TCR_Public/020124.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

            Thursday, January 24, 2002, Vol. 6, No. 17     


AMERICA WEST: S&P Maintains Positive Watch on Junk Ratings  
AVIATION SALES: Special Shareholders' Meeting Set for Feb. 19
AVIATION SALES: Names Gil West as Pres., Replacing Ben Quevedo
BOYD GAMING: Fitch Affirms BB Sr. Secured Credit Facility Rating
BROCKER TECH: Amends Terms for Acquisition of Generic Technology

BURLINGTON: Assuming GE Capital Purchasing & Fleet Card Pacts
BURNHAM PACIFIC: Reports Tax Status of 2001 Distributions
CHIQUITA BRANDS: Wants Lease Decision Period Extended to March 8
COMDISCO: Court Amends Order Re Wachtell's Engagement By Panel
COMPUTONE: Shareholders to Elect Five Directors on January 29

CONSECO INC: S&P Drops Ratings, Along with Insurance Units
CONTINENTAL AIRLINES: S&P Will Resolve Ratings Review Soon
COVANTA ENERGY: S&P Drags Ratings Down Citing Liquidity Concerns
COVANTA ENERGY: Edward Moneypenny Resigns as Executive VP & CFO
CYGNIFI DERIVATIVES: Asks Court to Extend Exclusivity Periods

EARTHCARE CO.: No Date Yet for February Shareholders' Meeting
ECHOSTAR COMMS: Completes Vivendi's $1.5BB Equity Investment
ENRON LIQUID: Chapter 11 Case Summary
ESOFT: Results Fall Below Expectations Despite Rise in Revenues
EXODUS COMMS: Committee Signs-Up Pachulski Stang as Co-Counsel

ICG COMMS: SBC Affiliates Seek Stay Relief to Terminate Services
IT GROUP: Honoring Pre-Petition Employee Obligations
INNOVTIVE GAMING: Gets Nod to Restructure Preferred Securities
KMART CORP: S&P Drops Ratings to D Following Bankruptcy Filing
KMART CORP: Martha Stewart Confident About Chapter 11 Emergence

KMART: Fleming Will Resume Delivery Upon Receipt of Assurance
KMART: Appoints Ronald Hutchison as Chief Restructuring Officer
LAIDLAW INC: Obtains Okay to Modify Intercompany Debts Structure
LODGIAN INC: Court Allows Payment of Pre-Petition Taxes
MARINER POST-ACUTE: Committee Supports First Amended Joint Plan

MATLACK SYSTEMS: Court Extends Exclusive Period through Feb. 22
METALS USA: Seeks Okay to Sell Lafayette Property for $1 Million
NEON COMMS: Seeks Waiver from Nortel Networks on Note Payment
OPTICARE HEALTH: Wins Shareholders' Consents for Restructuring
PACIFIC GAS: Exclusive Period to File Plan Extended to June 30

PACIFIC GAS: Preemption & Objections to Plan Hearing Tomorrow
PILGRIM CLO: Fitch Ratchets Class C Notes' Rating Down a Notch
POINT.360: Haig Bagerdjian Discloses 5.8% Equity Stake
PSINET INC: Court Approves Sale of Japanese Unit for $16.6MM
RAYOVAC CORP: S&P Assigns BB Rating to $250MM Bank Loan Facility

SPALDING: Reaches Recapitalization Pact with 10-3/8% Noteholders
SPIKE BROADBAND: Sells All Assets to REMEC for $4 Million
STATE LINE: Case Summary & Largest Unsecured Creditors
STATIA TERMINALS: Seeks OK of Proposed Liquidation & Asset Sale
SUN HEALTHCARE: Secures Approval to Divest SunBridge Care Center

SWEET FACTORY: Wants Lease Decision Deadline Moved to April 15
TAKE TWO INTERACTIVE: Nasdaq Halts Trading & Requests More Info
US AIRWAYS: S&P Maintains Watch Negative Due to Heavy Losses
UBRANDIT.COM: Withdraws Request for Hearing Before AMEX Panel
VINTAGE PETROLEUM: S&P Will Keep Watch on Low-B Ratings

WHX CORPORATION: Fire Razes Sumco's Plating Facility
WHEELING-PITTSBURGH: Lease Decision Period Extended to June 7
XEIKON N.V.: Board Pursues Sale of Assets to Begin Liquidation

* H. Jason Gold Sees More Retail Bankruptcy on the Horizon

* DebtTraders' Real-Time Bond Pricing


AMERICA WEST: S&P Maintains Positive Watch on Junk Ratings  
America West Airlines Inc. (CCC-/Watch Pos/--), a subsidiary of
America West Holdings Corp. (CCC-/Watch Pos/--), disclosed it
did not make $49 million of deferred aircraft lease payments due
on January 16, 2002, the end of the grace period.

However, the company said it expects to make the payment when it
receives $429 million of loan proceeds. Standard & Poor's
ratings for both entities remain on CreditWatch with positive

The loan follows a commitment from the Air Transportation
Stabilization Board for a $380 million federal loan guarantee,
which has already been received. The loan proceeds will aid the
company's liquidity, enabling it to avoid a Chapter 11
bankruptcy filing.

In the meantime, Standard & Poor's understands that payments to
investors have been made from dedicated liquidity facilities
that are sized to cover up to 18 months of scheduled interest
payments (typically three semiannual payments).

AVIATION SALES: Special Shareholders' Meeting Set for Feb. 19
A special meeting of stockholders of Aviation Sales Company, a
Delaware corporation, will be held on February 19, 2002 at 10:00
a.m., local time, at One Southeast Third Avenue, 19th Floor
Conference Center, Miami, Florida, for the following purposes:

  (1) To approve the issuance of shares of the Company's post-
      reverse split common stock, warrants to purchase shares of
      the Company's post-reverse split common stock and its new
      8% senior subordinated convertible PIK notes due 2006
      in exchange for all of its currently outstanding 8 1/8%
      senior subordinated notes due 2008;

  (2) To approve the issuance of: (a) shares of its post-reverse
      split common stock equal to 80% of its reorganized company
      for $20 million in a rights offering to its existing
      stockholders, (b) shares of its post-reverse split common
      stock to Lacy Harber, who is a 29.4% beneficial owner of
      its common stock, in the rights offering, to the extent
      that Mr. Harber is called upon to purchase unsold
      allotments in the rights offering, and (c) warrants to
      purchase additional shares of its post-reverse split
      common stock to its existing stockholders;

  (3) To approve an amendment to the certificate of
      incorporation increasing the number of authorized common
      shares from 30 million shares to 500 million shares;

  (4) To approve an amendment to the certificate of
      incorporation to effect a reverse stock split of its
      issued and outstanding common stock on a one-share-for-
      ten-shares basis;

  (5) To approve and adopt the 2001 Stock Option Plan;

  (6) To approve an amendment to the certificate of
      incorporation to change the corporate name to "TIMCO
      Aviation Services, Inc.";

  (7) To vote to adjourn the special meeting if there are not
      sufficient votes to approve one or more matters, in order
      to provide additional time to solicit proxies; and

  (8) To transact such other business as may properly come
      before the meeting.

Approval of each of proposals 1-4 is conditioned upon the
approval of all such proposals. Therefore, proposals 1, 2, 3 and
4 should be considered together. If any of proposals 1, 2, 3 and
4 are not approved, none of them will be approved, even if any
such proposal receives the requisite stockholder

Aviation Sales provides maintenance, repair, and overhaul (MRO)
services to major commercial carriers, airline leasing
companies, and jet engine manufacturers (including Pratt &
Whitney). Aviation Sales is restructuring: It has sold its
redistribution business (to Kellstrom Industries), as well as
its manufacturing operations and other noncore businesses.
Proceeds from the deals will be used to pay down debt. With the
divestitures, MRO operations -- including aircraft heavy
maintenance, component repair and overhaul services, and
engineering services -- are now Aviation Sales' sole focus. The
company operates repair facilities in the US. As at June 30,
2001, the company's balance sheet was upside-down, showing a
total stockholders' equity deficit of $60 million.

AVIATION SALES: Names Gil West as Pres., Replacing Ben Quevedo
Aviation Sales Company (OTCBB:AVIO) said that Gil West has been
appointed President of the Company and will continue to serve as
the Company's Chief Operating Officer.

Mr. West, who has served as Executive Vice President and Chief
Operating Officer of the Company since August 2001, replaces Ben
Quevedo, who remains on the Company's Board of Directors.

Roy T. Rimmer, Jr., the Company's Chairman and Chief Executive
Officer, stated: "Gil's elevation to the office of President of
our Company reflects the confidence that our Board of Directors
has in Gil's ability to lead our operations. Since joining
Aviation Sales, Gil has worked closely with our senior
management team and our employees to restructure our operations
and to position our Company to better meet the MR&O needs of our
current and future customers. We are also pleased with the
positive response that we have received from our customers to
Gil's involvement with the Company. Gil's previous airline and
OEM experience, as well as his unique abilities and energy, have
helped us to raise the levels of service which we provide to our
customers and to improve our operating results."

Mr. West added: "I am very appreciative of the vote of
confidence which is evidenced by this appointment and by the
hard work and support which I have received from our employees
since I joined the Company. I am very excited about the long-
term prospects of our business. I know that with the continued
dedication of our team, we will do what is required to meet and
exceed the expectations of our customers and improve our
financial performance."

Mr. Rimmer continued: "I want to thank Ben Quevedo for all of
his hard work in leading our operations through this very
difficult period of restructuring. I am also pleased that Ben
has agreed to continue to serve on our Board of Directors, where
we will continue to receive the benefit of his many years of
experience in the MR&O industry."

Mr. Quevedo stated: "It has been an honor working with the many
talented and dedicated employees of the Company. I feel
confident that the Company will continue to grow and thrive
under Gil's leadership as we continue to build on our market
leading position as the largest independent provider of heavy
airframe maintenance in the world."

Aviation Sales Company is a leading independent provider of
fully integrated aviation maintenance, repair and overhaul
(MR&O) services for major commercial airlines and maintenance
and repair facilities. The Company currently operates four MR&O
businesses: TIMCO, which, with its three locations, is one of
the largest independent providers of heavy aircraft maintenance
services in North America; Aerocell Structures, which
specializes in the MR&O of airframe components, including flight
surfaces; Aircraft Interior Design, which specializes in the
refurbishment of aircraft interior components; and TIMCO Engine
Center, which refurbishes JT8D engines. The Company also
operates TIMCO Engineered Systems, which provides engineering
services to our MR&O operations and our customers.

DebtTraders reports that Aviation Sales Company's 8.125% bonds
due 2008 (AVIAS1) are trading between 38 and 40. See  
real-time bond pricing.

BOYD GAMING: Fitch Affirms BB Sr. Secured Credit Facility Rating
Fitch affirmed the 'BB' rating on Boyd Gaming Corporation's
(NYSE: BYD) $613 million senior secured bank credit facility. At
the same time, the ratings on BYD's $200 million 9.25% senior
unsecured notes due 2003 and $200 million 9.25% senior unsecured
notes due 2009 have been affirmed at BB- and $250 million 9.50%
senior subordinated notes have been affirmed at 'B'.

The ratings have been removed from Rating Watch Negative where
they were placed on September 25, 2001 following concerns
related to the events of September 11th. The Rating Outlook is

The debt ratings incorporate BYD's favorable earnings mix and
growing cash flow visibility. More than 60 percent of the
company's revenues are generated from slot play, which is
generally a more consistent source of earnings. In addition,
through the nine months ended September 30, 2001, more than
sixty percent of property EBITDA was generated from the Blue
Chip, Par-A-Dice and Treasure Chest properties, which are drive-
to properties. Recently, drive-to properties have had a
relatively strong performance compared to the Las Vegas Strip,
which has been more adversely impacted by the slowing economy.
BYD generates less than 10 percent of property EBITDA from the
Las Vegas Strip. The ratings also incorporate the cash flow
potential of Delta Downs Racetrack, which was delayed from its
original fall 2001 opening. Fitch expects the casino operations
at Delta Downs to open during the first quarter 2002.

Rating concerns are centered upon the company's relatively high
debt levels in relation to cash flows. In particular,
debt/EBITDA for the last twelve months ended September 30, 2001
was 5.4 times compared to approximately 5.0x at December 31,
2000. The increase in debt is attributable to the company's
acquisition of the Delta Downs Racetrack on May 31, 2001. BYD
invested approximately $165 million in Delta Downs and has
recently received approval from the Louisiana Gaming Control
Board for approximately 1,5 00 slots.

In addition, construction risk pertaining to BYD's joint venture
project with MGM Mirage in Atlantic City, the Borgata, could
also hinder higher cash flow generation. However, approximately
93 percent of the hard construction costs have already been
spent or are under fixed price contracts. BYD must fund an
additional $37 million for the Borgata project during the first
quarter of 2002, at which time their funding requirements are
complete until a $25 million contribution in mid 2003. Cash flow
from the Borgata will initially be used to pay down debt
associated with the joint venture.

The Negative Rating Outlook reflects potential integration
issues, high leverage, and refinancing risk as BYD has a
substantial amount of debt maturing in 2003. Over the near term,
Fitch expects credit metrics to remain low for the rating
category. Future rating action will be driven by a solid opening
at Delta Downs and BYD's ability to increase cash flow  
visibility to total debt.

BROCKER TECH: Amends Terms for Acquisition of Generic Technology
Brocker Technology Group Ltd (BKI-TSE) an information technology
and telecommunications company, said that an agreement has been
reached to amend the terms for its acquisition of Generic
Technology Group Ltd.  

An initial installment of approximately CDN$1.5 million was paid
on the closing in October 2000, and 435,942 common shares were
to be issued, allowing Brocker Technology Group Ltd., to
purchase Generic and its subsidiaries - the Datec Group. Under
the original terms of the transaction additional payments
totaling approximately CDN$4.5 million (plus interest) were to
be made in installments, beginning in October 2001. The
settlement of these obligations is made possible by a
significant re-negotiation of the original terms of purchase to
include a combination of cash, common shares, warrants and debt
which is payable to complete the transaction.

Additional cash payments totaling CDN$265,000 are being made
immediately. A balance of CDN$560,000 plus interest will be paid
from the proceeds of the sale of a commercial building located
in Auckland, New Zealand, which is presently owned by Brocker.
To complete the Generic acquisition, common shares totaling 1.5
million (valued at CDN$0.50 per share) are to be issued, a first
ranking debenture will be issued for a principal amount equal to
approximately CDN$3.5 million bearing an interest rate of 8% per
annum to be fully repayable within 5 years and a further
1,092,132 share purchase warrants exercisable at CDN$0.75 are to
be issued for the purchase. The immediate cash payment is being
funded in part by a secured loan that involves the issuance of
132,000 warrants with a CDN$0.75 exercise price.

The alteration of terms to complete the acquisition creates a
potential change of control in Brocker and is subject to the
approval of Brocker's shareholders and the approval of the
Toronto Stock Exchange. The Datec Group of companies have become
the core operating focus of Brocker within the past year.
Reorganization measures implemented by Brocker in the past 10
months have resulted in the wind-down and liquidation of most of
the subsidiaries in New Zealand, along with significant staff
reductions. Brocker is now nearing completion of its major
restructuring efforts, moving toward rebuilding a stronger
operating base in the technology and telecommunications sectors
with the Datec Group as its core.

The Datec Group (, established in  
1985, is a leading supplier of Information Technology and
telecommunications provider in the south Western Pacific with
offices in Australia, Papua New Guinea, Fiji and Vanuatu. With
approximately 340 employees in these countries, Datec is the
leading supplier of IT services to the banking,
telecommunications, utilities, retail and Government sectors in
these Pacific countries.

Brocker makes most of its money distributing third-party
telecommunications and computer systems (93% of sales). Its
offerings include computer hardware and software (PCs, servers,
Microsoft programs) and communication equipment (telephone,
voice mail, cellular, and facsimile systems). Brocker also sells
proprietary employee management and other business process
software, and is developing an e-commerce suite for large and
midsized businesses. The company distributes products in
Australia and, with acquisitions, the South Pacific. Worldwide
expansion of the sales and distribution operations is planned.
VC Michael Ridgway owns 20%. As at June 30, 2001, the company
had a working capital deficit of about $2 million.

BURLINGTON: Assuming GE Capital Purchasing & Fleet Card Pacts
Burlington Industries Inc. and GE Capital Financial Inc. are
parties to a Purchasing Card Program Agreement dated January 3,
2001.  B.I. Transportation Inc. and GE Capital Financial Inc.
are also parties to a Fleet Card Program Agreement dated July 2,

By this motion, the Debtors seek the Court's authority to assume
and continue to perform under the Purchasing Card Program
Agreement and the Fleet Card Program Agreement.

Paul N. Heath, Esq., at Richards, Layton & Finger PA, in
Wilmington, Delaware, relates that these Card Agreements have
initial 3-year terms, but may be terminated prior to the
expiration of the Initial Term.  Mr. Heath tells the Court that
GE Capital Financial provides "MasterCard" charge cards to the
Debtors' authorized employees for business purposes, subject to
credit limits.  GE Capital Financial then sends a single bill to
the Debtors for all charges incurred by the Authorized Employees
in a given month, Mr. Heath explains.  Although such charges are
immediately due and payable, Mr. Heath says, the Debtors have a
17-day grace period -- after an invoice is received -- to pay
the invoice without incurring late fees.

Furthermore, Mr. Heath continues, GE Capital Financial may also
receive certain fees, such as late payment fees and cash advance
fees, in addition to reimbursement of charges.

Pursuant to the Burlington Purchasing Card Agreement, Mr. Heath
informs Judge Walsh that the Debtors licensed software from GE
Capital Financial to enable Burlington to access electronically
records of the charges made with the Charge Cards.  To continue
to use the Software, Mr. Heath explains, the Debtors are
obligated to pay GE Capital Financial:

    (a) a one-time license fee of $5,000, and
    (b) a monthly communication charge of $250.

Moreover, Mr. Heath adds, the Burlington Purchasing Card
Agreement also provides for certain revenue sharing payments
from GE Capital Financial to the Debtors if the aggregate
charges under the agreement exceed $5,000,000 in a particular

According to Mr. Heath, the Card Agreements also contain
indemnification provisions under which Debtors and GE Capital
Financial indemnify each other for:

    (a) loss caused by breach of a representation or warranty
        contained in the Burlington Purchasing Card Agreement;

    (b) failure to perform any of the covenants of the
        Burlington Purchasing Card Agreement; or

    (c) any gross negligence, fraud or willful misconduct by
        either party, its employees or agents.

