035 Distribution Way
Farmers Branch, TX 75234

Arthur Nadersen              Trade                   $246,452

Jenkens & Gilchrist          Trade                   $201,148

Xerox Corporation            Trade                   $196,496

United Parcel Service        Trade                   $182,042

Corporate Park Investment    Trade                   $144,606

Little Mendelson             Trade                   $115,000

Clampitt Paper Company       Trade                   $108,704

Post Press Services          Trade                    $99,416

Heartland Imaging            Trade                    $94,081

Olmsted-Kirk Paper           Trade                    $84,528

Taylor Impression Inc.       Trade                    $83,893

Mac Paper                    Trade                    $75,723

Kohl & Madden                Trade                    $74,514

L.E.C. Construction          Trade                    $73,962

Midland Paper                Trade                    $73,367

Federal Express              Trade                    $70,956

WWF Midwest                  Trade                    $69,575

Westvaco                     Trade                    $69,048

Temboard Inc.                Trade                    $66,122

Sun Chemical Corp.           Trade                    $62,227

Scott Printing Corp.         Trade                    $61,430

Hunton & Williams            Trade                    $60,359

Heller & Usdan               Trade                    $58,162

Quality Assurance-Human      Trade                    $55,492
Resource Services, Inc.

Lindenmeyr Monroe Paper      Trade                    $55,305

American Trade Bindery       Trade                    $54,305

Keystone Printing Ink,       Trade                    $54,176

Data & Mailing Resources,    Trade                    $51,706

QUALITY STORES: Files for Chapter 11 Reorganization in Michigan
Quality Stores announced that it has commenced voluntary
reorganization proceedings under Chapter 11 of the United States
Bankruptcy Code in the U.S. Bankruptcy Court for the Western
District of Michigan. The Company intends to continue to
maintain its business and operations.

Quality Stores intends to focus its operations on a core group
of 178 stores and two distribution centers focused on markets in
the eastern U.S., historically its strong markets. The Company
anticipates that its cash collateral and cash flow from
operations moving into its strongest selling season will provide
adequate liquidity.

"Quality Stores has made considerable progress in reducing its
costs and streamlining its operations. A voluntary Chapter 11
petition provides us a process and framework within which we can
continue to address the significant issues facing the Company,"
said Peter Fitzsimmons, Quality Stores' Chief Executive Officer.

On October 20, 2001, Quality Stores announced that a group of
three bondholders filed an involuntary bankruptcy petition
demanding payment for certain debt obligations. The Company also
previously announced its intent to close a total of 133 stores
and two distribution centers. "We acknowledge the hard work and
dedication of all of our employees and regret the impact our
decision will have on those who have worked loyally in our
western markets," Said Bill Waack, the Company's President and
Chief Operating Officer.

Quality Stores, Inc., operating stores under the names of
Quality Farm & Fleet, Quality Farm & Country, County Post, and
Central Tractor Farm & Country, is a specialty retailer
targeting the ranch, farm, and "ruralpolitan" customer.

Stores feature an assortment of over 25,000 products from more
than 1,200 vendors. Product categories include Agriculture,
Animal Health, Feeds, Pet, Truck & Trailer, Home Improvement,
Hardware, Electrical, Plumbing, Lawn & Garden, Energy, and

ROUGE INDUSTRIES: Negotiations for Additional Financing Underway
Rouge Industries, Inc. (NYSE: ROU) reported a net loss of $46.3
million, for the third quarter of 2001, compared to a net loss
of $6.3 million in the third quarter of 2000.  Steel product
shipments in the quarter totaled 576,000 tons, 46,000 tons or
7.4% below the third quarter of 2000 and 89,000 tons or 13.4%
below the second quarter of 2001.  Raw steel production totaled
788,000 tons, 41,000 tons or 5.5% higher than the third quarter
of 2000.

Prior to the horrific events that befell our country on
September 11, the Company's shipments already were showing the
effects of the general weakness of the U.S. economy and the
automotive industry.  Immediately following September 11, the
Company's shipments declined by more than 40,000 tons as
customers deferred the delivery of the steel already produced or
they reduced steel orders not yet ready to ship.

"The events of September 11 were indescribably tragic," said
Carl L. Valdiserri, chairman and chief executive officer of
Rouge Industries.  "The prayers and sympathy of all Rouge
employees are extended to the families and friends of those who
were affected.  The aftermath of this event caused substantial
economic disruption to our business and our customers'
businesses as well.  While we are encouraged by the recent
strong automotive sales levels precipitated by the marketing
incentives of the U.S. automakers," continued Mr. Valdiserri,
"we remain concerned about the economic state of the U.S. steel
industry as its business fundamentals, led by volume and steel
pricing, continue to be painfully adverse."

On October 22, 2001, the U.S. International Trade Commission
(the "ITC") voted that foreign steel imports have been a
substantial cause of serious injury to the U.S. steel industry
in affirmative decisions covering nearly 80 percent of the total
import tonnage.  This includes the four carbon and alloy flat
product categories that Rouge Steel produces.  "We appreciate
President Bush's leadership in directing the Section 201
investigation by the ITC," stated Mr. Valdiserri.  "We now look
forward to participating in the ITC's remedy hearings and
shaping the forms of assistance that the U.S. steel industry
needs to recover.  Unless there is a quick, comprehensive and
meaningful response, excessive financial losses in our industry
will continue. To that end, Rouge Industries is leaving no stone
unturned to remain a viable producer of high quality steel for
our many valued customers and to continue to provide good jobs
for our employees and our many supportive suppliers.  The
survival of the domestic integrated steel industry is at stake.  
This is a battle we must win for the basic manufacturing
industry in America and the American way of life," concluded Mr.

