TCR_Public/960802.MBX BANKRUPTCY CREDITORS' SERVICE, INC.


Bankruptcy and Troubled Company News


August 2, 1996



  1. MIDCOM Communications announces preliminary 2nd quarter 1996 results...
  2. CENTOCOR REPORTS SECOND QUARTER 1996 FINANCIAL RESULTS
  3. KERR REPORTS SECOND QUARTER 1996 RESULTS
  4. NIAGARA MOHAWK RATINGS PLACED ON FITCHALERT





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MIDCOM Communications Inc. announces preliminary second quarter 1996 results; company also announces letter of intent with AT&T


        


            SEATTLE, WA  --  Aug. 2, 1996  --  MIDCOM Communications
        Inc. (NASDAQ:MCCI) today announced preliminary financial results for
        the second quarter ended June 30, 1996.  
        


            The company also announced that it has executed a letter of
        intent with AT&T to negotiate a new contract to replace existing
        agreements.  The new contract is expected to afford MIDCOM more
        favorable pricing and other terms for services purchased from AT&T.
        


            The company expects to report revenue for the second quarter in
        the range of $40.0 to $42.0 million, negative EBITDA (defined as
        operating income plus depreciation, amortization, loss of impairment
        of assets and restructuring charges) in the range of $4.0 to $4.5
        million and a net loss of approximately $45.0 million, including a
        write-down of approximately $19.0 million, primarily relating to
        intangible assets.  
        


            The net loss also includes a charge in the amount of $8.8
        million for payments to be made in connection with the satisfaction
        of certain obligations under an agreement with a major supplier.  
        


            The expected decline in second quarter revenue, from $53.0
        million in the first quarter of 1996, is primarily attributable to
        the loss of a major reseller in March 1996 and customer attrition
        principally with respect to the company's acquired customer bases.
        Final second quarter results are expected to be announced prior to
        August 14, 1996.
        


            In addition, the company expects that, over the next nine to 12
        months, revenue will decline as a result of customer attrition and
        other factors.  Profitability is also expected to be adversely
        affected in the near term as a result of substantial increases in
        the company's investment in sales, marketing, customer support,
        systems development, capital expenditures and other factors.
        


            The terms of the letter of intent with AT&T are subject to
        negotiation and execution of a mutually acceptable definitive
        agreement.
        


            Founded in 1989, MIDCOM Communications Inc. provides a broad
        range of telecommunications services to small and medium-sized
        businesses nationwide.  The company has headquarters in Seattle and
        has regional offices throughout the nation.  MIDCOM currently
        invoices approximately 125,000 customer locations per month.  
        


        CONTACT:  MIDCOM Communications Inc., Seattle
                  Robert Chamberlain-CFO, 206/628-5174
                  or
                  Teresa Stackpole-Dir., 206/628-6115



CENTOCOR REPORTS SECOND QUARTER 1996 FINANCIAL RESULTS


        


            MALVERN, Pa., Aug. 1, 1996  --  Centocor, Inc. (Nasdaq:
        CNTO) announced today its second quarter financial results, for the
        period ending June 30, 1996.  For the quarter, Centocor achieved
        revenues of $30.6 million, comprising $20.1 million in
        Pharmaceutical revenues and $10.5 million in Diagnostic revenues.
        The company reported a loss of $4.3 million, or $0.06 per share,
        compared to a loss for the second quarter of last year of $17.3
        million, or $0.30 per share.
        


            Cash balances at the end of the second quarter totaled $162.3
        million. This compares with $251.5 million at the end of the first
        quarter of 1996, which reflected the company's public offering of
        four million additional shares of Common Stock during that quarter.
        Total debt was reduced by $168.6 million, or 69% in the second
        quarter, and now stands at $77.1 million.  The  7-1/4% Convertible
        Notes were eliminated, as well as $70.2 million of the 6-3/4%
        Convertible Debentures.  Total cash usage was $9.7 million for the
        quarter, excluding financing and debt reduction, versus $19.3
        million in the same period a year ago.
        


            "Centocor is on track to reach its goal of profitability in the
        final quarter of this year.  Our financial and operating performance
        this quarter demonstrates our corporate commitment to improving
        shareholder value," said David P. Holveck, President and Chief
        Executive Officer of Centocor.  "Second quarter revenues show market
        share growth in the adoption of ReoPro(TM), which is becoming the
        standard of care in high-risk angioplasty, in a market where
        economic value plays an increasing role in managing patient care."
        


        Pharmaceutical Update:


        ReoPro (anti-platelet for high-risk angioplasty)


        CenTNF(TM)(anti-inflammatory)

        Diagnostics Update:

            Medical Advertising News has named Centocor the "Best
        Biotechnology Company" in its 1995 Annual Report of Biotechnology
        Companies.  MedAd News, a monthly business newsmagazine targeted for
        the pharmaceutical business and marketing community, said "after a
        complete restructuring and a new business strategy, the company is
        on its way to commercialization and profitability."
        


            Centocor is a biotechnology company that develops therapeutic
        and diagnostic human health care products for cardiovascular,
        autoimmune and infectious diseases, and cancer.  The company
        concentrates on research and development, manufacturing and market
        development, with a primary technological focus on monoclonal
        antibodies, with additional programs in genetic vaccines and
        peptides.
        


            Any statements released by Centocor that are forward looking are
        made pursuant to the safe harbor provisions of the Private
        Securities Litigation Reform Act of 1995.  Investors are cautioned
        that forward looking statements involve risks and uncertainties
        which may affect the Company's business and prospects, including
        economic, competitive, governmental, technological and other factors
        discussed in the Company's filings with the Securities and Exchange
        Commission.
        