Mr. Heath relates that the Debtors issued a standby letter of
credit to GE Capital Financial in the amount of $500,000 on
December 12, 2000.  "This letter of credit secured the Debtors'
obligations under the Card Agreements," Mr. Heath explains.  On
September 27, 2001, Mr. Heath says, the amount of the Pre-
petition Letter of Credit was increased to $1,000,000.  At that
same time, Mr. Heath notes, the outstanding amount under the
Card Agreements reached $370,000.  As of Petition Date, Mr.
Heath report that the outstanding amounts under the Card
Agreements totaled $590,000.

Mr. Heath tells the Court that GE Capital Financial refused to
allow the Debtors or their Authorized Employees to use the
Charge Cards under the Card Programs after the Petition Date.  
"GE Capital Financial claims that the Agreements were financial
accommodation contracts under which GE Capital Financial had no
further obligation to perform post-petition and which could not
be assumed by the Debtors in these chapter 11 cases without GE
Capital Financial's consent," Mr. Heath relates.  Although the
Debtors do not agree with this assertion, Mr. Heath says, it was
crucial to the Debtors' business that their employees be
permitted to use the Charge Card.  Thus, Mr. Heath notes, the
Debtors and GE Capital Financial entered into a stipulation to
temporarily resolve the dispute.

According to Mr. Heath, the Stipulation generally:

    (a) permits the Authorized Employees to use the Charge Cards
        pending the assumption of the GE Capital Financial Card
        Agreements; and

    (b) sets forth the terms of certain transactions relating to
        the Interim Relief and the Debtors' assumption of the GE
        Capital Financial Card Agreements.

The Related Transactions include:

    (a) In accordance with the terms of the Stipulation, GE
        Capital Financial will draw on the Pre-petition Letter
        of Credit to pay all Pre-petition Amounts owing under
        the GE Capital Financial Card Agreements to the extent
        liquidated and unconditional at the time of such draw.
        Burlington also will amend the Pre-petition Letter of
        Credit to clarify that:

         (i) multiple draws are permitted under the Pre-petition
             Letter of Credit to satisfy any Pre-petition
             Amounts; and

        (ii) after the Initial Draw, the outstanding face value
             of the Pre-petition Letter of Credit would be
             permanently reduced to $30,000;

    (b) In accordance with the terms of the Stipulation,
        Burlington will cause to be issued, in the ordinary
        course of its business and upon either:

         (i) the reactivation of the Charge Cards, or

        (ii) at such other time as agreed to by the parties, a
             standby letter of credit in the amount of 5700,000
             to secure the post-petition obligations of the
             Debtors under the GE Capital Financial Card

    (c) In accordance with the terms of the Stipulation,
        Burlington will pay, as an ordinary course business
        expense, the reasonable attorneys' fees of GE Capital
        Financial related solely to the reactivation of the
        Charge Cards and to the approval of the assumption
        and/or continuation of the GE Capital Financial Card
        Agreements; and

    (d) GE Capital Financial's right to terminate the Card
        Agreements, to change the credit limits and/or to
        suspend services and extensions of credit shall be
        governed by the Card Agreements, as supplemented and
        modified by the Stipulation.

Mr. Heath emphasizes that the Initial Draw under the Pre-
petition Letter of Credit will constitute a cure of the Debtors'
defaults under the Card Agreements and compensation for GE
Capital Financial's pecuniary loss resulting from such default.  
Mr. Heath adds that the Pre-petition Letter of Credit and the
Post-petition Letter of Credit will provide adequate assurance
of future performance under the Card Agreements.

The Debtors contend that:

    (a) entry into the Related Transactions, and

    (b) continued performance under the GE Capital Financial
        Agreements may be done in the ordinary course of
        business without Court approval.

Mr. Heath argues that the Court should approve the relief
requested because the Card Agreements are invaluable to the
Debtors' continued operations.  "The Card Agreements allow for
lower transaction costs in accomplishing the numerous small
ordinary course of business transactions that are critical to
the smooth functioning of the Debtors' continued business
operations," Mr. Heath asserts.

Moreover, Mr. Heath says, assumption of these Card Agreements is
a more efficient use of the Debtors' resources than seeking a
new supplier for these services.  "Searching for new vendors,
negotiating the terms of the replacement agreements and
implementing a new purchasing program would be time-consuming
and costly, not to mention - disruptive of the smooth operations
of the Debtors' business," Mr. Heath anticipates. (Burlington
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)   

BURNHAM PACIFIC: Reports Tax Status of 2001 Distributions
Burnham Pacific Properties, Inc. (NYSE: BPP) announced the tax
status of all of the distributions declared and paid to
stockholders for 2001:

                                Cash Distributions   Liquidating
Record Date     Payable Date        Per Share      Distributions
-----------     ------------    ------------------ -------------
04/13/01        04/23/01            $0.10                $0.10
12/31/01        01/08/02 *          $1.25                $1.25
                           Total    $1.35                $1.35

         * This distribution is included in taxable year 2001
           because it was declared in December 2001, was payable
           to stockholders of record on December 31, 2001, and
           was paid in January 2002.

These distributions are liquidating distributions and
stockholders must determine their tax consequences as a result
of the distributions pursuant to Internal Revenue Code Section
331.  Accordingly, stockholders should consult their individual
tax advisors.

A Form 1099-DIV will be mailed to all stockholders of record
that received distributions with respect to 2001 indicating the
gross distributions declared and paid.

Burnham Pacific is a real estate investment trust (REIT) that
focuses on retail real estate. The real estate investment trust
(REIT), unable to agree on a price with potential buyers, is
liquidating its assets. Burnham Pacific at one time boasted a
portfolio containing ownership and management interest in some
60 properties, including several office buildings as well as
strip malls and shopping centers anchored by supermarkets,
drugstores, and theaters. Most of its holdings were in
California, although it also owned real estate in New Mexico,
Oregon, Utah, and Washington. The REIT has entered into a
liquidation services agreement with DDR Real Estate Services, an
affiliate of shopping center REIT Developers Diversified Realty.
More information on Burnham Pacific may be found on the
Company's web site at

CHIQUITA BRANDS: Wants Lease Decision Period Extended to March 8
James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells Judge
Aug that Chiquita Brands International, Inc., is party to
various leases and executory contracts subject to assumption,
assumption or assignment, or rejection (based on the Debtors'
business judgment) pursuant to 11 U.S.C. Sec. 365.

The Plan contemplates that all leases and executory contracts
not expressly rejected will be assumed.  In short, the Debtors
have already completed their review of their lease and contract

However, there is always a remote possibility that the Plan
might not be confirmed.  If the Plan were not confirmed for some
bizarre reason, the Debtors do not want to throw away their
right to make decisions about the disposition of leases and

Against this backdrop, and purely for protective purposes, the
Debtors sought and obtained an extension of their time within
which to make lease-related decisions through the conclusion of
the March 8 Confirmation Hearing. (Chiquita Bankruptcy News,
Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900)   

COMDISCO: Court Amends Order Re Wachtell's Engagement By Panel
Having considered the request of Official Committee of Unsecured
Creditors of Comdisco Inc., Judge Barliant rules that:

  (i) Wachtell shall be retained as counsel for the Committee
      for the period of July 26, 2001 through December 20, 2001;

(ii) subject to the submission of a final fee application,
      Wachtell shall receive compensation for its services on a
      time-incurred basis and shall receive reimbursement for
      its expenses, and

(iii) any amount paid by the Debtors to Wachtell prior to
      approval of Wachtell's final fee application shall be held
      by Wachtell as a retainer against its allowed fees and
      expenses. (Comdisco Bankruptcy News, Issue No. 19;
      Bankruptcy Creditors' Service, Inc., 609/392-0900)   

COMPUTONE: Shareholders to Elect Five Directors on January 29
The Annual Meeting of Stockholders of Computone Corporation will
be held at 10:00 a.m., Atlanta time, on Tuesday, January 29,
2002, at the Company's  Corporate Office at 1060 Windward Ridge
Parkway,   Suite 100, Alpharetta, GA 30005 for the following

     1. To elect five directors to serve until the next Annual
Meeting of Stockholders and until their successors are elected;

     2. To approve the appointment of Deloitte & Touche LLP as
independent auditors for the Company for its fiscal year ending
March 31, 2002;

     3. To  consider and vote upon a proposal to adopt an
amendment to the Company's Amended and Restated 1998 Equity
Incentive Plan for officers and key employees to increase the
number of shares subject to such Plan from 1,000,000 shares to

     4. To transact such other business as may properly come
before the Annual Meeting and any adjournment, postponement or
continuation thereof.

All stockholders of record as of the close of business on
December 31, 2001 are entitled to vote at the Annual Meeting.

Computone Corp., makes connectivity hardware and software for
corporate computer systems. Computone's IntelliServer remote-
access servers give users access to the Internet, LANs, and
WANs, and its IntelliPort multiport input/output devices connect
multiple users or peripherals to the same computer. Subsidiary
Multi-User Solutions provides software vendors and their
customers with network support and integration services,
specializing in services for Linux, UNIX, Windows NT, and Novell
systems. Computone customers include Arrow Electronics and
Lowe's Companies. In July, the company's auditors issued a going
concern note on the company's continuing losses and debt

CONSECO INC: S&P Drops Ratings, Along with Insurance Units
Standard & Poor's removed from CreditWatch and lowered its
various ratings on Conseco Inc., and its insurance subsidiaries.
The outlook is stable.

These rating actions follow a review of Conseco's insurance
operations as well as the parent company's progress in reducing
debt and increasing financial flexibility. Conseco has made
considerable progress in reducing debt over the past 18 months,
largely through the sale of non-strategic assets. However, there
is the expectation that the current weakness in the economy will
reduce Conseco's flexibility in making further planned debt
reductions. Standard & Poor's believes that in 2002, there will
be increased reliance on dividends from insurance operations to
support the needs of the parent.

Financial leverage, interest coverage, operating earnings, and
operating cash flow remain in line with Standard & Poor's prior
expectations. Nevertheless, further asset sales will be
necessary for the parent to continue to meet its debt-reduction

The lowering of the financial strength ratings on Conseco Inc.'s
life insurance subsidiaries is directly linked to the rating
action on Conseco. Standard & Poor's continues to believe that
these subsidiaries maintain an appropriate level of
capitalization and a good level of liquidity.

Standard & Poor's has elected not to take any rating actions on
Conseco Finance Corp. and its units at this time. Rather,
pending further review, these ratings will remain on CreditWatch
with negative implications, where they were placed on Dec. 11.,

Discussions with senior management are continuing and are
focusing on Conseco and Conseco Finance Corp.'s efforts to raise
cash to meet the finance units' 2002 debt maturities. In
addition, Standard & Poor's will continue to closely monitor
asset-quality trends, especially in the manufactured housing
loan portfolio. Standard & Poor's expects to complete its review
within 30-45 days.

                         Outlook: Stable

Standard & Poor's believes Conseco's insurance operations'
operating earnings and capitalization will remain at or above
that of the rating level, but Conseco could experience increased
pressure to sell strategic assets to meet debt repayment

             Ratings Removed from CreditWatch and Lowered

                                    TO             FROM
     Conseco Inc.
       Counterparty credit rating        B/Stable       B+
       Senior debt rating                B              B+
       Preferred stock rating            CCC            CCC+
     Bankers Life & Casualty Co.
     Conseco Annuity Assurance Co.
     Conseco Direct Life Insurance Co.
     Conseco Health Insurance Co.
     Conseco Life Insurance Co.
     Conseco Life Insurance Co. of NY
     Conseco Medical Insurance Co.
     Conseco Senior Health Insurance Co.
     Conseco Variable Insurance Co.
     Manhattan National Life Insurance Co.
     Pioneer Life Insurance Co.
       Counterparty credit rating        BB+/Stable     BBB-
       Financial strength rating         BB+            BBB-
          Ratings Removed from CreditWatch and Affirmed

     Conseco Inc.
       Commercial paper rating           B

DebtTraders reports that Conseco Inc.'s 9.000% bonds due 2006
(CNC5) are trading between 47 and 50. See  
real-time bond pricing.

CONTINENTAL AIRLINES: S&P Will Resolve Ratings Review Soon
Continental Airlines (BB-/Watch Neg) reported a fourth-quarter
2001 net loss of $220 million, before federal government cash
grants and other special items ($149 million net loss as
reported). Ratings remain on CreditWatch with negative
implications, where they were placed September 13, 2001 (along
with those of other rated U.S. airlines), but Standard & Poor's
expects to resolve the CreditWatch review fairly soon.

The fourth-quarter earnings performance, and the full year 2001
net loss of $266 million before special items ($95 million as
reported), are relatively good, given the very difficult airline
industry environment. Revenue is recovering gradually, with
revenue per available seat mile improving each month from
negative 25.6% (versus the prior year) in September 2001 to
negative 14.3% in December. So far, most of that improvement, as
at other airlines, has been due to increased traffic and load
factors, rather than better pricing, which remains weak.

The airline ended the year with $1.1 of cash and forecasts $750
million-$800 million at the end of first-quarter 2002. With
predicted positive operating cash flow starting in March 2002
and all aircraft deliveries during the year prefinanced or with
manufacturer financing commitments, management is targeting
year-end cash of about $1.5 billion. Accordingly, financial
flexibility, while still constrained, has improved materially
since mid-September 2001.

Continental faces contract negotiations with its mechanics,
whose contract recently became amendable, and pilots, whose
contract becomes amendable in October 2002. Despite the weak
airline environment, labor costs will likely rise over time as
Continental follows through on its stated policy of paying
"industry standard" wages while maintaining a relative advantage
in work rules and productivity. The risk of operational
disruption during labor negotiations is considered less than at
other airlines, given the company's positive labor relations and
the adverse economy.

According to DebtTraders, Continental Airlines' 8.000% bonds due
2005 (CAL2) currently trade between 88 and 90. See  
real-time bond pricing.

COVANTA ENERGY: S&P Drags Ratings Down Citing Liquidity Concerns
Standard & Poor's lowered its corporate credit and senior
unsecured ratings on Covanta Energy Corp. (formerly Ogden Corp.)
to single-'B' from triple-'B' and its subordinated debt rating
to single-'B'-minus from triple-'B'-minus. All ratings remain on
CreditWatch with negative implications, where they were placed
on December 28, 2001.

Covanta has not reached cash balance targets that are a covenant
in its bank facility as a result of slower-than-anticipated
asset sales and delays in the collection of accounts receivable
from California utilities. Covanta is reviewing options to
strengthen short-term liquidity and to extend covenant waivers
that currently run through the end of January. Although there
are currently no draws under the bank facility, if the banks
grant no further extension, the resultant default could cause
draws on a number of LOC facilities, making it difficult for
Covanta to remain solvent.

Standard & Poor's still believes that there is value in
Covanta's underlying core energy business, but Covanta's failure
to divest remaining noncore assets, as well as continued
expenditures associated with nonenergy activities, has been a
larger drag on cash flow than the company expected. These
expenditures include, but are not limited to, corporate overhead
associated with these nonenergy activities and sharply higher
bank fees.

Covanta has $149 million in convertible subordinated debentures
coming due during the next 12 months ($85 million on June 1 and
$64 million on October 1).  Covanta needs to formulate and
execute a credible recapitalization plan, pay down these
debentures when they come due, and provide liquidity for
near-term operations. If the company does not soon implement an
adequate plan and secure the requisite financing, a further
downgrade will likely occur. Standard & Poor's does not
anticipate a substantial ratings upgrade until the remaining
nonenergy assets have been divested.

COVANTA ENERGY: Edward Moneypenny Resigns as Executive VP & CFO
Covanta Energy Corporation (NYSE: COV) announced the resignation
of Executive Vice President and Chief Financial Officer Edward
Moneypenny, effective February 1, 2002.

Mr. Moneypenny has been appointed senior vice president and
chief financial officer of 7-Eleven, Inc. in Dallas, Texas,
where he has lived for the past 23 years.

Covanta also announced that it has reached agreement with a
candidate for the position and expects to announce that
individual's appointment promptly. The executive search firm of
Seiden Krieger Associates, Inc. conducted the search for this

Scott G. Mackin, President and Chief Executive Officer, said, "I
want to thank Ed for all his hard work and service to Covanta.
He joined the Company early last year and has played an
important role in our financial restructuring process. In
addition, he has helped us strengthen our internal reporting
systems. While his services will be missed as we continue the
strategic review process that is currently underway, we wish him
all the best in returning to the Dallas business community,
where he has worked for more than 20 years."

Covanta Energy Corporation is an internationally recognized
designer, developer, owner and operator of power generation
projects and provider of related infrastructure services. The
Company's independent power business develops, structures, owns,
operates and maintains projects that generate power for sale to
utilities and industrial users worldwide. Its waste-to-energy
facilities convert municipal solid waste into energy for
numerous communities, predominantly in the United States. The
Company also offers single-source design/build/operate
capabilities for water and wastewater treatment infrastructures.
Additional information about Covanta can be obtained via the
Internet at, or through the Company's
automated information system at 866-COVANTA (268-2682).

CYGNIFI DERIVATIVES: Asks Court to Extend Exclusivity Periods
Cygnifi Derivatives Services, LLC asks the U.S. Bankruptcy Court
for the Southern District of New York to extend the exclusive
periods during which only the Debtor may file a plan of
reorganization and solicit acceptances of that plan. The debtor
wants its exclusive period during which to propose and file a
plan to run through May 1, 2002 and the debtor asks that its
exclusive solicitation period run through July 1, 2002.

The Debtor asserts that it needs more time to focus its efforts
on closing the first round of IP Sales, negotiating and seeking
Court's approval of a second round of IP Sales, and thereafter
filing a joint liquidating plan with the Creditors' Committee
without the distractions that a competing plan would entail.

Because this case is less than four months old and the Debtor is
current on all post-petition obligations, the Debtor believes
that the extension will not prejudice creditors and parties in

The Debtor intends to move forward with its orderly liquidation
efforts, but to do so this Court must give them the time
necessary to formulate and propose a plan.