Operating income was adversely impacted by $9.8 million due to
the Company's continued reliance on temporary steam boilers and
blast furnace gas flaring penalties, a continuing legacy of the
February 1, 1999 Powerhouse explosion.  In addition, revenue in
the third quarter of 2001 was down $47 per ton or 11% from the
third quarter of 2000, underscoring the severe price pressures
resulting from the continuation of high import levels.

"The Company's long-term debt at the end of the third quarter
totaled $129.2 million compared to $76.0 million at the end of
the second quarter of 2001," said Gary P. Latendresse, vice
chairman and chief financial officer. "The increase in debt was
attributable to three key factors: exceedingly low selling
prices; the economic effect of the September 11 tragedy; and a
substantial increase in raw material and steel product
inventories.  Temporary plant closings by several key customers
in the days and weeks following September 11 caused cash flow
imbalances as billings and cash receipts unexpectedly declined.  
We have been working closely with our bank group, customers and
suppliers to work through this difficult period.  This includes
the negotiation of additional financing from a variety of
sources.  If successful, we expect to avoid any short-term
liquidity problems at least through the first quarter of next
year," concluded Mr. Latendresse.

The Company plans to apply for a loan under the federal
Emergency Steel Loan Guarantee Act in the near future.  If
successful, the Company expects to embark on a substantial
restructuring effort designed to substantially lower its
operating costs and strengthen its longer-term viability.

Rouge Industries is a leading producer of premium quality, flat
rolled steel products for the automotive, converter and service
center markets.

SERVICE MERCHANDISE: Provides Adequate Protection to Insurers
Service Merchandise Company, Inc. asks Judge Paine's permission
to grant adequate protection to certain insurance carriers to
adjust, if necessary, from time to time, the level of collateral
that secures the Debtors' obligations to the Carriers.

According to Beth A. Dunning, Esq., at Bass, Berry & Sims PLC,
in Nashville, Tennessee, these Carriers all supply workers'
compensation insurance to the Debtors.  And in the ordinary
course of business, Ms. Dunning notes, the Carriers routinely
vary the level of their collateral to match prevailing loss
experiences.  Ms. Dunning tells the Court that Carriers agree to
reductions and also request increases in their collateral levels
as the circumstances change.

Ms. Dunning explains that the Debtors want to continue this kind
of arrangement because it allows them to maintain efficient
liquidity levels.  The Debtors assure the Court that no party-
in-interest will be prejudiced because they do not request
authority to grant the Carriers more collateral than they
possessed on the Petition Date.  Rather, Ms. Dunning clarifies,
the Debtors only request approval to adjust the Carriers'
collateral protection consistent with past practices up to the
level of collateral that the Carriers enjoyed on the Petition

To further explain the scenario, Ms. Dunning relates that the
Carriers insure the Debtors' risk under certain pre-petition
workers' compensation programs that were in effect during the
period of July 1992 to July 1995.  According to Ms. Dunning, the
Carriers hold collateral to secure their exposure in connection
with the Programs in the form of a letter of credit in the
amount of $4,221,500.

Considering the Debtors' loss experience under the Programs, Ms.
Dunning says, the Debtors and the Carriers agreed to reduce the
collateral levels in the amount of $1,000,000.  But Ms. Dunning
makes it clear that the Carriers agreed to this reduction
provided that the Debtors agree to return the Carriers'
collateral levels to their original pre-petition amount, in the
light of changed loss experience.

And so, Ms. Dunning explains, the Debtors request permission to
return the Carriers to their original collateral levels upon a
request by the Carriers.  According to Ms. Dunning, the Debtors
anticipate increasing the collateral levels by issuing
supplemental or replacement letters of credit.

The Debtors contend that the relief requested is both necessary
and appropriate.  "The adequate protection arrangement
represented is fair and reasonable under the circumstances and
reflects the Debtors' exercise of prudent business judgment,"
Ms. Dunning asserts. (Service Merchandise Bankruptcy News, Issue
No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900)

SHARED TECHNOLOGIES: Obtains Court Nod to Use Cash Collateral
Shared Technologies Cellular Inc. received final authorization
from Judge Robert L. Krechevsky of the U.S. Bankruptcy Court in
Hartford, Connecticut, to use the cash collateral of a pre-
petition secured creditor through November 29, according to Dow
Jones Newswires.

Judge Krechevsky signed an order on Thursday that allows the
company to use Mobile Investments LLC's cash collateral. A final
hearing on the matter had been slated for October 18, but Judge
Krechevsky continued the hearing so the company and creditor
could work out specifics of a proposed final order.

On October 1, the Hartford court authorized Shared Technologies
to use Mobile Investments' cash collateral on an interim basis
through a final hearing. The bankrupt telecommunications
products and services provider had requested the final hearing,
hoping it could get court approval to use the collateral for
three additional months after the preliminary period expired.
In its motion, Shared Technologies said it required about
$835,000 of cash collateral for September 28 to October 12. The
company used the cash to pay wages, rent, utilities, taxes and
vendors under the terms of a budget. Hartford-based Shared
Technologies filed for chapter 11 bankruptcy protection on
September 28. (ABI World, October 31, 2001)

SITEL CORP: Expects to Achieve Breakeven in Fourth Quarter
SITEL Corporation (NYSE: SWW), the world's leading contact
center expert, posts its financial results for the third quarter
and nine months ended September 30, 2001.  The results met the
Company's previously announced outlook.

