TCR_Public/020109.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

            Wednesday, January 9, 2002, Vol. 6, No. 6     


ANC RENTAL: Further Hearing On Cash Collateral Set for Today
AMERICA WEST: S&P Lifts Junk Rating Watch Status to Developing
APPLIED DIGITAL: IBM Credit Extends Formal Waiver Until Jan. 31
ARGUSS COMMS: Inks Pact to Sell All Outstanding Shares to Dycom
ARMSTRONG HOLDINGS: Settles Pennsylvania State Sales Tax Appeals

BANKAMERICA: Fitch Downgrades Manufactured Housing Bonds Series
BETHLEHEM STEEL: Taps Skadden & Dewey as Int'l Trade Counsels
BIZNESSONLINE: MCG Converts $5MM of Debt Into Preferred Stock
BURNHAM PACIFIC: DDR to Acquire 2 Calif. Retail Assets for $65MM
CATELLUS: S&P Concerned About Highly Leveraged Financial Profile

CHIQUITA BRANDS: Court Sets Disclosure Hearing for January 18
CLEAR LOGIC: Files Voluntary Chapter 11 Petition in San Jose
CLEAR LOGIC: Chapter 11 Case Summary
COMDISCO INC: Court Allows Goldman Sach's $8.25M Transaction Fee
CONSECO INC: Says SSB Report "Contains Bad Analysis"

DIGITAL TELEPORT: Gets Interim Approval of $5MM DIP Financing
DIVERSIFIED REIT: Fitch Affirms Low-B Ratings on 3 Cert. Classes
ESOFT INC: Will Begin Trading on OTCBB Effective January 15
ETOYS: Seeks to Extend Removal Period through May 2
ENRON CORP: Hires Brobeck Phleger as Special Regulatory Counsel

EXODUS COMMS: Seeks Approval to Sell Gulf Assets to TekInsight
FACTORY CARD: Has Until February 19 to File Chapter 11 Plan
FEDERAL-MOGUL: Appointment of Property Damage Committee Sought
FLEETWOOD ENT: Liquidation Amount Tendered in Offer Tops $264MM
GLENOIT CORPORATION: Court Okays Exclusive Periods Extension

IFR SYSTEMS: Bank Lenders Agree to Forbear Until March 4, 2002
INFINIUM SOFTWARE: Total Revenues Drop 20% to $74.1MM in FY 2001
IMPERIAL CREDIT: Names Richard Cupp as Vice Chairman & CEO
INTEGRATED HEALTH: Settles Dispute Re SBMS Note Purchase Price
KOMAG INC: Secures Creditors' Support for Plan of Reorganization

LANDSTAR: Continuing Talks to Secure $20MM In Equity Investment
LODGIAN INC: Secures OK to Pay Prepetition Employee Obligations
MARINER POST-ACUTE: Will Pay $3.3MM to Novacare Under Agreement  
MCLEODUSA INC: Fleming Recommends Purchase of Preferred A Stock
MCLEODUSA INC: S&P Slashes 11.375% Senior Unsecured Notes to D

MENTERGY LTD: Closes Refinancing Deal with Principal Creditors
METALS USA: Court Okays Continued Employment of Arthur Andersen
NORTHPOINT COMMS: J. Gallen to Closely Monitor Chapter 7 Process
OPTICARE HEALTH: Inks Pact to Extinguish Debt Owed to Palisade
OWENS CORNING: Future Claimants Sign-Up Hamilton as Consultants

PRINTING ARTS: Asks Court to Extend Lease Decision Period
PSINET INC: Pushing For Sale of HQ Property for $27.7 Million
REGAL CINEMAS: Intends to Sell $200 Million of Sr. Sub Notes
SIMPLIFIED EMPLOYMENT: Sees First Quarter Chapter 11 Emergence
SYNERGY TECHNOLOGIES: Must Seek Additional Financing to Continue

THERMOVIEW: Meets 2001 Targets of Restructuring Long-Term Debts
TORVEC INC: Working Capital Deficiency Pegged At $1.14 Million
USINTERNETWORKING: Files Chapter 11 Petition with Pre-Pack Plan
WINTERLAND CONCESSIONS: Sells All Assets to Signatures Network
XEROX CORP: S&P Assign BB Rating to $500 Million Senior Notes

XEROX CORP: Fitch Rates Proposed $500 Million Debt Issue at BB

* Two New Bankruptcy Communication Pros Join Adam Friedman

* Meetings, Conferences and Seminars


ANC RENTAL: Further Hearing On Cash Collateral Set for Today
Determining that ANC Rental Corporation and its debtor-
affiliates have a continuing and compelling need to use their
Lenders' cash collateral, Judge Walrath granted ANC interim
authority to use the Secured Lenders' cash collateral until
January 11, 2002.  A further hearing on the motion is to be held
on January 9, 2002. (ANC Rental Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

AMERICA WEST: S&P Lifts Junk Rating Watch Status to Developing
Standard & Poor's revised its CreditWatch status on America West
Holdings Corp., and subsidiary America West Airlines Inc. to
developing from negative.  The rating action does not apply to
enhanced equipment trust certificates that are insured by
triple-'A' rated Ambac Assurance Corp., which are not on
CreditWatch. The developing status is based on America West's
conditional approval to receive $380 million in federal loan
guarantees under the Air Transportation Safety and Stabilization
Act, with proceeds expected to be received in mid-January 2002.
America West is currently negotiating final terms of the loan
guarantee. Following finalization and receipt, America West's
ratings would likely be raised, because proceeds would provide
the company with enough liquidity to allow the company to avert
a Chapter 11 bankruptcy filing. Without the loan, the company
would be forced to file for bankruptcy.

America West has deferred $72 million of aircraft lease payments
under outstanding enhanced equipment trust certificates that
were due Jan. 2, 2002, in order to conserve cash. The company
has indicated it intends to make the payments before the end of
the grace periods, most of which coincide with the receipt of
the federal loan guarantee. In the meantime, Standard & Poor's
understands that the various dedicated liquidity providers
have made the payments in a timely manner, so there have been no
defaults on these notes. Given the likely imminent receipt of
the federal loan proceeds and the company's stated intention to
pay the deferred amounts by the end of the grace periods, no
rating action is warranted at this time.

      Ratings on CreditWatch with Developing Implications

     America West Holdings Corp.

       * Corporate credit rating                       CCC-

     America West Airlines Inc.

       * Corporate credit rating                       CCC-
       * Senior unsecured debt                         C
       * Equipment trust certificates                  CCC

       * Equipment trust certificate issues (pass-thru)
         $99.5 mil 6.85% class A ser 1996-1 due 2011   BB+
         $37.1 mil 6.93% class B ser 1996-1 due 2009   B+
         $37.7 mil 6.86% class C ser 1996-1 due 2006   B-
         $29.6 mil 8.16% class D ser 1996-1 due 2002   CCC
         $14.5 mil 10.5% class E ser 1996-1 due 2004   CCC
         $45.8 mil 7.33% class A ser 1997-1 due 2008   BB+
         $17 mil 7.4% class B ser 1997-1 due 2005      B
         $17.1 mil 7.53% class C ser 1997-1 due 2004   CCC
         $131.67 mil 6.87% ser 1998-1A due 2017        BB+
         $41.154 mil 7.12% ser 1998-1B due 2017        B+
         $17.705 mil 7.84% ser 1998-1C due 2010        B-
         $20.158 mil 8.54% ser 1999-1G due 2006        B
         $20.429 mil 9.244% ser 2000-1C due 2008       B
         $57.021 mil 8.37% ser 2001-C due 2007         B
         $45 mil flt rate ser 2001-D due 2005          CCC

APPLIED DIGITAL: IBM Credit Extends Formal Waiver Until Jan. 31
Applied Digital Solutions, Inc. (Nasdaq: ADSX), an advanced
digital technology development company, announced that it has
been granted an extension of the formal waiver and amendment to
its credit agreement with its senior lender, IBM Credit
Corporation, through January 31, 2002.

The waiver and amendment had been previously announced on
November 20, 2001.

Commenting on the extension, Chairman and CEO of Applied Digital
Solutions, Richard J. Sullivan stated, "This extension of the
waiver and amendment should provide us with the time to finalize
the terms of a final restructuring agreement with IBM Credit

Applied Digital Solutions is an advanced digital technology
development company that focuses on a range of early warning
alert, miniaturized power sources and security monitoring
systems combined with the comprehensive data management services
required to support them. Through its Advanced Wireless unit,
the Company specializes in security-related data collection,
value-added data intelligence and complex data delivery systems
for a wide variety of end users including commercial operations,
government agencies and consumers. For more information, visit
the company's website at

ARGUSS COMMS: Inks Pact to Sell All Outstanding Shares to Dycom
Dycom Industries, Inc. (NYSE: DY) and Arguss Communications,
Inc. (NYSE: ACX) announced that they have signed a definitive
merger agreement pursuant to which Dycom will acquire all the
outstanding shares of Arguss in a stock-for-stock transaction.

In the transaction, each outstanding share of Arguss common
stock will be exchanged for 0.3333 shares of Dycom common stock.

Based upon the closing price of Dycom common stock of $17.30 on
January 4, 2002, the value of the consideration to be received
by stockholders of Arguss is approximately $5.77 per share of
Arguss common stock or $83.7 million in the aggregate.

In addition, Dycom will assume $65 million of Arguss'
outstanding net debt resulting in a total transaction value in
excess of $148 million. The implied value represents a premium
of approximately 30.5% to the closing price of Arguss common
stock on January 4, 2002.

Under the terms of the merger agreement, a newly formed, wholly
owned subsidiary of Dycom will commence an exchange offer in
which it will offer 0.3333 of a share of Dycom common stock for
each outstanding share of Arguss common stock.

The exchange offer will be followed by a merger in which Dycom
would acquire, at the same exchange ratio, the remaining shares
of Arguss common stock not previously acquired in the exchange
offer. The exchange offer is expected to commence as soon as
practicable after the filing of required documents with the U.S.
Securities and Exchange Commission.

"Dycom's acquisition of Arguss strategically strengthens our
customer base, geographic scope, and technical service
capabilities," said Steven E. Nielsen, Chairman and Chief
Executive Officer of Dycom. "It significantly enhances our
broadband construction and design service offerings just as
recent industry developments indicate new potential
opportunities. Together our combined scale will enable us to
better serve our customers while also generating opportunities
for cost synergies."

Rainer H. Bosselmann, Chairman and Chief Executive Officer of
Arguss, said, "We believe this transaction is an excellent fit
for both companies, both strategically and operationally. Dycom
has demonstrated an outstanding track record in the industry,
and the combination offers our stockholders an excellent
opportunity for future growth."

The transaction is expected to qualify as a "tax-free"
reorganization for federal income tax purposes. The offer is
subject to the satisfaction of customary conditions, including
the tender for exchange of at least a majority of Arguss'
outstanding shares and the expiration or termination of the
waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act.

The offer is also subject to the lenders under Arguss'
syndicated credit agreement agreeing to extend their forbearance
agreement until the consummation of the merger.

In connection with the merger agreement, Dycom has entered into
a stockholders' agreement with Mr. Bosselmann and certain other
directors and executive officers of Arguss pursuant to which
they have agreed to tender their shares into the offer, vote in
favor of the merger and against any competing transaction and
grant an irrevocable proxy to Dycom.

Merrill Lynch & Co. and Banc of America Securities LLC are
acting as financial advisors to Dycom and Shearman & Sterling is
its outside legal counsel. Allen & Company Incorporated is
acting as financial advisor to Arguss and Gibson, Dunn &
Crutcher LLP is its outside legal counsel.

Dycom will discuss this transaction in a conference call with
investors beginning at 4:30 PM Eastern Standard Time on Monday,
January 7, 2002. To participate in this conference call in the
United States call 1-800-230-1085 and internationally call
(612)-288-0318 and ask for the "Dycom acquisition" conference

Dycom is a leading provider of engineering, construction, and
maintenance services to telecommunication providers throughout
the United States.

Additionally, Dycom provides similar services related to the
installation of integrated voice, data and video local and wide
area networks within office buildings and similar structures.
Dycom also provides underground utility locating and mapping and
electric utility construction services.

Arguss conducts its operations through its wholly owned
subsidiaries - Arguss Communications Group, Inc. and
Conceptronic, Inc. Arguss Communications Group designs,
constructs, reconstructs, maintains and repairs
telecommunication systems and provides aerial, underground and
premise construction services and splicing of both fiber optic
and coaxial cable to major telecommunication customers. As at
September 30, 2001, Arguss Communications' liquidity is strained
with total current liabilities exceeding total current assets by
close to $30 million.

Conceptronic manufactures and sells highly advanced, computer-
controlled capital equipment used in the SMT circuit assembly

ARMSTRONG HOLDINGS: Settles Pennsylvania State Sales Tax Appeals
Armstrong Worldwide, Inc., brings before Judge Newsome its
Motion asking his approval of a settlement with the Commonwealth
of Pennsylvania in connection with certain sales and use tax
assessment appeals begun by the Commonwealth, and certain tax
refund appeals commenced by AWI.

The Commonwealth imposes sales and use taxes on each transfer of
a retailer of tangible personal property and certain enumerated
services at a rate of 6% of the purchase price.  Sales taxes are
paid to the vendor, which remits the collected tax to the
Commonwealth.  Use taxes are accrued and remitted directly to
the Commonwealth by the customer. Thus, sales and use taxes are
computed on a transaction-by-transaction basis.  In addition,
the Commonwealth's sales and use tax statute provides nearly 100
exemptions and exclusions from the tax.  A review of AWI's
purchases for a typical 3-year period involves millions of
transactions and thus is extraordinarily time-consuming and

Virtually all companies doing business in the Commonwealth are
liable for a certain amount of sales and use taxes.  Due to
AWI's size, the Commonwealth allows AWI to use a direct pay
permit.  That permit allows AWI to pay use tax instead of sales
tax.  Thus AWI files monthly returns with the Commonwealth
reporting AWI's monthly tax liability and remits monthly
payments to the Commonwealth based on those returns. The
Commonwealth periodically audits the nontaxable transactions
accounted by those returns to identify and assess tax based on
any underpayment.  AWI periodically reviews the taxable
transactions accounted by those returns to identify and seek
refunds of tax based on any overpayment of tax.

Consequently AWI has two assessment and two refund appeals
pending with the Commonwealth Court of Pennsylvania.  Each of
those appeals have been adjudicated by the administrative tax
review boards of Pennsylvania, the Board of Appeals and Board of
Finance and Review, which have granted AWI a considerable amount
of relief.  The four appeals are:
    Appeal        Period       Amount at Uncontested   Est. Tax
                             Issue after   Tax Amt     Recovery
                            Board Relief
    -----         ------    ------------ -----------   ---------
1. Assessment I   1/89-6/94   $  803,293   $408,115           NA
2. Assessment II  7/94-6/97   $  588,204   $408,667           NA
3. Refund I       7/94-12/96  $  985,299      NA        $523,000
4. Refund II      1/97-8/98   $1,740,859      NA        $675,260

The four appeals contain several hundred thousand contested
transactions involving 34 issues.  AWI's tax counsel estimates
that the four appeals would cost between $200,000 and $800,000
to litigate in the Commonwealth Court due to the size of the
appeals and the complex nature of the subject matter.  In
addition, any party has an automatic right to appeal a decision
of the Commonwealth Court to the Pennsylvania Supreme Court,
which also would be costly. The number of issues involved in the
appeals also raises the litigation risk that a court may
disagree with, and thus rule against, AWI.

            Settlement of the Tax Assessment Appeals

After substantial arms'-length negotiations with the
Commonwealth, Debra A. Dandeneau, Esq., at Weil, Gotshal &
Manges relates, AWI has agreed to enter into a compromise and
settlement that will finally dispose of the tax assessment
appeals pending with the Commonwealth Court. AWI and the
Commonwealth have agreed:

       (1) With respect to Assessment I, AWI will pay the
Commonwealth $440,000.00, plus interest, or the uncontested
amount of tax plus approximately eight percent.

       (2) With respect to Assessment II, AWI will pay the
Commonwealth $466,094, plus interest, or the uncontested amount
of tax plus approximately 14 percent.

       (3) The total settlement amount for the assessment
appeals is $906,000, plus interest, or $1,493,919.00.
Accordingly, AWI will pay the Commonwealth, or offset the
assessment settlement amount, against the refund settlement

       (4) The Commonwealth agrees that it will not seek any
additional funds, fees or costs from AWI for any use tax
liability accruing during the time periods covered by the tax
assessment appeals.

                 Settlement of the Refund Appeals

During their negotiations concerning the refund appeals, AWI and
the Commonwealth developed a method the parties agreed was fair
and reasonable to determine the amount of the use tax refund the
Commonwealth owes AWI That method takes into account the legal
basis for relief and the sufficiency of the evidence available
for AWI to prove its case. The refund appeals were both settled
using such method. AWI and the Commonwealth have agreed to
compromise and finally settle the tax refund appeals as follows:

       (1) With respect to Refund I, the Commonwealth will pay
AWI $523,000.00, plus interest, or the maximum estimated

       (2) With respect to Refund II, the Commonwealth will pay
AWI $675,000.00, plus interest, or the maximum estimated

       (3) The total settlement amount for the refund appeals
equals a refund of $1,198,000.00, plus interest, or
$1,493,919.00. Accordingly, the Commonwealth will pay AWI or
offset the refund settlement amount against the assessment
settlement amount.

       (4) AWI may seek additional refunds, fees or costs from
the Commonwealth for any use tax overpayments accruing during
the time periods covered by the tax refund appeals.

Because the assessment settlement amount and the refund
settlement amount are equal to each other, AW1 and the
Commonwealth will finalize the settlement by offsetting such
amounts against each other.

Accordingly, the Commonwealth and AWI will enter into
Stipulations for Judgment or similar documents finally resolving
all of the issues and disposing of each of the assessment
appeals and refund appeals. The Settlement Documents effectively
calculate the (a) tax due, (b) interest due, and (c) penalty due
at zero dollars ($0.00) for each appeal.

                     The Debtor's Argument

Ms. Dandeneau says that AWI believes that it has a strong case
against the Commonwealth with respect to each of the appeals;
however, AWI recognizes that each of the assessment appeals and
the refund appeals is in its infancy and will require several
years of litigation. Notwithstanding the merits of AWI's claims
against the Commonwealth in the tax refund appeals and its
defenses to the Commonwealth's claims in the assessment appeals,
litigation is always fraught with uncertainty and in this
instance is expected to be extremely costly.  Likewise, because
AWI's use tax must be evaluated on a transaction-by-transaction
basis, the issues raised by the assessment appeals and the
refund appeals are complex and fact-intensive, and it is
impossible to predict with any degree of certainty how a court
ultimately would rule in each of the appeals.

In order to obtain a final disposition on each of the appeals,
AWI would be required to expend substantial time and legal
expense without any assurance of a better result than the
settlement proposed by this Motion.  AWI estimates the cost of
this litigation could be anywhere between $200,000 and $800,000.  
These legal expenses would constitute administrative costs that
would diminish AWI's chapter 11 estate.  AWI does not believe
that the substantial fees and expenses associated with
litigating the appeals to their conclusion are reasonable,
particularly when such costs are balanced against the amount of
AWI's expected recovery if successful.

Finally, AWI believes that approval of this settlement is in the
best interests of its creditors.   This settlement contemplates
an offset of the assessment settlement amount and the refund
settlement amount, without incurring the administrative expenses
associated with litigation in the Commonwealth Court, or the
transaction-by-transaction review and analysis of AWI's use tax
obligations dated back to 1989. Moreover, because the
Commonwealth's assessment claims in the appeals will be finally
adjudicated and satisfied under the settlement, the total claims
against the estates will be reduced by more than $1.4 million if
this settlement is approved.  AWI therefore believes, in what it
describes as the "exercise of its sound business judgment", that
this settlement should be approved. (Armstrong Bankruptcy News,
Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900)   

BANKAMERICA: Fitch Downgrades Manufactured Housing Bonds Series
Fitch has downgraded the rating of 6 classes of BankAmerica
Manufactured Housing Contract Trust, series 1997-1 and 1997-2.

Additionally, 3 classes of BankAmeica Manufactured Housing
Contract Trust, series 1998-2, are placed on Rating Watch

Since June 1999, numerous rating actions have been taken on
series 1997-1 and 1997-2. The actions reflect the continued poor
performance of the underlying manufactured housing loans in the
transactions. Each of the transactions has experienced higher
than expected losses which has caused principal shortfalls to
the senior certificates and considerable interest shortfalls to
the subordinate certificates.

The class M, B-1 and B-2 in series 1997-1 and 1997-2, have
multiple years of interest shortfalls accumulated, and prior to
receiving any of the outstanding interest shortfall amounts the
senior certificates in each deal need to recoup their principal
shortfall amounts of $654,844.35 and $1,955,542.52 respectively.
At this time, Fitch expects the subordinate bonds to continue to
experience prolonged disruptions in interest payments.

For series 1998-2, the class M, B-1 and B-2 have started to
experience interest shortfalls due to the Reserve Fund being
depleted in August 2001. To date the class M, B-1 and B-2 have
interest shortfalls equal to 3, 4 and 5 times their monthly
interest amount respectively. In addition, the senior
certificates recently started to experience principal shortfalls
and to date there is $102,123 outstanding that needs to be paid
back prior to the subordinate tranches receiving any of their
interest shortfall amounts. Since the financial structure
provide for repayment of interest shortfalls which Fitch
believes may be recoverable, these bonds are placed on Rating
Watch Negative to inform investors of the cash flow status.
Fitch will continue to monitor the deal to determine whether
these shortfalls are going to be short term or are going to
occur over a prolonged period of time.

The affected securities are: BankAmerica manufactured housing
contracts pass-through certificates:

     -- series 1997-1, class M, downgraded to 'BBB-' from 'A-'
        and will remain on Rating Watch Negative;

     -- series 1997-1, class B-1, downgraded to 'B-' from 'BB-'      
        and will remain on Rating Watch Negative;

     -- series 1997-1, class B-2, downgraded to 'CCC' from 'B';

     -- series 1997-2, class M, downgraded to 'BBB-' from 'A-'
        and will remain on Rating Watch Negative;

     -- series 1997-2, class B-1, downgraded to 'B-' from 'BB-'
        and will remain on Rating Watch Negative;

     -- series 1997-2, class B-2, downgraded to 'CCC' from 'B'

Additionally, the following securities are placed on Rating
Watch Negative:

     -- series 1998-2, class M, B-1 and B-2.

Additional comments concerning these transactions:

On Jan. 3, 2002, GreenPoint Credit (servicer) announced that it
was exiting the manufactured housing lending business effective
immediately. The company intends to continue servicing all
existing manufactured housing loans. Currently, GreenPoint
services $1.5 billion of BankAmerica manufactured housing loan

Due to its lack of dealer relationships as a result of exiting
the manufactured housing lending business, GreenPoint is reliant
upon wholesale liquidations of repossessed homes. Recovery rates
on wholesale liquidations are generally substantially lower than
retail liquidation recoveries.

Fitch will continue to monitor the performance of the collateral
pools backing the securities as well as the status of the
servicing platform.

BETHLEHEM STEEL: Taps Skadden & Dewey as Int'l Trade Counsels
Bethlehem Steel Corporation, and its debtor-affiliates seek the
Court's authority to retain Skadden, Arps, Slate, Meagher & Flom
LLP and Dewey Ballantine LLP, as special international trade
counsel, nunc pro tunc to Petition Date.