Cygnifi Derivatives Services, LLC, which provides a wide range
of services relative to the management of its clients'
derivatives portfolios, filed for Chapter 11 petition on October
3, 2001 in the U.S. Bankruptcy Court for the Southern District
of New York. Marc E. Richards, Esq. at Blank Rome Tenzer
Greenblatt, LLP represents the Debtor in its restructuring
effort. When the Company filed for protection from its
creditors, it listed total assets of $34,200,000 and $5,100,000
in total debts.

EARTHCARE CO.: No Date Yet for February Shareholders' Meeting
A special meeting of the stockholders of EarthCare Company will
held on February __, 2002 (date yet to be announced) at Company
offices at 14901 Quorum Drive, Suite 200, Dallas, Texas 75254.
The meeting will begin promptly at 10:00 a.m., local time.

At the special meeting, EarthCare will ask atockholders to
approve: (1) the sale of the EarthLiquids division to USFilter
Recovery Services (Mid-Atlantic), Inc., a Delaware corporation
and a wholly owned subsidiary of United States Filter
Corporation, and (2) an amendment to EarthCare's Certificate of
Incorporation to increase the number of authorized shares of
EarthCare common stock.

USFilter has agreed to purchase the EarthLiquids division for
$35 million in cash, subject to adjustment, the assumption of
certain liabilities and up to $5 million in contingent payments.
USFilter will hold back approximately $3.8 million of the
purchase price for 12 months after the closing of the sale to
satisfy certain indemnification obligations, including
indemnification for expenses related to compliance with
environmental laws, should they arise.

EarthCare's senior credit facility, as currently in effect,
requires that the Company sell (1) the EarthLiquids and Solid
Waste divisions by December 31, 2001, (2) its portable toilet
line of business in New Jersey by April 30, 2002, and (3) the
remaining components of its Liquid Waste division, which was
formerly named the EarthAmerica division, by April 30, 2002. On
January 8, 2002, EarthCare completed the sale of its Solid Waste
division to General Waste Corporation, a private company wholly
owned by Donald F. Moorehead, Jr., Chairman and CEO of
EarthCare. The Company did not complete the sale of its
EarthLiquids division by December 31, 2001. The failure to sell
any of these divisions by the stipulated dates will cause
EarthCare to be in default under its senior credit facility. The
Company has informed its senior lenders that it plans to
complete the sale of the EarthLiquids division shortly after the
special meeting of stockholders in February 2002. The senior
lenders have orally indicated that they will agree to waive the
December 31, 2001 deadline to sell the EarthLiquids division.
However, the Company cannot provide any assurance that its
senior lenders will in fact agree to waive this deadline, and
they may decide to pursue other courses of action, including
accelerating the date for repayment of the amounts owed under
the Company's senior credit facility.

Because the sale of the EarthLiquids division will benefit
certain of the Company's officers and directors, its board of
directors has formed a special committee consisting of two
independent members of its board of directors to evaluate the
fairness of, and approve or disapprove the terms and conditions
of, the proposed EarthLiquids sale. Based on its review, the
special committee has unanimously determined that the terms of
the EarthLiquids stock and asset purchase agreement are fair to
and in the best interests of EarthCare and the Company's
stockholders. In making this determination, the special
committee considered, among other things, an opinion received
from Wm. H. Murphy & Co., Inc., the special committee's
financial advisor, that the USFilter offer to acquire the
EarthLiquids division is fair, from a financial point of view,
to the Company and its stockholders. Because EarthCare has been
advised that the sale of its EarthLiquids division is considered
under Delaware law a sale of substantially all of its assets,
stockholder approval of the transaction is required pursuant to
Delaware law.

Only the holders of record of EarthCare's common stock and
preferred stock at the close of business on January 8, 2002 are
entitled to notice of and to vote at the special meeting and any
adjournment thereof.

EarthCare is changing its hazardous waste diet from liquids to
solids. The company plans to sell its nonhazardous liquid waste
operations along with its oil and oil-polluted water treatment
operations to focus on its nonhazardous solid waste operations.
EarthCare serves commercial, residential, and industrial
customers in Florida where it collects, hauls, and disposes of
solid waste. The company is expanding its solid waste operations
by acquiring small solid waste collection companies in Florida.
Chairman Donald Moorehead and founder and vice chairman Raymond
Cash together control more than 56% of EarthCare. As of June 30,
2001, the company had a total stockholders' equity deficit of
around $44 million.

ECHOSTAR COMMS: Completes Vivendi's $1.5BB Equity Investment
EchoStar Communications Corporation (Nasdaq:DISH) has closed the
previously announced $1.5 billion Vivendi Universal (NYSE:V)
(Paris Bourse:EX FP) equity investment in EchoStar.

Proceeds from the investment are expected to be used to provide
a portion of the funding for the pending merger with Hughes
Electronics Corporation, a wholly owned subsidiary of General
Motors Corporation (NYSE:GM) (NYSE:GMH) and the parent company
of DIRECTV, and for general corporate purposes.

At Tuesday's closing, Vivendi Universal received 5,760,479 newly
issued shares of EchoStar Series D Preferred Stock at an issue
price of approximately $260.40 per share in exchange for the
$1.5 billion equity investment by Vivendi Universal. Each share
of the preferred stock will have the same economic and voting
rights as the 10 shares of Class A common stock into which it is
convertible and will have a liquidation preference equal to its
issue price. In connection with the consummation of the pending
merger with Hughes Electronics Corporation, the Series D
Preferred stock will convert into shares of new EchoStar Class A
common stock. In the event the merger is not consummated for any
reason, the Series D Preferred Stock would convert into shares
of EchoStar Class A common stock upon the occurrence of certain
events as described in the investment documents. As a result of
the transaction, Vivendi Universal owns approximately 10 percent
of EchoStar's fully diluted equity, or less than 5 percent of
the combined EchoStar/Hughes fully diluted equity assuming the
pending merger is consummated. The shares represent
approximately 2 percent of the total fully diluted voting rights
of EchoStar today, and would represent less than 1 percent of
the total fully diluted voting rights of the new company
assuming the Hughes merger is consummated.

Also effective Tuesday, Jean-Marie Messier, the chairman and CEO
of Vivendi Universal, became a member of EchoStar's Board of

The transactions are not conditioned on the closing of the
EchoStar-Hughes merger and will remain in effect whether or not
the EchoStar-Hughes merger is approved.

In connection with the proposed transactions, General Motors
Corporation, Hughes Electronics Corporation and EchoStar
Communications Corporation intend to file relevant materials
with the Securities and Exchange Commission, including one or
more Registration Statement(s) on Form S-4 that contain a
prospectus and proxy/consent solicitation statement. Because
those documents will contain important information, holders of
GM $1-2/3 and GM Class H common stock are urged to read them, if
and when they become available.

General Motors and its directors and executive officers, Hughes
and certain of its officers, and EchoStar and certain of its
executive officers may be deemed to be participants in GM's
solicitation of proxies or consents from the holders of GM $1-
2/3 common stock and GM Class H common stock in connection with
the proposed transactions. Information regarding the
participants and their interests in the solicitation was filed
pursuant to Rule 425 with the SEC by EchoStar on November 1,
2001, and by each of GM and Hughes on November 16, 2001.
Investors may obtain additional information regarding the
interests of the participants by reading the prospectus and
proxy/consent solicitation statement if and when it becomes

EchoStar Communications is the #2 US direct broadcast satellite
(DBS) TV provider (behind DIRECTV), the company operates the
DISH Network, providing programming to nearly 6.5 million
subscribers in the continental US. Subsidiaries develop DBS
hardware such as dishes and integrated receivers and deliver
video, audio, and data services. EchoStar has teamed up with
Gilat Satellite Networks (a partner with Microsoft) and Colorado
startup WildBlue to develop satellite-based two-way broadband
Internet access. CEO Charles Ergen owns about 51% of the company
but has more than 91% of the voting power. EchoStar has agreed
to buy Hughes Electronics, DIRECTV's parent. As of September 30,
2001, the company's total shareholders' equity deficit totaled
close to $1 billion.

ENRON LIQUID: Chapter 11 Case Summary
Debtor: Enron Liquid Fuels, Inc.
        1400 Smith Street
        Houston, Texas 77002

Bankruptcy Case No.: 02-10252

Type of Business: International marketing of LPGs, domestic and
                  international marketing of MTBE, methanol and
                  petrochemicals; shipping (assuming non-
                  domestic NGL business of EGLI).

Chapter 11 Petition Date: January 18, 2002

Court: Southern District of New York (Manhattan)

Debtor's Counsel: Melanie Gray, Esq.
                  Weil, Gotshal & Manges LLP
                  700 Louisiana, Suite 1600
                  Houston, Texas 77002
                  Telephone: (713) 546-5000


                  Brian S. Rosen, Esq.
                  Weil, Gotshal & Manges LLP
                  767 Fifth Avenue
                  New York, New York 10153
                  Telephone: (212) 310-8000

Total Assets: $35,549,794

Total Debts: $74,690,216

ESOFT: Results Fall Below Expectations Despite Rise in Revenues
eSoft, Inc. (OTC Bulletin Board: ESFT) reported financial
results for the fourth quarter ended December 31, 2001.  The
Company reported total revenue of $2.3 million, a 29% increase
over the fourth quarter of 2000.  Since the introduction of its
flagship product, the InstaGate Internet security appliance, the
Company has experienced an average quarterly revenue growth
rate of 15%.

             Fourth Quarter Financial Highlights

     --  Revenue of $2.3 million -- a 29% increase over the
         fourth quarter of 2000

     --  EPS of $.02, including extraordinary gain, compared to
         ($.35) loss per share in the fourth quarter of 2000

     --  EBITDA loss was $1.56 million -- an improvement of 45%
         from the fourth quarter of 2000

     --  Gross margin for the fourth quarter of 2001 was 48%
         compared to 24% in the fourth quarter of 2000

                Product/SoftPak Highlights

     --  Introduced the high performance InstaRak HP -- an
         extension to the InstaRak product line that provides
         features such as a faster CPU, additional RAM and a
         larger capacity hard drive.

     --  Totaled over $1 million in SoftPak bookings while
         subscription bookings from the IBM transition program
         reached $1.1 million.  Total SoftPak and subscription
         bookings were up 400% from the fourth quarter of 2000.

     --  Transitioned a total of 1,200 customers by year end
         under the IBM transition program that will generate
         close to $300,000 in recurring quarterly revenue.

     --  Shipped approximately 2,300 eSoft appliances in the
         fourth quarter of 2001, which was an increase of 236%
         over the fourth quarter of 2000.

     --  Finished the year with 13 SoftPaks available compared
         to four SoftPaks available at the end of 2000.

     --  Signed up over 100 new value added resellers (VARS) and
         added over 15 new distributors internationally.

     --  Continued the previously announced marketing
         collaboration program with Intel(R) Corporation to
         promote the Company's InstaRak secure server appliance
         and the InstaGate EX2 Internet security appliance.

     --  Announced the InstaGate EX2 Internet security appliance
         earned recognition as a "Pick of 2001" from Info
         Security News.

     --  Announced Network World Germany selected the InstaGate
         EX2 Internet security appliance over the WatchGuard
         Firebox 1000 in a product "round up."

"While our financial results have improved year over year, they
are nonetheless below our expectations and impacted by three
factors," said Jeff Finn, President and CEO of eSoft.  "First,
we were impacted by the general economic slowdown which affected
us across nearly all of our markets by delaying out the sales
process; second, due to a slowdown in collections, we have
tightened the revenue recognition criteria for our sales, which
deferred the revenue recognition for a significant amount of
sales made during the quarter until future periods; and third,
we simply did not execute as planned in several key areas of our
business, most notably sales."

"Despite these factors, we are encouraged that SoftPak revenue
has continued to grow," continued Finn.  "We believe that
SoftPak revenue can provide not only a predictable revenue
stream, but is also a key contributor to continued earnings

"We strongly believe that the need for security and VPN
continues to grow," added Finn, "fueled in large part by the
deployment of low-cost, high-bandwidth connectivity offerings to
small and medium-size enterprises. In particular, we believe the
market demand for distributed VPN networking solutions is strong
and growing.  In response to these demands in our target
customer groups, the Company is currently in the process of
expanding offerings in this area as part of our strategy to ramp
up revenue and increase market share."

                    Financial Results

The Company has achieved an average sequential revenue growth
rate of 15% over the past five quarters with total revenue for
the fourth quarter of 2001 being $2.3 million, a 29% increase
over the fourth quarter of 2000.  In addition, gross margin
improved from 24% in the fourth quarter of 2000 to 48% in the  
fourth quarter of 2001.  Operating expenses for the fourth  
quarter of 2001 decreased 18% from the fourth quarter of 2000.

Net Internet security appliance and SoftPak revenue totaled $2.0
million for the quarter, an increase of 98% over the fourth
quarter of 2000.  Of this total, revenue from SoftPak
applications, which is predominantly recurring revenue, grew to
$1.1 million, an improvement of 202% over the fourth quarter
of 2000 and an improvement of 35% over the third quarter of

EBITDA for the fourth quarter 2001 was a loss of $1.56 million,
an improvement of 45% from the fourth quarter of 2000.  The
fourth quarter 2001 EBITDA figure includes a non cash bad debt
expense of $545,000 related to doubtful accounts.

Net income for the quarter was $330,000, including the effect of
the early extinguishment of debt with respect to a Convertible
Subordinated Promissory Note issued to Gateway.  Under the terms
of this transaction, the Company prepaid $6.0 million at a 45%
discount.  This transaction contributed to the Company's
profitability for the quarter, improved net tangible assets and
reduced ongoing interest costs.  In addition, in January 2002
the Company prepaid the remaining Brown Simpson debt of $2.0
million.  At this time, the only remaining outstanding debt is
the restructured Gateway note, which carries a principal balance
of $6.5 million and is due in September 2004.

Deferred revenue relating to subscriptions grew to $1.54 million
at December 31, 2001, an improvement of 103% from December 31,
2000.  The deferred revenue does not include the sales made to
customers transitioned from IBM under the transition program.

Based on the current cash burn rate and business projections,
the Company believes its current cash reserves and investments
of approximately $8.7 million at the end of the fourth quarter
will provide the capital required to sustain operations for the
foreseeable future.

During the quarter, the Company repurchased 353,000 shares of
its common stock.  Under the terms of the share repurchase
program that was announced in 2001, the Company had repurchased
457,000 shares at an average price of $0.97 per share by the end
of the year.


For the first quarter ending March 31, 2002, due to current and
anticipated economic conditions, the Company anticipates revenue
to show only a slight improvement from the fourth quarter of

The Company has also begun a sales acceleration initiative under
which it expects to add sales personnel in selected markets and
regions in an effort to increase sales in 2002.  The Company
believes that this sales initiative will increase sales growth
rates in the second half of the year, although the initiative
may increase operating expenses in the beginning of the year.  
With this initiative in place, the Company is projecting a loss
per share of $0.08 to $0.10 for the first quarter.

"We continue to target our goal of near-term positive EBITDA and
net profitability.  However, these goals are clearly affected by
economic and market factors that have become more pervasive over
recent months.  We will remain focused on reaching profitability
and believe that revenue growth will be the key factor," said

eSoft is pioneering the delivery of business and IT-related
applications through its secure Internet appliances.  The
Company's product line provides security features that include
firewall and VPN, Internet and Web hosting services, and
business-enhancing software upgrades.  eSoft's products are sold
internationally through a network of value added resellers,
Internet service providers and value added distributors.  The
Company is headquartered in Broomfield, Colo. and trades on the
OTC Bulletin Board exchange under the ticker symbol ESFT.  For
more information, contact eSoft at 295 Interlocken Blvd, #500
Broomfield, Colo., 80021, USA  Phone 303-444-1600, Fax 303-444-
1640, http://www.esoft.comor

As reported in the Troubled Company Reporter January 9, 2002,
edition, eSoft began trading on the Over-The-Counter Bulletin
Board effective January 15, 2002. The Nasdaq Staff Determination
Panel determined said that the delisting was based on the
concern regarding eSoft's ability to sustain long-term
compliance with Marketplace Rule 4310c(2)(B).

EXODUS COMMS: Committee Signs-Up Pachulski Stang as Co-Counsel
The Official Committee of Unsecured Creditors of Exodus
Communications, Inc., and its debtor-affiliates asks the Court
for entry of an order, authorizing the employment and retention
of Pachulski Stang Ziehl Young & Jones P.C. as its co-counsel in
the above-captioned cases nunc pro tunc to October 11, 2001.

The Committee seeks to retain Pachulski as its attorneys because
of the firm's extensive experience and knowledge in the field of
debtors' and creditors' rights and business reorganizations
under chapter 11 of the Bankruptcy Code and because of the
firm's expertise, experience, and knowledge practicing before
this Court. In preparing for its representation of the Committee
in these cases, Pachulski has become familiar with the Debtors'
businesses and financial affairs and many of the potential legal
issues that may arise in the context of these proceedings.

The Committee requests nunc pro tunc retention of Pachulski as
it commenced work on several matters requiring immediate
attention in connection with the Debtors' chapter 11 cases,
including reviewing the first day orders and commenting on the
Debtors' ongoing bankruptcy proceedings, immediately upon its
retention on October 11, 2001. The Committee anticipates that
Pachulski will render services to the Committee as needed
throughout the course of these chapter 11 cases, particularly
the following legal services:

A. serving as Delaware counsel to the Committee;

B. preparing necessary applications, motions, answers, orders,
     reports and other legal papers on behalf of the Committee;

C. appearing in court to present necessary motions, applications
     and pleadings and to otherwise protect the interests of the
     Committee; and

D. performing all other legal services for the Committee that
     may be necessary and proper in these proceedings.

The principal attorneys and paralegals presently designated to
represent the Committee and their current standard hourly rates

                Laura Davis Jones       $550
                James E. O'Neill         375
                Michael P. Migliore      215
                Timothy M. O'Brien       105

The Committee believes that it is necessary to employ attorneys
to render the professional services described above to the
Committee, and that, without such professional assistance,
neither the Committee's evaluation of the activities of the
Debtors nor its meaningful participation in the negotiation,
promulgation, and evaluation of a plan or plans of
reorganization would be possible.

Ms. Jones assures the Court that the firm and certain of its
shareholders, counsel and associates may have in the past
represented, and may currently represent and likely in the
future will represent creditors of the Debtors in connection
with matters unrelated to the Debtors and these chapter 11
cases. At this time, the Firm is not aware of such
representations other than as disclosed herein and will make any
further disclosures as may be appropriate upon the discovery of
a potential conflict.