Net income for the third quarter of 2001 was $1.1 million, on
revenues of $173.8 million.  This compares to net income of $3.7
million for the third quarter of 2000, on revenues of $185.3
million.  For the first nine months of 2001, the Company
recorded a net loss of $2.0 million, on revenues of $535.6
million.  This compares to net income of $11.1 million for the
same period of 2000 on revenues of $577.7 million.

The income for 2001 and 2000 exclude the effects of items in the
second and third quarters of 2001 related to the Company's
restructuring announced in June 2001, and a charge in the second
quarter of 2000 related to the restructuring of SITEL's
operations in Japan. These amounts also exclude a tax benefit
recorded in the first quarter of 2001, and certain deferred tax
valuation allowances recognized in the second and third quarters
of 2001.

Excluding these items, earnings before interest, taxes,
depreciation and amortization (EBITDA) were $15.4 million for
the quarter and $60.5 million for the trailing four quarters.  
Capital expenditures were approximately $6.5 million for the

Revenues for the quarter were in line with the Company's
previously announced outlook and, as expected, decreased 2.2%
from second quarter 2001 revenues of $177.8 million.  This
revenue decrease was primarily attributable to reductions in
certain client programs as a result of the continuing weak
economy and the September 11th attacks on the U.S.  The
reduced client programs were partially offset by increased new
business and expansion of existing client programs.

As previously announced, a restructuring plan designed to
intensify the Company's focus on its core competencies,
accelerate revenue growth and improve profitability was
instituted in June of this year. The plan resulted in asset
impairment and restructuring charges of $26.2 million and losses
on disposals of fixed assets of $1.3 million, of which $25.1
million was recorded in the second quarter of 2001 and $2.4
million in the third quarter. These amounts include non-cash
charges of approximately $11 million.

The Company also wrote-off $0.8 million of credit acquisition
costs in connection with the amendment of its credit facility
during the third quarter.  During the first quarter of 2001, the
Company recorded a $9.8 million net deferred tax benefit in
connection with its election to treat certain foreign operations
as branches of the U.S. company.  In the third quarter of 2001,
the Company offset a portion of this benefit by increasing its
deferred tax valuation allowance by $3.8 million.

In addition, the Company established a $3.3 million valuation
allowance for U.K. deferred taxes in the second quarter of 2001.  
Including these items, the Company's reported net loss for the
third quarter of 2001 was $5.9 million, and the reported net
loss for the nine months ended September 30, 2001 was $25.5

Pursuant to the restructuring plan and other cost reduction
efforts, the Company reduced Operating, Selling and
Administrative (OS&A) expenses in the third quarter of 2001 by
$10.1 million compared to the second quarter of 2001. Excluding
asset impairment and restructuring charges, EBITDA increased
from $8.2 million in the second quarter of 2001 to $15.4 million
in the third quarter of 2001. In addition, the Company generated
operating income of $6.1 million in the third quarter of 2001
compared to an operating loss of $2.5 million in the second
quarter of 2001. The Company generated earnings per diluted
share of $0.02 in the third quarter of 2001 compared to a loss
in the second quarter of 2001.

The Company's cash flow for the third quarter of 2001 was
strong.  The Company generated cash from operations of $16.5
million, after making approximately $4 million of one-time
payments related to the restructuring plan and a $4.6 million
semi-annual interest payment on its $100 million subordinated
notes. The Company repaid $7.3 million of debt during the
quarter and increased its cash balance from $26.6 million at the
beginning of the quarter to $31.5 million at September 30, 2001.  
The Company's unused line of credit under its long-term
committed credit facility was $40.4 million at September 30,

Commenting on the Company's results, Jim Lynch, Chairman and CEO
of SITEL Corporation, said, "It has been a difficult time for
everyone. All of us have been impacted by the terrible attacks
in New York and Washington. However, I am pleased to say that
through the momentum we have been building in our business,
SITEL was able to meet our third quarter of 2001 revenues and
earnings outlook.  The September 11th attacks significantly
reduced our U.S. business for two days and continued to affect
our U.S. customer acquisition business for several days
thereafter.  Increased revenues from new and existing clients
partially offset the reduced business caused by the attacks. I
am encouraged that we continue to make steady progress in our
focus on growing the business by concentrating on our core
competencies of customer acquisition, customer care, and
technical support services while continuing to assist our multi-
national clients with their strategic approach of increasing
customer potential through customer relationship management."

Mr. Lynch further stated, "We enjoyed a number of important new
contract wins and expansions during the quarter.  These include
an alliance with Cable & Wireless to build and operate a 400
workstation multi-channel contact center in Panama, and an
agreement to expand our existing business with General Motors
Credit Corporation (GMAC) in Europe by taking over Opel Bank
GmbH's in-house operations in Germany, which combined with
SITEL's existing operations will provide customer care and
collection services to over 500,000 of their customers.  Also,
during the quarter, the Company announced the addition of five
new clients with services provided in seven countries, and
expanded business with another ten companies with services
provided in eight countries. All of these are exciting wins for
the Company."

Mr. Lynch concluded, "I am not happy with the performance of our
stock price. But I am happy with the initial results of our
restructuring plan which is designed to intensify the Company's
focus on its core competencies, accelerate revenue growth and
improve profitability. We are operating in a difficult economic
environment and I am encouraged that we were still able to meet
expectations during the quarter.  We are dedicated to bringing
value back to our shareholders."