Lonnie A. Arnett, Bethlehem Steel's Vice President, Controller
and Chief Accounting Officer, relates that Skadden and Dewey
have in the past served, and continue to serve, as joint
international trade counsel to a coalition of four United States
producers of carbon steel flat-rolled products in their ongoing
efforts to secure and retain relief from injuries arising from
increased imports of these products and from unfair trade
practices with respect to these products.  In addition to the
Debtors, Mr. Arnett tells the Court that the members of the
Coalition are LTV Steel Company, Inc., National Steel
Corporation and United States Steel LLC.

Unfair trade practices by foreign steel producers and the injury
from increased steel imports are among the principal reasons
that the Debtors filed their chapter 11 petitions, Mr. Arnett
explains.  ""High levels of unfairly traded import steel have
chronically depressed sales prices in the United States market
and deprived United States producers, including the Debtors, of
sales volume, thereby forcing down operating rates," Mr. Arnett

Thus, Mr. Arnett asserts, it is essential to the success of any
reorganization plan that effective legal and public policy
measures be taken to offset the effects of unfair trade and the
serious injury to the United States steel industry caused by
increased steel imports.

(A) The Section 201 Case - Increased Steel Imports

   According to Mr. Arnett, sections 201 to 204 of the Trade Act
   of 1974 provide a mechanism for protection of domestic
   industries from serious injury due to increases in the amount
   of imports to the United States.

   Upon the June 22, 2001 request of the United States Trade
   Representative, Mr. Arnett recounts, the International Trade
   Commission initiated an investigation into injury of the
   domestic steel industry caused by imports of flat-rolled
   steel products. The International Trade Commission later
   unanimously found that the domestic steel industry has been
   seriously injured by steel imports of flat-rolled products.
   The International Trade Commission held public hearings for
   the remedy phase of the Section 201 Case in early November
   and announced its remedy recommendations on December 12,
   2001.  A report from International Trade Commission was
   provided to the President on December 19, 2001.  "The
   President is to take action, if any, to facilitate the
   industry's positive adjustment to import competition within
   60 days of receiving the International Trade Commission's
   report, although this time period may be extended by several
   weeks if the President requests additional information," Mr.
   Arnett anticipates.

   According to Mr. Arnett, Skadden and Dewey perform all of the
   legal work on behalf of the Coalition in the steel industry's
   Section 201 Case.  Going forward, Mr. Arnett says, Skadden
   and Dewey will continue to perform legal and economic work as
   they advise the Coalition with respect to:

       (i) remedy recommendations of the International Trade
      (ii) the Administration's consideration of remedy options,
     (iii) action taken by the President,
      (iv) Congressional resolutions regarding such Presidential
           action, and
       (v) periodic reports and reviews of the effects of any
           remedies enacted by the President.

(B) The Antidumping and Countervailing Duty Cases - Unfairly
    Traded Steel

   The principal legal remedies available to United States steel
   producers to mitigate the effects of unfair trade are the
   antidumping law and the countervailing duty law, Mr. Arnett
   points out.

   In this case, Mr. Arnett says, Skadden and Dewey will perform
   all of the legal work required to prosecute antidumping and
   countervailing duty proceedings on behalf of the Coalition.
   "The two firms jointly represent the Coalition with respect
   to approximately 62 ongoing administrative and legal
   proceedings," Mr. Arnett tells the Court.  For example, Mr.
   Arnett illustrates, Skadden and Dewey are currently
   prosecuting on behalf of the Coalition 20 antidumping and 4
   countervailing duty investigations with respect to imports of
   cold-rolled flat products from 20 countries. In addition, Mr.
   Arnett continues, the two firms continue to litigate appeals
   and remands to the administering agencies of final
   antidumping and countervailing duty decisions that have
   already been made with respect to hot-rolled flat products,
   cold-rolled flat products, plate and corrosion-resistant flat
   products.  "There are currently 24 active appeals pending
   before the United States Court of International Trade, 5
   appeals pending before the United States Court of Appeals for
   the Federal Circuit and 1 NAFTA Binational Panel Review," Mr.
   Arnett states.  Moreover, Mr. Arnett remarks, the two firms
   also represent the Coalition in periodic administrative
   reviews of existing antidumping and countervailing duty
   orders, which can result in the upward or downward
   adjustments in the level of duties.  According to Mr. Arnett,
   there are currently 4 such active administrative reviews
   under way.  Aside from that, Mr. Arnett says, there are also
   two changed circumstance reviews and two anti-circumvention
   proceedings related to existing antidumping orders.

   In addition, Mr. Arnett relates, Skadden and Dewey advise the
   Coalition with respect to "suspension agreements," pursuant
   to which antidumping and countervailing duty proceedings can
   be suspended by government-to-government agreements that
   establish restrictions on the quantities and/or prices of
   subject products allowed to enter the United States market in
   lieu of imposition of antidumping and countervailing duties.
   "The firms also provide advice and support to the United
   States government with respect to challenges to United States
   antidumping and countervailing duty decisions by foreign
   governments under the dispute resolution procedures of the
   World Trade Organization," Mr. Arnett discloses.

(C) Other Remedies and Activity

   There are other legal remedies exist, which can be applied,
   under some circumstances, to offset unfair trade practices
   and injurious imports, according to Mr. Arnett.  Among these
   other remedies are section 301 of the Trade Act of 1974, and
   the civil and criminal antitrust law of the United States.
   From time to time, Mr. Arnett tells the Court, the Coalition
   has asked Skadden and Dewey to examine the applicability of
   these laws to the problem of unfair trade in steel.  "While
   to date the firms have not commenced legal actions under any
   of these laws on behalf of the Coalition, the Coalition may
   direct them to do so during the course of the current
   representation," Mr. Arnett says.

The Debtors expect that Skadden and Dewey will continue to
provide services to the Debtors in connection with the trade
matters, and will provide such other additional related services
as may be reasonable and appropriate, without duplication of the
services to be performed by each other or the Debtors' other
counsel.  Mr. Arnett assures Judge Lifland that Skadden and
Dewey will work closely with each other to avoid duplication of
effort and so that each firm's knowledge and experience with
respect to the international trade legal affairs of the
Coalition can be made available to the other firm.

Prior to Petition Date, Mr. Arnett notes that Skadden and Dewey
jointly represented the Coalition on the basis of a fee
arrangement that allocated fees based, in part, on each
Coalition member's annual production tonnage of products that
were the subject of the representation. Pursuant to the fee
arrangement, Mr. Arnett relates that each firm's fees were, and
will continue to be, discounted at a rate of 10% from normal
billing rates.

Between September 30, 2000 and the Petition Date, Mr. Arnett
tells the Court that Skadden incurred fees, expenses and other
charges in the approximate amount of $4,482,383 in connection
with its representation of the Debtors on matters related to the
Coalition engagement and the Trade Engagement. As of the
Petition Date, Mr. Arnett informs Judge Lifland that
approximately $1,223,355 remained outstanding for fees, expenses
and other charges incurred.  Further, Mr. Arnett adds, the
Debtors have incurred approximately $321,426 in charges from
Skadden for services rendered and disbursements and other
charges incurred between the Petition Date and November 30,
2000, representing the reasonable value of the services rendered
by Skadden to the Debtors in connection with the Coalition
engagement and the Trade Engagement.

During these same periods, Mr. Arnett says, Dewey also billed
the Debtors $4,484,340 for services rendered and disbursements
and other charges incurred between September 30, 2000 and the
Petition Date.  According to Mr. Arnett, Dewey had outstanding
bills to the Debtors for legal services totaling $1,654,478 as
of the Petition Date.  Moreover, Mr. Arnett continues, the
Debtors have incurred $280,109 in charges from Dewey for
services rendered and disbursements and other charges incurred
from the Petition Date through October 31, 2001.  "These charges
and compensation represent the reasonable value of the services
rendered by Dewey," Mr. Arnett asserts.

The Debtors do not state, nor do Skadden or Dewey disclose, how
they will be compensated for services performed during these
chapter 11 cases.  As LTV Steel explained to Judge Bodoh when it
retained Skadden and Dewey in its chapter 11 cases, the Firm's
fees are divided-up among members of the Steel Coalition based
on each steel company's annual output.  LTV anticipated paying
Skadden and Dewey a total of $1 million in 2001.  See In re LTV
Steel Company, Inc., et al., Bankruptcy Case No. 00-43866
(Bankr. N.D. Ohio), Docs. 865 and 876 filed April 9, 2001.

Robert E. Lighthizer, Esq., a member of the Skadden, Arps,
Slate, Meagher & Flom LLP, and Thomas R. Howell, a partner in
Dewey Ballantine LLP, each assure Judge Lifland that their
respective firms do not:

  (a) have any connection with the Debtors or their affiliates,
      their creditors, or any other party-in-interest, or their
      respective attorneys and accountants, or

  (b) hold or represents any interest adverse to the Debtors'
      estates with respect to the matters on which the firms are
      to be retained.

Mr. Lighthizer and Mr. Howell tell the Court that their firms
will file supplemental affidavits if any relevant information
comes to their attention.

                         *     *     *

Satisfied by the firms' disinterestedness and qualifications as
well as by the Debtors' need to continue the retention of these
firms, Judge Lifland permits the Debtors to retain Skadden and
Dewey as special international trade counsel, effective nunc pro
tunc to October 15, 2001. (Bethlehem Bankruptcy News, Issue No.
8; Bankruptcy Creditors' Service, Inc., 609/392-0900)

BIZNESSONLINE: MCG Converts $5MM of Debt Into Preferred Stock
-------------------------------------------------------------, Inc., (OTC BB: BIZZ) announced that its
senior lender MCG Capital Corporation (NASDAQ: MCGC) has
converted $5 million of's outstanding debt
into a new series of Senior Preferred Stock of the company and
increased's line of credit by an additional

MCG has also restructured the remaining debt to provide enhanced
liquidity and delay the commencement of principal payments until
May 2003.

Mark E. Munro, CEO of commented, "We are
pleased that MCG has demonstrated their commitment to our
business model and to our future prospects. This restructuring
will allow us to focus on strengthening our business through
customer acquisition and retention while we continue to explore
other strategic alternatives for the company. Our customers,
vendors, employees and shareholders should be pleased by MCG's
conversion and additional capital infusion."

Steven Tunney, President of MCG said, "MCG is committed to
supporting through these difficult times in
the capital markets. We believe that this restructuring will
allow the company to focus it efforts on providing high value
services to its customers." is one of the Northeast's leading integrated
communications providers, and offers customers co-location, e-
commerce development, Web design and hosting services, high-
speed Internet access and local/long distance telco services.
Committed to satisfying the increasing Web and
telecommunications needs of businesses,
provides bundled, advanced IP and essential telco services.
Customers' secure broadband and Internet connections are served
via's state-of-the-art Internet Data Centers
and fault-tolerant, fiber-optic backbone network, and are
supported by the Company's 24x7 customer care and network
monitoring. The Company can be found on the World Wide Web at  MCG Finance can be found at

BURNHAM PACIFIC: DDR to Acquire 2 Calif. Retail Assets for $65MM
Developers Diversified Realty (NYSE: DDR) announced it has filed
a registration statement with the Securities and Exchange
Commission relating to the possible issuance by DDR of up to 2.8
million common shares to fund a portion of the purchase price
for two California retail assets from Burnham Pacific
Properties, Inc. (NYSE: BPP) and related entities.

Under the purchase agreement with Burnham, as described more
fully in DDR's registration statement, the properties will be
acquired for $65.4 million, of which $15.1 million will be paid
in cash.  At DDR's option, any or all of the remaining balance
may be paid in cash or, subject to listing approval of the NYSE
and effectiveness of the registration statement, by the issuance
of DDR common shares to Burnham.  The transaction is expected to
close in late February and the assets will be wholly owned by

DDR has agreed to purchase the retail component of 1000 Van
Ness, which is a mixed-use property in downtown San Francisco.  
The 123,000 square foot building has been designated as a
National Historic Landmark and is leased to AMC Theatres, Crunch
Fitness (owned by Bally Total Fitness) and several restaurants.  
The property also includes a parking garage and residential
units, which are separately owned.

DDR has also agreed to purchase Hilltop Plaza Shopping Center, a
245,000 square foot open-air community shopping center, located
along Interstate 80 in Richmond, California.  This center, which
was constructed in 1996 and renovated in 2000, is anchored by a
Barnes & Noble, Circuit City, Ross Dress, Petsmart, and a
recently constructed Century Theater.

DDR currently manages both properties under its Liquidation
Services Agreement with Burnham.  Under this two-year agreement,
which went in effect in December 2000, DDR and its affiliate,
Coventry Real Estate Partners, earn fees for the management,
leasing, and construction management of Burnham's remaining real
estate portfolio.  Originally, the liquidation portfolio was
comprised of 42 assets.  Excluding the two properties to be
purchased by DDR, there are currently 14 assets remaining in the
liquidation portfolio.

DDR previously purchased 10 west coast assets from Burnham
through its Retail Value Investment Program, a joint venture
among DDR, Coventry Real Estate Partners and Prudential Real
Estate Investors.  These acquisitions, which totaled 2.16
million square feet, were made between December 2000 and August

DDR currently owns and manages approximately 240 shopping
centers in 41 states totaling 58 million square feet of retail
real estate.  DDR is a self-administered and managed real estate
investment trust (REIT) operating as a fully integrated real
estate company which acquires, develops and manages shopping
centers. You can learn more about DDR on the Internet at  

CATELLUS: S&P Concerned About Highly Leveraged Financial Profile
Standard & Poor's affirmed its double-'B' corporate credit
rating on Catellus Development Corp.

The outlook is stable.

The rating acknowledges the stability of the cash flow generated
from Catellus' increasingly diversified and growing operating
portfolio, although ratings are also tempered by the inherent
risks associated with a development-focused growth strategy,
particularly at this weakening stage of the real estate cycle,
and Catellus' more highly leveraged financial profile.

San Francisco, Calif.-based Catellus is a fully integrated real
estate development concern. The company was established in 1984
as the real estate operating subsidiary of Santa Fe Pacific
Railroad and spun off to investors in 1990. By 1993, the deep
real estate recession in California severely challenged the
company, but by 1995, Catellus embarked on a major
restructuring, focusing on its core competency of land and
property development. During the past few years, the company has
expanded its stabilized operating portfolio by retaining
ownership of newly completed real estate development projects in
existing and new markets. The active development pipeline
includes five million square feet (sq. ft.), or $225 million
worth of build-to-suite office and industrial properties, as
well as a healthy mix of speculative development.

Catellus' diversification into new markets includes Minooka,
Ill. and Woodridge, Ill. (1.7 million sq. ft. and 1.0 sq. ft.
potential, respectively), Coppell, Texas (1.1 million sq. ft.
potential), and Stapleton, Colo. (1.4 million sq. ft.
potential). This geographic expansion, thus far successful,
should continue to improve cash flow stability as additional
development projects season within the stabilized portfolio.
Catellus also pursues a limited amount of third-party
development, but prefers the benefits of a build-and-hold
strategy. The existing landholdings are entitled for an
additional 42 million sq. ft., and it is expected that the
amount of development activity pursued by Catellus, particularly
that which is speculative, will somewhat match the ebb and flow
of demand for space in each of its markets

Catellus' financial strategy continues to rely upon the use of
secured mortgage debt as the main form of financing. However,
since Catellus is not structured as a REIT, the company can
retain cash flow for use in future development and acquisition
projects. As a result, Catellus has demonstrated good internal
liquidity by recycling cash flow generated from stabilized
operations to fund its ongoing development pipeline and other
operating requirements. Furthermore, the company's sizable cash
balance (nearly $300 million at Sept. 30, net of the recently
announced $180 million stock buyback from CalPERs, a large
shareholder) acts as a backstop to complete existing development
opportunities should economic conditions negatively impact the
availability of conventional mortgage financing. Nevertheless,
the use of secured mortgage financing has resulted in a fully
encumbered portfolio, thereby limiting financial flexibility
relative to like-rated REITs. As a result of this large amount
of encumbered net operating income, Standard & Poor's would be
required to differentiate between the company's corporate credit
rating and any future unsecured debt rating.

Catellus' financial measures (profitability, leverage, and
fixed-charge coverage) have benefited from an expanded operating
portfolio and a healthy real estate market. Management's
strategy of acquiring large land development tracts (such as
Kaiser Commerce Center in Ontario, Calif. and Stapleton Business
Center in Denver, Colo.) as inventory for its build-and-hold
activity results in a lower cost basis in the stabilized
portfolio. This lower basis bolsters overall profitability and
gives Catellus a competitive leasing advantage in its
submarkets. This advantage should mitigate potential challenges
presented by the portfolio's 10%-16% (of total sq. ft.) annual
lease expiration schedule over the next five years.

The impact of continued development activity and a weakened
economic and real estate environment are expected to place
modest downward pressure on coverage measures over the next few
years. At Sept. 30, fixed-charge coverage (on a funds from
operations basis, including capitalized interest and principal
amortization) was about 1.9 times (x) and is supported solely by
the operating portfolio, as it does not give credit to generally
recurring, yet highly variable, net gains related to development
activity and miscellaneous asset sales. This measure increases
to over 2.0x when these gains are included. Additionally, the
company's cash flow benefits from deferred taxes associated with
development projects, typically sold through a 1031 exchange.
These deferrals allow the company to reinvest its development
yields in additional near-term projects while deferring capital
gains taxes until a later date.

                       Outlook: Stable

Catellus' credit profile has been bolstered by the expanded size
and geographic diversity of its stabilized portfolio. Recently
completed projects and a strong cash balance should continue to
provide modest support for potentially weakened debt coverage
measures resulting from ongoing development drag and
deteriorating real estate market fundamentals. However, should
core portfolio performance be negatively impacted by market
conditions, with no corresponding pullback in development
activity, the ratings outlook would be revisited.

CHIQUITA BRANDS: Court Sets Disclosure Hearing for January 18
Chiquita Brands International, Inc., sought and obtained from
the Court an order:

  (a) scheduling hearings to approve adequacy of the disclosure
      statement and to confirm the Plan, and

  (b) establishing objection deadlines thereto.

The disclosure hearing will be held on January 18, 2002 at 10:00
a.m., while the confirmation hearing is scheduled for March 8,
2002.  Both will take place before Judge Aug, on the 8th Floor,
United States Bankruptcy Court for the Southern District of
Ohio, Atrium II, 221 East Fourth St., Suite 800, Cincinnati,

Objections, if any, to the adequacy of the disclosure statement
shall be filed with the Court so as to be received by the Clerk
of the Court on or before 4:00 p.m., prevailing Eastern Time, on
January 8, 2002.  Objections, if any, to the confirmation of the
Plan shall be filed with the Court so as to be received by the
Clerk of the Court on or before 4:00 p.m., prevailing Eastern
Time, on February 21, 2002.  In addition, these persons must
receive copies of all such objections by the appropriate
objection deadline:

    (1) Counsel to Debtor and Debtor in Possession

          Kirkland & Ellis
          200 East Randolph Drive
          Chicago, Illinois 60601
          Attn: Matthew N. Kleiman

    (2) Co-Counsel to Debtor and Debtor in Possession

          Dinsmore & Shohl LLP
          1900 Chemed Center
          255 East Fifth Street
          Cincinnati, Ohio 45202
          Attn: Kim Martin Lewis

    (3) Counsel to Ad Hoc Committee of Senior Bondholders of
        Chiquita Brands International, Inc.:

          Paul, Weiss, Rifkind, Wharton & Garrison
          1285 Avenue of the Americas
          New York, New York 10019-6064
          Attn: Alan W. Kornberg and Andrew N. Rosenberg

          Squire Sanders & Dempsey
          Suite 3500
          312 Walnut Street
          Cincinnati, Ohio 45202
          Attn: Stephen D. Lerner

    (4) Counsel to Ad Hoc Committee of the 7% Subordinated
        Debenture Holders of Chiquita Brands International,

          Schulte, Roth & Zabel LLP
          919 Third Avenue
          New York, New York 10022
          Attn: Jeffrey S. Sabin and Mark Allen Broude

    (5) Assistant United States Trustee

          Neal J. Weill
          2030 CBLD Center
          36 East 7th Street
          Cincinnati, Ohio 45202

"All objections to the Plan and/or the disclosure statement
shall state with particularity the grounds for such objection,"
Judge Aug orders.

Judge Aug further directs the Debtor to file a response to any

    (i) to the adequacy of the disclosure statement so that such
        response is received by the Clerk of the Court on or
        before 4:00 p.m., prevailing Eastern time, 3 days before
        the disclosure hearing; and

   (ii) to confirmation of the Plan so that such response is
        received by the Clerk of the Court on or before 4:00
        p.m., prevailing Eastern Time, 5 days before the
        confirmation hearing. (Chiquita Bankruptcy News, Issue
        No. 4; Bankruptcy Creditors' Service, Inc., 609/392-

CLEAR LOGIC: Files Voluntary Chapter 11 Petition in San Jose
On Jan. 4, 2002, Clear Logic, Inc., filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the Northern District
of California, San Jose Division.

The Chapter 11 filing was prompted, in large part, by the
Company's pending litigation with Altera Corporation. In this
litigation Altera contends that customers who send a bitstream
containing their design to Clear Logic are violating the Altera
click-wrap software license agreement, and that Clear Logic has
wrongfully interfered with these agreements.

Clear Logic disputes Altera's contentions. For example, Altera
and other FPGA manufacturers have consistently promoted in their
marketing literature the use of their software for third-party
ASIC development(1). Clear Logic intends to continue to
prosecute the case vigorously, but believes that Chapter 11
protection will allow the Company to focus on its core
operations pending the conclusion of the Altera litigation.

"Clear Logic is currently analyzing several options which can be
implemented to resolve its dispute with Altera while at the same
time improving its cash flow and balance sheet," according to
Leonard Perham, Clear Logic's CEO. "We intend to implement one
or more of such options as soon as possible in order to allow
Clear Logic to emerge from bankruptcy as a stronger reorganized
company. Clear Logic's customers can assume that, while
operating under the protection of the bankruptcy court, we will
continue to ship existing and new orders on time every time."

CFO Mike Gumport added: "Clear Logic intends to pay our
manufacturing vendors and employees in a timely fashion during
the bankruptcy process. We received $10.5 million in financing
in 2001, and, as a result, our cash on hand substantially
exceeds our manufacturing payables. Importantly, we have
received strong indications of support from our key financial
backers and believe our decision to pursue reorganization will
facilitate our access to additional capital. Currently, we are
working to minimize any disruption to payment schedules and
normal operations. Based on current backlog and order rates,
another quarter of sequential revenue growth remains a
reasonable expectation for 1Q02."

Clear Logic is a fabless semiconductor manufacturer that
provides low cost, no-NRE, automated FPGA-to-ASIC conversions.
Through these conversions, customers achieve huge cost
reductions for high volume production applications. Founded in
1996, the company has provided millions of dollars of savings
for several of the largest suppliers of networking and
telecommunications equipment.

Clear Logic, Inc. is a fabless chip supplier and the world
leader in a new market sector of FPGA compatible logic devices
(FCLDs). Clear Logic's design conversion process is fully
automated and patented.