Ms. Jones submits that the Firm currently represents a creditor
of the Debtors, Sanrise, Inc. generally and specifically in
connection with a number of matters relating to the pre- and
post-petition business relationship between Sanrise and the
Debtors. Among other things, the firm's pre-petition
representation of Sanrise related to Sanrise's pre-petition
purchase and lease of certain assets from the Debtors as well as
a certain revenue sharing relationship between the Debtors and
Sanrise. Ms. Jones adds that the firm has continued to represent
Sanrise generally in connection with the revenue sharing
agreement and other matters relating to its business
relationship with the Debtors.

At the time of filing this Application, Ms. Jones believes that
Sanrise and the Debtors have resolved any outstanding issues
related to the revenue sharing agreement and their other
business issues in principle. Pachulski shall not commence,
prosecute or defend litigation on behalf of the Committee or
Sanrise in connection with any dispute which may arise between
Sanrise and the Debtors and Pachulski shall remove itself from
any and all Committee consultations in connection therewith.
(Exodus Bankruptcy News, Issue No. 12; Bankruptcy Creditors'
Service, Inc., 609/392-0900)

ICG COMMS: SBC Affiliates Seek Stay Relief to Terminate Services
Southwestern Bell Telephone, L.P. d/b/a Southwestern Bell
Telephone Company, Ameritech (composed of Illinois Bell
Telephone Company d/b/a Ameritech Illinois, Indiana Bell
Telephone Company Incorporated d/b/a Ameritech Indiana, Michigan
Bell Telephone Company d/b/a Ameritech Michigan, The Ohio Bell
Telephone Company d/b/a Ameritech Ohio and Wisconsin Bell, Inc.,
d/b/a Ameritech Wisconsin and Pacific Bell Telephone, each an
affiliate of SBC Communications Inc.), represented by Laurie
Selber Silverstein of the Wilmington firm of Potter Anderson &
Corroon LLP, asks Judge Peter Walsh to permit each of the SBC
Affiliates to terminate the provision of services to ICG  
Communications Inc. and its affiliated debtors, or
alternatively, for an order (i) requiring ICG to provide
additional adequate assurance under the United States Bankruptcy
Code, and (ii) setting a time in which Debtors must make a
decision and file a motion to assume or reject each executory
contract with the SBC Affiliates.

Ms. Silverstein says the reason for this Motion is simple: the
Debtors refuse to timely pay their postpetition bills.

As of January 3, 2002, the SBC Affiliates are collectively owed,
postpetition, in excess of $24 million. Of that amount, almost
$20 million is past due. Ms. Silverstein warns that the past due
amounts in the Motion do not include amounts owed by ICG to the
SBC Affiliates for reciprocal compensation. Additionally,
amounts owed for structure access charges are not included. The
SBC Affiliates expressly reserve the right to seek compensation
for additional services provided to ICG, but which may not be
included in this Motion.

Despite efforts on the part of the SBC Affiliates to address
each and every question that the Debtors have regarding their
monthly bills, Ms. Silverstein suggests that the Debtors
"apparently believe that timely payment is not required under
Section 366 of the Bankruptcy Code". If so, the Debtors are
wrong. The SBC Affiliates will show that termination is
permitted by the Bankruptcy Code, and file this motion,
protectively, to ensure that they do not remain in the position
of involuntary creditors to these Debtors.

Alternatively, the SBC Affiliates seek an order (i) modifying
the adequate assurance to which they are entitled under Section
366 of the Bankruptcy Code, and (ii) requiring the Debtors to
make the decision whether to assume or reject each executory
contract with the SBC Affiliates within thirty days. The Debtors
have had sufficient time to evaluate their business and to
determine whether they need their contracts with the SBC
Affiliates in any reorganization. Given their failure to live up
to their obligations under the Bankruptcy Code during the
pendency of this case, the time in which Debtors should be
permitted to make decisions regarding their contracts with the
SBC Affiliates must come to an end.

                        The SBC Services

Debtors are a telecommunications company, principally serving
Internet Service Providers by providing them with access to the
internet through connection to ICG's nationwide data network.
Debtors also offer voice and data services directly to business
customers. Debtors are a "competitive local exchange carrier",
or CLEC.  ICG assets that it is a facilities-based
communications provider and is one of the largest CLECs in the
United States. The purpose of the Telecommunications Act of
1996, 47 U.S.C.  151 et seq., was to promote competition in
local telephone service markets resulting in lower prices to the
ultimate consumers of telecommunications services. This
competition took the form of the creation of CLECs to compete
with ILECs in all forms of local service offering.

In order to service its customers, ICG enters into agreements,
and/or provisions services and equipment from service tariffs
offered by multiple "incumbent local exchange carriers". An ILEC
is the phone carrier that provided local exchange telephone
service within a particular geographic region prior to the
enactment of the Telecommunications Act of 1996. As noted by the
Debtors in their first day pleadings, the failure of the
delivery of these services would "severely and irreparably"
damage the Debtors' estates.

An ILEC is required to permit a CLEC to use the ILEC's
infrastructure to provide local telecommunications services to
the CLEC's customers. There are basically two ways in which the
use of an ILEC's infrastructure for local service can be
accomplished. First, a CLEC can obtain certain portions of an
ILEC's network for incorporation into its own service. Portions
of an ILEC's network ("unbundled network elements" or "UNEs")
that a CLEC may obtain include the physical and functional
elements of the network, such as local loops, switch ports,
transmission facilities and the like. Second, a CLEC can resell
an ILEC's retail services to the CLEC's own customers.
Alternatively, the CLEC can build its own infrastructure,
purchase its own equipment and interconnect its network with
that of the ILEC.  Often, CLECs engage in a combination of the

In addition to providing local service, ILECs provide CLECs and
long-distance providers with the ability to access the ILEC's
local customers to allow the local customers to place and
receive interexchange calls. In order to accomplish this, ILECs
offer various entities "access" service, for which a fee is
paid. In addition to the provision of services and UNEs, CLECs
must pay ILECs for the actual minutes of use of traffic running
across the ILEC's trunk facilities when the CLEC is the
originating carrier and the ILEC is the terminating carrier.
Reciprocally, ILECs must pay CLECs for the actual minutes of
traffic running across the CLEC's trunk facilities when the ILEC
is the originating carrier and the CLEC is the terminating
carrier. The rates for the use of each others' respective
networks, or "reciprocal compensation" varies by type of service
(e.g. local calls, IntraLATA Toll Traffic, InterLATA Toll
Traffic calls), and the rates for each type of traffic are set
forth in the applicable interconnection agreement, or tariff.

The SBC Affiliates are ILECs within the various states in which
they are licensed to conduct business. The SBC Affiliates
operate in 13 states: Missouri, Oklahoma, Kansas, Arkansas,
Texas, Illinois, Indiana, Michigan, Ohio, Wisconsin, California,
Nevada and Connecticut. Collectively, the SBC Affiliates are
among the largest providers of telecommunications services in
the United States. The customers of the SBC Affiliates include
businesses, individual consumers, and other telecommunications
providers, such as ICG.

The SBC Affiliates are organized both by region (i.e., by
groupings of the thirteen identified states), and by either
wholesale or retail services. Wholesale services include resale
of local exchange services, resale, UNEs and collocation and
access. Retail services include local exchange services, ATM
Frame Relay services, Centrex and Plexar services, and high
speed transport circuits (e.g. PRIs, DS1s, DS3s, OC3s, etc.).
The services and products offered by the SBC Affiliates vary by
region and can be offered, in some instances, by both the
wholesale and the retail side of the SBC Affiliates.

                  The ICG Interconnection Agreements

In order to provision local services from an SBC Affiliate, a
CLEC generally enters into an interconnection agreement. An
interconnection agreement is a comprehensive agreement between
the CLEC and the SBC Affiliate that details how the SBC
Affiliate's network and the network of the CLEC will interface.
In addition to the provisioning of UNEs, the interconnection
agreement must provide for collocation (the locating of the
CLEC's cables and other equipment within the SBC Affiliate's
central office so that the CLEC gains access to the UNEs it has
provisioned), and for the provision of various services (e.g.
call waiting, 911 service, information services). This agreement
sets forth in minute detail all aspects of the interconnection
of the two networks and can include everything from actual
architectural drawings of interconnection sites to transmission
and routing of telecommunications traffic to dispute resolution
mechanisms. The SBC Affiliates are parties with ICG to seven
interconnection agreements plus one resale agreement.

Specifically, the SBC Affiliates and ICG have interconnection
agreements governing the provision of services in Illinois,
Indiana, Michigan, Ohio, California, Texas, and Oklahoma.

In some states, a CLEC can provision various services on a
wholesale basis from an SBC Affiliate through a request for
service. The request for service incorporates the terms of the
applicable state or interstate tariff. Access Service is also
provisioned from the wholesale side of the SBC Affiliates.
Access services are provided pursuant to the applicable state or
federal tariff, each of which contains terms and conditions
applicable to all purchasers from that tariff, creating a
contractual agreement.

                      BAN/BTN Retail Services

ICG also provisions services from the retail side of the SBC
Affiliates in the states of Illinois, Indiana, Michigan, Ohio,
Wisconsin, California, Arkansas, Kansas, Missouri, Oklahoma and
Texas. Specifically, through a series of billing account numbers
("BANS" ) or billing telephone numbers ("BTNs"), ICG has
provisioned  literally hundreds of individual circuits of
various types. The SBC Affiliates identify each circuit by its
own circuit identification number, and it is not uncommon for
numerous circuits to be billed together on a consolidated
BAN/BTN. Most, if not all, of the circuits are purchased by ICG
under the SBC Affiliates retail tariffs, each of which contains
terms and conditions applicable to all purchasers from that
tariff, creating a contractual arrangement.

                     The Postpetition Arrearages

As of January 2, 2002, ICG owed the SBC Affiliates for post
petition services, collectively, in excess of $24 million.  On
the wholesale side, postpetition, Debtors owe the SBC Affiliates
over $16.4 million as follows: (i) approximately $11 million for
access service; and (ii) approximately $5.3 million for local
services, including, collocation services, resale services,
UNEs, and the like. While approximately $950,000 of this amount
is in dispute, $15,489,942.29 in undisputed billings are
outstanding. Of the over $16.4 million in accounts receivable,
$12.9 million is past due.

On the retail side, postpetition, Debtors owe the SBC Affiliates
approximately $7.6 million. All disputed items have been
reviewed. Of the $7.6 million in accounts receivable,
approximately $6.9 million is past due.

The SBC Affiliates, through their various in-house counsel and
businesspersons, have attempted to resolve any disputes with the
Debtors, and have spent hundreds of person-hours going through
each dispute submitted by the Debtors line by line. Beginning in
May 2001, the SBC Affiliates have made significant efforts to
resolve any and all disputes with respect to any SBC Affiliate
outstanding bill. Each such dispute has been considered and
resolved by either (i) accepting the dispute and providing the
Debtors with an appropriate credit, or (ii) denying the dispute
and informing the Debtors of the result. Despite the significant
expenditure of resources, and ICG's affirmative representations
that it has both the money and desire to pay the SBC Affiliates
for undisputed postpetition receivables, the Debtors still
refuse to pay postpetition undisputed amounts on a timely basis.

Mr. Silverstein admits that ICG has recently made a large
payment to the SBC Affiliates for access services, but says that
ICG is still significantly behind on its payments to the SBC
Affiliates on other wholesale services and for retail services.

                     The Utilities Motion

On the first day of this case, the Debtors asked this Court to
enter an order finding that Utilities (including the SBC
Affiliates) were adequately assured of postpetition payment
under Section 366  of the Bankruptcy Code by (i) the Debtors'
prepetition payment history and (ii) the Debtors' ability to pay
their postpetition bills. The Court, relying on the Debtors'
representations, and on the fact that the Debtors would actually
pay their bills on a timely basis going forward, entered the
requested order.

The Utilities Order provides that the Debtors' record of payment
of prepetition utility bills and "demonstrated ability to pay
future utility bills constitute adequate assurance of future
payment for utility services" under Section 366. Implicit in
this provision is that the Debtors will, in fact, pay their
future utility bills. Assuming, arguendo, that the Debtors'
representations to the Court were correct when made, it is
apparent that the Debtors are not fulfilling their postpetition
obligations to the SBC Affiliates now, and that the proffered
adequate assurance is in fact wanting.

Moreover, the Utilities Order provides, contrary to Section 366
of the Bankruptcy Code, that parties to "Line Contracts" may not
terminate or shutdown lines thereunder. While unclear whether
any of ICG's agreements with the SBC Affiliates are "Line
Contracts," this provision arguably prohibits termination of any
service provided pursuant to a contract despite Debtors'
nonpayment postpetition

                      SBC's Arguments

Ms. Silverstein concludes that, because ICG has failed to pay
for postpetition services, the SBC Affiliates are entitled to
terminate services to ICG pursuant to Section 366 of the
Bankruptcy Code.  In support of her conclusion, Ms. Silverstein
argues that Section 366 prohibits only those terminations of
service based "solely" upon either (i) the commencement of a
bankruptcy case; or (ii) the existence of a prepetition debt. By
implication, then, "termination for failure to pay post-petition
bills would not seem to be barred by section 366(a)."

When setting the appropriate "adequate assurance," courts take
into effect the length of time necessary to terminate services
once a postpetition payment is missed.  This methodology
"reflects an understanding that the utility will be allowed to
commence termination procedures once a post-petition payment is
missed, despite the prior security or "assurance deposit."

The intended effect of Section 366(a) is to prevent a utility
from withholding post-petition services in order to enforce
payment of pre-petition debts, so long as the debtor or trustee
provides adequate security for payment of future bills. Section
366(b) does not, by itself, bar a utility from terminating
service to a debtor or trustee who has posted adequate
assurance, but fails to make a post-petition payment.

The Debtors are seriously delinquent in payment of postpetition
amounts owing to the SBC Affiliates. The Debtors'
representations to this Court that their record of prepetition
payments and "demonstrated ability" to pay future utility bills
constituted adequate assurance of future payment have still not
resulted in payment of postpetition undisputed bills.
Accordingly, the SBC Affiliates have determined to terminate
service to ICG.

Out of an abundance of caution, the SBC Affiliates bring this
motion for permission to terminate its services to ICG, whether
such services are provisioned pursuant to an Interconnection
Agreement, another type of agreement, or pursuant to tariff.
While Section 366 permits termination, and the Utilities Order
does not attempt to alter the statute, the Utilities Order does
provide that no party to a "Line Contract" may terminate such
Line Contract or shutdown any lines thereunder. Accordingly, to
pre-empt any argument that the termination of services runs
afoul of the Utilities Order, the SBC Affiliates are erring on
the side of caution.

                   Additional Adequate Assurance

Alternatively, Ms. Silverstein asserts that the SBC Affiliates
are entitled to additional adequate assurance and to an Order
setting a definite time by which ICG must assume or reject its
contracts with the SBC Affiliates.  To Ms. Silverstein, adequate
assurance requires payment of postpetition bills, a two-month
deposit, and payment in advance.  The adequate assurance
proffered by the Debtors and embodied in the Utilities Order is
woefully inadequate. Adequate assurance here must include (i)
immediate payment of all postpetition arrearages, (ii) a
security deposit of $5.2 million and (iii) payment in advance of
the average monthly bill. Only in this way can the SBC
Affiliates ensure that they will not become involuntary
unsecured creditors.

Adequate assurance is furnished to provide a mechanism for
payment for services rendered postpetition. Congress has
explicitly stated that administrative claim status does not
constitute "adequate assurance." Similarly, Chief Judge Walsh
has ruled in the case of In re Weiner's Stores, Inc., that:

      "I do not believe that those cases which say that a good
history, prepetition history of utility payment and a strong
liquidity  position is assurance enough. I just don't think the
language at 366(b) support that, those cases. And I think that
Congress has just very explicitly stated that a deposit or other
security is required. That's the only basis for providing
adequate assurance. It is not acknowledgement of a priority
claim. It is not a Handholding comfort level. I think the
language is very clear that a deposit or other security is
required. And I read 366(b) when it used the term security as
security in the UCC sense of a collateral or a property
interest. So for example, you could furnish the comfort by a
letter of credit."

In determining the amount of deposit necessary for adequate
assurance, courts consider a variety of factors, including the
debtor's payment history, net worth, and present and future
ability to pay the provider for post-petition services. Courts
applying Section 366 have generally held that a deposit in the
amount of two months' service, plus payment for post-petition
services consumed by the debtor is appropriate adequate

Unlike at a first day hearing, the Court need not guess at, nor
take the word of the Debtors with respect to, the Debtors'
ability and willingness to pay utility bills. It is now known
that the SBC Affiliates are at significant risk of nonpayment
for postpetition services rendered. The only way to ensure
payment is for the immediate payment of all past due bills, a
deposit of $5.2 million, and payment in advance going forward.
To the extent that the Debtors still dispute any amounts
outstanding to the SBC Affiliates, funds sufficient to pay the
disputed amounts should be paid into an escrow account pending
agreement of the parties or further order of the court.

               A Deadline for Assumption or Rejection

The Debtors should make a decision whether to assume or reject
each contract with any SBC Affiliate within thirty days.  In
addition to the adequate assurance requested above, if Judge
Walsh does not permit the SBC Affiliates to terminate all
services to the Debtors, Ms. Silverstein suggests he should
order that the Debtors determine, within thirty days of the
hearing on this motion, whether they will assume or reject each
executory contract they have with the SBC Affiliates.

The determination of what constitutes a reasonable period of
time for a debtor to determine whether to assume or reject a
particular contract "is left to the bankruptcy court's
discretion in light of the circumstances of the case." In
evaluating the circumstances of the case, the Court can consider
the following factors: the nature of the interests at stake, the
balance of the hurt to the litigants, the good to be achieved,
the safeguards afforded those litigants, and whether the action
to be taken is so in derogation of Congress' scheme that the
court may be said to be arbitrary.