The following comments are based on current expectations,
supersede any and all prior outlooks provided by the Company,
and exclude any special charges.  As a result of the continuing
economic slowdown and the resultant uncertainties in the market,
the Company is only providing an outlook for the fourth quarter
of 2001.

For the fourth quarter of 2001, the Company expects revenues to
be in a range of $175 million to $180 million and earnings per
share to be in a range of breakeven.

SITEL, the world's leading contact center expert, empowers
companies to grow by optimizing contact center performance and
unlocking customer potential. SITEL designs, implements and
operates multi-channel contact centers to enhance company
performance and growth. SITEL manages more than 1.5 million
customer contacts per day via the telephone, web, e-mail, fax
and traditional mail. SITEL employees operate contact centers in
20 countries, offering services in 25 languages and dialects.
Visit SITEL's Web site at http://www.sitel.comfor further  

                          *  *  *

In September, Moody's Investors Service lowered the ratings of
Sitel Corporation. The outlook is negative while there was  
approximately $100 million of debt securities affected.

    * $100 million 9.25% senior subordinated notes, due 2006 to  
      Caa2 from B3

    * Senior unsecured issuer rating to Caa1 from B2

    * Senior implied rating to B3 from B1

In Moody's opinion, Sitel's business fundamentals are weak and  
the cyclicality of its customer base is significant. The rating  
agency believes that operations are further vulnerable to  
decline given the current macro-economic uncertainties in the  
United States. Moody's said that the liquidity is poor given the  
likely absence of cushion under recently revised bank covenants  
(August 2001).

According to Moody's the downgrades reflect Sitel's weakened  
operating and financial profile given the reduction in revenue  
and depressed margins. The ratings actions include the  
approximately $24 million of asset impairment and restructuring  
charges Sitel underwent in the second quarter 2001, Moody's  

SUPERVALU INC: Will Sell $185.5M Notes to Repay Short-Term Debts
SUPERVALU INC. (NYSE: SVU) announced that it will sell, pursuant
to a private offering, approximately $185.5 million in zero-
coupon convertible notes due 2031 with an aggregate principal
amount at maturity of $705 million.  The proceeds from the
offering will initially be used to repay short-term debt and
later, to retire a portion of the $300 million, 7.8 percent debt
maturing November of 2002.

The convertible notes are being offered only to qualified
institutional buyers at an initial offering of $263.15 per
$1,000 of principal amount at maturity, resulting in gross
proceeds to SUPERVALU of approximately $185.5 million.  The
issue price represents a yield to maturity of 4.5 percent per
annum.  The initial purchaser will also have a 30-day option to
purchase an additional amount of the convertible notes to cover
over-allotments, which would provide SUPERVALU with
approximately $28 million in additional gross proceeds.  The
offering is expected to close November 2, 2001.

The shares underlying this instrument will generally not be
treated as shares outstanding for earnings per share calculation
purposes until the notes become convertible.  The notes will
generally be convertible if the closing price of SUPERVALU
common stock on the NYSE for twenty of the last thirty trading
days of any fiscal quarter, exceeds certain levels, set
initially at $33.20 per share for the quarter ended February 23,
2002 and rising to $113.29 per share at September 6, 2031.  In
the event of conversion, 9.6434 shares of SUPERVALU common stock
will be issued per $1,000 note.

SUPERVALU may redeem the convertible notes without premium on or
after October 1, 2006.  SUPERVALU may be required to repurchase
the convertible notes at the original cost plus accrued interest
at the option of the holders on October 1st of 2003, 2006, and

SUPERVALU is a leading supermarket retailer holding the nation's
largest position in the extreme value grocery retailing segment
and is the nation's most successful food distributor to grocery

The notes and common stock issuable upon conversion have not
been registered under the Securities Act of 1933, as amended, or
applicable state securities laws, and are being offered only to
qualified buyers in reliance on Rule 144A under the Securities
Act.  Unless so registered, the notes and common stock issued
upon conversion may not be sold in the Untied States except
pursuant to an exemption from the registration requirements of
the Securities Act and applicable state securities laws.

As of Sept. 8, 2001, the Company recorded total current assets
of $1.8 billion, as opposed to total current liabilities of $1.9
million. Its cash and cash equivalents amounted to $22 million
and net receivables totaled $487 million.

TOUCHSTONE SOFTWARE: Product Revenues Plunge 54% in 3rd Quarter
TouchStone Software Corporation, Inc. and its consolidated
subsidiaries, is a provider of system management software, which
includes basic input/output software upgrades, personal computer
diagnostics for personal computers and embedded systems. System
management software is one of the fundamental layers in any
microprocessor-based system (including PCs) architecture and
provides an essential interface between the system's operating
software and hardware.

Organized in 1982 as a California corporation, the Company
reincorporated in Delaware in January 1997. The Company's
executive offices are located at 1538 Turnpike Street, North
Andover, Massachusetts 01845, and its telephone number is (978)

The Company's revenues consist of product sales, software
license fees and engineering services revenues. Product revenues
are recorded at the time products are shipped. Software license
fees are recognized upon delivery of the product, fulfillment of
acceptance terms, if any, and satisfactions of significant
support obligations, if any. Engineering service revenues
generally consist of amounts charged for customization of the
software prior to delivery and are generally recognized as the
services are performed.

Product revenues decreased by approximately 54%, for the three
month period ended June 30, 2001, from the same period of the
prior year. The decrease in revenues is primarily due from
the sale of the retail product line, along with a significant
decline in the demand for Cardware, as this product becomes

The Company has suffered recurring operating losses, has an
accumulated deficit of $19,186,883 at June 30, 2001, and is
largely dependent on its investment portfolio to fund projected
future operating losses, and accordingly, is subject to a number
of risks.