Clear Logic ASICs have a proprietary coarse grained
architecture. As a result, Clear Logic ASICs can perform logic
that has been implemented in a customer's design in exactly the
same way as the programmable device does. No other ASIC has this
capability. Since the customization of Clear Logic ASICs is the
last step in the manufacturing process, the company can deliver
samples in four weeks, instead of the eight weeks usually
required for an ASIC.

Clear Logic's ASIC architecture eliminates all of the
transistors that programmable devices rely upon for
programmability while maintaining the same basic functionality.
By doing this, and by applying additional silicon saving
technologies, Clear Logic has cut the silicon area of its
devices by 40% to 60% from that required for the same
functionality in a programmable device. Clear Logic's lower
prices are a direct result of the reduced die sizes of its
devices. The exceptionally small die size of Clear Logic ASICs
also permits the company to offer prices that are comparable to
those of other ASIC implementations, without the associated NRE
charges and design headaches.

Clear Logic is a registered trademark of Clear Logic. Clear
Logic's World Wide Web site is

CLEAR LOGIC: Chapter 11 Case Summary
Debtor: Clear Logic, Inc.
        dba RCD Associates, and Brill
        dba T and C Design
        dba Net Control
        5870 Hellyer Ave.
        San Jose, CA 95138

Bankruptcy Case No.: 02-50088

Chapter 11 Petition Date: January 4, 2002

Court: Northern District of California (San Jose)

Judge: James R. Grub

Debtor's Counsel: Craig M. Rankin, Esq.
                  Levene, Neale, Bender, Rankin
                  1801 Ave. of the Stars #1120
                  Los Angeles, CA 90067

COMDISCO INC: Court Allows Goldman Sach's $8.25M Transaction Fee
The Court allows and approves the $8,250,000 Transaction Fee for
Goldman Sachs as interim compensation.  Accordingly, the Court
directs Comdisco, Inc., and its debtor-affiliates authority to
pay to Goldman Sachs the amount of the Transaction Fee
calculated in accordance with the original Goldman Sachs &
Company Agreement. (Comdisco Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)   

CONSECO INC: Says SSB Report "Contains Bad Analysis"
The attached letter from Conseco, Inc. (NYSE:CNC) Executive Vice
President of Corporate Affairs, Mark Lubbers, was sent to
Conseco investors Monday afternoon via e-mail, fax, etc., thus:

                                   January 7, 2002

     Dear Conseco Investor:

     When Gary Wendt recruited me to the Conseco turnaround 17
months ago, he didn't sugar-coat the task ahead. At the time,
this company had $2 billion in bank debt coming due and no
apparent way to pay it. And if it could negotiate that
"boulder," as he called it, there were half a dozen other
boulders waiting to be moved. Beyond the immediate boulders was
the tough job of changing Conseco from an acquisition engine
into a company producing shareholder value through operations.
He knew there would be bumps in the road, and that an open
channel to investors and our other outside audiences would be
important to our success. Like the others Gary recruited to this
adventure, I enjoy a challenge. But I never imagined having to
write a letter like this.

     On Saturday morning, I was quoted in the New York Times
calling SalomonSmithBarney's January 3 "research" report absurd.
I called it that because the report contains misleading
information and bad analysis.

     The core of the January 3rd SSB report takes the loan
losses projected by Greenpoint on its exit from the MH business
and projects them onto Conseco. The report states:

     'Tied to its exit from MH loan financing, GPT essentially      
      doubled loan loss assumptions, and we anticipate, based on
      its own loan pool performance, that CNC may face similar

     The report proceeds to justify this statement NOT by an
analysis of loan pool performance, as promised. Rather, in an
official-looking table on page 3 of the report, the report takes
Conseco public data, ASSUMES the projected cumulative loss rate
projected by Greenpoint to calculate its write-off, and PLUGS
the difference as something called "projected additional future
losses based on GPT". Then, the assumed cumulative loss,
borrowed from the GPT announcement, is draped in a new title:
'SalomonSmithBarney Revised Projection of Lifetime MH Losses.'

     This so-called analysis is used to assert that it 'would
imply' future charges or loan losses of between $2.2 and $3.5
billion for Conseco.

     What is wrong with this 'analysis'? It is 100% based on the
Greenpoint data and assumptions. Two data points drive the
cumulative loan loss projection announced by Greenpoint: (1)
default rates and (2) severity rates. For the SSB analysis to
hold water, Conseco's experience would have to mirror the
Greenpoint experience and projections.

     Does it?  NO

     Will it?  NO.

     Is there any basis for an analyst's claiming that it does
or it will?  No, none whatsoever.  In fact, there is basis for
an opposite conclusion.

     In one of its several demonstrably misleading statements
the report says:

     'Greenpoint is considered to have been a much more
      disciplined and prudent lender than Conseco Finance.'

     Based on what? I should think that people reading
SalomonSmithBarney research would prefer data. Not to pick on
Greenpoint, a well-run and successful company, but the loan
performance data clearly shows that Conseco Finance is the
better performing MH lender. In data compiled by Lehman Bros.
and available on its website, you can see that for
securitization pools since 1999, Conseco has lower average
monthly losses and lower cumulative losses. See attached.

     Worse, SSB's analysis is based on Greenpoint's projected
severity rate of 80.2% -- which means that GPT plans on getting
less than 20 cents on the dollar for its repossessed MH units.

     Is that or will that be Conseco's severity rate? NO.

     Should an objective analyst know why this is an
inappropriate basis for making projections about Conseco?

     We have talked many times in the last year about how
critical it is to our operations to avoid wholesale disposition
of repo units. Throughout this bad cycle in the MH business, our
severity rates for on-balance-sheet receivables have remained at
approximately 48%.(1) In a business that plans on between 1 in 4
and 1 in 5 loans defaulting, the recovery rates on repossessed
collateral is a crucial financial metric. And this is where
being No. 1 in the industry really matters - as we've said many
times before.

     At September 30, Greenpoint's severity rate was 65%, 35%
higher than our on-balance-sheet severity rate and 20% higher
than our average of all MH repo disposition. And as Greenpoint
noted in its announcement last week, its 80% severity rate is
predicated on its exiting the market.

     Conseco is not exiting this business segment. There is no
disgrace in Greenpoint's exiting. Its presentation last week
shows pretty conclusively that it generates higher returns for
shareholders by getting out. As Gary Wendt has told you before,
he made the same decision at GE Capital, where, as we all know,
market leadership was prized above all things as a critical
element of financial success - just as it is in the MH lending
business, where Conseco Finance is No. 1.

     The positive variance between Greenpoint and Conseco
Finance on loan performance is almost exclusively owing to
Conseco Finance's strategic advantage in the market. Yet, the
SSB report gives it not a pause. It passes completely over the
data and extrapolates an unsupportable opposite conclusion,
namely, that whatever befell Greenpoint will befall Conseco.

     Extrapolating a conclusion about Conseco's ongoing business
from the economics of Greenpoint's exit is inappropriate. And
for an analyst to ignore completely the several reasons why a
Greenpoint exit is beneficial to Conseco Finance is

     In short, the 'analysis' that is the core of the SSB report
is the fabrication of a circumstance that does not and will not

     I am obliged to note a few other errors in the SSB report.

     Perhaps the most egregious is the comment that:

     'on a liquidation basis . . . policyholders should be
      reasonably well protected by various state guaranty

     The misinformation that this sentence implies is simply
irresponsible.  The analyst knows well that Conseco's insurance
policyholders are backed by $25 billion of assets that are held
on the books of our insurance subsidiaries, and that our risk-
based-capital (RBC) ratios are well in excess of prescribed
levels. We have worked diligently to maintain the confidence of
insurance regulators around the country, and the claims paying
ability of this company is not in doubt.

     The SSB report makes several references to the performance
of our MH securitization pools. We went into great detail on
this subject at the November 15th investor briefing in New York
(which Mr. Devine chose not to attend). I won't repeat those
arguments explaining why the SSB views on recent portfolio
performance are wrong.

     By the way, none of this note should be construed to say
that performance in the MH sector is by any means rosy. It is
not. We are in a very difficult economy that will continue to
put pressure on earnings in the Finance company. Obviously, the
accounting for the 4th quarter is not complete, but due in large
part to increasing provision for losses, we expect to fall short
of our previous guidance of 72 cents per share for 2001. This
will come as no surprise given the similar recent announcements
by many in the banking and lending business. The weight of the
unemployment and business slowdown hit hard in November and

     On two other 4th quarter issues raised in the SSB report,
we can report that there will be no I/O impairment charge in the
4th quarter - in other words, performance was within the more
conservative model put in place last quarter for the old gain-
on-sale pools. Second, the SSB report erroneously reports that
guarantees on securitizations are funded by and backed by an
LOC. That is not correct.

     Also incorrect, the report twice compares Conseco Finance's
home equity lending to Providian, in one instance as follows:

     'Our rating and estimate changes reflect ... continuing
      problems in the home equity segment that have plagued
      rival Providian Financial.'

     Not only is Providian not 'a rival,' they don't even do
home equity lending! Providian exited this market and sold its
home equity portfolio in early 2000.

     The other comparison that the report makes with our home
equity lending business is with 'Bank of America's now-
discontinued Money Store operations.' First, it must be noted
that The Money Store was never owned by Bank of America -- yet
another error. It was owned by First Union. Although in this
case it is at least true that The Money Store did home equity
lending, the comparability stops there. The Money Store served a
much riskier credit profile. Its distribution channel was direct
response to television ads. Conseco Finance's home equity
business is done through branch offices around the country.

     If Mr. Devine truly wants to present comparable home equity
lending data, we suggest that he take a look at our competitor
CitiFinancial - SSB's sister company at CitiGroup. The
CitiFinancial website description practically mirrors Conseco

     CitiFinancial provides community-based lending services
through a strong branch network system. Decisions are made
locally by CitiFinancial team members who live and work in the
locations they serve. This on-the-ground, face-to-face customer
interaction gives us a unique competitive advantage, allowing us
to best determine each client's needs. Our consumer loan
services include real estate-secured loans, unsecured and
partially secured personal loans, and loans to finance consumer

     Our team at Conseco Finance says that CitiFinancial may
generate better earnings than we do based on its lower cost of
capital, but that we may have the better loan performance in a
head-to-head comparison. Since SSB has unique access to the
data, they perhaps could make a comparison.

     Is this report just sloppy work? Or is it an intentional
effort to color the public perception of Conseco. I will leave
that for you to judge.

     The purpose of this note is to communicate to all investors
and potential investors in our company that Mr. Devine's work
contains errors. There are several other reputable analysts who
cover our company. If you read their work in combination, you
will get a more accurate view of Conseco.

     We are a company now in the 19th month of a difficult
turnaround, made even more difficult by the current economy. Our
original turnaround objectives hit rough sailing in the 2nd
quarter of 2001 when, as we now know, but didn't know then, the
economy entered a mild recession. Compounded by 9-11, this
economic backdrop has hindered our plan. Despite the setback, we
continue to execute. We said we would make all our debt payments
in 2001, and we did - six months early. We said we would reduce
the company's debt by more than $3 billion by the end of 2003,
and $2.2 billion has already been eliminated.

     We plan to survive. And we plan to thrive. We will do so
with the support of investors, regulators, and customers who
have the good sense - the common sense - to pay attention to the


                                   R. Mark Lubbers
                                   EVP, Corporate Affairs"

                             *  *  *

As reported in the November 26, 2001 Edition of Troubled Company
Reporter, international rating agency Fitch lowered the Conseco
Inc. senior debt rating to 'B-' from 'BB-', preferred stock
rating to 'CCC' from 'B' and the insurer financial strength
ratings of Conseco's insurance subsidiaries to 'BBB-' from
'BBB', all with Rating Outlook that is Negative.

This rating action followed Fitch's downgrading the long-term
counterparty rating of Conseco Finance Corp. (CFC) to 'CCC' from

Also, according to the report, the rating action on Conseco
reflects primarily the deteriorating credit quality of Conseco
Finance. Conseco is dependent on cash flow from Conseco Finance
to meet holding company cash needs. Therefore, the ratings of
Conseco are constrained by the stand-alone credit quality of
Conseco Finance.

Fitch further cited that Conseco remained highly leveraged with
a capital structure of debt at 37%, preferred stock of 17% and
common equity of 46% at September 30, 2001. Conseco has a
significant goodwill balance, 71% of equity at quarter-end.

DebtTraders reports that Conseco Inc.'s 10.500% bonds due on
December 15, 2004 (CNC8) are trading in the low 50s. See  
real-time bond pricing.  Conseco Finance's 10-1/4% notes --
$260,000,000 of them coming due in June 2002 -- are trading in
the mid to low-80s.  

DIGITAL TELEPORT: Gets Interim Approval of $5MM DIP Financing
Digital Teleport Inc., announced that a federal Bankruptcy Court
judge has approved a company request for initial lending under a
$5 million debtor-in-possession financing arrangement. The Court
also approved various other requests that provide authority to
continue the company's day-to day operations as a regional fiber
communications provider in secondary and tertiary markets.

Judge Barry S. Schermer of the U. S. Bankruptcy Court for the
Eastern District of Missouri in St. Louis, approved the
company's request to pay pre-filing and post-filing employee
wages, benefits and business expenses. These requests were among
various other "first day motions" filed with the Court. A
hearing on full funding under the DIP financing is pending.
Digital Teleport filed for voluntary Chapter 11 reorganization
on Dec. 31.

KLT Telecom Inc., the current majority owner of Digital
Teleport, is providing the $5 million DIP financing. Digital
Teleport will use the credit facility plus cash from continuing
operations to fund post-filing operating expenses and
obligations to suppliers and employees.

"We are pleased with the Court's prompt approval of our 'first
day' motions," said Paul Pierron, president and CEO of Digital
Teleport. "This should provide comfort to our vendors and
employees that we intend to continue our normal daily business
operations until we successfully emerge from court-supervised

Through Chapter 11 reorganization, the company plans to exit the
national long-haul business and eliminate non-revenue producing
fiber routes outside its operating region. Digital Teleport will
focus on operating its traditional core fiber optic network that
spans a five-state region in the Midwest.

Digital Teleport has retained Sonnenschein Nath & Rosenthal as
its main legal counsel and Summers Compton Wells & Hamburg as
special co-counsel. The company's financial advisor during the
restructuring is Deloitte & Touche LLP.

Digital Teleport provides wholesale fiberoptic transport
services in secondary and tertiary markets to national and
regional communications carriers. The company also provides
Ethernet service to enterprise customers and government agencies
in office buildings in areas adjacent to the company's
metropolitan network rings. Formed in June 1989, Digital
Teleport is 83.4 percent owned by KLT Telecom Inc. Year-to-date
through Sept. 30, 2001 Digital Teleport reported total revenues
of $13 million, up 68 percent over the same nine-month period a
year earlier. The company's Web site is

DIVERSIFIED REIT: Fitch Affirms Low-B Ratings on 3 Cert. Classes
Diversified REIT Trust 2000-1 certificates have been upgraded by
Fitch as follows: $18.1 million class B to 'AA+' from 'AA', $27
million class C to 'A+' from 'A', and $21.2 million class D to
'BBB+' from 'BBB'. The $50 million class A-1 certificates,
$145.8 million class A-2 certificates, and interest-only class X
certificates are affirmed at 'AAA' by Fitch. In addition, the
following classes have also been affirmed: $11.3 million class E
certificates at 'BBB-', $4.3 million class F certificates at
'BB', $5 million class G certificates at 'BB-' and $4.3 million
class H certificates at 'B'. All classes were privately placed
pursuant to Rule 144A of the Securities Act of 1933.

The certificates represent beneficial ownership interests in the
trust, the primary assets of which are unsecured senior debt
obligations of real estate investment trusts (REITs) or
operating partnerships in which REITs are the general partners.
The 21 REITs comprising the DIRT 2000-1 pool predominantly
invest in properties in one or more of the following six
sectors: retail (37%), office (23%), health care (11%),
multifamily (10%), self-storage (7%), diversified (7%), hotel
(4%) and industrial (1%).

The Fitch ratings are based on the credit enhancement provided
to each class by the subordination of the classes junior to it,
reflecting payment priority and loss allocation sequence. The
subordination provided to each rated class is as follows: 31.8%
to classes A-1 and A-2; 25.5% to class B; 16.1% to class C; 8.7%
to class D; 4.7% to class E; 3.2% to class F; and 1.5% to class

The rating associated with each credit enhancement level
reflects Fitch's assessment of the transaction's strengths and
concerns. Fitch's primary concern is the pool's concentration
within a single industry (commercial real estate), high dividend
distribution requirements for REITs, and the REIT sector's
greater reliance on debt and preferred securities as sources of
capital over the past several years. In addition, unsecured REIT
debt lacks the control over specific assets enjoyed by secured
commercial mortgage backed securities (CMBS), and may be subject
to a lengthier and less predictable recovery process during
bankruptcy. These concerns are mitigated by the strong asset and
geographic diversity of the DIRT 2000-1 pool's underlying real
estate assets, which aggregate approximately 5,400 individual
properties with a historical book value of approximately $57
billion. Refinancing risk for REITs is also mitigated by fee-
ownership of unencumbered assets, which can serve as a source of
collateral in a refinancing scenario. As of Sept. 30, 2001, the
DIRT 2000-1 pool's median historical cost of unencumbered real
estate to total unsecured debt was 2.2 times (x) as calculated
by Fitch, providing satisfactory debt refinancing capacity.

The overall performance of the DIRT 2000-1 trust assets remains
good. Since the closing of the transaction in April 2000, debt
protection measures for the DIRT 2000-1 pool have remained
strong. Median interest coverage from earnings before interest,
taxes, depreciation and amortization (EBITDA) was 3.1x for the
third quarter of 2001. Also, since deal closing, 14.4% of the
pool, representing four REIT credits, have been upgraded, while
only 3.5% of the pool, representing one REIT credit has been
downgraded. This has resulted in increased subordination levels
on investment grade classes, thus warranting upgrades. Non-
investment grade collateral continues to include the senior debt
obligations of Bradley Real Estate, Inc. (3.5% of pool value)
and Rouse Company (6.8% of pool value). The Bradley rating could
be positively impacted by a proposed IPO of parent Heritage
Property Investment Trust Inc, the company into which Bradley
was privatized in 1999.

Fitch will continue to monitor this transaction, as surveillance
is ongoing.

ESOFT INC: Will Begin Trading on OTCBB Effective January 15
eSoft, Inc. (Nasdaq: ESFT), announced that it received a Nasdaq
Staff Determination on January 4, 2002, from the Nasdaq Listing
Qualifications Department which indicates that eSoft's common
stock is subject to delisting from the Nasdaq SmallCap Market
effective January 14, 2002.  Although eSoft is currently in
compliance with the listing requirements, the Staff
Determination indicates that the Listing Qualifications
Department has determined to deny eSoft's request for continued
listing on the Nasdaq SmallCap market based upon its concern
regarding eSoft's ability to sustain long term compliance with
Marketplace Rule 4310c(2)(B).  eSoft does not plan to appeal the

eSoft expects to begin trading on the OTC Bulletin Board
effective January 15, 2002.

"We have determined the best course of action for eSoft and its
stockholders is to remain focused on the execution of our
business plan," said Jeff Finn, President and CEO of eSoft.  "We
believe we are well positioned in a strong and growing market
segment with a competitive product lineup."

ETOYS: Seeks to Extend Removal Period through May 2
EBC I, Inc. formerly known as eToys, Inc., asks the U.S.
Bankruptcy Court for the District of Delaware to further extend
its time to file notices of removal of related proceedings
through May 2, 2002.

Since the Petition Date, the Debtors have focused their
attention on the liquidation of their assets to maximize value
for their estates and creditors. The Debtors have also devoted a
substantial amount of time surrendering their numerous leases
and executory contracts in order to facilitate an orderly wind-
down of their affairs. Furthermore, the Debtors have initiated
their claims reconciliation process and have begun working with
their major creditors to formulate a liquidating plan on a
consensual basis.

The Debtors therefore, submit that they will not be able to make
an informed decision regarding the removal of any claims,
proceedings or civil causes of action prior to the current

eToys, Inc. now known as EBC I Inc, is a web-based toy retailer
based in Los Angeles, California. The Company filed for Chapter
11 Petition on March 7, 2001 in the U.S. Bankruptcy Court for
the District of Delaware. Robert J. Dehney, at Morris, Nichols,
Arsht & Tunnell and Howard Steinberg at Irell & Manella
represents the Debtors in their restructuring efforts. When the
company filed for protection from its creditors, it listed
$416,932,000 in assets and $285,018,000 in debt.

ENRON CORP: Hires Brobeck Phleger as Special Regulatory Counsel
Enron Corporation, and its debtor-affiliates want to employ
Brobeck, Phleger & Harrison LLP and particularly Gary S. Fergus,
a senior partner in the Brobeck firm, as special regulatory
counsel in connection solely with proceedings before the United
States Federal Energy Regulatory Commission encaptioned San
Diego Gas & Electric Co. v. Sellers of Energy and Ancillary
Services Into Markets Operated by the California Independent
System Operator Corporation and the California Power Exchange,
FERC Docket No. EL00-95-045 and FERC Docket No. EL-00-98-042 and
any related appeals in federal court of FERC orders issued in
these dockets.

Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New
York, explains that the FERC Proceedings arose out of a
complaint filed by San Diego Gas & Electric alleging that all
electric energy sellers into the California market had collected
unlawfully high prices during the period between October 2, 2000
and June 21, 2001.  At stake for the Debtors are outstanding
accounts receivable and potential offsets worth ten millions of
dollars as well as potential liability for refunds, Mr. Rosen
tells Judge Gonzalez.

According to Mr. Rosen, Brobeck and in particular Fergus
represented the Debtors in the FERC proceedings pre-petition
and, therefore, have substantial knowledge of those matters.
Selecting Brobeck and Fergus as special regulatory counsel is
this the most efficient and cost-effective method by which those
matters may be concluded, Mr. Rosen contends.

The Debtors propose to compensate Brobeck and Fergus at their
standard hourly rates:

              Partners            $400 - $615
              Associates          $285 - $400
              Paraprofessionals   $ 50 - $150
              Gary S. Fergus      $585

Gary Fergus tells Judge Gonzalez that since November 1, 2000,
Brobeck has received from the Debtors an aggregate of
approximately $4,000,000 for professional services performed and
to be performed and for reimbursement of related expenses
relating to a variety of matters.  As of the Petition Date, Mr.
Fergus relates, the Debtors owe Brobeck approximately $3,500,000
related to its pre-petition representation of the Debtors.

"With respect to the FERC Proceedings, Brobeck and Fergus are
'disinterested persons,' as defined in section 101(14) of the
Bankruptcy Code," Mr. Fergus affirms.  Nevertheless, in order to
avoid any potential conflict of interest or appearance of
impropriety, Mr. Fergus informs Judge Gonzalez, Brobeck will
enact procedures to ensure that only he and his immediate staff
shall have access to the confidential documents and information
pertaining to the FERC Proceedings.  Conversely, Mr. Fergus
adds, he, his staff and associates shall not have access to the
lawyers, information and documents relating to potential
conflict entities. (Enron Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

EXODUS COMMS: Seeks Approval to Sell Gulf Assets to TekInsight
Exodus Communications, Inc., and its debtor-affiliates request
entry of an order approving the sale of the Gulf Professional
Services' assets on the terms set forth in the asset purchase
agreement, to TekInsight or the Successful Bidder, free and
clear of liens, claims, encumbrances and interests, with any
such Interests attaching solely to the proceeds of the sale. The
Debtors also request entry of an order approving the Debtors'
assumption and assignment to TekInsight or the Successful Bidder
of certain executory contracts, as set forth in the Asset
Purchase Agreement, free and clear of Interests.