Where the contract to be assumed or rejected is a major asset of
the debtor, and the debtor has had sufficient time to
reorganize, an immediate decision on assumption or rejection is
warranted.  Based on the Debtors' previous representations to
this Court, it seems clear that the Debtors will be assuming its
executory contracts with the SBC Affiliates. The Debtors have
unequivocally stated that the use of telecommunications lines is
the "lifeblood of the Debtors' business; without such lines, the
Debtors literally could not provide services to their
customers." Any delay in the assumption of these contracts is
merely a pretext for delaying the payment of the postpetition
amounts due. By the time of the hearing on this motion, this
case will be 14 months old. Under these circumstances, and
especially given the Debtors' non payment postpetition of its
administrative expenses, it is not unreasonable to require ICG
to commit to its ability to reorganize or not."  The Debtors
should make their decisions and file their motion within thirty

Concurrently with this Motion, the ABC Associates bring a
separate Motion limited to stay relief, stating the same factual
grounds and arguments. (ICG Communications Bankruptcy News,
Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900)  

IT GROUP: Honoring Pre-Petition Employee Obligations
Harry J. Soose, The IT Group, Inc.'s Senior Vice President,
Chief Financial Officer and Principal Financial Officer, informs
the Court that as of Petition Date, the Debtors' workforce
consisted of approximately 6,400 full-time Employees and
approximately 390 part-time Employees, approximately 52 of which
are covered by a collective bargaining agreement. The Debtors
estimate that, as of the Petition Date, accrued but unpaid wages
and withholding taxes for the Employees aggregate to
approximately $4,001,000.

Mr. Soose states that certain Employees have also incurred
business expenses that, consistent with ordinary practice, are
reimbursable by the Debtors including expenses for relocation,
travel and incidental expenses such as parking and auto care.
The Debtors estimate that, as of the Petition Date, accrued but
unpaid reimbursable Employee expenses aggregate to approximately
$750,000. Mr. Soose adds that the Debtors offered Employees many
standard employee benefits and estimate that accrued, unpaid
Employee Benefits as of the Petition Date are approximately

Mr. Soose relates that the Debtors also currently maintain a
self-insured workers' compensation program. It is critical that
the Debtors be permitted to continue their workers' compensation
program and to pay prepetition claims, assessments and premiums
because alternative arrangements for workers' compensation
coverage would most certainly be more costly, and the failure to
provide coverage may, in some states, subject the Debtors and/or
their officers to severe penalties. The Debtors estimate that
accrued, unpaid workers compensation claims aggregate

If the Debtors fail to pay or honor the Employees' prepetition
benefit, compensation and reimbursement amounts in the ordinary
course, Mr. Soose fears that the Employees will suffer extreme
personal hardship and in many cases will be unable to pay their
basic living expenses, which would have a negative impact on
Employee morale and would likely result in unmanageable
turnover. Any significant deterioration in morale at this time
will substantially and adversely impact the Debtors and their
ability to reorganize, thereby resulting in immediate and
irreparable harm to the Debtors and their estates.

Marion M. Quirk, Esq., at Skadden Arps Slate Meagher & Flom LLP
in Wilmington, Delaware, relates that in light of the potential
delay in obtaining a hearing date, the Debtors are faced with
the possibility of not having authority to fund and pay their
payroll. If the Debtors fail to pay their complete payroll, the
morale and confidence of the Debtors' employees will be severely
impacted, possibly resulting in employees leaving their jobs and
a corresponding significant decrease in the value of the
Debtors' estates.

At this critical juncture in the Debtors' cases, Mr. Quirk
contends that it is essential that the employee workforce remain
in place and properly motivated. If the Debtors fail to meet
their complete payroll, the Employees will have little incentive
to remain on the job. Even if the Employees do not leave their
jobs, Mr. Quirk points out that the Debtors' failure to
completely meet payroll obligations will have a significant
detrimental effect on employee morale and thus reduce the
Employees' willingness to aid in the restructuring of the
Debtors. Thus if the Debtors do not obtain authority to meet
their complete payroll, the Debtors' estates will be immediately
and irreparably harmed.

The Debtors believe that all of the pre-petition employee wages
and salaries are entitled to priority and that all of the
Employees are owed $4,650 or less in wages and salaries as of
the Petition Date. Therefore, Mr. Quirk believes that the
interim authorization of the requested relief will not prejudice
other creditors or parties-in-interest, since the Employees
would be entitled to full payment of the employee wages and
salaries as priority claimants. Further, even if the Debtors did
owe employee obligations greater than $4,650 to any one
employee, the Debtors submit that such amounts would be for
reimbursable expenses, the payment of which may be authorized
under section 105(a).

Mr. Quirk deems it crucial that the Debtors satisfy their pre-
petition Employee Payments in their ordinary course during the
critical days following the commencement of these chapter 11
cases. The Debtors' Employees are critical and necessary to the
Debtors' continued operations, and the Debtors cannot risk the
disruption to their operations by failing to pay these persons
at this juncture in the Debtors' cases. The Debtors' ability to
preserve their business and, ultimately, to reorganize is
dependent upon the continued service, satisfaction and loyalty
of their numerous Employees.

A failure by the Debtors to fund, pay and have honored their
prepetition Employee Payments before the first day hearing on
the Employee Motion may have dramatic and irreparable
consequences.  Mr. Quirk asserts that it would be devastating to
the Debtors' business operations and prospects for a successful
reorganization if, immediately after commencing their chapter 11
cases, they were not authorized -- and therefore were not able -
- to fund and honor the Employee Payments. Maintaining the
confidence of Employees early in these cases is necessary and
essential to the ability of the Debtors to preserve and
successfully reorganize their business.

Without hesitation, and recognizing the vital role a Debtors'
employees play in any successful chapter 11 case, Judge Walrath
granted the Debtors' Motion to Pay Employee Obligations in all
respects. (IT Group Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)  

INNOVTIVE GAMING: Gets Nod to Restructure Preferred Securities
Innovative Gaming Corporation of America (Nasdaq: IGCA)
announced that Laus M. Abdo, the Company's Chief Financial
Officer, has been appointed President.

Tom Foley, Chairman and CEO of IGCA stated, "The Board of
Directors has great confidence in Mr. Abdo's ability to manage
the Company.   His financial and gaming experience is a great
asset to Innovative Gaming.  In the past three months, Mr. Abdo
has devoted substantial time and energy to right-sizing the
Company.  Under his leadership, the Company's Executive
Committee has taken great strides to reduce overhead and resolve
outstanding issues with the holders of its preferred securities,
and with creditors and vendors."

Mr. Abdo, who joined the Company in September 2001, will
continue to serve as the Company's Chief Financial Officer.  Mr.
Abdo's prior experience includes the arrangement and structuring
of private debt and equity financing for real estate, gaming and
leisure companies.  Mr. Abdo also previously served as the Chief
Financial Officer and a Director of a gaming-related real estate
company.  His expertise includes financial analysis, valuation,
transaction structuring and market feasibility for national
gaming companies as well as independent developers and

The Company also announced the following items relating to its

   -- The Company has reached agreement with the holders of its
      Series F and Series K Convertible Preferred Stock to
      restructure those securities. Upon execution of definitive
      documentation, each Series of Convertible Preferred will
      be exchanged for a combination of cash, common stock and
      a new convertible preferred stock with a minimum $1.00 per
      share conversion price.

   -- To avoid substantial dilution to IGCA's shareholders and
      to significantly reduce cash requirements relating to the
      merger, the Company has terminated its previously
      announced merger with Scotch Twist, Inc. by which it would
      have obtained the rights to certain gaming-related credit
      card patents.  A definitive termination and release
      agreement is presently being negotiated.  Termination of
      the merger will allow the Company to refocus its efforts
      on its core technologies.

   -- The Company and Crown Bank have agreed to extend an
      existing $1 million loan for six months.  Additionally,
      the Company has negotiated a one year extension on
      $700,000 of its notes payable.

   -- As previously announced, the Company has entered into an
      agreement with a lender to provide a $3 million working
      capital line of credit to fund future production.  The
      Company anticipates an initial funding under that line in
      the near term.

   -- The Company has reduced its overhead through employee
      reductions and other cost cutting measures.  These steps
      will allow the Company to reduce its 2002 overhead and
      expenses by approximately 40%.

   -- The Company has reached agreement with most of its largest
      materials suppliers to resolve outstanding balances and
      continues to work with its vendors and other creditors to
      resolve payables issues.

Mr. Abdo stated, "I am extremely pleased with the results of our
restructuring efforts.  We have made significant changes to the
Company's operating structure by reducing expenses and focusing
development efforts within the core gaming unit.  The timing for
IGCA to embark on its new strategy couldn't be better.  First,
the gaming manufacturing industry has strong fundamentals,
including the proliferation of new gaming jurisdictions and an
accelerating replacement cycle.  Second, the rollout of the
Company's enhanced Linux-based platform will significantly
enhance and expand the number of game titles available to our
customers positioning the Company to gain market share.  
Finally, the Company continues to focus on high margin recurring
revenue model games.  The combination of these factors should
make 2002 a watershed year for the Company."

The Company also announced that it would be exhibiting its
products at the Western Indian Gaming Conference in San Diego on
January 29 and 30, 2002.

Innovative Gaming Corporation of America, through its wholly-
owned operating subsidiary, Innovative Gaming, Inc., develops,
manufactures and distributes fast playing, high-entertainment
gaming machines.  The Company distributes its products both
directly to the gaming market and through licensed distributors.

For further information contact:

    IGCA Investor Relations:  Anthony D. Altavilla, Managing
Director of Redwood Consultants, LLC, Phone:  415-380-0500, or
Laus M. Abdo, President & Chief Financial Officer of Innovative
Gaming Corporation of America, 333 Orville Wright Court, Las
Vegas, NV  89119, Phone:  702-614-7199 or visit its Web site:

KMART CORP: S&P Drops Ratings to D Following Bankruptcy Filing
Standard & Poor's lowered its ratings on Kmart Corp. to 'D' and
removed the ratings from CreditWatch, where they had been placed
January 14, 2002. The downgrade follows Kmart's filing of a
petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code.

Kmart's operations had been struggling in recent years as it
tried to implement a strategic turnaround in the midst of an
intense competitive environment. Since the beginning of 2002,
vendor and investor confidence have fallen precipitously, and
the company indicated that it was reviewing its liquidity
position for 2002 and 2003. On January 18, 2002, Kmart missed a
payment to a key vendor, Fleming Companies Inc., which supplies
Kmart's food and consumables. Fleming has stopped shipment to
Kmart stores pending Kmart's receipt of debtor-in-possession

Kmart has about $37 billion sales and operates more than 2,100
stores nationwide.

             Ratings Lowered and Removed from Creditwatch

     Kmart Corp.                         TO          FROM
       Corporate credit rating           D           CCC-
       Senior secured debt               D           CCC-
       Senior unsecured debt             D           CCC-
       Shelf registration:
        Senior unsecured                 D   prelim. CCC-
     Kmart Financing I
       Corporate credit rating           D           CCC-
       Preferred stock                   D           C

DebtTraders reports that Kmart Corp.'s 8.125% bonds due 2006
(KMART3) currently trade between 48 and 50. See  
real-time bond pricing.

KMART CORP: Martha Stewart Confident About Chapter 11 Emergence
Martha Stewart Living Omnimedia, Inc. (NYSE: MSO), which
licenses its owner's name to Kmart under a 1997 agreement -- see  
a copy of the agreement -- says it won't attempt to cancel the

Stated Martha Stewart, Chairman and CEO of Martha Stewart Living
Omnimedia, Inc.: "We remain optimistic that Kmart, our long-time
domestic mass-market merchandising retail partner, will
ultimately emerge from this situation as a stronger, more
competitive company in keeping with its proud heritage."

"Going forward, Kmart will continue to sell Martha Stewart
Everyday brand products under the terms of our contract for the
foreseeable future.  Kmart had a number of outstanding payment
obligations to MSO at the time of the filing.  The amount we
ultimately realize from these payment obligations cannot
currently be determined.  However, we believe that Kmart values
its relationship with MSO and expect that Kmart will take steps
to ensure that we receive payment as fully and promptly as
possible," Ms. Stewart added.

As of the date of the Kmart bankruptcy filing, MSO had accounts
receivable due from Kmart totaling approximately $13 million,
including accrued royalty amounts and other amounts due
resulting from advertising placed in MSO media and cost
reimbursement arrangements.

"Despite difficulties experienced by Kmart in general, Martha
Stewart Everyday retail sales grew 25% in 2001 over 2000," said
MSO President and Chief Operating Officer Sharon Patrick.

"While a bankruptcy filing brings with it some uncertainty, we
currently expect that Kmart will take all possible steps to
strengthen our position at Kmart, and that we will be with them
throughout the term of our contract.  If for some reason that
doesn't happen, however, we are supremely confident in the
strength of our Martha Stewart Everyday brand label and in our
ability to realize full value for that brand label in domestic
mass market, whether at Kmart or other mass retail outlets,"
added Ms. Patrick.

"We have a strong balance sheet with cash of nearly $140 million
and no debt.  This position will allow us to easily manage
whatever near-term uncertainty this situation presents,"
affirmed Ms. Patrick.

Martha Stewart Living Omnimedia, Inc. is an integrated content
company consisting of four business segments.  The Company's
Publishing segment includes Martha Stewart Living and Martha
Stewart Weddings magazines; special issues such as Martha
Stewart Baby; books written by Martha Stewart and the editors of
Martha Stewart Living; and the syndicated askMartha newspaper
columns and radio show.  The Internet/Direct Commerce segment
consists of the Company's high-end catalog, Martha by Mail, and, which includes the online Martha by Mail
store, marthasflowers offerings, and eight linked content and
community channels.  This segment also includes The Wedding
List, a wedding registry and gift business.  The Television
segment includes a nationally syndicated, daily one-hour
television program, Martha Stewart Living; a daily cable
television program, from Martha's Kitchen, on the Food Network;
weekly appearances on The Early Show on CBS; and periodic
network primetime television specials.  The Merchandising
segment includes strategic partnerships through which
merchandise designed by the Company's in-house creative experts
are distributed and/or sold through Kmart, Sherwin-Williams,
P/Kaufmann, and Zellers.  Martha Stewart Living Omnimedia, Inc.
is listed on the New York Stock Exchange under the ticker symbol

KMART: Fleming Will Resume Delivery Upon Receipt of Assurance
Fleming (NYSE: FLM) responded to the announcement by Kmart
Tuesday that it has filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code and obtained debtor-in-possession

"First and foremost, the Kmart filing helps define the path
forward in our relationship.  Kmart's debtor in possession
financing gives it the critical liquidity needed to fund its
operations during the reorganization process, a necessary first
step in resuming our relationship," said Mark Hansen, chairman
of the board and chief executive officer of Fleming.  
"Additionally, Kmart's reorganization can be an opportunity to
close underperforming, high-cost-to-serve stores and redirect
capital toward efficient, highly productive discount stores and
supercenters.  We believe [Tues]day's filing provides Kmart the
opportunity to better focus company resources on these top
performing assets." Hansen noted the powerful and positive
impact of Kmart supercenters for Fleming.  Fleming typically
delivers approximately five times the volume of merchandise to a
Kmart supercenter compared to a traditional discount store.

Kmart's filing has almost no impact on Fleming's comprehensive
business strategy or its service to other customers.  Fleming's
short-term and long-term strategies have been, and still are,
predicated on diversified growth among a wide variety of
customers, including convenience stores, supercenters, self-
distributing grocery chains, independent supermarket operators,
drug chains, and a variety of alternative retail formats.  While
Kmart is Fleming's largest customer in terms of sales volume,
business with other retail customers continues to grow at a
significant rate.  Non-Kmart business accounted for more than
10% sales growth in the third quarter and will continue to grow
at a sustained rate of at least 5% per year for the foreseeable

Fleming currently intends to resume delivery of food and other
consumable products to Kmart upon receiving satisfactory
assurances from Kmart, via the bankruptcy court.  As previously
stated, Fleming's business arrangement with Kmart includes a
seven-day invoice and payment cycle.  The company believes
the short payment term for product shipments to Kmart limits
Fleming's exposure.  Additionally, the reclamation claim filed
by Fleming puts it in a strong position to recover its
merchandise receivables as of the filing date.

While it is not updating guidance at this time, Fleming is in
the process of fully evaluating what, if any, effect Kmart's
filing may have on its previously stated 2001, 2002 and 2003
guidance.  "It is our belief that store closures may be a
component of Kmart's plan," noted Hansen.  "To put this in
perspective, our analysis indicates that the least productive
ten percent of the Kmart store base likely constitutes less than
six percent of Fleming revenues attributable to Kmart, no more
than two percent of total Fleming revenues, and approximately
$.05 per share in earnings."

Hansen continued, saying, "We have benefited from the Kmart
alliance by proving that our coast-to-coast network can
effectively serve both large and small retailers with a low-cost
supply chain solution.  We believe the experience we have gained
and our demonstrated low-cost supply chain solution position us
to secure significant new volume in the coming year."

Fleming is the industry leader in distribution and has a growing
presence in value retailing.  Fleming's primary business is
buying and selling merchandise.  The company serves
approximately 3,000 supermarkets, 6,800 convenience stores, and
more than 2,000 supercenters, discount, limited assortment,
drug, specialty, and other stores across the United States.  To
learn more about Fleming, visit our Web site at

KMART: Appoints Ronald Hutchison as Chief Restructuring Officer
Kmart Corporation (NYSE: KM) announced that Ronald B. Hutchison
has been named Executive Vice President and Chief Restructuring
Officer, a new position, effective immediately.  He will work
closely with the other members of the Company's senior
management team to help Kmart aggressively address the financial
and operational challenges that have hampered its performance.
On Tuesday morning Kmart filed voluntary petitions for
reorganization under chapter 11 of the U.S. Bankruptcy Code.

Hutchison, 51, was most recently Chief Financial Officer of
Advantica Restaurant Group, Inc. where he was one of the key
architects of that company's successful reorganization, which
involved the elimination or restructuring of more than $2
billion of debt.  He was also involved in the financial
reorganization of Leaseway Transportation, a transportation
holding company that emerged from chapter 11 in the early 1990s.

Charles C. Conaway, Kmart Chief Executive Officer, said: "Ron
Hutchison is ideally suited to help guide Kmart through the
chapter 11 process.  The reorganizations he has led involved
many complex issues not unlike those we face at Kmart, and
through each he demonstrated considerable financial acumen and
the ability to work with multiple constituencies towards a
positive outcome.  My colleagues and I look forward to receiving
Ron's wise counsel as we work together towards our goal of a
successful emergence from the reorganization process in 2003."