Principally among these risks are marketing of its products and
services which are susceptible to competition from other
companies and the volatility in the value of the Company's
investment portfolio on which it is dependent to fund its short
term operating cash deficits. These factors, among others, raise
substantial doubt about the Company's ability to continue as a
going concern at December 31, 2000.

The Company has disposed of both its German branch, which was
responsible for nearly all sales of its CardWare products and
its retail suite of CheckIt products during 2000. Although the
Company has retained rights to sell and/or distribute these
products, sales related to these product lines are expected to
be significantly less in the future. Accordingly, the Company is
largely dependent on a single supplier for its future revenue
related to its Bios line of products.

VENCOR INC: Wrestles with IRS Re $6.3 Million Payment Request
The Internal Revenue Service filed the IRS Payment Request
demanding that Vencor, Inc. pay $6,331,830.24 as administrative
expenses for taxes that allegedly accrued after the Petition

The IRS Payment Request references four tax periods with respect
to which the Debtors allegedly owe taxes:


       (a) 03/31/1997, balance due $1,520,562.36;

Postpetition :

       (b) 12/31/00, balance due $368.88;
       (c) 03/31/01, balance due $4,254,935.00; and
       (d) 04/01/01-04/19/01, balance due $555,964.00.

The Debtors submit that:

(1) pursuant to Section 503(a)(b)(1)(B) of the Bankruptcy Code
    the Alleged Prepetition Liability is not properly subject to
    a request for payment of administrative expenses; and

(2) the Alleged Postpetition Liabilities do not adequately
    reflect the Debtors' obligations to the IRS for the tax
    periods referenced therein.

In addition, the IRS has filed proof of claim number 7806 for
the same Alleged Prepetition Liability. Therefore, the amount,
if any, due to the IRS from the Debtors for such Alleged
Prepetition Liability should be determined as a part of the
Debtors' negotiations with the IRS relating to this proof of
claim, the Debtors tell the Court.

For these reasons, the Debtors request an order from the Court
disallowing the IRS Payment Request. (Vencor Bankruptcy News,
Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900)

VIADOR INC: Nasdaq Delists Shares Effective October 31
Viador, Inc. received notice from the Nasdaq Stock Market, Inc.
that the company's stock will be delisted effective October 31,

Effective that date, the company's shares will trade on the
Nasdaq over the counter bulletin board (symbol VIAD). The
company's CEO, Stan Wang, stated, "While our new management team
has been working closely with Nasdaq, we have understood that
under the company's current circumstances, a delisting was very
possible. We do not expect that this fact affects the company's
recovery or its intention to achieve profitability as quickly as
possible. We remain optimistic about our business and its future

Viador Inc. combines proven experience, technology and
partnerships to deliver self-service portals for leading
businesses and organizations worldwide. The Viador E-Portal
facilitates enterprise-wide productivity gains, including
increased revenue from new e-services, improved partner
communications, better customer relationships and retention, and
streamlined, paperless information distribution at lower cost.
Viador is headquartered in Sunnyvale, California. For more
information, visit the Viador Web site at

WAXMAN INDUSTRIES: Financial Workout Yields Positive Results
Waxman Industries, Inc. (OTC Bulletin Board: WAXX), a leading
supplier of specialty plumbing and other products to the U.S.
repair and remodeling market, reported its revenue and earnings
for the fiscal 2002 first quarter ended September 30, 2001.

                  Operating Results

Net sales for the Company's wholly-owned operations for the
three months ended September 30, 2001 amounted to $18.7 million,
an increase of 8.4% as compared to $17.3 million in the prior
year's comparable period. The increase is due to the growth of
programs with certain existing retail customers and the
expansion into stores not previously served. In addition,
results for the prior year first quarter included net sales for
Medal Distributing, an operation sold on March 31, 2001.
Excluding Medal's results, net sales for the fiscal 2002 first
quarter would have increased by $2.7 million, or 16.8% in
comparison to the continuing businesses in the fiscal 2001 first

The Company reported operating income of $0.9 million for the
fiscal 2002 first quarter, as compared to an operating loss of
$0.9 million in the same period last year. Included in the
fiscal 2001 first quarter is a restructuring charge of $0.35
million for costs associated with warehouses closed by the

For the quarter ended September 30, 2001, net interest expense
totaled $0.2 million, as compared to $4.7 million in the fiscal
2001 first quarter. Average borrowings were significantly lower
due to the completion of the comprehensive financial
restructuring, including the sale of the Barnett Common Stock,
and the elimination of the Company's Senior Notes and Deferred
Coupon Notes in fiscal 2001.

Fiscal 2001 first quarter net income was significantly higher
due to the recognition of a $47.5 million gain on the sale the
Company's remaining equity interest in Barnett Inc. and the $7.8
million deferred gain on the sale of U.S. Lock. In addition, the
Company recognized $1.4 million in equity earnings from its
44.2% ownership interest in Barnett, which was sold on September
29, 2000.

Net income for the fiscal 2002 first quarter ended September 30,
2001 was $0.6 million, or $0.48 per basic and diluted share as
compared to the prior year first quarter net income of $48.2
million, or $3.98 per basic and diluted share. The fiscal 2001
first quarter net income was significantly greater due to the
financial restructuring transactions described above.