David R. Hurst, Esq., at Skadden Arps Slate Meagher & Flom LLP
in Wilmington, Delaware, relates that Gulf Professional
Services, a business unit of Debtors, provides information
technology support and intellectual property consulting services
to a variety of customers. The Gulf Services Business includes
various tangible and intangible assets directly used in the
operation of the business, including customer information,
hardware, software and other equipment.

Due to capital constraints and the expiration of significant
contractual relationships, the Debtors believe that they will no
longer be able to operate the Gulf Services Business at a
profit.  Therefore, Mr. Hurst submits that the continued
operation of the Gulf Services Business is no longer congruent
with the Debtors, overall goal of maximizing the value of the
estates. To this end, the Debtors and TekInsight entered into
arms-length negotiations and, subsequently, agreed upon the
terms of the Asset Purchase Agreement.

Mr. Hurst tells the Court that the Debtors will receive
approximately $2,000,000-$2,300,000 of value for the Gulf
Services Business, which reflects the premium associated with
selling the Gulf Services Business at a "going concern value".
The Debtors believe that such value exceeds both the value they
would receive by either conducting an orderly piecemeal
liquidation of the Gulf Services Business or continuing the Gulf
Services Business operations themselves.

The Debtors propose to serve a copy of this Motion and the
proposed order on all parties that have expressed interest, or
who the Debtors' believe may have an interest, in purchasing
some or all of the Gulf Services Business. In order for parties
other than TekInsight to make a competing bid, the Debtors
propose that any such interested party be required to submit:

A. a competing qualified bid in writing on or before January 9,
   2002 together with a marked-up version of the Asset
   Purchase Agreement detailing the terms of the proposed bid;

B. a refundable deposit in the amount of $50,000 to counsel for
   the Debtors.

The determination of whether such bid constitutes a competing
qualified bid shall be made in accordance with the Debtors'
business judgment, subject to review by the Court at a hearing
regarding the Gulf Services Business sale transaction, if such a
hearing is necessary. In the event a competing qualified bid is
received as set forth above, an auction will be held prior to
the Sale Hearing at a time and place to be announced by the

The Debtors have determined that the sale of the Gulf Services
Business in the manner and for the consideration proposed in the
Asset Purchase Agreement is the best use of these assets and
will provide the greatest possible return for the Debtors'
estates. Furthermore, the Debtors believe that any delay in the
sale of these assets will result in diminishing returns for the

The Debtors submit that the sale of the Gulf Services Business
pursuant to the Asset Purchase Agreement will provide fair and
reasonable consideration to the Debtors' estates. Although the
Debtors received one competing offer for the Gulf Services
Business, the Debtors determined TekInsight's offer to be
highest and best offer. The Debtors submit that the
consideration they would receive from TekInsight in exchange for
the Gulf Services Business is both fair and reasonable.

The Debtors have determined in the sound exercise of their
business judgment that the assumption of the Gulf Contracts and
the assignment thereof pursuant to the Asset Purchase Agreement
is in the best interests of the Debtors and their estates
because such an assumption and assignment is necessary to
consummate the Sale. Moreover, Mr. Hurst contends that a rapid
and efficient disposition of the Gulf Contracts will reduce the
risk that the Sale will not be consummated, the Debtors' cash
expenditures and the need to draw on the Debtors' post-petition
financing facility. (Exodus Bankruptcy News, Issue No. 11;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

FACTORY CARD: Has Until February 19 to File Chapter 11 Plan
A hearing was held on December 19, 2001 at the U.S. Bankruptcy
Court for the District of Delaware to consider the motion by
Factory Card Outlet Corp. extending their exclusive periods for
filing a plan of reorganization and to solicit acceptances of
that plan.  The Court granted the Debtors' request that its
Exclusive Filing Period be extended through February 19, 2002
and the Exclusive Solicitation Period through April 19, 2002.

Factory Card Outlet Corporation, one of the largest chains of
company-operated superstores in the card, party supply and
special occasion industry in the United States, filed for
chapter 11 protection on March 23, 1999 in the District of
Delaware. Daniel J. DeFrancheschi of Richards Layton & Finger,
P.A., represents the Debtor in their restructuring effort. As of
August 4, 2001, the company listed $ 77,551,000 in assets and
$92,141,000 in debt.

FEDERAL-MOGUL: Appointment of Property Damage Committee Sought
Lon Morris College, an institution of the United Methodist
Church, asks Judge Newsome to direct the United States Trustee
to appoint an official committee of asbestos property damage
claimants in these chapter 11 cases of Federal-Mogul
Corporation, and its debtor-affiliates.

According to Scott L. Baena, Esq., at Bilzin Sumberg Dunn Baena
Price & Axelford in Miami, Florida, despite the College's
repeated requests and numerous other property damage Claimants,
no official committee has been appointed to represent the
interests of property damage Claimants in these cases. Since the
organizational meeting convened by the U.S. Trustee at which the
College and one other property damage Claimant given notice of
the meeting appeared and expressed their interest in serving on
an official committee, the Catholic Archdiocese of New Orleans,
City National Bank, Anderson Memorial Hospital and other
property damage Claimants have urged the U.S. Trustee to form a
property damage committee and apprised of their willingness to
serve thereon.

Mr. Baena believes that in forming the Asbestos Claimants'
Committee, the U.S. Trustee relied principally upon statements
made by the Debtors concerning the amount and types of asbestos
claims asserted against them; however, the Debtors have
deliberately minimized the extent of asbestos property damage
claims by relegating the PD Claims to a mere footnote. The short
shrift paid by the Debtors to their property damage liability
belies the significance of such claims and is not surprising.
Mr. Baena states that the College has significant property
damage Claims against the Debtors, as do other property damage
Claimants who have expressed a willingness and desire to serve
on a property damage Committee. The understatement of asbestos
liabilities is a commonplace strategy of debtors in asbestos
bankruptcies; however, in virtually every instance allowed
property damage claims have exceeded the debtors' estimates by
multiples, and likely will do so in these chapter 11 cases.

Mr. Baens contends that neither the Asbestos Claimants Committee
nor the Commercial Committee can adequately represent the
interests of the property damage Claimants. Indeed, in all but
one bankruptcy case in which both asbestos personal injury and
property damage claims of any consequence are at issue, separate
committees were formed to represent the interests of personal
injury and property damage claimants.

Mr. Baena points out that the Asbestos Claimants Committee is
comprised solely of asbestos personal injury Claimants. The U.S.
Trustee likely did not appoint any asbestos property damage
Claimants to serve on the Asbestos Claimants Committee because
he was personally aware from experience in the other asbestos
bankruptcy cases pending in this District of the divergent
issues that exist between asbestos personal injury and property
damage Claimants and their inability to function within a single

Mr. Baena notes that the Asbestos Claimants Committee has
engaged the same counsel that presently represents the official
asbestos personal injury committees in each asbestos case
pending in this District in which such a committee was
appointed. As a result, such counsel's professional
responsibility prevents it from advancing the interests of any
asbestos constituency other than personal injury Claimants nor
does that Committee or such counsel profess to represent the
interests of property damage Claimants.

Likewise, Mr. Baena believes that the Commercial Committee
cannot adequately represent the interests of property damage
Claimants. The Debtors have already previewed that they intend
to treat asbestos claimants differently than trade creditors and
unsecured lenders. This alone is sufficient to disable the
Commercial Committee from representing the interests of property
damage Claimants. Mr. Baena adds that it is entirely predictable
that the Commercial Committee will align itself with the
Debtors' efforts to minimize the extent of allowable asbestos
claims. The fact that the U.S. Trustee appointed a committee to
represent personal injury interests is testimony to the U.S.
Trustee's recognition of the divergence of asbestos interests
and those of garden-variety unsecured creditors.

Mr. Baena tells the Court that the recent transfer, assignment
and referral of all pending asbestos bankruptcy cases in this
District has its genesis in the Third Circuit's apparent desire
to achieve consistent results in asbestos chapter 11 cases.
Under this premise, it is critically important that property
damage Claimants be adequately represented in every case where
such claims are meaningful, thereby allowing property damage
Claimants to advocate positions in each case through an official
committee in an effort to attain consistent treatment of
property damage Claims. These chapter 11 cases are currently the
only ones in which there exist substantial asbestos property
damage Claimants that are not represented by a separate official

Mr. Baena states that the College is acutely sensitive to the
proliferation of the administrative costs of these estates but
given the unique nature of the property damage Claims and the
experience in other asbestos bankruptcy cases pending in this
District and elsewhere, the College submits that the costs of an
additional committee are more than amply offset by the benefits
an additional committee would add.

Mr. Baena contends that it would be grossly unfair to require
individual property damage Claimants to fund activities in these
cases which would benefit the estate generally, while capable
adversaries are empowered and emboldened by estate funding of
their activities. Furthermore, even if property damage Claimants
could look forward to reimbursement of their individual expenses
on the theory of "substantial contribution," each property
damage Claimant would be well-advised to take an active role in
these cases in the absence of official committee representation,
virtually assuring that the sum of substantial contribution
reimbursements will far exceed the cost to the estates of an
official committee serving PD Claimants' interests.

Inasmuch as the Debtors ostensibly seek a consensual plan of
reorganization but have not as yet commenced discussions with
property damage Claimants, Mr. Baena asserts that the
establishment of a property damage Committee would be propitious
as these cases are far away reaching plan stages. Additionally,
the Collect has been seeking the appointment of a property
damage Committee through the U.S. Trustee's office since the
commencement of these cases and the failure of the U.S. Trustee
to act should not be charged to property damage Claimants.
(Federal-Mogul Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)

FLEETWOOD ENT: Liquidation Amount Tendered in Offer Tops $264MM
Fleetwood Enterprises, Inc. (NYSE: FLE), the nation's largest
manufacturer of recreational vehicles and a leading producer and
retailer of manufactured housing, announced that preliminary
results indicated approximately $264,685,550 in aggregate
liquidation amount of the original $287,500,000 aggregate
liquidation amount of Fleetwood Capital Trust's 6% convertible
trust securities due 2028 was tendered in its exchange offer
which expired on January 4, 2002.  This preliminary amount
includes approximately $69,814,500 in aggregate liquidation
amount that was tendered by notices of guaranteed delivery.  
Pursuant to the terms of the exchange offer, the Company has
accepted for exchange $86.25 million of the validly tendered 6%
convertible trust securities on a pro rata basis and will
promptly exchange those securities for $37.95 million of
Fleetwood Capital Trust II's 9.5% convertible trust securities
due 2013.

The complete terms of the exchange offer are contained in the
prospectus and amended exchange offer documents dated December
11, 2001.  Please direct any questions to Ed McCarthy of D.F.
King & Co. at 1-800-290-6428.

Fleetwood Enterprises has filed a Registration Statement with
the Securities and Exchange Commission on Forms S-3 and S-4, and
has also filed a Schedule TO.  The Registration Statement and
the prospectus and exchange offer documents contained in the
Registration Statement contain important information about
Fleetwood, the exchange offer, and related matters. Security
holders and potential investors are urged to read the
Registration Statement and the prospectus and exchange offer
documents, the Schedule TO and any other relevant documents
filed by Fleetwood Enterprises with the SEC. These and any other
relevant documents can be accessed for free through the Website
maintained by the SEC at In addition, these  
documents are available free of charge by contacting the
Information Agent for the offer, D.F. King & Co., attention Ed
McCarthy, at 1-800-290-6428.

Fleetwood Enterprises gets revved up over recreational vehicles
(RVs). The #1 US maker of RVs, Fleetwood also is the #2 maker of
manufactured housing (behind Champion Enterprises). Manufactured
housing accounts for about half of Fleetwood's sales. Housing
features include vaulted ceilings, walk-in closets, and porches.
Fleetwood's RVs come in three types: motor homes (brands such as
American Dream, American Eagle, Southwind, and Tioga), travel
trailers, and folding trailers. Its building-supply operations
include two fiberglass companies and a lumber producer.
Fleetwood operates manufacturing facilities in 16 US states and
in Canada; it sells through about 190 company-owned outlets and
independent distributors.

In December, Standard & Poor's lowered its corporate credit
rating on Fleetwood Enterprises Inc., to double-'B'-minus. At
the same time the rating on Fleetwood Capital Trust is lowered
to 'D', wherein the outlook remained negative.

According to the international rating agency, the lowered
corporate credit rating reflects a materially weakened business
position, due to the continued, very competitive industry
conditions for both of Fleetwood's major business segments. In
addition, Fleetwood's financial profile remains constrained, as
reflected by the granting of security to the company's bank
lenders and the recent discontinuation and deferral of the
company's common and preferred dividends, respectively.

GLENOIT CORPORATION: Court Okays Exclusive Periods Extension
By order of the U.S. Bankruptcy Court for the District of
Delaware, Glenoit Corporation's Exclusive Plan Filing Period is
extended through February 3, 2002 and its Exclusive Solicitation
Period now runs through April 7, 2002.

Headquartered in New York City, Glenoit Corporation is a
domestic manufacturer of small rugs, knit pile fabrics and an
importer and manufacturer of home products such as quilts,
comforters, shams, shower curtains, table linens, pillows and
pillowcases with operations in North Carolina, Ohio, California
and Canada. The Company filed for Chapter 11 protection on
August 8, 2000 in the US Bankruptcy Court for the District of
Delaware. Joel A. Waite at Young, Conaway, Stargatt & Taylor
represents the Debtors in their restructuring efforts.

IFR SYSTEMS: Bank Lenders Agree to Forbear Until March 4, 2002
IFR Systems, Inc. (NASDAQ/NMS:IFRS) announced that it has
entered into a forbearance agreement with its bank lenders.
During the period of the forbearance agreement, which expires on
March 4, 2002, all payments of interest and principal under its
credit facility are waived. "This agreement will allow the
Company to focus on refinancing its debt and on managing daily
operations," said Chief Executive Officer Jeffrey Bloomer.

The Company's credit agreement has a maturity date of September
30, 2002. As previously announced, the Company is in default of
its loan covenants and did not make the scheduled November
interest payments.

IFR is a leading designer and manufacturer of advanced wireless
test solutions for communications, avionics, and general test
and measurement applications. For more information about IFR in
the United States, contact: IFR, 10200 West York Street,
Wichita, Kan., 67215-8999. Contact us via e-mail at, on the Web at http://www.IFRsys.comor by  
telephone at 800/835-2352 or 316/522-4981.

INFINIUM SOFTWARE: Total Revenues Drop 20% to $74.1MM in FY 2001
Infinium Software, Inc. develops, markets and supports
enterprise-level business software applications and provides
software application services. Infinium offers Web-and server-
based financial, human resources, supply management, process
manufacturing, business analytics and customer relationship
management solutions, services, support and deployment options
to its customers.

During fiscal year 2001, under the leadership of a new Chief
Executive Officer and President hired in February 2001, the
Company reassessed its business and established short term goals
for fiscal 2001, which included stabilizing the Company,
focusing on its core competencies, improving the profitability
of the Company and preserving the Company's cash. As a part of
these efforts, the Company dramatically reduced the Company's
costs in the third and fourth quarters of fiscal 2001.

During the third quarter, the Company recorded $11.8 million in
one-time charges associated with headcount reductions,
facilities consolidations, write-offs of certain fixed assets,
goodwill and intangible assets. The headcount reductions
included 22 percent of the Company's workforce. During the
fourth quarter, the Company decided to discontinue its
Application Service Provider ("ASP") business and recorded $7.9
million in charges associated with fixed asset impairment and
the costs of disposing this segment. Also during the fourth
quarter, the Company recorded a charge of $1.2 million
associated with the restructuring of its AdvaNTage (also known
as "Cort") Business Unit, including headcount reductions, and
write-offs of goodwill and intangibles.

Total revenue, exclusive of revenue associated with discontinued
operations, decreased 20 percent, from $92.7 million for the
year ended September 30, 2000 to $74.1 million for the year
ended September 30, 2001. The decrease was due to the reductions
in the Company's consulting services and software license fees.

Revenue from continuing operations in North America (United
States and Canada) decreased 21 percent, from $84.6 million for
the year ended September 30, 2000 to $67.0 million for the year
ended September 30, 2001. This is representative of 91 percent
of total revenue for both fiscal 2000 and fiscal 2001. EMEA
(Europe, Middle East and Africa) revenue decreased 22 percent
from $7.2 million for the year ended September 30, 2000 to $5.6
million for the year ended September 30, 2001, which was 8
percent of total revenue for both fiscal 2000 and 2001. Other
international regions, including Asia Pacific and Latin America,
contributed approximately 1 percent of total revenue for both
fiscal 2000 and fiscal 2001.

Software license fee revenue decreased 49 percent, from $20.5
million for the year ended September 30, 2000 to $10.4 million
for the year ended September 30, 2001. The Company believes that
the decrease was primarily due to the slowdown in technology
spending, further complicated by restructuring within the

Service revenue, exclusive of revenue associated with
discontinued operations, decreased 12 percent, from $72.3
million for the year ended September 30, 2000 to $63.7 million
for the year ended September 30, 2001. The decrease was
primarily attributable to lower software license fee revenue.

                         Fiscal Year End
Total revenue, exclusive of revenue associated with discontinued
operations, decreased 24 percent, from $122.0 million for the
year ended September 30, 1999 to $92.7 million for the year
ended September 30, 2000. The decrease was due to the reductions
in the Company's consulting services and software license fees.

Revenue from continuing operations in North America (United
States and Canada) decreased 26 percent, from $113.5 million for
the year ended September 30, 1999 to $84.6 million for the year
ended September 30, 2000. This is representative of 93 percent
and 91 percent of total revenue for fiscal 1999 and fiscal 2000,
respectively. EMEA (Europe, Middle East and Africa) revenue
decreased 12 percent from $8.2 million for the year ended
September 30, 1999 to $7.2 million for the year ended September
30, 2000, which was 7 percent and 8 percent of total revenue for
fiscal 1999 and 2000, respectively. Other international regions,
including Asia Pacific and Latin America, contributed
approximately 1 percent of total revenue for both fiscal 1999
and 2000.

Software license fee revenue decreased 37 percent, from $32.4
million for the year ended September 30, 1999 to $20.5 million
for the year ended September 30, 2000. The Company believes that
the decrease was primarily due to the elimination of revenues
related to discontinued products, potential customers deciding
to postpone software acquisitions to focus on their Year 2000
compliance issues in the first quarter of fiscal 2000 and the
subsequent slow recovery in the market for the licensing of back
office applications.

Service revenue, exclusive of revenue associated with
discontinued operations, decreased 19 percent, from $89.6
million for the year ended September 30, 1999 to $72.3 million
for the year ended September 30, 2000. The decrease was
primarily attributable to lower software license fee revenue and
elimination of Year 2000 consulting services after the first
quarter of 2000.

As of September 30, 2001, the Company had cash, cash
equivalents, and marketable securities of $15.3 million,
resulting from a net use of cash, cash equivalents, and
marketable securities of $5.5 million during fiscal year 2001.
Operating activities consumed $1.7 million and included $5.8
million used in discontinued operations. The net loss, which
includes an $11.7 million operating loss associated with the ASP
business unit, and a $1.8 million estimated loss from the
disposal of the discontinued operations, totaled $24.3 million.
As at the end of June 2001, the company reported an upside-down
balance sheet, registering total stockholders' equity deficit of
about $6 million.

IMPERIAL CREDIT: Names Richard Cupp as Vice Chairman & CEO
Imperial Credit Industries, Inc., (Nasdaq: ICII) announced key
management changes at the Company and its principal subsidiary,
Southern Pacific Bank.

Effective immediately, Richard S. Cupp has become Vice Chairman
of the Board and Chief Executive Officer of ICII.  As previously
announced, Cupp had been appointed Chairman, President and Chief
Executive Officer of Southern Pacific Bank, subject to non-
objection by the Bank's principal regulatory authorities.  Non-
objection notices have now been received and the Bank
appointments are also effective January 7, 2002.

Brad Plantiko, Executive Vice President and Chief Financial
Officer of ICII, was appointed to the position of President,
Chief Financial Officer and Chief Operating Officer, also
effective January 7, 2002.  Plantiko retains his position as
EVP, Chief Financial Officer and Chief Operating Officer of
Southern Pacific Bank.

Michael Riley, Chairman of ICII, remarked:

     "These changes reflect the ongoing restructuring of the
Company and the Bank.  Critical to the success of ICII and
Southern Pacific Bank is a committed, experienced and high
performing team.  We are building the base for that success
through these appointments."

Imperial Credit Industries, Inc., is the parent company of
Southern Pacific Bank, a FDIC insured industrial bank
headquartered in Torrance, California.  Southern Pacific Bank
offers a wide variety of commercial loan and lease products to
its borrowers and certificates of deposit, money market,
passbook, and IRA accounts to its depositors.  Southern Pacific
Bank offers loans through its core lending divisions, including:  
Coast Business Credit -- specializing in asset-based commercial
lending; Imperial Warehouse Finance -- offering residential
mortgage repurchase facilities; the Lewis Horwitz Organization -
- the premier lender to independent film and television
production companies; the Income Property Lending Division --
lending to multifamily and commercial property owners; and
Southern Pacific BanCapital -- offering equipment leasing to
middle market businesses.

In July, as noted in the Troubled Company Reporter, Standard &
Poor's lowered Imperial Credit Industries Inc.'s senior debt
rating and Imperial Credit Capital Trust I to single-'D' from
double-'C'. The Torrance, Calif.-based specialty finance
company's long-term counterparty credit rating was also lowered
to 'D' from double-'C'.

The downgrade reflected the company's announcement that it had
executed a recapitalization agreement in which the two rated
issues have been tendered in exchange for newly issued debt that
is less than the par value of the original debt. Moreover, it
was uncertain whether the value of the stock and associated
warrants would maintain sufficient value by the maturity date of
the original debt to compensate bondholders for the discount
taken. Standard & Poor's considered such an exchange a default.

For further information contact: Brad Plantiko, President, Chief
Financial Officer, Chief Operating Officer of Imperial Credit
Industries, Inc., +1-310-791-8096

INTEGRATED HEALTH: Settles Dispute Re SBMS Note Purchase Price
Integrated Health Services, Inc., and its debtor-affiliates
including Community Care of America of Alabama, Inc. (CCA), seek
the Court's approval, pursuant to sections 105(a) and 363(b) of
the Bankruptcy Code and Rules 6004 and 9019(a) of the Bankruptcy
Rules, of a Settlement Agreement, by and among: (i) IHS, (ii)
CCA, and (iii) South Butler Medical Services, L.L.C. resolving a
dispute over the purchase price for the Georgiana Doctors
Hospital that SBMS purchased from CCA in 1997 before CCA became
affiliated with IHS.

The Hospital Purchase Agreement provided for an aggregate
purchase price of $3,140,000 a portion of which consisted of a
$1,500,000 promissory note executed by SBMS in favor of CCA.
Subsequent to the SBMS/CCA Transaction, IHS acquired the stock
of CCA and certain related entities.