Hutchison, a graduate of the University of Akron with a
bachelor's degree in accounting, is a Certified Public

Kmart Corporation is a $37 billion company that serves America
with more than 2,100 Kmart and Kmart SuperCenter retail outlets
and through its e-commerce shopping site

LAIDLAW INC: Obtains Okay to Modify Intercompany Debts Structure
Laidlaw Inc., and its debtor-affiliates ask the Court to approve

    (a) modification of the Intercompany Debts into non-interest
        bearing demand debts as of August 1, 2001;

    (b) conversion of the Laidlaw Investments Limited Debt into
        equity; and

    (c) transfer of assets to the three wholly owned
        subsidiaries of Laidlaw Transportation, Inc. and the
        consummation of the Restructuring Transactions.

Joseph M. Witalec, Esq., at Jones, Day, Reavis & Pogue, in
Columbus, Ohio, relates that the Laidlaw Companies has a cash
management system designed to move funds from the Laidlaw
Companies with excess cash into a common pool and transfer such
fund to Laidlaw Companies in need of cash.  Interest is paid on
any outstanding balances, Mr. Witalec adds.

As of July 31, 2001, Mr. Witalec reports that Laidlaw Transit,
Ltd., Greyhound Canada Transportation Corp. and Canadian Medical
Response Ltd. -- Canadian Subsidiaries -- owe Laidlaw, Inc.
$703,000,000 with an interest rate of 8.5%.  Laidlaw Inc.
intends to use the interest income to pay the interest on its
debt obligations to the Bank Group and the Pre-petition

                Amendment of Intercompany Debts

Interest payment ceased when the Debtors declared an interest
moratorium in 2000. Mr. Witalec explains that even though
Laidlaw, Inc. is no longer receiving cash, it must still accrue
such income on its books.  However, Mr. Witalec says, Laidlaw
Inc. is no longer able to offset that income with a
corresponding deduction for interest expense on its bank and
bond debt.

On August 1, 2001, Laidlaw, Inc. and the Canadian Subsidiaries
agree to convert the Intercompany debts owed by the Canadian
Subsidiaries to Laidlaw, Inc. into non-interest bearing demand
debts. The move will "amend the cash management system to
reflect the realities of the Debtors' financial situation and
result in a significant tax savings for Laidlaw, Inc.", Mr.
Witalec tells Judge Kaplan. Furthermore, Mr. Witalec adds, "the
savings in interest payments for the Canadian Subsidiaries will
directly benefit Laidlaw, Inc. as the sole beneficial
shareholder of the three companies."

                 Exchange of Intercompany Debts

With the same cash management system, Laidlaw Investments, Ltd.
owes Laidlaw, Inc. an approximate amount of $179,000,000. As
part of the Debtors' plan on company restructuring, the Debtors
desire to convert the Laidlaw Investment Debt to equity. "The
conversion will not prejudice any of the Debtors' estates or
creditors as Laidlaw, Inc. is the sole shareholder of Laidlaw
Investment," Mr. Witalec asserts.

                      Transfer of Assets

Lastly, the Debtors wish to modify the corporate structure of
their healthcare and transportation subsidiaries to reflect more
closely the operational structure of these units.

Mr. Witalec states that the healthcare related company --
American Medical Response Inc. -- is wholly owned by Laidlaw
Transit Inc., a transportation company. To rationalize the
corporate structure of the Laidlaw Operating Companies, the
Debtors propose that:

  (a) one of Laidlaw Transportation's presently inactive
      healthcare subsidiaries, Laidlaw Transportation Holdings
      One, Inc. would hold Laidlaw Transportation's interests in
      the Laidlaw Operating Companies providing healthcare and
      related services;

  (b) another of Laidlaw Transportation's presently inactive
      retail transportation subsidiaries, Laidlaw Transportation
      Holdings, Inc. would hold Laidlaw Transit's interest in
      Laidlaw Operating Companies involved in the retail portion
      of its transportation operations; and

  (c) a corporation presently operating as a holding company,
      Laidlaw Transit Holdings, Inc. would hold Laidlaw
      Transportation, Inc.'s interest in the non-retail portion
      of its transportation operations.

According to Mr. Witalec, the process of transfer would be done
through a series of transactions.

For Healthcare Subsidiaries:

    (i) Laidlaw Transportation will transfer its receivables due
        from American Medical Response to American Medical
        Response in exchange for stock in American Medical

   (ii) Laidlaw Transit will then transfer its stock in American
        Medical Response to Laidlaw Transportation to repay part
        of the receivable that Laidlaw Transit to Laidlaw
        Transportation; then,

  (iii) Laidlaw Transportation will transfer these assets to the
        Healthcare Subsidiary in exchange for additional stock
        of the Healthcare Subsidiary, which are:

        a) the stock of American Medical Response

        b) the stock of EmCare Holdings, Inc.

        c) Laidlaw Transportation's receivable from EmCare

Laidlaw Transportation will also transfer assets to the Retail
Transportation Subsidiary in exchange for additional stock of
the Retail Transportation Subsidiary. The assets to be
transferred are:

    (a) the stock of non-debtor Greyhound Lines, Inc.;

    (b) Laidlaw Transportation's receivable from Greyhound;

    (c) the stock of non-debtor Hotard Coaches, Inc.;

    (d) the stock of non-debtor Interstate Leasing, Inc.; and

    (e) Laidlaw Transportation's receivable from Hotard.

Moreover, Laidlaw Transit will transfer its stock in Nonretail
Transportation Subsidiary to Laidlaw Transportation in repayment
of part of the debt that Laidlaw Transit owes to Laidlaw
Transportation. Laidlaw Transportation would then transfer
assets to the Nonretail Transportation Subsidiary in exchange
for additional stock in the Nonretail Transportation Subsidiary.
The assets to be transferred will be:

    (a) its receivable due from non-debtor Laidlaw Transit
        Services, Inc.;

    (b) the stock of Laidlaw Transit; and

    (c) its receivables due from Laidlaw Transit.

Mr. Witalec explains to the Court that the Healthcare, Retail
and Nonretail Transportation Transactions will:

  (a) result in a corporate structure for the Laidlaw Companies
      that more closely mirrors their operational structure;

  (b) simplify the Laidlaw Operating Companies' management
      structure; and

  (c) result in numerous operational benefits

Mr. Witalec assures Judge Kaplan that the restructuring will not
affect the creditors because Laidlaw Transportation will still
maintain complete control and ownership of the relevant
operating subsidiaries.

                     Sunrise Objects

Sunrise Partners LLC asserts a claim in the amount of
$16,610,000 pursuant to the Exchangeable Notes and the 1995
Indenture issued by Laidlaw One.  The Notes were guaranteed by
Laidlaw, Inc.

Bruce S. Zeftel, Esq., at Saperston & Day PC, in Buffalo, New
York, points out that the Plan proposes to, among other things:

    (a) place holders of the Exchangeable Notes in a class with
        all other Noteholder creditors of the Laidlaw Companies,

    (b) settle certain claims of all Noteholders against
        certain bank lenders and Laidlaw companies, pursuant to
        a Settlement and Lock-Up Agreement dated June 27, 2001.

"Sunrise's preliminary review of the Transfers revealed that a
full investigation is necessary in order to determine whether
the proposed treatment of holders of the Exchangeable Notes
under the Plan is fair and appropriate," Mr. Zeftel relates.  
Sunrise and Debtors are almost finished with the document
discovery phase.

Mr. Zeftel asserts that the Court should not grant the Debtors'
motion because:

    (a) insufficient time has been provided to understand or
        analyze the potentially significant Intercompany

    (b) no sufficient presentation has been made explaining the
        value of the various assets and interests being shifted
        among the involved debtor and non-debtor entities; and

    (c) the Intercompany Transactions can only be accomplished
        pursuant to a plan of reorganization.

                         *     *     *

After hearing the arguments, Judge Kaplan authorizes Laidlaw Inc
to modify the Intercompany Debts to become non-interest bearing
demand debts as of August 1, 2001.  The Court also allows
Laidlaw Inc., to exchange the Laidlaw Investments Limited Debt
for stock in Laidlaw Investments Limited.  In addition, Judge
Kaplan permits Laidlaw Transportation Inc. to consummate the
Restructuring Transactions, including the transfer of assets to
the Laidlaw Transportation Subsidiaries.

But Judge Kaplan makes it clear that the consummation of the
Transactions authorized shall not affect recoveries by creditors
or equity security holders under a plan or plans of
reorganization or a chapter 7 liquidation in any of these cases.

Judge Kaplan further directs the Debtors to provide Safety-Kleen
Corporation and Sunrise Partners LLC with an analysis of the
impact of the Intercompany Transactions, subject to appropriate
confidentiality protections already in existence between the

The Court gives Safety-Kleen and Sunrise Partners until January
25, 2002 to object to the Intercompany Transactions.  If no
objection is filed by that time, the Intercompany Transactions
shall be deemed approved. (Laidlaw Bankruptcy News, Issue No.
13; Bankruptcy Creditors' Service, Inc., 609/392-0900)  

LODGIAN INC: Court Allows Payment of Pre-Petition Taxes
Lodgian, Inc., and its debtor-affiliates sought and obtained
authority to pay Sales, Occupancy and Use Taxes post-petition to
any Taxing Authorities, to the extent that the Debtors have
underestimated the pre-petition Sales, Occupancy and Use Taxes
through November 2001 or inadvertently omitted a payment of any
pre-petition accrued and unpaid amount due.  In addition, to the
extent that any checks and/or wire transfers previously sent to
the Taxing Authorities have not cleared the Debtors' bank
accounts as of the Commencement Date, the Court authorizes and
directs the Debtors' banks to honor such payments. Finally, the
Court authorizes the payment of outstanding pre-petition Sales,
Occupancy and Use Taxes for December 2001, on a post-petition
basis in the ordinary course of the Debtors' business.

According to Adam C. Rogoff, Esq., at Cadwalader Wickersham &
Taft in New York, New York, in the ordinary course of business,
the Debtors are required to collect sales taxes from their
customers on a daily basis and remit them to various state
taxing authorities on a periodic basis. The Debtors are also
required to collect hotel occupancy taxes from their customers
on a daily basis and remit them to various state and local
taxing authorities on a periodic basis.  Sales and Occupancy
Taxes accrue as calculated based upon a statutory percentage of
the sale price.

As the Debtors conduct business in various states, Mr. Rogoff
explains that the Debtors are obligated to remit Sales and
Occupancy Taxes to the states that collect such taxes. The
process by which the Debtors remit these taxes varies, depends
on the nature of the tax at issue and the Taxing Authority to be
paid. The Debtors may remit Sales and Occupancy Taxes to the
relevant Taxing Authority based on the tax actually collected
from customers during a period certain but the States determine
the frequency of the Sales and Occupancy Tax payments. The
payment cycle varies, requiring either weekly, bi-monthly,
monthly, or quarterly payments be made. With respect to those
jurisdictions which require the Debtors to remit estimated Sales
and Occupancy Taxes, Mr. Rogoff states that the applicable
Taxing Authority will reconcile payments once they have been
estimated and received to determine any payment deficiency or
surplus for any particular period. The Taxing Authority will
subsequently make a refund or payment to the Debtors to the
extent necessary and/or appropriate.

The Debtors are also obligated to remit use taxes on a periodic
basis to the applicable Taxing Authorities. Mr. Rogoff relates
that the Debtors incur these taxes through the purchase of
taxable supplies for their own use and in circumstances where a
vendor has failed to collect a Sales Tax from the Debtors. In
each state in which they operate, the Debtors remit Use Taxes to
the relevant Taxing Authorities on the same basis as they remit
Sales Taxes.

Prior to the date hereof, the Debtors paid, on an estimated
basis, the pre-petition accrued and unpaid amounts outstanding
on account of Sales, Occupancy and Use Taxes through November
2001. The Debtors have not, as yet, paid the pre-petition
portion of Sales, Occupancy and Use Taxes for the month of
December 2001. However, because such payments were made on an
estimated basis, it is possible that the Debtors underestimated
the amount of the pre-petition Sales, Occupancy and Use Taxes
through November 2001.

Mr. Rogoff tells the Court that the Debtors' officers and
directors may be held personally liable to the extent the
Debtors fail to meet the obligations imposed on them to remit
Sales, Occupancy and Use Taxes. To the extent that any accrued
taxes of the Debtors were unpaid as of the Commencement Date,
the Debtors' officers and directors may be subject to lawsuits
in certain jurisdictions during the pendency of these cases,
even if the failure to pay was not a result of any nonfeasance
or malfeasance on their part. Such potential lawsuits would
prove extremely disruptive for the Debtors, for the named
officers and directors whose attention to the reorganization
process is required, and for this Court, which might be asked to
entertain various requests for injunctions with respect to the
potential state-court actions against such individuals.

Mr. Rogoff contends that the Sales, Occupancy and Use Taxes are
entitled to priority status pursuant to section 507(a)(8) of the
Bankruptcy Code, and therefore, must be paid in full before any
general unsecured obligations may be satisfied. Accordingly, to
the extent that the Debtors are successful in confirming a plan
of reorganization, the relief will only affect the timing of the
payments of pre-petition Sales, Occupancy and Use Taxes and will
not prejudice the rights of other creditors or parties in
interest. (Lodgian Bankruptcy News, Issue No. 3; Bankruptcy
Creditors' Service, Inc., 609/392-0900)  

MARINER POST-ACUTE: Committee Supports First Amended Joint Plan
The Official Unsecured Creditors' Committee of Mariner Post
Acute Network, Inc., tells Judge Walrath it has reviewed the
Plan and the Disclosure Statement and lends its support to the
approval of both.

The Committee believes that the Disclosure Statement contains
adequate information and joins in support of its approval. The
Committee believes that the Plan represents the best available
recovery for all unsecured creditors and restructuring
alternative for the Debtors and will file a letter in support of
confirmation of the Plan for inclusion in the solicitation
package. (Mariner Bankruptcy News, Issue No. 24; Bankruptcy
Creditors' Service, Inc., 609/392-0900)  

MATLACK SYSTEMS: Court Extends Exclusive Period through Feb. 22
The U.S. Bankruptcy Court for the District of Delaware approved
Matlack Systems, Inc.'s third request to extend the Company's
Exclusive Periods to file a plan and to solicit acceptances of
that plan.  Matlack's Exclusive Plan Filing Period is extended
through February 22, 2002 and the Exclusive Solicitation Period
is moved through April 23, 2002.

Matlack, North America's No. 3 tank truck company, provides
liquid and dry bulk transportation, primarily for the chemicals
industry.  The company filed for chapter 11 protection last
March 29, 2001, and is represented by Richard Scott Cobb, Esq.,
at Klett Rooney Lieber & Schorling.  At the time of filing,
Matlack reported assets of $81,160,000 and liabilities of

METALS USA: Seeks Okay to Sell Lafayette Property for $1 Million
Metals USA, Inc., and its debtor-affiliates ask the Court to
approve the sale of their property located at 101 Metals Drive
in Youngsville, Louisiana, free and clear of all liens, claims
and encumbrances to Louisiana Valve Source Inc.

Carl Lenz, the Debtors' Vice President for Finance and
Administration, informs the Court that on September 27, 2001,
the Debtors and Louisiana Valve Source executed a Commercial
Agreement to Purchase and Sell the 6.75-acre property for
$1,000,000. Because the Bank Group holds a lien on all of the
Debtors' real estate, the sales proceeds will be applied
according to the post-petition loan agreement recently approved
by the Court. The group will be granted a replacement lien on
the cash proceeds of the sale.

Prior to listing the property in the market, Mr. Lenz relates
that the property was appraised by Associated Appraisers Ltd.
with a market value of $1,000,000. The Debtors also engaged R.
Hamilton Davis of Caldwell Banker Pelican Real Estate as the
listing broker, which engaged in substantial marketing efforts
to sell the property. Unfortunately, the Debtors received only
one sales contract that is the subject of this motion and are
not aware of any other potential purchasers.

The Debtors believe that the sales price constitutes the highest
and best value for the property for these reasons:

A. the sales price is the same amount as the market value placed
     on the property by Associated Appraisers and more than the
     property's book value of $478,407;

B. the broker's contract contains incentive to sell the property
     quickly and for a high value;

C. the real estate market in Louisiana is declining due to the
     general economic downturn and the uncertainty partly caused
     by the events of September 11, 2001.

According to Mr. Lenz, good cause and sound business reasons
exist to sell the property asset outside a plan of
reorganization because if the proposed sale does not close, it
is unlikely that a higher offer will be extended. The Debtors
have also consulted with the Creditors Committee and the Bank
Group, each of which support the sale.

Mr. Lenz assures the Court that the terms of the sale agreement
were negotiated at arms' length, made in good faith and with
full information. (Metals USA Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)

NEON COMMS: Seeks Waiver from Nortel Networks on Note Payment
NEON Communications, Inc. (Nasdaq:NOPT), a leading provider of
advanced optical networking solutions and services in the
northeast and mid-Atlantic markets, said it is in discussions
with Nortel Networks, Inc., to obtain a waiver for the December
31, 2001 payment due under a promissory note between the
Company's subsidiary, NEON Optica, Inc., and Nortel.

NEON Chairman and CEO, Stephen Courter, said: "We elected not to
make the December note payment, which totals approximately $7.3
million, in order to conserve cash for operations while the
company continues to work with Credit Suisse First Boston to
evaluate financing and restructuring alternatives to fully fund
its business plan."

There can be no assurance that NEON will be successful in
obtaining this waiver. If NEON does not obtain the waiver,
Nortel will have the option to accelerate the remaining payments
due under the note, which total approximately $42 million. If
Nortel elects to accelerate such payments, this action would
also trigger a cross-acceleration provision under NEON Optica's
$180 million senior notes due 2008. To date, Nortel has not
sought to accelerate the outstanding note balance.

NEON Communications is a wholesale provider of high bandwidth,
advanced optical networking solutions and services to
communications carriers on intercity, regional, and metro
networks in the twelve-state northeast and mid-Atlantic markets.

OPTICARE HEALTH: Wins Shareholders' Consents for Restructuring
OptiCare Health Systems, Inc. (Amex: OPT) announced that it has
obtained the consents of holders of a majority of its
outstanding common stock in favor of all of the proposals set
forth in OptiCare's Consent Statement dated January 4, 2002,
distributed to stockholders regarding its previously announced
capital restructuring.  Accordingly, OptiCare has terminated
solicitation of consents.