The completion of the comprehensive financial restructuring plan
in fiscal 2001 has resulted in a greatly improved balance sheet
for the Company. "We are very pleased with the improvement in
our continuing businesses, including the growth in sales,
improvement in gross profit margin and reduction in operating
costs." said Armond Waxman, President and Co-Chief Executive

Waxman Industries, Inc. is a leading supplier of specialty
plumbing and other products to the repair and remodeling market
in the United States. Through its wholly-owned subsidiaries,
Consumer Products, WAMI Sales, and its foreign sourcing
operations, TWI and CWI, the Company distributes its products to
a wide variety of large national and regional retailers and
wholesalers in the United States.

WILD OATS: Gets Waiver of Previous Defaults On Credit Facility
Wild Oats Markets, Inc. (Nasdaq: OATS), a leading national
natural and organic foods retailer, announced financial results
for the third quarter and first nine months ended September 29,

                      Financial Results

Wild Oats generated sales of $222.2 million in the third
quarter, a 7.2 percent increase compared with sales of $207.2
million in the third quarter of 2000.  Sales for the first nine
months of the year were $671.1 million, up 6.3 percent from
$631.2 million in the comparable period last year.  These
results are primarily due to improved comparable store sales,
which increased 5.5 percent in the third quarter, and 3.4
percent in the first nine months of 2001 compared with the same
period last year.  A focus on operational improvements in
previously acquired stores and new marketing programs in select
regions fueled the improved comparable store sales in both

Wild Oats has improved its comparable store sales throughout the
year.  In 2001, comparable store sales increased 5.5 percent in
the third quarter, 3.9 percent in the second quarter and 1.0
percent in the first quarter.  The Company expects the positive
comparable store sales to continue as it emphasizes operational
improvements and rolls out its new "Fresh Look" marketing and
advertising program.

The Wild Oats "Fresh Look" program was developed in response to
extensive customer research conducted in the second and third
quarters of 2001.  This research revealed several opportunities
for the Company to attract a broader segment of customers to its
stores.  Accordingly, the "Fresh Look" program includes
increased -- from monthly to weekly -- newspaper advertising
insertions and direct mail, weekly sale items and specials, more
competitive pricing in certain markets, and more strategic
merchandising efforts.  The Company has implemented a phased
roll out of this program, and, as of the end of the third
quarter, had launched "Fresh Look" in nine of its 23 states,
representing 29 of its 109 stores.  The program was test
marketed in Colorado beginning in mid-July 2001, and rolled out
to select stores in Connecticut, Florida, Kansas, Massachusetts,
Missouri, Nebraska, New Jersey and Oklahoma in mid-September.  
The Company has continued with its phased roll out, and has
added 15 additional stores in Missouri, Ohio, Oregon and
Washington as of the end of October 2001.

"We are pleased that our efforts to improve sales for the
company are gaining momentum despite overall weakness in the
economy and the negative economic impact of the events of
September 11th," said Perry D. Odak, President and Chief
Executive Officer.  "As we continue to implement our increased
advertising and modified pricing and merchandising strategies,
we expect our comparable stores sales in these regions to
continue to show gradual improvement."

The Company reported gross profit of $63.5 million for the third
quarter of 2001, a 2.1 percent increase compared with $62.3
million in the same period last year.  The gross profit margin
declined to 28.6 percent of sales in the third quarter of 2001
from 30.0 percent in last year's third quarter.  The year-over-
year decline in gross profit margin was primarily due to reduced
merchandising margins resulting from the implementation of the
"Fresh Look" pricing, merchandising and advertising program in
certain geographic markets, as well as a shift in the sales mix
between store formats.  For the first nine months of 2001, Wild
Oats reported $196.3 million in gross profit, a slight increase
compared to $195.1 million in the first nine months of 2000.  
The gross profit margin declined to 29.3 percent of sales during
the first nine months of 2001 from 30.9 percent of sales during
the comparable period last year.

Direct store expenses in the third quarter of 2001 totaled $52.1
million, a 7.7 percent increase over $48.4 million in the prior
year's third quarter. Direct store expenses as a percent of
sales remained constant at 23.5 percent in the third quarter
compared to the third quarter of 2000.  As a result of the
decline in gross profit margin, the store contribution margin
was 5.1 percent of sales in the third quarter of 2001, a decline
from 6.7 percent in the prior year period.

Selling, general and administrative expenses in the third
quarter of 2001 increased to $12.5 million from $7.5 million in
third quarter of 2000, an increase of 65.3 percent, and was 5.6
percent of sales in the third quarter of 2001 compared with 3.6
percent in the third quarter of 2000.  This increase included
$1.6 million of one-time expenses related to consulting and
professional fees associated with the Company's strategic
repositioning research, severance costs for former senior
executives of the Company, recruiting and relocation costs, and
expenses associated with the October 2001 amendment to the
Company's $125.0 million credit facility.  In addition, higher
selling, general and administrative expenses included $2.3
million of expenses related to Wild Oats' "Fresh Look"
advertising and marketing program, and $1.1 million of expenses
for expanded infrastructure at the Company's headquarters.  The
Company is committed to creating a stronger infrastructure to
better manage its operations and growth initiatives and, as a
result, its operating results will continue to be negatively
affected in the short-term.