SBMS has asserted that grounds exist for a reduction in the
Purchase Price under the Asset Purchase Agreement, and that such
grounds constitute a defense to the collection of the Note. In
essence, SBMS contends that the financial condition of the
Hospital may not have been fairly and accurately represented to
SBMS in connection with the Hospital Purchase.

The Debtors take the position that they disagree with SMBS's
position regarding the existence of a defense to collection of
the Note, but in view of the protracted process, expense and
uncertainty involved if the issue is resolved by litigation,
they have concluded that a consensual resolution of this issue
pursuant to the Settlement Agreement should be more beneficial
to the estate.

Pursuant to the Settlement Agreement, SBMS would pay the sum of
$700,000 in exchange for a full release and satisfaction of any
obligations under the Note.

The Debtors note that the proposed settlement is particularly
beneficial in view of the collectibility, or rather,
uncollectibility of the Note. In 1997, when IHS acquired CCA,
IHS deemed the Note uncollectible and established an accounting
reserve accordingly. IHS continues to believe that the Note must
be deemed uncollectible for accounting purposes based on the
following reasons:

-- Without the cooperation of the principals of SMBS pursuant to
   the Settlement Agreement, the Note is more than likely

-- The collectibility of the Note is in large part a function of
   the financial performance of the Hospital, which is a small
   facility of only 22 beds located in a rural county in
   southern Alabama with a population of approximately 20,000
   people. There are competing facilities in the areas and
   moreover, the value of the Hospital is dependent upon the
   continuing involvement of one of the SBMS principals, who is
   the primary admitting and attending physician for the

-- SBMS is highly leveraged, such that the Note is subordinate
   to a $1,800,000 line of credit (the PBT Credit Line) from
   Peoples Bank and Trust (PBT), of which approximately
   $1,500,000 has been drawn down and remains currently

-- The Note has a balloon payment which comes due in June 2002,
   and at such time as the Note comes due, SBMS may not be
   financially capable of paying the Note in full, repaying the
   PBT Credit Line, and continuing to fund the Hospital's

-- The Debtors have determined that the assets of SBMS are not
   sufficient to repay the Note. Moreover, there is also no
   reasonable likelihood that the financial performance or
   condition of SBMS, and therefore the collectibility of the
   Note, could or would be significantly improved in the future.

-- Significantly, the PBT Credit Line is personally guaranteed
   by the principals of SBMS, who have indicated that, due to
   their personal guarantees of the PBT Credit Line, they would
   opt to pay off the PBT Credit Line and cease operations at
   the Hospital, rather than cause SMBS to satisfy its
   obligations under the Note.

For these reasons, it appears to the Debtors that, even if they
were to prevail in litigation with SBMS with regard to alleged
defenses against the Note, such litigation would ultimately
prove to be of limited or no value.

Therefore, IHS believes that the proposed settlement would be
highly beneficial and should be approved. (Integrated Health
Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service,
Inc., 609/392-0900)   

KOMAG INC: Secures Creditors' Support for Plan of Reorganization
Komag, Incorporated (OTC Bulletin Board: KMAGQ), the largest
independent producer of media for disk drives, announced that
its non-subordinated creditors voted overwhelmingly to support
its Plan of Reorganization. Of the nine classes of creditors
voting, eight voted to confirm the Plan and only one class, the
Subordinated Notes Claims, rejected it. In addition to the
rejection by the Subordinated Notes Claims, the requisite two-
thirds of company's stockholders did not vote to confirm the
plan. As a result, stockholders will receive no distribution
under the Plan. The company believes, given this broad-based
support, the Plan can be confirmed and intends to go forward
with its Confirmation Hearing scheduled for January 10, 2002.

Founded in 1983, Komag is the world's largest independent
supplier of thin-film disks, the primary high-capacity storage
medium for digital data. Komag leverages the combination of its
U.S. R&D centers with its world-class Malaysian manufacturing
operations to produce disks that meet the high-volume, stringent
quality, low cost and demanding technology needs of its
customers. By enabling rapidly improving storage density at
ever-lower cost per gigabyte, Komag creates extraordinary value
for consumers of computers, enterprise storage systems and
electronic appliances such as peer-to-peer servers, digital
video recorders and game boxes.

For more information about Komag, visit Komag's Internet home
page at or call Komag's Investor Relations  
24-hour Hot Line at 888-66-KOMAG or 408-576-2901.

LANDSTAR: Continuing Talks to Secure $20MM In Equity Investment
LandStar prepared its latest financial reports filed with the
SEC with internal accounting and have advised that their
external auditors have not yet viewed the results.  However,
LandStar does state that comparison of results of the Company's
operations is made difficult because in the three and nine
months ended September 30, 2000, the Company was a development
stage company with no revenues, five to six employees and no
operating facilities. A pilot facility was in process of being
built in Dayton, Ohio. The Company continued as a development
company through the end of December 2000. However, significant
staff was hired in the second half of the year to prepare the
Company for its launch into operations in 2001.

Effective January 8, 2001, the Company took its first step into
operations with the acquisition of Polytek Rubber & Recycling,
Inc. With this action, they acquired four plants that
manufacture crumb rubber. Revenues for the first nine months of
2001 were $11,842,925 compared to zero for LandStar, Inc. for
the same period in the prior year. Polytek however produced
$13.8 million in revenues in the first nine months of 2000. In
that period in 2000, only two of the four plants were in full
operation and a third and fourth plants came online in that time
period. In 2001, three of the four plants were producing and the
fourth plant only operated for approximately three months in the
first half of the year. The fourth facility, the Michigan plant,
was closed permanently in June of this year.

In 2001, the Company lost $581,875 at the gross margin line due
to a combination of low sale prices of the crumb rubber and high
costs produced by inefficient operations. The Company is
attempting to right this situation by addressing both sides of
the formula. First, current negotiations are in process to
increase prices to customers. There has not been a price
increase for a number of years while costs to manufacture
continue to rise. However, there are no guarantees that
management will be successful in obtaining the increases from
all customers although new prices have been obtained from some.
Management is also reviewing and analyzing each plant on its own
merits. The plants must be expanded since this is a volume
business. They must have the correct equipment, properly
configured with capable operations and preventative maintenance
programs in place to operate in a safe, efficient and profitable
manner. They must also have a customer base that allows the
plants to ship on a 12-month basis. Management has for the most
part completed this review and analysis. A program has been
outlined for each facility that will bring their operations to
the proper production and efficiency levels. Management will not
rule out the option of ceasing operations at a facility if the
analysis indicates the costs to reconfigure a facility is cost
prohibitive and the return is not acceptable.

The primary sources of liquidity during the first nine months of
2001 was through financing activities: primarily, proceeds from
the revolving line of credit, issuance of stock and advances
from the largest shareholder of the Company. $2,000,000 of the
stock relates to the conversion of advances made by the former
shareholder of PolyTek in the first quarter to stock. Funds were
mainly utilized for working capital with $1.7 million used for
the acquisition of plant and equipment.

The Company has entered into a factoring arrangement of its
receivables. At the same time management has continued pursuing
other traditional debt or equity financing. Management is
finding difficulty on most financing fronts based on the
Company's and PolyTek's past performance and the lack of any
prior operations for LandStar.

The Company previously announced on August 6, 2001 that it had
signed a non-binding financing arrangement for a $20 million
equity investment. Negotiations continue concerning that
investment. If completed, funds from the investment would be
used for the capital improvement needs and expansion projects at
the crumbing facilities and other potential acquisitions.
However, there is no guarantee the financing arrangement will be

LODGIAN INC: Secures OK to Pay Prepetition Employee Obligations
Lodgian, Inc., and its debtor-affiliates sought and obtained
entry of an order:

A. authorizing the Debtors to pay, in their sole discretion,
   pre-petition obligations relating to the Employees, including
   the Unpaid Compensation, Payroll Tax Obligations, Incentive
   Program Obligations, Paid Absence Obligations, Vacation
   Obligations, Employee Benefit Obligations, Reimbursable
   Business Expenses and Independent Contractor Obligations
   and all costs incident to the foregoing, and to continue to
   honor their practices, programs and policies with respect
   to their Employees, as such practices, programs and
   policies were in effect as of the Commencement Date; and

B. authorizing and directing applicable banks and other
   financial institutions to receive, process and pay any and
   all checks drawn on the Debtors' payroll and general
   disbursement accounts, and automatic payroll transfers to the
   extent that such checks or transfers relate to any of the

The principal components of the pre-petition employee
obligations are:

A. Payroll: In the ordinary course of the Debtors' businesses,
   the Debtors incur payroll obligations to their employees
   for the performance of services rendered by such employees.
   The Debtors currently employ approximately 5,085 full-time
   employees and 1,780 part-time employees, for a total of
   approximately 6,865 persons. The average weekly gross
   payroll for Employees is approximately $2,850,000. The
   Debtors estimate that as of the Commencement Date,
   approximately $6,500,000 in pre-petition wages, salaries,
   holiday and/or sick pay which may have accrued during the
   most recent payment period, and other compensation earned
   prior to the Commencement Date was unpaid. The Debtors are
   also required by law to withhold from their Employees'
   payroll certain federal, state, and local income taxes, and
   social security and Medicare taxes and remit the same to
   the appropriate tax authorities. The Debtors estimate that
   the average weekly amount of Payroll Tax Obligations is
   approximately $690,500. The Debtors believe that there is
   approximately $990,000 outstanding with respect to earned
   and unpaid Payroll Tax Obligations.

B. Employee Incentive Program - The Debtors currently maintain
   approximately eight Employee incentive programs, which
   include incentive programs relating to sales, leadership
   and performance. With respect to all other Incentive
   Programs, the Debtors estimate that, as of the Commencement
   Date, their earned and unpaid gross obligations aggregate
   approximately $307,680. The Debtors estimate that the
   amount of Payroll Tax Obligations for payments under such
   Incentive Programs aggregate approximately $23,537.

C. Vacations - The Employees earn on the anniversary of their
   engagement with the Debtors, annual vacation days based on
   their length of service. The Debtors estimate that, as of
   the Commencement Date, approximately $2,185,000 is owed to
   Employees on account of earned and unused vacation days.
   The Debtors estimate that approximately $196,000 in Payroll
   Tax Obligations may be owed in connection with the
   foregoing. However, because vacation time is paid out to
   Employees only if and when their employment is terminated,
   the Debtors do not believe that actual payments for
   vacation time during the pendency of these cases will
   approach this sum. In addition to their allotted vacation
   time, the Debtors' Employees working in excess of thirty-
   two hours each week are entitled to six days of paid
   absence per calendar year. At present, the estimated value
   of all outstanding paid absence approximates $714,880
   salaried and $114,800 hourly. The estimated value of all
   outstanding earned but unused Paid Absence approximates

D. Employee Benefits - In the ordinary course of their
   businesses, the Debtors have established various Employee
   benefit plans and policies that provide Employees with
   benefits including health insurance, dental insurance,
   vision insurance, basic life and accidental death and
   dismemberment insurance, an Employee assistance program,
   voluntary life insurance, voluntary accidental death and
   dismemberment insurance, short-term disability insurance,
   long-term disability insurance, travel accident insurance,
   a 401(k) plan, an Employee stock purchase plan, a tuition
   reimbursement program, Employee discount cards, associate
   parking privileges, a Holiday Inn discount program, and a
   Marriott discount program. In addition, the Debtors
   maintain a payroll deduction program for an individual
   short-term disability policy, an individual universal life
   policy, an individual critical care policy and a credit
   union. As of the Commencement Date, the Debtors estimate
   that there is approximately $2,419,875 in earned and unpaid
   obligations owed in connection with the foregoing Employee

E. Pension Plan - The Debtors' 401(k) Plan is available to
   Employees age 21 and older who work at least 20 hours per
   week and who have been employed by the Debtors for at least
   six months.

F. Reimbursable Business Expenses - The Debtors reimburse their
   Employees for business expenses incurred in the performance
   of their duties, including those incurred in connection
   with domestic and overseas business travel, long-distance
   telephone charges, gasoline charges, automobile
   maintenance, cellular phone charges, and meals.
   Periodically, the Debtors will provide relocation expense
   reimbursements to certain of the Employees. The Debtors
   estimate that as of the Commencement Date, an aggregate of
   approximately $11,000.00 will be owed on account of
   Reimbursable Business Expenses, and will be payable upon
   submission of appropriate documentation and approval.

G. Employee Payroll Deductions - Periodically, the Debtors are
   presented with garnishment or child support orders
   requiring the withholding of Employee wages to satisfy
   Employee obligations. The average amount withheld on
   account of such orders is approximately $22,000.00. In
   addition, the Debtors withhold certain sums on a weekly
   basis as requested by individual Employees. Such sums are
   then applied to various programs administered or offered by
   the Debtors, including additional life insurance ($5,303
   each week); the Employee portion of dental and health
   insurance coverage ($94,200 each week); short-term
   disability coverage ($3,500 each week); investments in, or
   repayments to, the Debtors' 401(k) program ($28,950 each
   week); and repayment of company loans ($2,856 each week).

F. Independent Contractors - Periodically, the Debtors employ
   certain independent contractors to perform various services
   needed in connection with their businesses, including,
   without limitation, accounting and financing services, tax
   related services, security and housekeeping. Generally, the
   Debtors pay the Independent Contractors by the hour for
   their services.

The Debtors believe that substantially all of the Pre-petition
Employee Obligations constitute priority claims. The Debtors
submit that payment of such amounts at this time is necessary
and appropriate. The Debtors submit, however, that to the extent
any Employee is owed in excess of $4,650 on account of the Pre-
petition Employee Obligations, payment of such amounts is
necessary and appropriate and is authorized pursuant to the
"necessity of payment" doctrine, which "recognizes the existence
of the judicial power to authorize a debtor in a reorganization
case to pay pre-petition claims where such payment is essential
to the continued operation of the debtor."

Adam C. Rogoff, Esq., at Cadwalader Wickersham & Taft in New
York, New York, submits that any delay in paying the Pre-
petition Employee Obligations will adversely impact the Debtors'
relationship with their Employees and will irreparably impair
the Employees' morale, dedication, confidence, and cooperation.
The Employees' support for the Debtors reorganization efforts is
critical to the success of those efforts and at this early
stage, the Debtors simply cannot risk the substantial damage to
their businesses that would inevitably attend any decline in the
Employees' morale attributable to the Debtors' failure to pay
wages, salaries, benefits and other similar items. Absent an
order granting the relief requested by this Motion, Mr. Rogoff
contends that the Employees will suffer undue hardship and, in
many instances, serious financial difficulties, as the amounts
in question are needed to enable certain of the Employees to
meet their own personal financial obligations. In addition, the
stability of the Debtors will be undermined, perhaps
irreparably, by the possibility that otherwise loyal Employees
will seek other employment alternatives.

As a result of the commencement of the Debtors' chapter 11
cases, and in the absence of an order of the Court providing
otherwise, Mr. Rogoff informs the Court that the Debtors'
checks, wire transfers and direct deposit transfers on account
of the Pre-petition Employee Obligations may be dishonored or
rejected by the Disbursement Banks. The Debtors represent that
each of these checks or transfers is or will be drawn on the
Debtors' payroll and general disbursement accounts and can be
readily identified as relating directly to payment of the Pre-
petition Employee Obligations. Accordingly, the Debtors believe
that pre-petition checks and transfers other than those for Pre-
petition Employee Obligations will not be honored inadvertently.
(Lodgian Bankruptcy News, Issue No. 2; Bankruptcy Creditors'
Service, Inc., 609/392-0900)  

MARINER POST-ACUTE: Will Pay $3.3MM to Novacare Under Agreement  
Mariner Post-Acute Network, Inc. Debtors and Mariner Health
Group Debtors and other related parties have reached settlement
agreement to resolve the issue over "Prudent Buyer Appeal
Monies." Accordingly, the Debtors move the Court for approval of
the Settlement Agreement and related relief.

As previously reported, prior to the Petition Date, NovaCare,
Inc., a Pennsylvania corporation (NovaCare Pennsylvania)
provided therapy services at certain of the Debtors' skilled
nursing facilities and the facilities would compensate NovaCare
Pennsylvania for such services. The facilities would seek
reimbursement for Medicare-reimbursable therapy services from,
among others, the United States Health Care Financing
Administration (HCFA) for the payments to NovaCare Pennsylvania.
If HCFA disallowed the costs associated with the provision of
such services, NovaCare Pennsylvania would reimburse the
facility for the disallowed amounts.

NovaCare Pennsylvania had the right at its own expense to appeal
the disallowance. When and if a disallowance was reversed on
appeal, the facility would pay to NovaCare Pennsylvania any
amounts it recovered from HCFA as a result of such appeals to
the extent of the indemnification by NovaCare Pennsylvania.

Novacare Holdings, Inc. (NCH) has represented to the Debtors
that all claims which NovaCare Pennsylvania held against any of
the Debtors on any date prior to June 1, 1999, including without
limitation any claim for therapy-related services provided prior
to that date, have been assigned to NCH, directly or through NC
Resources, Inc. in connection with a transaction involving the
sale of the stock of NovaCare Pennsylvania to Chance Murphy. NCH
represents that it has obtained an assignment of, among other
things, any claims to the Prudent Buyer Appeal Monies and any
claims asserted in the Complaint.

NCH has filed proofs of claim alleging a right to certain
"Prudent Buyer Appeal Monies" which may be recovered as a result
of the appeal of certain "prudent buyer" cost disallowances of
the cost of therapy services provided by NovaCare Pennsylvania,
as well as alleging certain other claims against certain
Debtors. NCH asserts a claim of at least $9,480,706.99 in the
MPAN cases, consisting of a secured claim of at least
$8,163,930.00 and an unsecured claim of at least $1,166,776.99
and a secured claim of at least $726,207.00 in the MHG cases.
The secured portion of each of the NCH Proofs of Claim is
predicated upon NCH's alleged entitlement to almost $9 million
in Prudent Buyer Appeal Monies which may be recovered from HCFA.

In October, 2000, NCH commenced an adversary proceeding, styled
NovaCare Holdings, Inc. v. Mariner Post Acute Network,  Inc.,  
et al., Adv. Proc. No. 00-1577 (MFW) against certain of the MPAN
Debtors seeking a determination, among other things, that

(1) certain "Prudent Buyer Appeal Monies" were not property of
    the Debtor-Defendants'  estates;

(2) the Debtor-Defendants had an obligation to immediately turn
    such monies over to NCH; and

(3) NCH's claims to the Prudent Buyer Appeal Monies are superior
    to any claim thereto of Chase, Omega, or LaSalle resulting
    from any liens which they hold or assert.

On October 17, 2000, NCH's complaint was amended solely to name
LaSalle as a defendant.

In November, 2000, NCH filed the "Motion of Plaintiff NovaCare
Holdings, Inc. for Injunctive Relief Against the Section 541
Defendants and Their Section 541 Facilities" seeking a
preliminary injunction prohibiting the Debtor-Defendants from
entering into a settlement with HCFA regarding the Prudent Buyer
Appeal Monies or transferring those monies to anyone until the
Court determined whether the Prudent Buyer Appeal Monies were
property of the Debtor-Defendants' estates, and what party had a
superior right to such monies.

The Debtors believe that all of the services which gave rise to
the claims asserted in the NCH Proofs of Claim and the Adversary
Proceeding (each as defined below) were rendered prior to June
1, 1999, and so would be covered by the foregoing assignments to

The Court deferred any hearing on the Preliminary Injunction
Motion until after it ruled on the Motions to Dismiss the NCH
Complaint filed by the Debtor-Defendants on the grounds that
NCH's claims are barred by res judicata based upon prior
financing orders of the Bankruptcy Court. Subsequently, Chase
and Omega also filed similar motions to dismiss the NCH

On September 17, 2001, the Court denied the Motions to Dismiss.

On or about February 15, 2001, the Debtor-Defendants filed a
motion for summary judgment pursuant to which the Debtor-
Defendants seek summary judgment against NCH on all counts of
the Complaint which seek relief against them. Due to various
extensions of deadlines, NCH has not yet filed a response.
However, NCH has indicated that it intends to vigorously oppose
the Summary Judgment Motion and that it contemplates filing a
cross-motion for summary judgment.

Following the denial of the Motion to Dismiss, and on or about
October 9, 2001, the Debtor-Defendants answered the NCH
Complaint, denied the allegations material to NCH's claims to
the Prudent Buyer Appeal Monies, and asserted certain enrichment
and other claims, and seeking to avoid certain transfers. The
Lender-Defendants also filed answers denying the material
allegations of the NCH Complaint relating to NCH's assertion of
superior rights to the Prudent Buyer Appeal Monies and raising
various affirmative defenses.

                   The Settlement Agreement

After extensive and substantial negotiations, NCH, on the one
hand, and the Debtors, Omega, LaSalle, Chase, and Foothill, on
the other hand, have agreed to fully and finally resolve all of
the issues raised in the Adversary Proceeding and the NCH Proofs
of Claim and certain other matters among them.

The Settlement Agreement provides for, among other things, the

(1) Settlement Payment.

    In full, complete, and total satisfaction of any and all
    claims of NCH including, without limitation, any claims that
    are the subject of the Adversary Proceeding or the NCH
    Proofs of Claim, and any claim to or rights in or respecting
    the Prudent Buyer Appeal Monies, the Debtors shall pay NCH
    $3,300,000.00. Such payment shall be without prejudice to,
    or determinative of the appropriate allocation of the
    Settlement Payment between the MPAN Debtors and the MHG

(2) Dismissal of All Pending Litigation and Withdrawal of All
    NCH Proofs of Claim.

(3) General Releases of various claims by and between NCH and

(4) Limited Release - NCH and Lender Parties.

    Effective upon the payment in full of the Settlement
    Payment, NCH on the one hand, and Chase, Foothill, LaSalle,
    and Omega (collectively, the "Lender Parties"), and each of
    them, on the other, agree to fully, finally, and forever
    irrevocably release certain claims against one another and
    their respective Related Parties, as such limited release is
    described more fully in the Settlement Agreement.

(5) Release by NCH of Any Claim To Computer Equipment.

    Upon the payment in full of the Settlement Payment, (a) the
    Computer Equipment shall be deemed to have been abandoned to
    the Debtors by NCH and the Debtors shall be deemed to have
    relinquished any and all claims against NCH with respect to
    the Computer Equipment, including any claims for storage of
    such equipment. However, NCH makes no representation or
    warranty that it holds title to, or any ownership interest
    in, any of the Computer Equipment.

(6) No Further Standing of NCH Following Settlement Payment.

    NCH agrees that, upon the receipt of the Settlement Payment,
    it will no longer have any claims in any of the Debtors'
    chapter 11 cases and will not be a party in interest

    Accordingly, upon payment in full of the Settlement Payment
    to NCH: (i) NCH shall be deemed to have resigned from the
    Official Committee of Unsecured Creditors in the MPAN
    Committee; and (ii) NCH shall no longer be a party in
    interest or have standing to be heard on any matter in the
    Chapter 11 Cases. NCH shall, however, retain standing with
    respect to the interpretation and enforcement of the
    Settlement Agreement.

(7) Deferral of Motion to Settle Government Claims.