Consummation of the capital restructuring remains subject to the
execution of definitive agreements by certain parties and
certain other conditions which have not yet been satisfied.  
OptiCare intends to close the proposed capital restructuring
transactions as promptly as practicable after all conditions to
the closing of the transactions have been fulfilled or waived.

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.

PACIFIC GAS: Exclusive Period to File Plan Extended to June 30
Pacific Gas and Electric Company asks Judge Montali for a
further extension of its exclusive period within which to
propose a plan of reorganization and solicit acceptances of that
plan through until June 30, 2002 (or such later date as the
Court may order).

PG&E believes it needs an extension because it anticipates that
it may take months to fully resolve matters and obtain
confirmation of the Plan through revisions to the Plan and
Disclosure Statement.  Although the Plan has broad creditor
support, approximately 70 parties have filed objections to the
Disclosure Statement, many of which also reflect opposition to
the Plan over issues which are likely to be quite time-consuming
to resolve or adjudicate, for example, sovereign immunity and
preemption grounds. In fact, the Court has scheduled a hearing
and separate briefing on these relatively complicated issues.

The request is clearly not meant to delay the case, which costs
the estate literally millions of dollars per week in fees, costs
and interest accruals with respect to creditor claims, PG&E
tells the Court. Having substantially revised the Plan and
Disclosure Statement to address concerns raised by interested
parties, PG&E is diligently working the plan process through a
fast track, and will continue to seek prompt adjudication of
disputed issues, the utility submits. "The requested extension
will protect this process while the Plan efforts are concluded
expeditiously," the Utility represents, "By contrast, a failure
to extend exclusivity will create needless confusion and
conflict that will presumably prejudice all parties."

Based on this, and the size and complexity of the case involving
a utility company subject to a myriad of state and federal
statutes, rules and regulations and the energy crisis, PG&E
submits that there is "cause" to grant the requested extension
pursuant to Bankruptcy Code Section 1121(d).

PG&E believes that the requested extension of the exclusivity
period under Section 112l(c)(3) should allow a reasonable and
adequate time for obtaining confirmation of the Plan, after
approval of the Disclosure Statement. Moreover, the requested
extension date of June 30, 2002 is consistent with the Support
Agreement between PG&E and PG&E Corporation, the co-Proponents
of the Plan, and the Committee with respect to the Plan and the
Plan itself, which both envision confirmation of the Plan by
June 30, 2002, PG&E notes.

                         *   *   *

At a hearing on January 16, 2002, the Court granted PG&E a
further extension of the exclusivity period for its plan of
reorganization, but allowed the CPUC by February 13 to provide
the Court with specific and credible evidence that it can
produce a viable alternative. The Court also ordered PG&E, the
CPUC and the State to provide comments on January 25 whether a
third party should be appointed to meet with those parties to
try and attempt to resolve conflicts relating to PG&E's plan.
(Pacific Gas Bankruptcy News, Issue No. 20; Bankruptcy
Creditors' Service, Inc., 609/392-0900)   

PACIFIC GAS: Preemption & Objections to Plan Hearing Tomorrow
As requested by the U.S. Bankruptcy Court, Pacific Gas and
Electric Company Tuesday filed its response to preemption and
Eleventh Amendment immunity objections to its Disclosure
Statement submitted by the California Public Utilities
Commission (CPUC), the California Attorney General and six other
parties.  On January 25, the Court is scheduled to hear oral
arguments on these issues.

Federal law gives the Bankruptcy Court the authority to preempt
applicable state laws in order to confirm a plan of
reorganization and allow the debtor to pay creditors and emerge
from Chapter 11.  The Bankruptcy Code also allows a plan to
transfer assets without approval of state agencies.

"Congress has deliberately withheld from state regulators the
very veto power over public utility reorganizations that the
CPUC seeks to wield in this case:  Congress has expressly
determined that only a 'rate change provided for in the plan' of
reorganization is subject to state regulatory pre-approval,"
PG&E stated in its filing.  "PG&E plan does not call for such a
change in rates."

Under PG&E's plan of reorganization, all valid claims would be
paid in full by borrowing against the full value of the assets,
the utility would regain its creditworthy status and the state
could get out of the energy business.

PG&E's plan asks the Court to preempt some 37 CPUC regulations
and state laws, out of the thousands of laws and regulations
under which the utility operates, in order to complete the
transfer of certain assets and establish three new California-
based companies.  PG&E's plan of reorganization seeks to
preempt the minimum amount of laws and regulations necessary to
allow it to emerge from bankruptcy.

The plan does not ask the Court to exempt PG&E from the ordinary
regulatory oversight of the CPUC and other state agencies.  
Following the adoption of the plan, all of the businesses will
continue to be subject to all applicable federal, state and
local public health, safety and environmental laws and

"Having succeeded in precipitating the bankruptcy, the CPUC now
seeks to prevent PG&E from solving its financial problems
through the orderly reorganization process established by
federal law by arguing at the threshold that the Bankruptcy
Court is powerless to confirm the plan of reorganization,"
the utility said.

PILGRIM CLO: Fitch Ratchets Class C Notes' Rating Down a Notch
Fitch downgrades two tranches of the liabilities of Pilgrim CLO
1999-1 and removes them from Rating Watch Negative. The
securities downgraded are:

     -- $60,000,000 class B notes to 'BBB-' from 'BBB+';
     -- $10,000,000 class C notes to 'BB-' from 'BB+'.

The collateralized loan obligation is backed predominately by
senior secured bank loans. Pilgrim CLO is managed by Pilgrim
Investments, Inc. These rating actions are being taken after
reviewing the performance of the portfolio amidst increased
levels of defaults and deteriorating credit quality of the
underlying assets. Given the current quality of the portfolio,
Fitch believes the credit risk to noteholders is no longer
consistent with the liability ratings. Pilgrim CLO is failing
its weighted average rating test of 2600, with a current level
of 2720 at Jan. 2, 2002. To date, the deal has had a total of
$27.7 million in defaults, with $14.6 million still outstanding.
There is $50.4 million (10.82%) in 'CCC+' and below rated
assets, which includes defaulted securities.

Fitch will continue to monitor this transaction. Deal
information and historical data is available on Fitch's web site

POINT.360: Haig Bagerdjian Discloses 5.8% Equity Stake
Haig S. Bagerdjian beneficially owns 5.8% of the outstanding
common stock of Point 360, represented by the holding of 530,200
share of the Company's common stock.  Mr. Bagerdjian holds sole
voting and dispositive powers.

Mr. Bagerdjian's principal occupation is Executive Vice
President of Syncor International Corporation and President and
Chief Executive Officer of Syncor Overseas, Ltd. The Company is
principally engaged in the distribution of radio-pharmaceutical
products internationally and the executive offices are located
in Woodland Hills, California.

Mr. Bagerdjian used personal funds in the aggregate amount of
$465,438.82 to acquire the securities which were acquired for
purposes of investment.

Point.360, which changed its name from VDI MultiMedia in mid-
2001, provides video and film management services to film
studios and ad agencies. Point.360 offers editing, mastering,
reformatting, archiving, and distribution services for
commercials, movie trailers, electronic press kits,
infomercials, and syndicated programs. Services provided to the
seven major film studios accounted for nearly 40% of VDI's 2000
revenue. Its ad agency clients include Saatchi & Saatchi and
Young & Rubicam. A deal to be acquired by Bain Capital was
terminated in 2000. President and CEO R. Luke Stefanko owns 54%
of VDI. As of September 30, 2001, the recorded a working capital
deficit of about $17 million.

PSINET INC: Court Approves Sale of Japanese Unit for $16.6MM
The offer by Cable & Wireless to acquire PSINet, Inc.'s Japanese
non-debtor subsidiary was approved by the Court. However, C&W's
was modified and revisions made to the Share Purchase Agreement
after a Competing Offer was made by Livin' on the EDGE Co.,
Ltd., a company organized under the laws of Japan, and an
auction was held on January 14-15, 2001. Among other things,

(1) The Purchase Price is changed from $10,200,000 to
    $16,600,000, subject to the Adjustments.

(2) The Transition Services Agreement is revised, replacing "3
    months" with "60 days" so as to provide, under "G3 network
    management, equipment and software," that:

          "Seller to continue monitoring and operating
           the G3 network in Japan for 60 days after the Closing

(3) The Reseller Agreement is revised correspondingly replacing
    the use of "3 months" in Section 3.01 with "60 days."

The Closing Date shall occur as soon as practicable.

The Competing Offer made by EDGE provides for, among other
things, an Alternative Purchase Price equal to $10,956,000,
accompanied by a deposit of US $953,800 and a commitment by EDGE
to consummate the purchase of the Shares within not more than 30
days after the entry of an order by the U.S. Bankruptcy Court
approving such purchase, subject to receipt of any governmental
and regulatory approvals which must be obtained or otherwise
satisfied within 60 days after entry of such order. EDGE's
Competing Offer is irrevocable until the closing of its purchase
of the Shares.

At certain juncture, the U.S. Government objected to waiving the
automatic 10-day stay on closing on the bases that (i) Debtors
have made no showing of exigency requiring that closing occur
within ten days of an approval order; and (ii) in the event the
purchaser is a foreign entity, the Government should be afforded
the period of the ten-day stay to evaluate the potential impact
of the proposed transfer of equipment and accompanying
technology upon national security.

Upon considering the motion and the objection and the Competing
Offer, the Court found that the Debtors have exercised sound
business judgment in deciding to enter into the Share Purchase
Agreement, Escrow Agreement, Registration Agreement and the
Related Agreements and to sell the Shares as contemplated
therein. The Court also found that Debtors have exercised sound
business judgment in selecting C&W as the highest and best
bidder following an auction, in which the Debtors also received
a Competing Offer from Livin' on the EDGE Co., Ltd.

The Court concurred that the Sale must be approved and
consummated promptly in order to preserve the value of the
Shares, and a reasonable opportunity to object or be heard with
respect to the Motion and the relief requested therein has been
afforded to all interested persons and entities.

Pursuant to 11 U.S.C. Sec. 363(b), the Court approved the Share
Purchase Agreement, the Escrow Agreement, the Registration
Agreement, and the Related Agreements in all respects.

All objections to the Motion that are not withdrawn are
overruled or denied.

Pursuant to 11 U.S.C. Secs. 105(a), 363(b) and 363(f), upon the
Closing Date, the Shares shall be transferred to C&W IDC free
and clear of all liens, claims, encumbrances, and other
Interests, with all such Interests and Claims to attach to the
net proceeds of the sale of the Shares in the order of their
priority, with the same validity, force and effect which they
now have as against the Shares, subject to any claims and
defenses the Debtors may possess with respect thereto. The Court
directed that, following the Closing Date, no holder of any
Interests in the Shares shall interfere with C&W IDC's use and
enjoyment of the Shares based on or related to such Interests,
or any actions that the Debtors may take in their Chapter 11

The Competing Offer submitted by EDGE shall remain open until
the Closing provided that,

(a) if the stay provided by Bankruptcy Rule 6004(g) be waived
    and the Closing shall not have occurred by January 25, 2002;
    or if

(b) if the stay provided by Bankruptcy Rule 6004(g) not be
    waived and the Closing shall not have occurred by February
    14, 2002, EDGE shall be permitted to move the Court to
    permit them to terminate their bid. (PSINet Bankruptcy News,
    Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-

RAYOVAC CORP: S&P Assigns BB Rating to $250MM Bank Loan Facility
Standard & Poor's assigned its double-'B' bank loan rating to
Rayovac Corp.'s existing $250 million senior secured revolving
credit facility due 2004 and $34 million senior secured term
loan facility due 2004. At the same time, Standard & Poor's
affirmed its double-'B'-minus corporate credit rating on the

The outlook is positive.

Total debt as of September 30, 2001, was about $258 million.

The ratings on Madison, Wisconsin-based Rayovac reflect its
small size in relation to competitors and aggressive growth
strategy, partially mitigated by its solid position in certain
niches of the highly competitive battery industry.

The U.S. battery market experienced good growth, averaging in
the mid-to-high single-digit range, for many of the last several
years. However, growth of branded products moderated in 2001,
and in certain categories, declined due to the slowdown in
demand for the computer, electronic and telecommunication
sectors, lower consumer spending at retail, and a focus on
better inventory management by retailers.

Two financially stronger competitors, Gillette (Duracell) and
Energizer (Energizer, Eveready), dominate the U.S. battery
industry. However, Rayovac maintains leading market shares in
certain battery niches within the U.S. market, including hearing
aid batteries, rechargeable household batteries, and lantern
batteries. Niche products accounted for about 27% of Rayovac's
fiscal 2001 sales. The company maintains a much stronger market
share of batteries sold through mass merchants in relation to
Rayovac's share of batteries sold through all retail channels.
While Rayovac has been successful in penetrating the mass
channel with its value-priced brand strategy, competition in
this segment has increased as the growth in battery sales in the
mass channel continues to exceed the growth in other channels.
Furthermore, private-label sales by large retailers have also
been growing in significance over the past few years.

Financially, lower debt leverage from the repayment of $65
million in senior subordinated notes in June 2001 will result in
a strengthening of operating lease-adjusted credit protection
measures in fiscal 2002 (year ending September 30). However,
given the partial year benefit of lower debt servicing costs in
fiscal 2001 and the decline in operating profits, fiscal 2001
EBITDA interest coverage remained unchanged year over year at
3.4 times. The reduction in debt led to the improvement in debt
to EBITDA to 2.8x in fiscal 2001 from 3.0x a year earlier.
Standard & Poor's expects the company's credit protection
measures to fluctuate from year to year given the firm's
acquisition orientation. Even so, Standard & Poor's anticipates
that acquisitions will be financed in a manner consistent with
the ratings.

The company's bank loan is rated one notch higher than the
corporate credit rating. The security interest in substantially
all of the company's assets offers reasonable prospects for full
recovery of principal. Considering the value of Rayovac's
battery business, it is anticipated that the company would
retain value as a business enterprise in the event of a
bankruptcy. Rayovac's cash flows were severely discounted to
simulate a default scenario and capitalized by an EBITDA
multiple reflective of its peer group. Under this simulated
scenario, collateral value is sufficient to fully cover the bank
facility if a payment default were to occur.

                       Outlook: Positive

Standard & Poor's expects that Rayovac's good presence with mass
merchants and in certain niche areas of the U.S. battery market
will continue to support the ratings. The ratings could be
raised over the intermediate term upon sustainable improvement
in credit protection measures, despite the firm's external
growth strategy.

SPALDING: Reaches Recapitalization Pact with 10-3/8% Noteholders
Spalding Holdings Corporation announced that it has reached an
agreement in principle with holders of more than 95% of its 10-
3/8% Senior Subordinated Notes due 2006 to exchange the notes
for other securities as part of a recapitalization of the
Company. Although the recapitalization is subject to the
negotiation and execution of definitive agreements and other
customary conditions, the Company expects that it will be
concluded over the next few months.

Jim Craigie, Spalding's President and Chief Executive Officer,
stated that:

     "Spalding's management team is very excited about the
resolution of this issue. The new capital structure will
significantly reduce the Company's cash outflow for interest
expense, which will enhance our ability to continue to drive
profitable growth behind our strong portfolio of brands.

     "The Spalding company has a long history of product
innovation in the sporting goods businesses. This includes the
recent inventions of multi-layer golf balls and sports balls
with built-in pumps, which have revolutionized these categories.
These innovations and others have been the driving force behind
our improved business results on key brands over the past two
years. The new capital structure will enable Spalding to
continue to develop and launch innovative products, which have
been the key to our successful growth.

     "Most of all, I would like to thank our customers and
suppliers for their patience and continued support during the
resolution of this issue in which some elements of the press and
some of our competitors spread unsubstantiated rumors concerning
the threat of bankruptcy and the potential sale of important

SPIKE BROADBAND: Sells All Assets to REMEC for $4 Million
REMEC, Inc. (Nasdaq: REMC), announced that it has purchased, in
a sale approved by the U.S. Bankruptcy Court, substantially all
of the assets of Spike Broadband Systems, Inc., of Nashua, New
Hampshire for cash consideration of $4 million.  Spike had been
engaged in the development, manufacture, and sale of broadband
wireless communications products and services, until it filed
for voluntary reorganization under Chapter 11 of the United
States Bankruptcy Code in November 2001.

In connection with the Spike acquisition, REMEC entered into a
contract expected to result in sales of approximately $17
million with a major European integrator for the delivery of
fixed wireless broadband systems over the next three years.  
This contract supports the implementation of broadband voice and
data services in Denmark that began in June 2001 with the
delivery of the initial systems by Spike.  REMEC will also
assist with overall deployment and network integration

Ron Ragland, REMEC Chairman and CEO, stated, "Spike's products
and technology complement our endeavors in the fixed wireless
market. This action allows REMEC to provide a more highly
integrated and cost-effective solution to our customers
worldwide.  The Spike equipment is well designed with an
outstanding reputation.  This addition is expected to broaden
REMEC's customer base and accelerate our growth in the fixed
wireless market."

REMEC is a designer and manufacturer of high frequency
subsystems used in the transmission of voice, video and data
traffic over wireless communications networks and in space and
defense electronics applications.

STATE LINE: Case Summary & Largest Unsecured Creditors
Debtor: State Line Casino
        101 Wendover Blvd
        West Wendover, NV 89883

Bankruptcy Case No.: 02-50081-gwz

Type of Business: The Company owns and operates a casino

Chapter 11 Petition Date: 01/10/2002

Court: District of Nevada (Reno)

Judge: Gregg W. Zive

Debtor's Counsel: Ron Bender, Esq.
                  Levene, Neale, Bender, Rankin & Brill LLP
                  1801 Avenue of the Stars
                  Suite 1120
                  Los Angeles, CA 90067
                  Tel: 310 229 1234
                  Fax: 310 229 1244

Estimated Assets: $10 million to $50 million

Estimated Debts: $10 million to $50 million

Debtor's Largest Unsecured Creditors:

Entity                                Claim Amount
------                                ------------
United States Playing Card Co.          $19,065

Bet Technology, Inc.                     $8,640

Shuffle Master, Inc.                     $6,237

Hanse, Barnett & Maxwell                 $5,437

Paulson Gaming Supplies                  $4,931

Xpertx, Inc.                             $4,125

PC Connections Sales of                  $3,721
Massachusetts, Inc.