As part of its previously announced strategic repositioning, in
the third quarter of 2001, the Company recorded a non-cash
restructuring and asset impairment charge of $776,000 pre-tax,
primarily for the closure of three commissary kitchens.  The
Company expects to record a restructuring charge of
approximately $250,000 in the fourth quarter of 2001 related to
severance costs for the employees affected by the closure of
these support facilities. Excluding this charge, the Company
reported net loss in the third quarter of 2001 of $2.6 million,
compared with net income of $1.1 million in the third quarter of
2000.  Despite an overall increase in sales, this loss primarily
is the result of lower merchandising margins and higher SG&A

In addition to the above-mentioned restructuring charge, as
previously announced, the Company recorded a restructuring and
asset impairment charge of approximately $55 million pre-tax in
the second quarter of 2001.  Excluding these charges, for the
first nine months of 2001, the Company reported net loss of $6.1
million, compared with net income of $11.0 million in the first
nine months of 2000.  In the first nine months of 2000, the
Company recorded a $22.7 million pre-tax restructuring and asset
impairment charge related to the sale and closure of under
performing stores.

During the first nine months of 2001, net cash provided by
operating activities was $25.6 million, an overall $1.2 million
increase to cash. Capital expenditures were $2.9 million for the
third quarter and $18.9 million year-to-date.  During the first
nine months of 2001, the Company paid down $7.5 million on its
credit facility and, as of the end of the quarter had
approximately $116.5 million outstanding on its credit facility.

                    Business Developments

On October 18, 2001, the Company announced the completion of an
amendment to its credit facility, which waived previous defaults
and modified or added certain terms or covenants, including an
increase in interest rates and agency fees, limitations on the
execution of new leases, opening of new stores and other capital
expenditures, and modification of other financial covenants.

Wild Oats intends to raise $30.0 to $50.0 million in equity
financings to provide additional liquidity and to fund growth
initiatives.  If the Company is successful in raising additional
equity financing, under the amended credit agreement, it will be
allowed to increase the number of new leases it executes and new
stores it opens.

As previously announced, the Company has postponed any further
new store openings planned for 2001 while it reviews and
redesigns key store components. The sites previously planned for
opening in the current year will be rescheduled.

"As demonstrated in the first three quarters of this year, we've
experienced momentum in our comparable store sales, and they are
showing increasingly greater improvement as the year
progresses," said Mr. Odak.  "As we continue the phased roll out
of our 'Fresh Look' program, we expect to generate modest sales
growth, but it will be at the expense of the continued short-
term negative impact on our bottom line.  We expect to begin to
see the positive outcome of these strategies in the second half
of 2002, and are confident that these sales gains will
eventually translate into bottom-line improvement over time."

Wild Oats Markets, Inc. is a nationwide chain of natural and
organic foods markets in the U.S. and Canada.  With annual sales
of $838.1 million, the Company currently operates 107 natural
food stores and two vitamin stores in 23 states and British
Columbia, Canada.  The Company's markets include:
Wild Oats Market, Henry's Marketplace, Nature's - a Wild Oats
Market, Sun Harvest Farms and Capers Community Market natural
foods stores.  For more information, please visit the Company's
website at

As of June 30, 2001, the Company's total current liabilities
exceeded its total current assets by about $139 million. Total
debts is over twice as much as the Company's stockholders'

WILLIAMS COMMUNICATIONS: Amends Bank Credit Facility Covenant
Williams Communications (NYSE: WCG), a leading provider of
broadband services for bandwidth-centric customers, announced it
has amended the company's bank credit facility covenant that
required the company to raise additional capital by end of year.  
Under the new amendment, which was made possible by the
company's strong liquidity position, the date by which the
company is required to raise additional capital has been
extended from December 31, 2001 to July 1, 2003.  

Prior to the amendment, Williams Communications would have been
required to issue additional debt and equity in the amount of
$225 million by December 31, 2001.

"With our success in executing on every part of our financing
plan throughout this year, the company has a fully funded
business plan and does not need to raise additional capital at
this time," said Scott E. Schubert, chief financial officer of
Williams Communications.  "The deferral of this additional
capital covenant reflects a joint decision between the company
and our bank group based upon current liquidity and existing
market conditions."

In addition to the amendment referenced above and consistent
with the company's strategic imperative of optimizing its
capital structure, Williams Communications to date has purchased
approximately 18.3% of its outstanding publicly traded senior
notes at a total cost of about 43 cents per dollar of face
value.  These purchases were executed in the open market
starting in the third quarter, utilizing excess liquidity.

"As the company continues to optimize its capital structure and
position itself for long-term success, we will be working
jointly with our bank group to perform a more comprehensive
review of the existing credit agreement," said Mr. Schubert.  
"This review will ensure that the existing credit agreement
remains consistent with our current capital structure, our
reduced capital expenditure requirements and the overall market
environment."  During this review period, which may require 60-
90 days to complete, the company will not make any additional
cash purchases of its publicly traded debt.

Based in Tulsa, Okla., Williams Communications Group, Inc., is a
leading broadband network services provider focused on the needs
of bandwidth-centric customers.  Williams Communications
operates the largest, most efficient, next-generation network in
North America.  Connecting 125 U.S. cities and reaching five
continents, Williams Communications provides customers with
unparalleled local-to-global connectivity.  By leveraging its
infrastructure, best-in-breed technology, connectivity and
network and broadband media expertise, Williams Communications
supports the bandwidth demands of leading communications
companies around the globe.  For more information, visit

WINDSWEPT ENVIRONMENTAL: New Financing Needed to Satisfy Debts
Windswept Environmental Group, Inc., through its wholly-owned
subsidiaries, Trade-Winds Environmental Restoration, Inc., New
York Testing Laboratories, Inc. and North Atlantic
Laboratories, Inc., provides a full array of emergency response,
remediation and disaster restoration services to a broad range
of clients.