    The Debtors agree that until the earlier of (a) the entry of
    a final, non-appealable order of the Court approving the
    Settlement Agreement and (b) the termination of the
    Settlement Agreement in accordance with its terms, the
    Debtors will not file a motion for approval of any
    settlement between any of the Debtors, on the one hand, and
    HCFA, or Centers for Medicare and Medicaid Services, on the
    other hand, which would involve a release or modification of
    any claim with respect to any of the Prudent Buyer Appeal

The Debtors believe that the proposed settlement with NCH is in
the best interest of the Debtors' estates, creditors, and other
parties in interest, and should be approved by the Court.

Were NCH to prevail in the Adversary Proceeding and the NCH
Proofs of Claim, NCH could be entitled to as much as $9 million
in Prudent Buyer Appeal Monies to which certain Debtors may
otherwise be entitled. While the Debtors vigorously dispute
NCH's claim to a turnover of any of the Prudent Buyer Appeal
Monies, the Debtors recognize that there is a significant degree
of risk and uncertainty in any litigation involving claims such
as those raised by NCH. The extensive briefing that has already
occurred in connection with the Motion to Dismiss, the
Preliminary Injunction Motion and the Motion for Summary
Judgment highlights the point that this is not a simple piece of
litigation. Moreover, this litigation has already proven to be
quite expensive and time consuming and, absent a settlement, the
expense of litigation will continue to be substantial. The
continuation of the litigation between NCH and the Debtor-
Defendants would also continue to be time consuming and would
distract certain of the Debtors' personnel from their other

Furthermore, the Settlement Agreement will remove a potentially
substantial impediment to the negotiation and implementation of
a global resolution of Medicare-related claims asserted by and
against the Federal Government. A global resolution of such
claims is likely to be critical to a plan of reorganization for
the Debtors. The resolution of claims regarding the Prudent
Buyer Appeal Monies, in turn, is likely to be an integral and
indispensable component of such a global settlement.

In addition, the Debtors seek a determination that upon the
receipt of the Settlement Payment by NCH, any and all Claims
which (a) NC Resources, Inc. ever had against any of the Debtors
or (b) NovaCare Pennsylvania had against any of the Debtors on
any day prior to June 1, 1999 shall be released. The Debtors
believe that such determination is appropriate and important in
light of the fact that the Debtors will be paying $3.3 million
to NCH based on the representation that it owns and has the
ability to release the claims.

Accordingly, the Debtors request that the Court enter an order,
pursuant to Secs. 105 and 363 of the Bankruptcy Code and
Bankruptcy Rules 2002, 6004, and 9019(a),

(a) authorizing the Debtors' entry into the "Stipulation and
    Agreement Regarding Settlement of Claims by NovaCare
    Holdings, Inc." (the "Settlement Agreement") with

   (1) NovaCare Holdings, Inc.;

   (2) JPMorgan Chase Bank, formerly known as The Chase
       Manhattan Bank, individually and as Collateral Agent for
       those entities holding an interest with respect to the
       Prepetition Facility;

   (3) Foothill Capital Corporation, individually and as
       administrative agent for those entities holding an
       interest with respect to the Postpetition Facility;

   (4) Omega Healthcare Investors, Inc.; and

   (5) LaSalle National Bank; and

(b) determining that, upon the receipt of the Settlement Payment
    by NCH, all the following Claims will be fully and finally

   (i)  claims that NC Resources, Inc. ever had against any of
        the Debtors, or

   (ii) claims that NovaCare Pennsylvania had against any of the
        Debtors on any date prior to June 1, 1999, including
        without limitation, any claims which NovaCare
        Pennsylvania had prior to June 1, 1999, under or
        relating to any therapy services. (Mariner Bankruptcy
        News, Issue No. 22; Bankruptcy Creditors' Service, Inc.,

MCLEODUSA INC: Fleming Recommends Purchase of Preferred A Stock
McLeodUSA (Nasdaq: MCLD) provides telecommunication services,
internet, data and publishing services to both wholesale and
retail customers.  McLeod is concentrated on tier-2 and tier-3
markets in the Midwest, Northwest, Southwest, and the Rocky
Mountain regions of the United States and currently provides
services to almost 500,000 customers in 25 states.

On Dec. 3, 2001, McLeodUSA Inc. announced a restructuring plan
to reduce its debt but warned it may seek Chapter 11 bankruptcy
protection.  McLeodUSA said it will also make an offer under
which its publicly traded bonds will be tendered in exchange for
at least $560 million in cash, plus about 15 percent of its
common stock after the recapitalization is complete.  The
restructuring, would eliminate at least 95 percent of its $2.9
billion of bond debt and the associated $300 million of annual
interest expense.

As part of the proposed restructuring, Forstmann Little will
purchase McLeodUSA's publishing division for $535 million and
make an additional equity investment of $100 million for new
convertible preferred stock, which will be converted to new
common and it's Series D and E stock will also be converted to
new common.

After the deal is complete, Forstmann Little will own about 45%
of the firm's new common stock.  Bondholders will receive
approximately 15%, Series A existing public preferred stock
receive 11.9%, and existing Class A common stock are expected to
retain 33.1% of the new common shares.  All of which may be
found in the preliminary proxy statement, schedule 14A.

"In our opinion, based upon today's prices and the proposed
reorganization plan, the Preferred A stock has more than four
times the value of the common shares.  This statement is based
upon the proposal that the 1.145 million preferred shares will
receive 11.9% of the new common and the 627.7 million common
shares will receive 33.1% of the new common," says Fleming
Securities, Inc., a member of the National Association of
Securities Dealers.

"We consider any investment in McLeodUSA highly speculative with
considerable risk, but we believe if you choose to own McLeodUSA
you should purchase the preferred A stock (Nasdaq: MCLDP) and
sell the common stock (Nasdaq: MCLD).  Under the current
proposal before the shareholders we believe the preferred A
stock has a significantly better upside appreciation potential
than the common stock."

MCLEODUSA INC: S&P Slashes 11.375% Senior Unsecured Notes to D
Standard & Poor's lowered its corporate credit rating on
McLeodUSA Inc. to 'SD' from double-'C' and lowered its rating on
the company's 11.375% senior unsecured notes due 2009 to 'D'
from single-'C', following the company's missed January 1, 2002,
interest payment on these notes. These ratings were
simultaneously removed from CreditWatch.

Standard & Poor's also lowered its bank loan rating on McLeod to
single-'C' from double-'C'. This rating remains on CreditWatch
with negative implications.

Standard & Poor's other ratings on McLeod remain on CreditWatch
with negative implications. Because McLeod has indicated that it
will not meet interest payments due January 15, 2002, on its 12%
senior unsecured notes due 2008 and 9.25% senior unsecured notes
due 2007, the ratings on these two issues are expected to be
lowered to 'D' at that time.

The missed interest payment on the company's 11.375% senior
unsecured notes due 2009 followed McLeod's recent action to
coercively exchange 95% of its outstanding senior notes or,
failing that, file for pre-packaged Chapter 11 bankruptcy. Once
the company completes either action, the ratings on all the
unsecured notes, preferred stock, and shelf registration are
expected to be lowered to 'D'. However, it is possible that the
secured bank loan will not go into default under either action.

McLeod is a facilities-based competitive local exchange carrier
(CLEC) that provides local, long-distance, Internet access, and
data services to small business and residential customers in 25
states located mostly in the Midwest and Southwest. The company
originally aspired to be a national telecommunications carrier
by acquiring a data service provider and another CLEC near the
peak of the Internet boom in early 2000. The ensuing downturn
in the economy and the telecommunications sector left McLeod
saddled with debt and with a very weak financial profile.

         Ratings Lowered and Removed From CreditWatch

     McLeodUSA Inc.                               TO     FROM
       Corporate credit rating                    SD     CC
       11.375% senior unsecured notes due 2009    D      C

     Rating Lowered and Remaining on CreditWatch Negative

     McLeodUSA Inc.                               TO     FROM
       Senior secured bank loan                   C      CC

         Ratings Remaining on CreditWatch Negative

     McLeodUSA Inc.                                  RATING
       12% senior unsecured notes due 2008              C
       9.25% senior unsecured notes due 2007            C
       8.5% senior unsecured notes due 2009             C
       9.5% senior unsecured notes due 2008             C
       11.5% senior unsecured notes due 2009            C
       8.375% senior unsecured notes due 2008           C
       10.5% senior unsecured discount notes due 2007   C
       Shelf registration:
        Senior unsecured debt                   prelim. C
        Preferred convertible stock             prelim. C
DebtTraders reports that McLeodUSA Inc.'s 8.125% bonds due
February 15, 2009 (MCLD1) are currently trading between 24 and
25.5. For real-time bond pricing, go to

MENTERGY LTD: Closes Refinancing Deal with Principal Creditors
Mentergy, Ltd. (Nasdaq: MNTE), a leading global provider of
blended e-Learning solutions, announced the closing of the
transactions contemplated by the agreement with its principal
creditors, previously announced by the Company on October 12,
2001.  As part of the agreement, certain principal shareholders
made equity investments of an aggregate of $2.85 million in cash
and Mentergy's stockholders' equity increased by $46.3 million.

Trefoil Gilat Investors LP, (a partnership managed by Trefoil
Gilat Inc. and is an affiliate of the Shamrock group) exchanged
its convertible note of approximately $26 million for
approximately 2.9 million ordinary shares. Accordingly, on
January 3, 2002 the Board of Directors of the Company accepted
the resignation of five as directors of the Company:  Basil
Gamsu, Amiram Levinberg, Gershon Patron, Lenny Recanati, and
Shlomo Tirosh, and appointed the following individuals who were
designated by Trefoil as members of the Board.

Michael Geiger is the Managing Director of Shamrock
International, Ltd., London, and is Senior International
Consultant to Shamrock Holdings, Inc.  Mr. Geiger has been
responsible for assisting Shamrock in identifying investment
opportunities in Europe and the Middle East.  He is a director
of Tadiran Communication Ltd., Tadiran Wireless Communication
Industries Ltd., M.P.I. Mediterranean Properties and Investments
Ltd. (formally known as Comfy Interactive Movies Ltd.), The New
Tel Aviv Bus Terminal Ltd., Pelephone Communication Ltd., Emed
Real-Estate Development and Investments Ltd., Dan Zabar Ltd. and
Comfynet Ltd.  Previously, Mr. Geiger was President of an
international consulting company, which participated in
diversified large-scale investment projects on a worldwide
basis, and was a member of the Board of Directors of Koor
Industries Ltd. and Netia Holdings, Inc

Liora Kvoras-Hadar is the Chief Executive Officer of Antal, a
market of quality toys and educational products Company since
1992.  Since 1993 Ms. Kvoras-Hadar serves as Board member of
Telad Ltd., (franchisee of Israeli TV - Channel 2), and since
May 2000 has been the Chairperson of the Telad's Audit
Committee.  She acts as an outside Board member in Natur, since
2001. Ms. Kvoras-Hadar has been a member of the New York bar
since 1987 and the Israeli bar since 1985.

Yona Shoham has been CEO and major shareholder of the Onyx Group
between 1989-2001.  Onyx is a group of Software Companies active
in both the Israeli and International markets.  Mr. Shoham
served as Regional Manager of "Control Data Europe" between
1987-1989, and the CEO of Control Data Israel between 1984 and

Meir Srebernik has been a Board member and Chairman of the
Finance Committee of the Board of Pelephone Communications Ltd.
since Jan. 1, 2001. Mr. Srebernik served as President and CEO of
the Netia Group, including its operating subsidiaries between
1998 and 2000, and President and CEO of Netia Holdings SA
between 1994 and 2000.

As a result of the Board's action and the resignations referred
to above, the Company's Board is now comprised of the following
7 individuals:  Miki Ben-Dor, Michael Geiger, Liora Kvoras-
Hadar, Yona Shoham, Meir Srebernik, and Yona Admon and Roni Ofer
as outside directors.

Eran Lasser, Co-CEO Mentergy said that "The closing of the
agreement will stabilize the position of Mentergy in the market,
and as a result allow the Company to more aggressively pursue
new and existing customers".

Eytan Mucznik, CFO Mentergy said that "The appointment of the
new Board members of Trefoil, with their local and international
experience, will contribute to the business growth and strategy
of the Company The additional breadth of management and
financial experience will undoubtedly contribute greatly to the
Company's future."

Mentergy, Ltd. (Nasdaq: MNTE), formerly Gilat Communications,
Ltd. (Nasdaq: GICOF), is a global e-Learning company, providing
e-Learning products, consulting, and courseware development
services for large enterprises.  With over 21 years of expertise
in the learning industry, Mentergy assists businesses worldwide
to make a cost-effective shift from traditional learning to a
blended e-Learning approach. Mentergy Ltd's North American
operations comprise of the Allen Communication Learning Services
division and the LearnLinc Live e-Learning division (Entergy,
Inc.), in addition to John Bryce Training in Israel and Europe
(Aris Education, KocBryce and Iqsoft JohnBryce Training Center),
Global sales and marketing operation that includes Mentergy
Europe, Gilat Satcom and Israsat that supplies service for VSAT
Network, Point to Point satellite links, Internet backbone
connectivity over satellite, and satellite infrastructure for
the e-Learning industry.  

Mentergy is a trademark and LearnLinc is a registered trademark
of Mentergy, Ltd.  All other brand names, product names, or
trademarks belong to their respective holders.

METALS USA: Court Okays Continued Employment of Arthur Andersen
Metals USA, Inc., and its debtor-affiliates obtained authority
from the court to continue employing the international
accounting firm Arthur Andersen LLP as accountant for Debtors-

The services that the Debtors expect from Andersen include:

A. Audit the Debtors' annual financial statements and perform
   other tasks related to auditing, accounting, financial
   reporting and tax services as required by the Debtor or the

B. Render accounting assistance in connection with reports and
   filings required by the court;

C. Assist and advise the Debtors on all tax matters;

D. Act as Debtors' contract tax department with functions
   including, preparation of all federal and state income and
   franchise tax reporting as well as related correspondence
   and response to subsequent notices and estimate tax
   payments and calculations for quarterly and income tax
   accounting for financial statements;

E. Consult with the Debtors' management and counsel on
   operational, financial and other business matters relating
   to accounting, auditing and general tax matters;

F. Consult with and advise the Debtors regarding financial
   reporting controls and procedures;

G. Consult and assist in research related to tax compliance
   issues and year-end tax planning;

H. Assist in tax matters in connection with potential
   acquisitions, dispositions or similar transactions;

I. Prepare any amended tax returns or applications for tax

J. Research and consult on compensation and benefit plan matters
   and preparation of annual benefit returns; and

K. Assist in other matters consistent with the above-mentioned
   and provide other auditing, accounting, financial reporting
   and tax services as may be requested by the debtors (Metals
   USA Bankruptcy News, Issue No. 5; Bankruptcy Creditors'
   Service, Inc., 609/392-0900)

NORTHPOINT COMMS: J. Gallen to Closely Monitor Chapter 7 Process
As of December 13, 2001, Pequod Investments, L.P., a New York
limited partnership, was the holder of 6,700,000 shares of the
common stock of NorthPoint Communications Group, Inc. and Pequod
International, Ltd., a corporation organized under the laws of
the Bahamas,  was the holder of 3,300,000 shares.  Jonathan
Gallen possesses sole power to vote and to direct the
disposition of all shares held by Pequod Investments, L.P. and
Pequod International, Ltd. In addition, as of such date,
3,000,000 shares were held individually by Mr. Gallen and/or by
third parties for whom Mr. Gallen exercises sole voting and
investment control with respect to such shares.  Thus, as of
December 13, 2001, Mr. Gallen is deemed to beneficially own

The Funds are engaged in the investment in personal property of
all kinds, including but not  limited to capital stock,
depository receipts, investment companies, mutual funds,  
subscriptions, warrants, bonds, notes, debentures, options and
other securities of whatever kind and nature. Mr. Gallen also
invests his personal funds and provides investment  management
services for various other third parties.

Mr. Gallen intends to closely monitor the Company's Chapter 7
bankruptcy proceedings currently pending in the United States
Bankruptcy Court for the Northern District Of California (San  
Francisco Division).  Further, Mr. Gallen believes that the
Company's principal asset is its interest in the litigation
captioned E. Lynn Schoenmann, Trustee for the Chapter 7 Estates
of NorthPoint Communications Group, Inc. et al. v. Verizon
Communications, Inc. et al., which is pending in the Superior
Court of the State of California, City and County of San
Francisco.  Mr. Gallen, to the extent permitted by applicable
law, rule and regulation, may seek to influence the outcome of
the Verizon Litigation and the Bankruptcy Case, including, among
other things, through (i) direct and/or indirect communications
with the Trustee, (ii)  direct and/or indirect communications
with other participants in the Verizon Litigation  and/or the
Bankruptcy Case and (iii) direct and/or indirect communications
with other persons, including other holders of shares and other
securityholders of the Company, in each case for the purpose of
attempting to maximize the value of the shares described here.

OPTICARE HEALTH: Inks Pact to Extinguish Debt Owed to Palisade
OptiCare Health Systems, Inc., (Amex: OPT) announced, in
connection with its the previously announced capital
restructuring, that its senior secured bank lender and one of
OptiCare's major investors, Palisade Concentrated Equity
Partnership, L.P. have signed a non-binding letter of intent
which would, if consummated, extinguish OptiCare's debt to that
lender and substantially reduce its debt overall.

If the transactions contemplated in the letter of intent are
completed, OptiCare will make a settlement payment to its senior
bank lender in exchange for which the bank will extinguish all
principal and accrued interest owed to it by OptiCare and will
surrender all OptiCare securities held by the senior bank
lender.  Simultaneously, OptiCare will also retire a bridge loan
from a junior secured lender.

As provided in a Restructure Agreement between OptiCare and
Palisade, as amended, funds for OptiCare's payment to its senior
bank lender are expected to come from two sources: CapitalSource
Finance, LLC, an asset-based lender specializing in the health
care industry, which has offered to provide a revolving credit
facility and a two-year term loan; and Palisade, in the form of
a ten-year loan.  The loans from CapitalSource and Palisade, the
final terms and documentation of which are still being
negotiated, would be secured, respectively, by first and second
priority liens on substantially all of OptiCare's assets.  In
connection with its loan, Palisade would receive a warrant
entitling it to purchase shares of OptiCare's common stock.

Cash to be used to retire the bridge loan and for additional
working capital would, as provided in the Restructure Agreement,
come from a purchase by Palisade of new preferred stock in

The completion of the transactions is subject to the parties
entering into binding agreements and other conditions including
obtaining the consent of a majority of the holders of OptiCare
common stock and consummating the financing with CapitalSource.  
If consummated, Palisade's effective ownership of the company's
voting stock (before exercise of its warrants) would rise from
approximately 16% to approximately 69%.

At the request of Palisade, Dean J. Yimoyines, M.D., OptiCare's
president and chief executive officer, will participate in the
Palisade investment.

OptiCare Health Systems, Inc. is an integrated eye care services
company focused on managed care and professional eye care
services.  It also provides systems, including internet-based
software solutions, to eye care professionals.

OWENS CORNING: Future Claimants Sign-Up Hamilton as Consultants
James J. McMonagle, the Legal Representative for Future
Claimants of Owens Corning and its debtor-affiliates, sought and
obtained an order from the Court authorizing him to employ and
retain Hamilton Rabinovitz & Alschuler, Inc. as his claims
evaluation consultant, nunc pro tunc to October 11, 2001.

Francine A. Rabinovitz, an HR&A member, tells the Court that her
firm provides analytical services focused on the estimation of
claims and the development of claims procedures with regard to
payments and assets of a claims resolution trust. Hamilton is
well-qualified to serve as claims evaluation consultants for the
Futures Representative because its members have assisted and
advised numerous chapter 11 debtors and creditors in the
estimation of the value and number of claims in other "mass
tort" reorganizations, particularly in the chapter 11 cases of
Celotex Corp., A.H. Robins Co., Inc. and Silicone Gel Breast
Implant Products Liability Litigation.

The consulting services that Hamilton will render for the
Futures Representative include:

A. Estimation of the number and value of present and future
   asbestos-related claims for each of the Debtors;

B. Development of claims procedures to be used in the
   development of financial models of the assets of and payments
   by a claims resolution trust;

C. Analyzing and responding to issues relating to the
   establishment of one or more bar dates with respect to the
   filing of asbestos-related claims;

D. Analyzing and responding to issues relating to notice
   procedures concerning asbestos-related claimants and
   assisting in the development of such notice procedures;

E. Assessing proposals made by the Debtors or other parties,
   including proposals from the committees regarding the
   estimation of claims and/or the formulation of a claims
   resolution trust pursuant to Section 524(g) of the
   Bankruptcy Code;

F. Assisting the Futures Representative in negotiations with the
   Debtors and/or other parties in interest regarding the

G. Rendering expert testimony as required by the Futures

H. Assisting the Futures Representative in the preparation of
   testimony or reports by other experts and/or consultants;

I. Obtaining all previously filed public data regarding
   estimations against other defendants in asbestos-related

J. Analyzing and evaluating other ongoing asbestos-related
   litigations, including tobacco-related litigations; and

K. Such other advisory services as may be requested by the
   Futures Representative from time to time.

Ms. Rabinovitz submits that Hamilton intends to apply for
compensation for professional services rendered in accordance
with its normal billing practices plus reimbursement of all of
its reasonable out-of-pocket expenses incurred in connection
with Hamilton's employment, subject to allowance by this Court.
The current hourly rates Hamilton charges are:

      Senior Partners          $375
      Junior Partner            325
      Principals                275
      Directors                 200
      Managers                  175
      Senior Analysts           150
      Analysts                  100
      Research Associates        75

Hamilton requests that this Application be granted nunc pro tunc
to October 11, 2001 to allow the firm to be compensated for work
it performed for the Futures Representative from and after
October 11, 2001, but prior to the submission of this
Application or the order granting it.

Hamilton has informed the Futures Representative that it does
not have or represent any interest materially adverse to the
interests of the Debtors or their estates, creditors or equity
interest holders, and is a "disinterested person" as defined in
section 101(14) of the Bankruptcy Code, except that:

A. Hamilton performed an executive search for the Fibreboard
   Trustees for a prospective Chief Executive Officer and Vice
   President of Claims. However, said trust was never formed
   and the relationship between the Fibreboard Trustees and
   Hamilton ceased.

B. Hamilton has provided and will likely continue to provide
   training for certain personnel in the real estate lending
   department of the Fleet National Bank.

C. Hamilton has previously served or has been represented by
   Latham and Watkins; Orrick, Herrington & Sutcliffe; Kazan,
   McClain, Edises Simon & Abrams; Ness, Motley, Loadholt,
   Richardson & Poole; Anderson Kill & Olick; Akin, Gump
   Strauss Hauer & Feld; and Young, Conway, Watkins & Kurtz.
   (Owens Corning Bankruptcy News, Issue No. 25; Bankruptcy
   Creditors' Service, Inc., 609/392-0900)   

PRINTING ARTS: Asks Court to Extend Lease Decision Period
Printing Arts America, Inc. wishes to enlarge its time to decide
whether to assume or reject nonresidential real property leases
through March 29, 2002.

Considering the numerous business and administrative emergencies
on the commencement of these Chapter 11 cases, the Debtors
expect that they will require additional time to carefully
review and analyze each of the unexpired Leases.