No Peek 21                               $2,349

Joe's Trophies                           $1,007

V S R Lock, Inc.                           $419

Spindle Co. Inc.                           $308

Gamblers General Store, NC                 $186

Clark Security Products                    $164

Day-Timers, Inc.                           $133

Nielson's Printing Services                $119

Reno Ball Shop                              $80

Corporate Express                           $55

Butler Builders                             $28

V S R Gaming                                $22

STATIA TERMINALS: Seeks OK of Proposed Liquidation & Asset Sale
Statia Terminals Group N.V. (NASDAQ: STNV) announced that its
Board of Directors approved a distribution of $0.45 per class A
common share.

The distribution will be paid on Thursday, February 14, 2002, to
shareholders of record on Thursday, January 31, 2002. No
distribution was declared on the Company's class B subordinated
shares. Since the distribution meets the target quarterly
distribution rate stated in the Company's Articles of
Incorporation, the aggregate class A common share arrearage will
remain unchanged at $1.60 per share.

The Company also announced that its Board of Directors has fixed
the close of business on Tuesday, January 22, 2002, as the
record date in order to vote at an extraordinary meeting of
shareholders to be held as soon as permissible at which its
shareholders will be asked to approve, as previously announced
on November 13, 2001, (i) the sale of the Company's subsidiaries
(which constitute substantially all of the assets of Statia) to
Kaneb Pipe Line Operating Partnership, L.P. a subsidiary of
Kaneb Pipe Line Partners, L.P. (NYSE: KPP), (ii) an amendment to
the Company's Articles of Incorporation implementing a
distribution mechanism for the proceeds of the sale, and (iii)
the subsequent liquidation of the Company. In addition to
shareholder approval, the sale is subject to regulatory
approvals and other customary conditions. Statia expects to mail
definitive proxy materials (which will contain additional
information on the proposed transaction) to its shareholders in
the near future. The extraordinary meeting of shareholders is
currently expected to take place in late February, and if the
sale is approved, closing of the transactions would take place
within five business days thereafter.

The Company previously announced on November 13, 2001, that it
had entered into a definitive agreement under which Kaneb will
acquire the stock of the Company's three subsidiaries, including
Statia Terminals International N.V., for a cash purchase price
of approximately $300 million, plus a portion of the remaining
cash on hand less approximately $107 million of debt owed by the

Statia provides storage, blending, processing, and other marine
terminaling services for crude oil, refined products, and other
bulk liquids to crude oil producers, integrated oil companies,
traders, refiners, petrochemical companies, and others at its
facilities located on the island of St. Eustatius, Netherlands
Antilles, and at Point Tupper, Nova Scotia, Canada. The
Company's facilities, with their deep-water ports, can
accommodate substantially all of the world's largest oil
tankers. In connection with its terminaling activities, Statia
also provides value-added services, including delivery of bunker
fuels to vessels, other petroleum product sales, emergency and
spill response services, and ship services. The Company is
headquartered in Curacao, Netherlands Antilles, and maintains an
administrative office in Deerfield Beach, Florida.

SUN HEALTHCARE: Secures Approval to Divest SunBridge Care Center
Sun Healthcare Group, Inc., and its debtor-affiliates sought and
obtained the Court's authority to reject a real property lease
and related Medicare and Medicaid provider agreements relating
to a skilled nursing facility commonly known as SunBridge Care
Center located in 18811 Florida Street in Huntington Beach,

Michael J. Merchant, Esq., at Richards, Layton & Finger PA, in
Wilmington, Delaware, persuaded Judge Walrath that rejection of
the Lease and the Provider Agreements is absolutely necessary
considering the Debtors have expended over $2,000,000 in rental
payments under the lease during the post-petition period.
"During 2001, the Debtors incurred approximately $758,447 in
negative EBITDA at the Facility, annualized based on year to
date performance on October 31, 2001," Mr. Merchant reports.

The Court also approves the implementation procedures that
govern the disposition of the Facility and the treatment of
claims relating to it.  It includes an opt-out mechanism, which
enables the Debtors to transfer the Facility as a going concern,
upon the consent of the Landlord, Mr. Merchant relates.  The
implementation procedures also provide that the rejection of the
Provider Agreements become effective as of the actual date of
divestiture of the Facility, Mr. Merchant adds.

The Implementation Procedures are:

  (a) The Facility will be subject to divestiture in accordance
      with the applicable state law that sets forth the
      Transition Procedures for the Facility;

  (b) The rejection of the Lease and Provider Agreements with
      respect to the Facility shall be effective of the date of
      the completion of the state-law Transition Process;

  (c) In the absence of an agreement to the contrary, the
      Landlord and the relevant Medicaid agency shall have 30
      days from the Transition Date to submit a proof of claim
      for rejection damages; and

  (d) In the event that during the state-law Transition Process
      the Debtors and the Landlord agree on the transfer of the
      Facility as a going concern, the Debtors shall be entitled
      to opt-out the Transition Procedures subject to applicable
      state law, in which the Debtors shall proceed with a
      consensual transfer of the Facility as a going concern to
      the Landlord or another new operator. (Sun Healthcare
      Bankruptcy News, Issue No. 30; Bankruptcy Creditors'   
      Service, Inc., 609/392-0900)   

SWEET FACTORY: Wants Lease Decision Deadline Moved to April 15
Sweet Factory Group Inc., and its debtor-affiliates request the
U.S. Bankruptcy Court for the District of Delaware further
extend their time period to decide whether to assume or reject
unexpired leases of nonresidential real property. The Debtors
want their Lease Decision Period to run through April 15, 2002.

The Debtors have down-sized their business a great deal. On the
Petition Date, the Debtors filed a motion seeking to reject
approximately 90 of their real property leases.

While the Debtors have previously rejected certain of their
unexpired non-residential real property leases, they presently
are not in a position to decide which of the remaining Leases
should be assumed or rejected because of the holiday sales. The
Christmas holiday season is one of the busiest sales period of
the year for the Debtors. The Debtors will not be able to
compile and analyze operational and financial data arising from
Christmas sales at this moment.

Sweet Factory Group Inc. filed for chapter 11 protection on
November 15, 2001. Laura Davis Jones at Pachulski, Stang, Ziehl
Young & Jones represents the Debtors in their restructuring

TAKE TWO INTERACTIVE: Nasdaq Halts Trading & Requests More Info
The Nasdaq Stock Market(R) announced that the trading halt
status in Take Two Interactive Software, Inc., (Nasdaq: TTWO)
was changed to "additional information requested" from the
company. Trading in the company was halted Tuesday at 4:09 p.m.
Eastern Time for News Pending at a last sale price of $18.56.
Trading will remain halted until Take Two Interactive Software,
Inc., has fully satisfied Nasdaq's request for additional

For news and additional information about the company, please
contact the company directly or check under the company's symbol
using InfoQuotes(SM) on the Nasdaq Web site.

For more information about The Nasdaq Stock Market, visit the
Nasdaq Web site at http://www.nasdaq.comor the Nasdaq  
Newsroom(SM) at

US AIRWAYS: S&P Maintains Watch Negative Due to Heavy Losses
US Airways Group (CCC+/Watch Neg/--), parent of US Airways Inc.
(CCC+/Watch Neg/--), reported a heavy $552 million net loss
before federal cash grants and other special items ($1.17
billion net loss as reported) in the fourth quarter of 2001.
Ratings remain on CreditWatch with negative implications, where
they were placed September 13, 2001 (along with those of other
rated U.S. airlines).

The fourth-quarter 2001 losses, and the full-year 2001 net loss
of $1.17 billion before special items ($1.97 billion net loss,
including special items--principally a $309 million credit for
federal cash grants, more than offset by $810 million of asset
impairment charges) are worse than the results for other large
U.S. airlines that have reported thus far.

Management cites US Airways' concentration in East Coast markets
(hard hit by the events of September 11, 2001), the closure and
gradual reopening of Washington's Reagan National Airport (where
US Airways operates 5% of its flight capacity), an unusually
large proportion of short routes competitive with automobile and
train travel, and continuing loss of passengers to regional jets
of competitors.

US Airways has undertaken significant operational changes since
September 11, 2001, including retirement of aircraft and
reduction in staffing and flying to meet reduced demand. The
company is seeking permission needed from its unionized pilots
to allow deployment of more regional jets flown by owned or
outside regional partners, but has not sought broad pay or
productivity concessions. Rather, management is seeking to link
US Airways into the route network of another airline or airlines
to capture potential revenue synergies. With the rejection of an
earlier planned acquisition by UAL Corp., sale of US Airways to
another U.S. airline appears unlikely in the near term.
Alternatives, not specified by management, might include code
sharing with another large U.S. airline, with a major European
airline, or with a global alliance. Acquisition by a non-U.S.
airline is barred under current U.S. law.

US Airways had $1.08 billion of cash at December 31, 2001,
adequate for near-term liquidity needs, and states no current
intention to apply for a federal loan guaranty. Management
expects to lose about $3 million daily from operations in the
first quarter of 2002, but turn cash positive in the second

DebtTraders reports that US Airways Inc.'s 9.820% bonds due 2013
(USAIR2) are trading in the low 80s. For real-time bond pricing,

UBRANDIT.COM: Withdraws Request for Hearing Before AMEX Panel
------------------------------------------------------------- (AMEX:UBI) announced that it has sent a letter
dated Jan. 18, 2002, to the American Stock Exchange, its
Associate General Counsel and Members of the Amex Committee on

The text of the letters stated:

     " hereby withdraws its appeal from the notice
of intent to delist the company from the Exchange. The hearing
is scheduled for Jan. 29, 2002. The company will not provide
additional information or documentation prior to the scheduled

The company made its withdrawal because current economic
conditions have inhibited the company's ability to raise capital
to complete certain technologies under development, thus
delaying anticipated profitable licensing agreements the company
had hoped to close before the hearing date.

In addition, the company acknowledges that its audited financial
statements for fiscal year ending Sept. 30, 2001, have not been
completed or filed. The financial statements were due Dec. 30,
2001, with an extension to Jan. 15, 2002. The company's
statements are now delinquent.

Due to circumstances surrounding the transition from the
company's former independent auditor to its recently appointed
independent auditor, the statements cannot yet be completed. The
company is not yet able to set a completion date, but completion
will not be accomplished until the company is able to pay
certain service costs and fees associated with prior audits and
the transition.

The company anticipates that audited financial statements will
continue to show losses. The company has endeavored to reduce
expenditures, reduce operating losses by subleasing space and
reducing personnel to a minimum, raise capital and attempt to
attract distribution and other contracts.

Negotiations and other efforts continue. Technology development
has been continuing and diligent but potential investors and
licensees have asked that certain additional developmental steps
be completed before funding agreements can be closed."

In addition, the company has received notice that its outside
directors J. Truher, C. Wilson and D. Hancock have resigned.

The company provides co-branded Internet content, ISP
applications and other revenue producing applications to
businesses and media groups.

In addition, the company, through its subsidiary Mindtronics
Corp., does leading edge technology development and licensing
and specializes in hardware, software and product design for a
variety of high-tech applications, including text, audio, video
and still image compression search and storage.

VINTAGE PETROLEUM: S&P Will Keep Watch on Low-B Ratings
Standard & Poor's placed the ratings on Vintage Petroleum Inc.
on CreditWatch with negative implications. The rating action
stems from ongoing concerns over political and economic
uncertainty in Argentina. Vintage expects 40% of its 2002 total
oil and gas production from Argentina.

Foreign oil companies operating in Argentina are facing the
possibility of the government's imposition of a proposed five-
year tax on oil and gas exports that is likely to be about 20%
or more. This tax would be in addition to the current 12%
royalty payments and 35% earnings tax. To avert such a
burdensome tax, foreign oil companies in Argentina are
attempting to negotiate an alternative plan that could include a
loan from the producers to the government or a one-time cash
payment to the government to offset the benefits these producers
will receive from a recent 30% devaluation of the local

While Vintage will most certainly suffer negative financial
consequences as a result of the current crisis, Standard &
Poor's is unable to assess the ultimate effect until a final
plan regarding the Argentine government's treatment of foreign
oil and gas companies is announced. Resolution of the
CreditWatch rating will occur once this plan is announced and
Standard & Poor's is able to fully assess its implications for

              Ratings Placed on CreditWatch Negative

     Vintage Petroleum Inc.
       Corporate credit rating            BB+
       Subordinated debt rating           BB-

WHX CORPORATION: Fire Razes Sumco's Plating Facility
WHX Corporation (NYSE: WHX) announced that a fire occurred at
Handy & Harman's Sumco Inc., plating facility, located in
Indianapolis, Indiana on Sunday evening, January 20, 2002, and
was extinguished on Monday morning, January 21, 2002.  Handy &
Harman is a wholly owned subsidiary of WHX. Handy & Harman
reported that to its knowledge no injuries occurred as a
consequence of the fire.

Handy & Harman is in the process of determining the extent of
the damage to the facility.  Although it believes that the
damage is extensive and the facility will not be operational for
a period of time not yet determined, Handy & Harman is committed
to commencing repairs and to resuming operations at the facility
as soon as is reasonably possible.  Handy & Harman is also
monitoring the effects of the fire on the community where the
plant is located.  Handy & Harman has business interruption and
casualty insurance.  At the present time, the cause of the fire
is not yet known.

WHX is a holding company that has been structured to invest in
and/or acquire a diverse group of businesses on a decentralized
basis. WHX's primary businesses currently are: Handy & Harman, a
diversified manufacturing company whose strategic business
segments encompass, among others, specialty wire, tubing, and
fasteners, and precious metals plating and fabrication; and
Unimast Incorporated, a leading manufacturer of steel framing,
vinyl trim and other products for commercial and residential
construction. WHX's other business consists of the WPC Group, a
vertically integrated manufacturer of value-added and flat
rolled steel products, which filed a petition for relief under
Chapter 11 of the Bankruptcy Code on November 16, 2000.

WHEELING-PITTSBURGH: Lease Decision Period Extended to June 7
Judge Bodoh extended Wheeling-Pittsburgh Steel Company's time
within which to decide whether it should assume, assume and
assign, or reject its unexpired leases and contracts through
June 7, 2002.

XEIKON N.V.: Board Pursues Sale of Assets to Begin Liquidation
Xeikon N.V. (Nasdaq: XEIK) announced that the Board of Directors
together with the Officers that were appointed by the Antwerp
Court of Commerce, reviewed the various initiatives that to date
have been deployed to secure the continuity of the Company and
of its operations.

The Board concluded that, in spite of all the efforts that have
been made, it does not appear feasible to secure new capital for
the Company within the timeframe of the provisional creditor
protection. By contrast, several parties have shown an interest
in acquiring all or part of the Company's activities and assets.

In these circumstances, the Board considered that the interests
of the Company are best served by arranging for the sale of its
activities and assets to one or more parties, pursuant to
applicable Belgian legislation. The Company has received a
number of non-binding offers, which it expects to be finalized
in the near term.

The Board foresees that, upon completion of the transfer of the
activities and sale of assets, the Company will be put into
liquidation and the purchase price will be applied first towards
the repayment of its outstanding debts. Based on the analysis of
the current proposals, the Company does not expect that there
will be any remaining funds available in the liquidation for its

Xeikon also announced that Nasdaq has informed the Company that
it will seek to delist the Company's securities from the Nasdaq
National Market System. Nasdaq has imposed a trading halt on the
Company's securities since its voluntary filing for creditor
protection on November 9, 2001.

Xeikon N.V. develops, produces and markets commercial digital
color and black and white printing systems and related
consumables specifically designed to meet the quality, speed,
reliability, cost, variable content and on-demand requirements
of the global digital printing market. Additional information on
the Company can be found at

* H. Jason Gold Sees More Retail Bankruptcy on the Horizon
Tuesday's announcement of the Chapter 11 filing of Kmart may be
just the first of many attempted reorganizations by retail
chains large and small.  "Retailers do the bulk of their
business just before the end of year holidays.  By mid-to-late
January they have usually collected all the revenue from those
sales.  But at the same time, the bills start coming due,"
commented H. Jason Gold, Managing Principal of Gold Morrison &
Laughlin PC, the Tysons Corner, Virginia bankruptcy, restructure
and insolvency law firm.  "There are indications that those
retail firms that were struggling in the slowed economy and that
were further impacted by the events of September 11th will be
failing.  There has been a high level of activity among
reorganization professionals who are trying to keep up with all
the work," he added.

Consumers should be particularly vigilant.  "For example, don't
leave cash deposits on special ordered goods.  It's always
better to use a credit card for this purpose.  Many credit card
companies will refund your deposit if the store files bankruptcy
and fails to honor the order," added Gold.

Gold, whose firm is involved in most of the large cases in the
district is also Chapter 7 Trustee for Computer Learning
Centers, Inc., the largest and most complex Chapter 7 case ever
commenced in the region.

Gold Morrison & Laughlin PC is the Washington, D.C. metropolitan
area's leading independent bankruptcy and financial restructure
law firm and represents lenders and borrowers in financial
restructures, bankruptcy proceedings, out-of-court workouts,
credit recovery litigation and foreclosures.  The firm
represents many area financial institutions and has
participated on behalf of clients, in virtually all the major
reorganization cases undertaken in the jurisdictions of the
Washington metro area.  For further information contact H. Jason
Gold at 703-836-7004.  E-mail:

* DebtTraders' Real-Time Bond Pricing

Issuer               Coupon   Maturity   Bid - Ask Weekly change
------               ------   --------   --------- -------------
Crown Cork & Seal     7.125%  due 2002    75 - 77       -1
Federal-Mogul         7.5%    due 2004    15 - 17       +1
Finova Group          7.5%    due 2009  37.5 - 38.5     -2
Freeport-McMoran      7.5%    due 2006    75 - 78       +4
Global Crossing Hldgs 9.5%    due 2009     9 - 11     -2.5
Globalstar            11.375% due 2004     8 - 10       +1
Levi Strauss & Co     11.625% due 2008    96 - 98       +8
Lucent Technologies   6.45%   due 2029    68 - 70       -2
Polaroid Corporation  6.75%   due 2002     9 - 11        0
Terra Industries      10.5%   due 2005    80 - 83       +3
Westpoint Stevens     7.875%  due 2005    27 - 30       -6
Xerox Corporation     8.0%    due 2027    56 - 58     -1.5

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


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 ***