The Company has expertise in areas of hazardous materials
remediation, testing, toxicology, training, wetlands
restoration, wildlife and natural resources rehabilitation,
technical advisory, restoration and site renovation services.  
The Company believes that it has assembled the resources,
including key environmental professionals, construction
managers, and specialized equipment to become a leader in the
expanding worldwide emergency services market.

The Company further believes that few competitors provide the
diverse range of services provided by Windswept on an emergency
response basis. Management believes that its unique breadth of
services and its emergency response capability has positioned
the Company for rapid growth in this expanding market.

However, as of July 3, 2001, Windswept Environmental Group, Inc.
had a stockholders' deficit of $2,487,156 and an accumulated
deficit of $34,208,295. The Company has financed its operations
to date primarily through issuance of debt and equity
securities. As of July 3, 2001, the Company had $323,732 in
cash. As of July 3, 2001, the Company had working capital of

In addition, as of July 3, 2001, the Company was in arrears with
respect to preferred stock dividends plus interest of
approximately $149,000. The Company also has $680,000 principal
amount of convertible notes that will be due in full on March
15, 2002. In the opinion of management, the Company will have
sufficient working capital to fund current operations and repay
the convertible notes and any related accrued interest on March
15, 2002, however, market conditions and their effect on the
Company's liquidity may restrict the Company's use of cash which
may result in the Company not making payment on the convertible
notes when they become due on March 15, 2002.

During the 2001 period, in order to address cash flow and
operational concerns, the Company borrowed $250,000 from
Spotless. A balance of $1,200,000 in loans from Spotless was
outstanding as of July 3, 2001. Subsequent to July 3, 2001, the
Company borrowed an additional $1,000,000 from Spotless for
working capital needs. All borrowings from Spotless bear
interest at LIBOR plus 1 percent.

As of July 3, 2001, interest of $27,479 was accrued on these
borrowings. In the event that sufficient positive cash flow from
operations is not generated, the Company may need to seek
additional financing from Spotless to satisfy the convertible
notes when they become due, although Spotless is under no legal
obligation to provide such funds. The Company currently has no
credit facility for additional borrowing.  These factors raise
substantial doubt as to the Company's ability to continue as a
going concern.

             Case Studies in Bankruptcies, Buyouts, and Breakups
Author: Stuart C. Gilson
Publisher: Wiley
Hardcover: 516 pages
List Price: $79.95
Review by David M. Henderson
Order your copy -- and one for a colleague -- today at

Most business books fall into two categories.  The first is very
important. It is like that stuff you have to drink before you
have a colonoscopy.  You keep telling yourself, this is very
good for me, while you would rather be at the beach reading
Liar's Poker or Barbarians at the Gate.

Stuart Gilson, of the Harvard Business School, has managed to
write a book important to everybody in the distressed market
that is also quite enjoyable.  His prose is fluid and succinct
and a pleasure to read.  But don't take my word for it.  The
dust jacket endorsements come from Jay Alix, Martin Fridson,
Harvey Miller, Arthur Newman, and Sanford Sigoloff.  At a
collective gazillion dollars a billing hour, that's a lot of

Be advised that this is designed as a text book.  The case study
format might be off-putting to some.  The effect can be jarring
as you read the narrative history of the case and suddenly
confront the financial statements without any further clue as to
what to do, but this must be what it is like for the turnaround
manager.  Even after reading several of the cases, when I got to
the financials I had that sinking feeling of, what do I do now?
If you read carefully, clues to the solutions are in the

The book is divided into three "modules", bizspeek for sections:  
Restructuring Creditors' Claims,. Restructuring Shareholders'
Claims, and Restructuring Employees' Claims. The text covers 13
corporate restructurings focusing on debt workouts, vulture
investing, equity spinoffs, tracking stock, assete divestitures,
employee layoffs, corporate downsizing, M & A, HLTs, wage give-
backs, employee stock buyouts, and the restructuring of employee
benefit plans.  That's a pretty comprehensive survey, wouldn't
you say?

Dr. Gilson's chapter on "Investing in Distressed Situations" is
an excellent summary of the distressed market and a good
touchstone even for seasoned vultures.

Even in the two appendices on technical analysis, this book is  
marvelously free of those charts and graphs that purport to show  
some general ROI of distressed investing.  Those are cute,
aren't they?  As Judy Mencher has famously said, "You can buy
the paper at 50 thinking it's going to 70, but it can just as
easily go to 30 if you are not willing to act on it."  Therein
lies the rub and the weakness, if inevitable, of this or any
book on corporate restructurings.  As Dr. Gilson notes, no two
are alike, and the outcome is highly subjective, in our out of
Court, but especially in Chapter 11. Is the Judge enthralled by
Jack Butler as Debtor's Counsel or intimidated by Harvey Miller
as Debtor's Counsel?  Are you holding "secured" paper only to
discover that when it was issued the bond counsel forgot to
notify the Indenture Trustee of the most Senior debt?    Is
somebody holding Junior paper that you think is out of the money
only to have Hugh Ray read the fine print and discover that the
"Junior" paper is secured?  This is the stuff of corporate
reorganizations that is virtually impossible to codify into a

That said, this is an especially valuable text for anybody
working in the distressed market.  As a Duke grad, I tend to be  
disdainful of all things Harvard, but having read Dr. Gilson's
book, I am enticed to encamp by the dirty waters of the Charles
long enough to take his course, appropriately entitled,
"Creating Value Through Corporate Restructuring."


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

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

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

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


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

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

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

This material is copyrighted and any commercial use, resale or
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re-mailing and photocopying) is strictly prohibited without
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contained herein is obtained from sources believed to be
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