The Debtors should not be compelled to make a potentially haste
determination of assumption or rejection with respect to the
unexpired leases and perhaps inadvertently reject a valuable
lease or prematurely assume a lease and incur a substantial
administrative obligation to the detriment of the estate and

Printing Arts America, Inc. filed for chapter 11 protection on
November 1, 2001 in the U.S. Bankruptcy Court for the District
of Delaware. Teresa K.D. Currier, Esq. and William H. Schorling,
Esq. at Klett Rooney Lieber & Schorling represent the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed an estimated assets and
debts of more than $100 million.

PSINET INC: Pushing For Sale of HQ Property for $27.7 Million
PSINet Inc. and PSINet Realty Inc., two of the Debtors, move the
Court for the entry of two orders relating to the proposed sale
of the land, building and improvements comprising the PSINet
Inc., headquarters facility located at 44983 Knoll Square,
Ashburn (Loudoun County), Virginia and additional vacant land
near the headquarters facility to The George Washington
University (the Buyer) for $27,750,000.

In the first part of the Motion, Realty seeks entry of a Sale
Procedures Order approving the payment of a 2.5% breakup fee to
the Buyer as well as other bid protection procedures in advance
of the consummation of such sale. In the second part of the

   (a) Realty seeks approval of the sale of the Property to the
       Buyer under the terms of a Real Property Purchase and
       Sale Agreement between Realty and the Buyer, dated
       December 12, 2001, free and clear of all liens, claims,
       encumbrances, rights and interests (other than Permitted
       Exceptions and Unrecorded Rights) to the highest and best
       bidder, and

   (b) PSINet seeks an order of the Court authorizing it to
       enter into a lease agreement with the Buyer pursuant to
       which PSINet will lease a portion of the Property which
       will continue to serve as PSINet's headquarters for three

The Property consists of approximately 39.95 acres of land
located in the University Center subdivision, an office park in
Loudoun County, Virginia, together with an office building of
approximately 204,000 square feet of rentable space. The
Property includes the office building that currently serves as
PSINet's headquarters and is owned in fee simple by Realty.

                   The Sale Procedures Order

The Court has granted part I of the motion and issued a Sale
Procedures Order:

(1) authorizing payment by Realty to the Buyer of the Breakup
    Fee in the amount of up to $693,750, which is 2.5% of the
    Purchase Price, and the reimbursement of expenses not to
    exceed $100,000, in certain circumstances where the Breakup
    Fee would not be payable.

(2) authorizing the Debtors to solicit bids pursuant to the
    Bidding Procedures and, if necessary, to subsequently hold
    an auction on January 24, 2002 at 10:00 a.m. at the offices
    of Wilmer, Cutler & Pickering, 1600 Tysons Boulevard, 10th
    Floor, Tysons Corner, Virginia.

(3) scheduling the Sale Hearing to be held on January 30, 2002,
    at 9:45 a.m. Eastern time, at which time the Court will
    consider the relief requested in Part II of the Motion with
    respect to the Sale and consider confirmation of the
    Auction, if any.

(4) directing that Objections to the entry of the Sale Order, if
    any, must be filed and served so as to be actually received
    no later than 4:00 p.m. Eastern time on January 26, 2002.

The Court has determined that Realty's payment to the Buyer of
the Breakup Fee or the Expense Reimbursement is (i) an actual
and necessary cost of preserving Realty's estate, within the
meaning of 11 U.S.C. Sec. 503(b), (ii) necessary to ensure that
the Buyer will continue to pursue its proposed acquisition of
the Property, (iii) of substantial benefit to Realty and the
other Debtors' estates, and (iv) reasonable and appropriate,
including in light of the size and nature of the Sale and the
efforts that have been and will be expended by the Buyer
notwithstanding that the proposed Sale is subject to higher or
better offers. The Court is satisfied that the Termination Fee
and Expense Reimbursement were material inducements for, and
conditions of, Purchaser's entry into the Purchase Agreement and
has therefore promoted more competitive bidding.

Before the entry of the order of the Court, the United States
Trustee requested that the Debtors clarify whether they are
asking the Court to grant the proposed buyer an administrative
claim with priority over charges due to the Clerk of the Court
and the United States Trustee quarterly fees. To the extent the
Debtors are seeking a priority over Court costs and the
statutory fees of the United States Trustee as provided for in
28 U.S.C. Sec. 1930, the United States Trustee objects to this

Judge Gerber makes it clear that Realty's obligation to pay the
Breakup Fee or the Expense Reimbursement shall survive
termination of the Purchase Agreement and, until indefeasibly
paid, shall constitute administrative expenses of Realty's
estate under sections 503(b) and 507(a)(1) of the Bankruptcy
Code and shall be paid when due without further order of the
Court, provided, however, that such payment shall have priority
over any and all other administrative expenses other than Court
costs and the statutory fees of the United States Trustee as
provided for in 28 U.S.C. Sec. 1930.

                  Approval of the Transaction

As previously reported, in February 2001, the Debtors engaged
Wilmer, Cutler & Pickering as its bankruptcy and restructuring
counsel. In March 2001, the Debtors engaged Dresdner Kleinwort
Wasserstein (DrKW) as its restructuring financial advisors and
PricewaterhouseCoopers LLP as its restructuring accountants.
Since its engagement in March 2001, DrKW has also been assisting
the Debtors in preparing for the Chapter 11 process and
exploring and pursuing strategic alternatives in the Chapter 11
context. Since its engagement in November 2000 and through the
Petition Date, Goldman, Sachs had been assisting the Debtors in
assessing and pursuing strategic alternatives outside the  
Chapter 11 context, including the sale of all or parts of the

The Debtors, while continuing to pursue potential transactions
with candidates who may wish to purchase all or a portion of the
Debtors' assets, are simultaneously developing a stand-alone
business plan for reorganized continued operations of its core
businesses under its newly reconstituted management.

On December 12, 2001, Realty and the Buyer entered into the
Purchase Agreement. Pursuant to the Purchase Agreement, Realty
agreed to sell all of its right, title and interest in and to
the Property to the Buyer for $27,750,000 subject to certain
usual and customary adjustments.

Realty must also conduct the Sale consistent with the timeframes
negotiated in the Bidding Procedures and Purchase Agreement,
under which, among other things, the Buyer may terminate the
Purchase Agreement if the Sale does not close and the Sale Order
does not become final by March 11, 2002 (April 10, 2002, if,
despite Realty's diligent efforts, Realty has been unable to
obtain the Sale Order by March 11).

In addition, as a condition to the effectiveness of the Purchase
Agreement, the Buyer and PSINet have agreed to enter into the
Lease, pursuant to which PSINet will lease a portion of the
Property which will continue to serve as PSINet's headquarters)
for three months at a rate of $11.80 per rentable square foot,
net of Operating Expenses; the Buyer has agreed to grant PSINet
one additional three-month renewal option and two additional
six-month renewal options, albeit at higher cost. The purpose of
the Lease and the options is to provide Realty and PSINet with a
transition mechanism for a reorganized U.S. business. In the
event of a sale of the U.S. operations to a third party, the
Lease specifies that the Lease shall - subject to certain
qualifications and limitations - automatically terminate on the
earlier of: (i) the 180th day after the settlement date of such
sale, or (ii) the expiration of the Term of the Lease by its
terms (including any Renewal Periods which Tenant has

The Buyer has placed into escrow a $500,000 deposit toward the
Sale of the Property. The material provisions of the Purchase
Agreement require the Buyer to pay to Realty, at closing, in
cash, a purchase price equal to the specified Purchase Price
less the amount already placed into escrow, and require Realty
to transfer to the Buyer, pursuant to Section 363 of the
Bankruptcy Code, the Property free and clear of all liens,
claims, encumbrances, rights and interests (other than Permitted
Exceptions and Unrecorded Rights). The Purchase Agreement
defines Unrecorded Rights as "any existing or potential
assertion of contractual rights or interests that purport to run
with the land under the Purchase and Sale Agreement, dated as of
December 20, 1999, by and between Collin Equities, Inc., as
Seller, and PSI Net Inc., as Buyer, and the First Amendment to
it as assigned to PSINet Realty Inc. The Buyer makes it clear
that, in agreeing that the Sale Order shall not provide for the
transfer of the Property free and clear of Unrecorded Rights, it
has not agreed that such interests are valid or binding upon it
as the purchaser of the Property.

Unless and until the Court determines that The George Washington
University is the winning bidder and approves the Purchase
Agreement, the Buyer's liability in the event of a breach by it
of the Purchase Agreement is limited to the $500,000 deposit.
Once the Court determines that The George Washington University
is the winning bidder and approves the Purchase Agreement, the
Buyer's liability in the event of a breach by it of the Purchase
Agreement shall be Realty's actual damages up to a maximum of
20% of the purchase price.

Realty will only make minimal, customary representations and
warranties, which are set forth in the Purchase Agreement.

Although Realty believes the Purchase Agreement is fair and
reasonable and reflects the highest and best value for the
Property as of the date of this Motion, it intends to submit the
Purchase Agreement to the test of the broader public marketplace
in the hope that higher and better offers are received in order
to obtain the greatest value for the Property.

To help solicit higher and better offers, Realty has retained
The Staubach Company-Northeast (TSC) to help it, among other
things, actively market for sale certain of the Debtors' real
property assets, including the Property. Under an order that
this Court entered on July 10, 2001, PSINet was authorized to
retain TSC to provide real estate services with respect to,
among other things, the sale of the headquarters. Pursuant to
TSC's arrangement with PSINet, TSC will be entitled to a
commission of $428,500 if the Purchase Agreement is consummated.
Realty believes that its considerable efforts, together with the
ongoing efforts of TSC, will ensure that Realty obtains the
highest and best offer for the Property.

                      Bidding Procedures

As authorized by the Court, the proposed transaction will be
subject to Bidding Procedures, summarized as follows:

   (1) Requirements for Competing Bid.

Any Competing Bid must be:

(A) for a purchase of the entire Property;

(B) for a purchase price that includes at least $28,643,750 cash
    at closing;

(C) subject to no closing conditions relating to (i) due
    diligence, (ii) board, shareholder, or other internal
    approvals, or (iii) financing;

(D) submitted to PSINet Realty Inc. with a copy to the Buyer and
    counsel to the Committee by no later than 4:00 p.m. Eastern
    Time on January 18, 2002 (Bid Deadline);

(E) in writing, along with: (x) a markup of the Purchase
    Agreement showing all changes required by the prospective
    purchaser; (y) credible evidence, in a form satisfactory to
    the Debtor, of the bidder's ability to consummate the
    purchase at the bid price, and (z) a deposit in an amount
    equal to 10% of the purchase price offered (provided,
    however, that the Debtor, with the consent of the Committee,
    may reduce the amount of the deposit to an amount not less
    than $500,000), in immediately available funds, which
    deposit shall be held in escrow by Debtor's counsel or its  
    designee and shall be applied to the purchase price at
    closing if such bidder is the prevailing bidder and shall
    otherwise be refunded to such bidder unless such bidder is
    the Prevailing Bidder but subsequently fails to close under
    its proposed purchase agreement other than because of a
    breach by the Debtor or failure to occur of a closing
    condition specified in such purchase agreement.

   (2) Auction.

At the Bid Deadline, if any timely Competing Bid has been
submitted to the Debtor which meets all of the Competing Bid
Requirements (a Qualified Competing Bid), then an auction shall
be conducted at the offices of the Debtor's counsel, 1600 Tysons
Boulevard, 10th Floor, Tysons Corner, Virginia, on January 24,
2002, at 10:00 a.m. or at such other time and place as may be
ordered by the Bankruptcy Court, provided that such alternative
date is consistent with the Debtor obtaining court approval of
the sale prior to March 11, 2002 (March 26, 2002, if, despite
the Debtor's diligent efforts, the Debtor has been unable to
obtain the Sale Order by March 11).

Only the Buyer and any person who made a Qualified Competing Bid
shall be entitled to participate in the Auction. At the Auction,
bidding will proceed starting with the highest Qualified
Competing Bid made by any bidder other than the Buyer prior to
the Bid Deadline. Any bidder at the Auction shall be required to
bid an amount that is at least $200,000 more than the highest
previous bid, taking into account any breakup fee.

Bidding shall continue until the highest and best bid has been
made and no other person in attendance at the Auction desires to
bid. As part of any bid that it makes, the Buyer shall be
entitled to "credit bid" the amount of the breakup fee that
would be paid to the Buyer if a sale to a bidder other than the
Buyer were consummated.

If (i) any bidder other than the Buyer makes a bid at or prior
to the Auction which includes economic or other terms that are
in any respect materially different from the terms proposed by
the Buyer, and (ii) the Debtor regards such bid as a Qualified
Competing Bid that is superior to the bid originally made by the
Buyer (or the most recent bid subsequently made by the Buyer),
and (iii) the Buyer elects to make a competing bid, then, as
part of its competing bid, the Buyer may modify any of the
terms, conditions or provisions of the Purchase Agreement in
order to (A) conform the Buyer's bid to the terms of the
Qualified Competing Bid deemed superior by the Debtor, or (B)
otherwise attempt to make its competing bid, taken as a whole,
superior to such prior bid, taking into account the Buyer's
right to "credit bid".

The bidder who prevails at the auction is referred to as the
"Prevailing Bidder." The Debtor shall sell the Property to the
Prevailing Bidder on the terms and conditions set forth in its
prevailing bid (or to the Buyer, on the terms set forth in the
Purchase Agreement, if there are no Qualified Competing Bids).

   (3) Hearing and Sale Free and Clear of Liens.

If no Qualified Competing Bid is made, and there is therefore no
Auction, then a hearing shall be held before the Bankruptcy
Court no later than 7 business days after the date set for the
Auction. If a Qualified Competing Bid is made, and an Auction
takes place, then a hearing shall be held before the Bankruptcy
Court no later than 7 business days after the Auction.

   (4) Breakup Fee and Expense Reimbursement.

In the event it becomes obligated to pay the Breakup Fee or
Expense Reimbursement, such obligation will constitute an
administrative expense under Sections 503(b) and 507(a)(1) of
the Bankruptcy Code, with priority over other administrative
expenses, and be payable in accordance with the Bidding
Procedures without further order of the Court.

(A) If the Debtor sells the Property to another bidder pursuant
    to a Qualified Competing Bid, then the Debtor shall pay to
    the Buyer the Breakup Fee of $693,750.

(B) If the Debtor is in material breach of the Purchase
    Agreement before the Court determines that Buyer is the
    Prevailing Bidder and approves the Purchase Agreement, and
    the Buyer is not in material breach or has cured such breach
    within any applicable cure period, then - except as
    specifically provided in paragraph 4.C - the Debtor shall
    pay $693,750 to the Buyer.

(C) In the event the breach entitling the Buyer to terminate the
    Purchase Agreement is a Specified Breach, and such Specified
    Breach and the resulting termination occur before the Court
    determines that Buyer is the Prevailing Bidder and approves
    the Purchase Agreement, then the Debtor shall pay to the
    Buyer an amount (not to exceed $693,750) equal to the
    greater of (i) the amount by which the price for which the
    Property was sold exceeds $27,750,000, or (ii) the Expense

    The amount in (i) shall be payable only if the Debtor sells
    or disposes of the Property (or any portion of or interest
    in the Property) to a person or entity other than the Buyer
    (an "Alternative Transaction") at any time during the
    Debtor's bankruptcy case or during the six-month period
    following the date on which such case is closed (the "Tail

    The Expense Reimbursement component of such amount will be
    payable (x) if the parties agree in good faith that the
    breach giving rise to the right of termination is a
    Specified Breach within 5 business days of such termination
    or (y) if a court of competent jurisdiction determines that
    such breach was a Specified Breach, within 5 business days
    of such determination.

    The remainder of such amount shall be payable within five
    (5) business days of the closing of an Alternative

(D) If a material breach by Debtor occurs on or after the date
    on which the Court determines that Buyer is the Prevailing
    Bidder and approves the Purchase Agreement, Buyer shall be
    entitled to elect, either (1) to obtain a judgment of
    specific performance of this Agreement by Seller, or (2) as
    full and complete liquidated damages, to receive the sum of
    $693,750 if there is an Alternative Transaction during the
    pendency of Debtor's bankruptcy case or during the Tail
    Period, or, if there is no such transaction, the Expense
    Reimbursement. (The fee described in subparagraph A, B, C or
    D of paragraph 4 is referred to as the "Breakup Fee.")

(E) If the Debtor does not sell the Property to the Buyer and
    also does not enter into an Alternative Transaction during
    the Debtor's bankruptcy case or the Tail Period and
    subparagraphs A, B, C and D of paragraph 4 do not apply,
    then the Buyer shall be entitled to receive from the Debtor
    an amount equal to the fees, costs, and expenses actually
    incurred by the Buyer relating to the Purchase Agreement and
    the transactions contemplated, subject to a cap for all such
    expenses of $100,000 (the "Expense Reimbursement"), but not
    the Breakup Fee.

(F) The Debtor shall not be obligated to pay to the Buyer the
    Breakup Fee or the Expenses if the Buyer is in material
    breach but the Debtor is not in material breach.

(G) For purposes of these Bidding Procedures, a "Specified
    Breach" of the Purchase Agreement shall mean (a) the
    existence of an environmental condition on the Property that
    constitutes a breach of a representation, warranty, or other
    provision of the Purchase Agreement if the Debtor did not
    and could not reasonably have known of such condition; (b) a
    casualty event on the Property that was not caused by
    Debtor; (c) a condemnation of the Property; or (d) any
    litigation, proceeding, or investigation that violates
    Section 9.1(D) of the Purchase Agreement, unless such
    litigation, proceeding, or investigation was commenced by

Realty, after consultation with the Committee, shall determine
in good faith whether a submitted Competing Bid meets the
qualifications described herein and whether the Purchase
Agreement or a submitted Competing Bid constitutes the most
favorable transaction for the Debtors' estates. The most
favorable bid as reasonably determined by Realty shall be
submitted to the Court for approval at the Sale Hearing.

Realty reserves its right to request that the Court eliminate or
reduce the 10-Day Stay under Rule 6004(g) of the Federal Rules
of Bankruptcy Procedure. (PSINet Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 609/392-0900)   

REGAL CINEMAS: Intends to Sell $200 Million of Sr. Sub Notes
DebtTraders reports that Regal Cinemas, which filed for Chapter
11 bankruptcy protection October 12, intends to sell $200
million of senior subordinated ten year notes. The Company,
which recently won approval for its prepackaged bankruptcy
filing, intends to use the proceeds to help fund future

In addition, DebtTraders analysts Daniel Fan and Blythe Berselli
advise that Regal Cinemas Inc.'s 8.875% bonds due 2010 was last
quoted at a price of 19.5. For real-time bond pricing, see

SIMPLIFIED EMPLOYMENT: Sees First Quarter Chapter 11 Emergence
Simplified Employment CEO Joseph J. Whall said he is prideful of
his workforce and their effort to retain such a significant
client.  "Despite the difficulties of early last year, we still
have an incredible staff.  No other professional employment
organization can match our expertise and depth of experience,"
Whall said.

Simplified Employment, formerly SES, filed for court-authorized
reorganization on July 9 when Whall was approved as the new CEO
of the once embattled Employment Company.  Since then,
Simplified Employment has paid all bills and last month filed a
reorganization plan that would settle claims with creditors and
allow the company to emerge from court oversight.  Approval of
the plan is expected in the first quarter of this year.

"This is a tremendous start to the New Year," Whall said about
the new Nationwide Truck Brokers (NTB) contract.  "We lost some
customers last year and I can say that I genuinely wish them
well.  I assure everyone from clients to vendors and employees,
this company today is on solid ground and moving forward.  It is
propelled by the best in the business."

Whall said NTB Chief Financial Officer Ken Elliott negotiated a
strong agreement for his workforce that allows the company to
concentrate on its business and prosper.  Grand Rapids-based NTB
is a growing trucking firm that has succeeded with on-time
deliveries and competitive pricing.  The company's clients
include major market leaders like Meijer, Kellogg, and Dow.

"It is no wonder to me that NTB is growing," Whall said.  "Ken
and his other managers are sharp and their workers are
professional, experienced and dedicated."

Elliott said he is pleased to have his employment
responsibilities handled by an aggressive and experienced
Professional Employer Organization.

"I really appreciate working with Joe Whall and the rest of his
people," Elliott said.  "I believe Simplified Employment is an
organization that is gaining strength daily and will have
significant growth this year as a result."

For more information please call Michael Bencsik at 248-270-2020
or Mike Belletini at 248-270-2099.

SYNERGY TECHNOLOGIES: Must Seek Additional Financing to Continue
Synergy Technologies Corporation has had negative cash flows
from operating activities during the quarter ended September 30,
2001 and cumulatively from inception through September 30, 2001.
As the Company has not yet developed or constructed plants or
facilities of a commercial size, it does not expect to be able
to generate any substantial amounts of revenues until the
construction of such facilities, or the completion of other
arrangements such as for the construction of such facilities by
third parties or the sale of an interest in the Company's
technologies. The construction of any plants or other facilities
would require the Company to raise substantial amounts of
additional funds.

The Company does not presently have any known sources of
additional funds, or have other arrangements that would result
in any substantial revenues in the foreseeable future. These
conditions raise substantial doubt about Synergy's ability to
continue as a going concern. Synergy's continued existence is
dependent on its ability to obtain additional financing. The
Company will attempt to continue to raise additional funds from
public and private markets and through arrangements with certain
related and unrelated companies with which it is negotiating
mutually beneficial agreements for the use of the technologies.
However, there is no assurance that additional financing will be
realized. If Synergy is unable to realize this additional  
financing, it could cease to be a going concern.

THERMOVIEW: Meets 2001 Targets of Restructuring Long-Term Debts
By reducing annualized operating costs, the diversified home
improvement company ThermoView Industries, Inc. (Amex: THV) has
achieved management's 2001 streamlining and cost-reduction
goals, CEO Charles L. Smith said Monday.

"We set out to reduce annualized expenses by $3.4 million, and
we've met that goal.  We're thrilled with the progressive
results ThermoView has achieved to identify and reduce general
and administrative expenses.  These cost benefits have boosted
cash flow, which is expected to meet or exceed our budget
targets for the year," said Smith.

"The company is launching a second phase of this cost-
containment effort for 2002, and we are targeting an additional
$1 million of efficiencies to achieve," Smith said.

ThermoView, the nation's fifth-largest remodeler (according to
Qualified Remodeler magazine), markets and installs replacement
windows, doors, siding, and many other home improvements.  Its
16-state sales area includes metropolitan areas such as greater
Chicago, Los Angeles, San Diego, St. Louis, Kansas City,
Milwaukee, Indianapolis, Cincinnati, Nashville, Louisville and

In 2001, Smith said, the company reduced corporate overhead
expenses by restructuring long-term debt, consolidating retail
operations, reducing headcount, adopting corporate
administrative standards, reducing professional expenses, and
leveraging its purchasing power, among other actions.

While accomplishing its cost savings goal, the company also
achieved important product development objectives during the
year.  ThermoView established a joint venture operation to
manufacture weather-resistant window components from
thermoplastic resins developed by the GE Plastics division of
General Electric.  The company has also substantially completed
research and development on "smart windows," moving the company
closer to production when SPD light-control film becomes
available from the manufacturer.

In 2002, the company will be targeting additional ways to
streamline material costs while enhancing the company's high
product quality standards, he said.

The company's continuing mission is to expand its position as
one of the top home improvement companies in the U.S.  While it
continues to identify and implement operational and marketing
efficiencies throughout the organization, ThermoView is
examining product offerings throughout its markets and is
targeting new sales offices where it makes strategic and
operational sense.

"We've achieved considerable progress with corporate
streamlining and cost-cutting while keeping sharply focused on
our home improvement customers," said ThermoView Chairman
Stephen A. Hoffmann.  "Our position has improved substantially
over the last year, and we're very confident that in 2002, we'll
build upon that momentum gained from corporate streamlining and
product development."

Headquartered in Louisville, ThermoView Industries, Inc.
designs, manufactures, markets, and installs home improvements
in the $200 billion home improvement/renovation industry, and is
the fifth-largest remodeler in the country, according to the
September 2001 issue of Qualified Remodeler Magazine.  
ThermoView Industries' common stock is listed on the American
Stock Exchange under the ticker symbol "THV."  Additional
information on ThermoView Industries is available at

TORVEC INC: Working Capital Deficiency Pegged At $1.14 Million
Torvec Inc.'s operations during the quarter ended September 30,
2001 were funded through the sale of 12,810 shares of common
stock to Swartz Financial for aggregate proceeds of
approximately $46,425.  The Company estimates that at the
current market prices, and its daily trading volume, it will be
able to sell additional shares to Swartz during the next twelve

During the quarter ended September 30, 2001 the Company issued
72,150 shares to business consultants under its Business
Consultants Stock Plan in exchange for ongoing corporate legal
services, internal accounting services, expenses associated with
two lawsuits, marketing research expenses as well as legal fees
and associated expenses for ongoing patent work.

At September 30, 2001 the Company's cash position was $3,000 and
had a working capital deficiency of $1,141,000.  During the nine
months ended September 30, 2001 the Company has been dependent
on the Swartz equity funding and the exchange of stock for
services to sustain operations.  In addition, during the three
months ended September 30, 2001, the Company received $92,000 in
loans from stockholders to fund operations.

The company anticipates that the funding it will receive from
Swartz as well as its continuing issuance of shares under its
Business Consultants Stock Plan may not be adequate to fulfill
its needs during the next 12 months.  The Company recognizes,
based on its current financial status and proposed plans and
assumptions relating to its operations (including assumptions
regarding the nature and extent of its prototype development
program, its testing program, the ability of the company to
secure adequate manufacturing and distribution relationships and
market acceptance of the company's products) that, over the next
twelve months, the company may be required to seek additional
financing in the form of a significant equity investment by one
or more investors in privately-negotiated transactions or
through debt-financing or both which may significantly dilute
existing stockholders.  However, other opportunities such
as collaborations or license arrangements may generate
additional funding.

If the company is unable to raise additional financing through
equity or other opportunities in addition to monies  raised from
Swartz if any, it would be forced to cancel any attempt to
manufacture and distribute the company's products. The Company
would have to reduce and or delay expenditures, including
research and development expenditures.  The Company would be
forced to lengthen its timeframes within which the company would
be able to commercialize its technologies.  The Company may also
be forced to commercialize its technologies on terms which are
less favorable than are presently being negotiated.

Torvec's cash position at any time during the quarter ended
September 30, 2001 was directly dependent upon its success in
selling stock since the company did not generate any revenues.  
This trend is expected to continue through the balance of fiscal

Torvec has an obligation to purchase 51% of Variable Gear, LLC
on January 1, 2008.  The purchase price is equal to 51% of the
then value of Variable Gear, as determined by an independent
appraiser selected by the parties.  This liability can not be
estimated at this time.  Management believes that contributions
of cash flows from operations, financing and strategic alliances
will produce sufficient cash flow to fund this obligation.

USINTERNETWORKING: Files Chapter 11 Petition with Pre-Pack Plan
USinternetworking, Inc., (Nasdaq: USIX), the leading Application
Service Provider (ASP), announced the signing of a definitive
agreement under which USi Holdings, an investment affiliate of
Bain Capital Partners, LLC, will invest up to $106 million in
USi.  The investment is subject to court confirmation of a pre-
agreed reorganization plan as well as other normal closing

In conjunction with the agreement and in an effort to speed the
implementation of the restructuring, USi, with the support of
creditors, today filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code, as part of a pre-
negotiated plan to eliminate a substantial amount of the
Company's debt.  The majority of the Company's lessors,
including its largest, endorsed the plan in the form of signed
support letters.  The Company also received signed support
letters from an ad hoc committee holding a majority of the
Company's convertible debt. Based upon the consensus reached
with creditors, the Company expects to emerge from court
protection in the Spring of 2002.

Andrew A. Stern, CEO of USi, said that the restructuring process
should have no impact on the company's ability to fulfill its
obligations to customers or employees.  "During the
restructuring period, USi's operations will proceed as usual and
the company will continue to provide the high-quality service
that our customers have come to expect.  USi's cash on hand
should be more than adequate to fund operations during this

Under terms of the agreement, an affiliate of Bain Capital
Partners will initially invest $81 million in USi, with an
additional $25 million to be invested upon the achievement of
certain business milestones.  USi said the investment would
significantly strengthen the Company's balance sheet, enabling
USi to successfully execute its business plan and meet its
growth targets.  Bain Capital Partners is the private equity
affiliate of Bain Capital, LLC, a global investment firm with
more than $12 billion in assets under management.  When
completed, Bain will own all of the equity in USi.

"Over the past year, we have made excellent progress in
improving and strengthening the operational side of the
business," added Stern.  "We have a strong business model, a
large base of satisfied customers, and a team of committed
employees.  And I believe that USi will emerge from the
reorganization plan a much stronger company."

"We are excited by the prospect of investing in the leader of
the emerging ASP market to support its growth and operational
plans," said Andrew Balson, Managing Director at Bain Capital
Partners.  "We have been extremely impressed by USi's talented
management team and its work to create a restructuring plan to
restore financial stability and create an appropriate capital
structure to fund the Company's growth.  With the support USi
has obtained from creditors, Chapter 11 should provide the
quickest and most reliable route to implement the

USinternetworking, Inc. filed its petition for reorganization in
the U.S. Bankruptcy Court for the District of Maryland in

USinternetworking Inc. (Nasdaq: USIX), the leading Application
Service Provider, delivers enterprise and e-commerce software as
a service.  The company's iMAP portfolio of service offerings
delivers the functionality of leading software from Ariba,
BroadVision, Lawson, Microsoft, Oracle, PeopleSoft, and Siebel
as a continuously supported, flat-rate monthly service via an
advanced, secure global data center network.  Additionally,
USi's AppHost managed application hosting services provide the
most advanced solutions for enterprises, software companies,
marketplaces, public sector clients and system integrators that
are seeking a better way to deliver solutions over the Internet
to their customers and end users. For more information, visit .

Internet Managed Application Provider, iMAP, AppHost,
PriorityPeering, USiGSP, USiSAN USiAccelerate, and Making
Software Simple are service marks of USinternetworking, Inc.  
All other trademarks are the property of their respective

Bain Capital Partners is the private equity affiliate of Bain
Capital, LLC, a global investment firm that owns private equity,
venture capital, fixed income and public market fund advisors
with over $12 billion in assets under management.  Through its
seven funds, Bain Capital Partners has made private equity
investments and add-on acquisitions in over 225 companies in a
variety of industries, including technology and communications,
healthcare, consumer goods and industrial products.  Bain
Capital Partners works with exceptional management teams in
order to build long-term value in its portfolio companies.
Headquartered in Boston, Bain Capital has offices in New York,
San Francisco, London, and Munich.  For more information, please

WINTERLAND CONCESSIONS: Sells All Assets to Signatures Network
Signatures Network, Inc. announces the purchase of substantially
all of the assets of Winterland Concessions Company, dba
Winterland Productions.  The sale was approved by the U.S.
Bankruptcy Court in Oakland on December 12, 2001.

Signatures Network is the music industry's leading merchandising
and licensing company.  Through this acquisition, Signatures
Network adds over 50 artists to its current roster.

Signatures Network is owned by Dell Furano, CEO and Don Hunt,
President and COO with CMGi, Inc., holding a significant
minority stake.

Winterland Productions was founded and operated by Furano, Hunt,
and the late Bill Graham during the 70s, 80s, and into the early

"Dell and I are very pleased to be able to acquire substantially
all of the assets, name, history and Winterland's significant
roster of current artists.  We look forward to bringing our
creativity and integrity to bear on the Winterland roster and
meld the culture and history of our "old company" (pre-1992) and
that of Signatures Network to provide the best service level
possible for our total artist roster," said Don Hunt, President
of Signatures Network.

Signatures Network is completing its biggest year ever handling
such major artists as U2, Madonna, Ozzy Osbourne/Ozzfest, and
Tim McGraw among others.

Signatures Network is a leading entertainment licensing and
event merchandising company that holds the merchandising and
marketing rights to more than 125 top celebrities, artists and
entertainment properties. Signatures Network is dedicated to
expanding music artist franchises by bringing the experiences
and interactions between artists and their fans to a new level
with great products.  Signatures Network distributes at
concerts, retail and online through its online supermall,  

Signatures Network enables music artists to extend their brand
and surround fans with consistent messaging via powerful
marketing opportunities, including licensing agreements;
innovative product development; tour services and merchandising;
retail distribution partnerships; and, sponsorship and
endorsement negotiations.

For more information visit

XEROX CORP: S&P Assign BB Rating to $500 Million Senior Notes
Standard & Poor's assigned its double-'B' rating to Xerox
Corp.'s senior notes due 2009. The notes, expected to total $500
million, will be denominated in dollars and euros. At the same
time, Standard & Poor's affirmed its ratings on Xerox and its

The ratings reflect the company's good position in its core
document processing business, a sizable recurring revenue base,
and a broad product lineup, offset by highly competitive
industry conditions with diminished growth expectations. The
ratings also reflect Standard & Poor's expectations of
substantial, ongoing debt reductions and successful
renegotiation of Xerox' bank facility maturing in October 2002.

Xerox has made material progress in executing its turnaround
program, including: asset sales totaling more than $2 billion,
significant cost reduction and cash conservation actions, and
agreements to transition the majority of Xerox' equipment-
financing business to third parties. However, economic weakness
has reduced Xerox' prospects for significant improvement in
operating earnings and debt-protection measures in the near

Xerox has substantially completed its $1 billion cost-reduction
program announced last year, while improved asset management and
asset sales should continue to provide sufficient liquidity and
financial flexibility to meet near-term debt maturities
(excluding the $7 billion bank facility).

                       Outlook: Stable

The current rating incorporates the expectation that Xerox will
successfully renegotiate its bank facility and, as the economy
allows, significantly improve operating profit for fiscal 2002
from what it currently expects to report for fiscal 2001.

                       Ratings Affirmed

     Xerox Corp.
       Corporate credit rating               BB/Stable/B
       Senior unsecured debt                 BB
       Subordinated debt                     B+
       Commercial paper                      B
       Preferred stock                       B

     Xerox Credit Corp.
       Corporate credit rating               BB/Stable/B
       Senior unsecured debt                 BB
       Commercial paper                      B
     Xerox Capital (Europe) PLC
       Sr unsecd notes*                       BB
       Commercial paper*                     B
       *Guarantor, Xerox Corp.

DebtTraders reports that Xerox Corporation's 8.125% bonds due
April 15, 2002 (XEROX26) are trading at par. See  
real-time bond pricing.

XEROX CORP: Fitch Rates Proposed $500 Million Debt Issue at BB
Fitch assigned a 'BB' rating to Xerox Corp.'s proposed $500
million senior unsecured 144A notes issuance due 2009. Proceeds
will be used for general corporate purposes and debt reduction.
The company's and its subsidiaries' 'BB' senior unsecured debt
and 'B+' convertible trust preferred ratings are affirmed. The
Rating Outlook is Stable. The outlook reflects the substantially
improved liquidity situation and improved operational results as
the company continues to execute on its turnaround strategy.

Fitch recognizes the company's improved liquidity, the progress
made in asset dispositions and its $1 billion cost cutting
program, its strong technologically competitive product line and
business position, its continued effort to improve working
capital management, and the commitment to continue its cost
cutting program beyond the initial $1 billion. The ratings also
consider the company's strained credit protection measures,
refinancing risk of its $7.0 billion revolver due October 2002,
the ongoing Securities and Exchange Commission investigation
into Xerox's Mexican accounting issues and other accounting
matters, and overall weaker economic conditions. Although the
company's financial flexibility has improved with forecasted
flat to down revenues, it is crucial that Xerox executes its
cost cutting programs in order to return the core operations to

As of September 30, 2001, Xerox's cash position was $2.4 billion
with total debt at approximately $16.1 billion, of which more
than half is from customer financing. However, with the current
proceeds from the 144A offering, the recent $1.0 billion
convertible trust preferred securities issuance as well as funds
from several securitizations of its financing receivables with
General Electric Capital Corp. (GECC), the company's cash
position should increase substantially. As of December 28, 2001,
cash was approximately $3.9 billion after approximately $1.1
billion of debt repayment. Debt maturities for the first half of
2002 are estimated to be $1.3 billion. The company's revolver
expires in October 2002 and Xerox is currently in compliance
with all covenants.

Credit protection measures for the latest twelve months ending
September 30, 2001, show Xerox's leverage, measured by total
debt (including the financing segment) to EBITDA, increasing to
greater than 20 times compared to 14x at December 31, 2000. For
the same time period, the company's core interest coverage
(defined as core EBITDA divided by core interest expense)
declined to less than 1.5x from 2.4x at Dec. 31, 2000. Fitch
anticipates core credit protection measures will continue to be
challenged for the near term, despite continued anticipated cost
reductions from the company's ongoing restructuring programs.

Xerox has made significant progress with its turnaround
strategy. Asset sales have totaled more than $2.0 billion,
including an agreement to outsource approximately half of its
manufacturing, the common stock dividend has been eliminated,
and the company exited the ink-jet market, which was a
significant cash drain. In addition, Xerox continues to make
progress in exiting the customer financing business, with GECC
eventually being the primary source of customer financing in the
U.S., Canada, Germany, and France, and De Lage Landen
International BV managing equipment financing for Xerox
customers in the Netherlands. The previously announced $1
billion cost cutting program has been achieved ahead of
schedule, including a 10% headcount reduction from year-end
2000. The company has indicated that it has identified further
cost cuts of approximately $200 million that could occur in the
next two quarters. In addition to Xerox Corp., the ratings
affected are: Xerox Credit Corp. and Xerox Capital (Europe)
plc's rated senior debt.

* Two New Bankruptcy Communication Pros Join Adam Friedman
Adam Friedman Associates LLC, a full-service investor and
corporate relations firm based in New York, announced today that
it has significantly bolstered its Crisis Communications
practice by hiring Steven D. Goldberg and Alexander C.
Goldsmith, counselors with extensive experience in crisis
communications, bankruptcy, restructuring and creditors' rights

Both will play prominent roles in the firms' efforts to grow its
crisis communications client base and further develop its
Bankruptcy & Restructuring Communications practice.

"In today's difficult economic climate, more and more companies
will look to experienced advisors for help in negotiating the
complex communications challenges that bankruptcy and
reorganization present," said AFA Principal Adam Friedman.
"Steven and Alex's proven experience advising companies facing
adverse situations including bankruptcies, restructurings and
other corporate crises will be valuable resources to AFA's

AFA provides communications counsel to various parties involved
in bankruptcy proceedings, including debtors, creditors,
investors, corporate counsel and committees representing the
interests of other parties.

Steven Goldberg is an attorney who has specialized in
bankruptcy, restructuring and creditors' rights matters. He was
most recently an associate at Otterbourg, Steindler, Houston &
Rosen, P.C. where he represented commercial banking institutions
in asset-based loan transactions, restructurings and bankruptcy
proceedings. Previously, Steven was an associate at Curtis,
Mallet-Prevost, Colt & Mosle LLP where he represented debtors
and creditors in Chapter 11 bankruptcy cases and restructurings.
He also spent three years as an associate in the bankruptcy
department of Kaye Scholer LLP representing debtors and
creditors' committees in Chapter 11 cases. At Kaye Scholer,
Steven represented, among others, The Caldor Corporation,
Emerson Radio Corp., Plaid Clothing Group, Hills Stores,
Leaseway Transportation Corporation, Commodore Business
Machines, Maxwell Newspapers and Houbigant Inc. in their Chapter
11 proceedings. He is a graduate of Duke University with a
degree in Political Science and has a J.D. from the University
of Pennsylvania Law School.

Prior to joining AFA, Alex Goldsmith was an Engagement Director
in the New York office of AGENCY.COM Ltd., a leading e-business
consulting firm. Prior to that position, Alex spent four years
in the Corporate Communications practice at Hill & Knowlton
Public Relations / Public Affairs in New York where he
specialized in crisis communications and issues management. In
this capacity, Alex provided strategic guidance to Fortune 500
and Global 1000 clients on a variety of corporate crises and
special situations including: restructurings; product liability;
accounting fraud; litigation; natural disasters; product
recalls; environmental issues; labor/employee relations;
regulatory inquiries; and commercial accidents. His clients have
included Swissair, Puerto Rico Tourism Commission, Marriott
International and Trans World Airlines.  Alex graduated from
Connecticut College where he earned a degree in English

Adam Friedman Associates provides a variety of crisis
communications services including strategic communications
counsel to senior executives, message development, media and
analyst relations including serving as company spokespeople,
preparing and coaching executives on media interview and
presentation techniques, a full range of editorial services for
preparing communications materials and custom research.

* Meetings, Conferences and Seminars
January 31 - February 1, 2002
   American Conference Institute
      Chapter11 Bankruptcy
         The Four Seasons Hotel in Dallas, Texas
            Contact: 1-888-224-2480 or
January 31 - February 2, 2002
   American Bankruptcy Institute
      Rocky Mountain Bankruptcy Conference
         Westin Tabor Center, Denver, Colorado
            Contact: 1-703-739-0800 or

January 11-16, 2002
   Law Education Institute, Inc
      National CLE Conference(R) - Bankruptcy Law
         Steamboat Grand Resort, Steamboat Springs, Colorado
            Contact: 1-800-926-5895 or

February 25-26, 2002
   American Conference Institute
      Chapter11 Bankruptcy
         Hyatt Regency in Los Angeles, California
            Contact: 1-888-224-2480 or

February 27-28, 2002
    Information Management Network
       The Distressed Real Estate Symposium
          Crowne Plaza, New York, New York
             Contact: 1-212-768-2800 or

February 28-March 1, 2002
      Corporate Mergers and Acquisitions
         Renaissance Stanford Court, San Francisco, CA
            Contact: 1-800-CLE-NEWS or

March 3-4, 2002
   Association of Insolvency and Restructuring Advisors
      Business Valuation Conference (Held in conjunction with
      The Norton Bankruptcy Litigation Institute I)
         Park City Mariott, Park City, UT
            Contact: (541) 858-1665 Fax (541) 858-9187 or

March 3-6, 2002
      Norton Bankruptcy Litigation Institute I
         Park City Marriott Hotel, Park City, Utah
            Contact:  770-535-7722 or

March 7-8, 2002
      Third Annual Conference on Healthcare Transactions
         The Millennium Knickerbocker Hotel, Chicago
            Contact: 1-800-726-2524 or

March 8, 2002
   American Bankruptcy Institute
      Bankruptcy Battleground West
         Century Plaza Hotel, Los Angeles, California
            Contact: 1-703-739-0800 or

March 14-15, 2002
   American Conference Institute
      Commercial Loan Workouts
         The New York Marriott Marquis in New York City
            Contact: 1-888-224-2480 or
March 20-23, 2002
      Spring Meeting
         Sheraton El Conquistador Resort & Country Club
         Tucson, Arizona
            Contact: 312-822-9700 or

April 11-14, 2002
      Norton Bankruptcy Litigation Institute II
         Flamingo Hilton, Las Vegas, Nevada
            Contact:  770-535-7722 or

April 18-21, 2002
   American Bankruptcy Institute
      Annual Spring Meeting
         J.W. Marriott, Washington, D.C.
            Contact: 1-703-739-0800 or

April 25-27, 2002
      Fundamentals of Bankruptcy Law
         Rittenhouse Hotel, Philadelphia
            Contact:  1-800-CLE-NEWS or

May 13, 2002 (Tentative)
   American Bankruptcy Institute
      New York City Bankruptcy Conference
         Association of the Bar of the City of New York
         New York, New York
            Contact: 1-703-739-0800 or

May 15-18, 2002
   Association of Insolvency and Restructuring Advisors
      18th Annual Bankruptcy and Restructuring Conference
         JW Mariott Hotel Lenox, Atlanta, GA
            Contact: (541) 858-1665 Fax (541) 858-9187 or

May 26-28, 2002
   International Bar Association
      International Insolvency 2002 Conference
         Dublin, Ireland
            Contact: Tel +44 207 629 1206 or

June 6-9, 2002
   American Bankruptcy Institute
      Central States Bankruptcy Workshop
         Grand Traverse Resort, Traverse City, Michigan
            Contact: 1-703-739-0800 or

June 20-21, 2002
      Fifth Annual Conference on Corporate Reorganizations
         The Millennium Knickerbocker Hotel, Chicago
            Contact: 1-800-726-2524 or

June 27-30, 2002
      Western Mountains, Advanced Bankruptcy Law
         Jackson Lake Lodge, Jackson Hole, Wyoming
            Contact: 770-535-7722 or

July 11-14, 2002
   American Bankruptcy Institute
      Northeast Bankruptcy Conference
         Ocean Edge Resort, Cape Cod, MA
            Contact: 1-703-739-0800 or

July 17-19, 2002
   Association of Insolvency and Restructuring Advisors
      Bankruptcy Taxation Conference
         Snow King Resort, Jackson Hole, WY
            Contact: (541) 858-1665 Fax (541) 858-9187 or

August 7-10, 2002
   American Bankruptcy Institute
      Southeast Bankruptcy Conference
         Kiawah Island Resort, Kiawaha Island, SC
            Contact: 1-703-739-0800 or

October 9-11, 2002
   INSOL International
      Annual Regional Conference
         Beijing, China
            Contact: or

October 24-28, 2002
      Annual Conference
         The Broadmoor, Colorado Springs, Colorado
            Contact: 312-822-9700 or

December 5-8, 2002
   American Bankruptcy Institute
      Winter Leadership Conference
         The Westin, La Paloma, Tucson, Arizona
            Contact: 1-703-739-0800 or

April 10-13, 2003
   American Bankruptcy Institute
      Annual Spring Meeting
         Grand Hyatt, Washington, D.C.
            Contact: 1-703-739-0800 or

December 3-7, 2003
   American Bankruptcy Institute
      Winter Leadership Conference
         La Quinta, La Quinta, California
            Contact: 1-703-739-0800 or

April 15-18, 2004
   American Bankruptcy Institute
      Annual Spring Meeting
         J.W. Marriott, Washington, D.C.
            Contact: 1-703-739-0800 or

December 2-4, 2004
   American Bankruptcy Institute
      Winter Leadership Conference
         Marriott's Camelback Inn, Scottsdale, AZ
            Contact: 1-703-739-0800 or

The Meetings, Conferences and Seminars column appears in the
Troubled Company Reporter each Wednesday.  Submissions via
e-mail to are encouraged.


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

Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at

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 2002.  All rights reserved.  ISSN: 1520-9474.

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers.  Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.

The TCR subscription rate is $575 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each.  For subscription information, contact Christopher
Beard at 240/629-3300.

                     *** End of Transmission ***