            On the Internet: Recent press releases can be found on
        Centocor's site on the World Wide Web.
        


        Point your browser to http://www.centocor.com" target=_new>http://www.centocor.com">http://www.centocor.com
        



                               CENTOCOR, INC.
                           SUMMARY OF OPERATIONS

                 (in thousands except for per share amounts)
                                (Unaudited)
        
                              Three months ended   Six months ended
                                 6 1/430 1/496    6 1/430 1/495   6 1/430
        1/496   6 1/430 1/495
        
          Revenues:
             Sales           $29,526    $17,754   $51,236   $37,073
             Contracts         1,060      3,000     1,232     7,676
        
           Total Revenues     30,586     20,754    52,468    44,749
        
          Costs and expenses  35,732     32,199    66,237    61,819
          Other income
           (expense), net        118     (2,114)     (957)   (4,731)
        
          Loss before special
           items             ($5,028)  ($13,559) ($14,726) ($21,801)
        
          Loss per share before
           special items      ($0.07)    ($0.23)   ($0.23)   ($0.38)
        
          Special items:
           Net gain on extinguishment
            of debt(1)           705        -         705       -
           Litigation charge(1)  -       (3,750)      -      (3,750)
        
          Loss               ($4,323)  ($17,309) ($14,021) ($25,551)
        
          Loss per share      ($0.06)    ($0.30)   ($0.22)   ($0.44)
        
          Weighted average
           number of shares
           outstanding        67,645     58,258    63,901    58,014
        
            (1) The extraordinary net gain for the three and six months
        ended June 30, 1996 pertains to the repurchase of the Company's 6-
        3/4% Convertible Debentures net of debt issuance costs, partially
        offset by debt issuance costs on the conversion of the Company's 7-
        1/4% Convertible Notes.  Special charges for the three and six
        months ended June 30, 1995 represent a charge relating to a
        litigation settlement.
        

          SUMMARY OF CONSOLIDATED QUARTERLY STATEMENTS OF OPERATIONS
                 (Amounts in thousands except per share data)
                               (Unaudited)
        
            For three months ending: 3 1/431 1/495  6 1/430 1/495  9 1/430
        1/495  12 1/431 1/495
        
         REVENUES:
          Sales                  19,319   17,754   15,860    12,068
          Contracts               4,676    3,000    3,295     2,944
          Total Revenues         23,995   20,754   19,155    15,012
        
         COSTS AND EXPENSES:
          Cost of sales           8,625    8,071    7,271     5,199
          Research and
           development           13,501   17,008   18,376    17,350
          Marketing,
           general and
           administrative         7,494    7,120    7,643     6,919
        
          Subtotal:              29,620   32,199   33,290    29,468
        
         OTHER INCOME (EXPENSE):
          Interest income         2,785    2,798    2,425     2,118
          Interest expense       (4,964)  (4,868)  (2,592)   (4,577)
          Other                    (438)     (44)   2,147      (869)
           Total Other           (2,617)  (2,114)   1,980    (3,328)
        
         LOSS BEFORE SPECIAL
          ITEMS:                ($8,242)($13,559)($12,155)  ($17,784)
        
         LOSS PER SHARE BEFORE
          SPECIAL ITEMS:         ($0.14)  ($0.23)  ($0.21)    ($0.30)
        
         SPECIAL ITEMS:
          Litigation charge          -   (3,750)       -         -
          Severance charge           -        -        -      (1,642)
        
         LOSS                   ($8,242)($17,309)($12,155)  ($19,426)
        
         LOSS PER SHARE          ($0.14)  ($0.30)  ($0.21)    ($0.33)
        
        WEIGHTED AVERAGE
          NUMBER OF SHARES
          OUTSTANDING            57,769   58,258   58,347     58,451
        

          SUMMARY OF CONSOLIDATED QUARTERLY STATEMENTS OF OPERATIONS
                 (Amounts in thousands except per share data)
                                 (Unaudited)
        
                                   YTD
                                 THROUGH
                                12 1/431 1/495   3 1/431 1/496   6 1/430 1/496
         REVENUES:
          Sales                   65,001     21,710    29,526
          Contracts               13,915        172     1,060
          Total Revenues:         78,916     21,882    30,586
        
         COSTS AND EXPENSES:
          Cost of sales           29,166     10,554    14,554
          Research and
           development            66,235     12,548    13,296
          Marketing,
           general and
           administrative         29,176      7,403     7,882
        
          Subtotal:              124,577     30,505    35,732
        
          OTHER INCOME (EXPENSE):
          Interest income         10,126      2,265     3,222
          Interest expense       (17,001)    (3,267)   (2,464)
          Other                      796        (73)     (640)
            Total Other           (6,079)    (1,075)      118
        
         LOSS BEFORE SPECIAL
          ITEMS                 ($51,740)   ($9,698)  ($5,028)
        
         LOSS PER SHARE BEFORE
          SPECIAL ITEMS           ($0.89)    ($0.16)   ($0.07)
        
         SPECIAL ITEMS:
          Net gain on extinguishment
           of debt                   -          -        705
          Litigation charge       (3,750)       -        -
          Severance charge        (1,642)       -        -
        
         LOSS                   ($57,132)   ($9,698) ($4,323)
        
         LOSS PER SHARE           ($0.98)    ($0.16)  ($0.06)
        
         WEIGHTED AVERAGE
          NUMBER OF SHARES
          OUTSTANDING             58,207     59,944   67,645
        

              SUMMARY OF CONSOLIDATED BALANCE SHEET INFORMATION
                (Amounts in thousands except per share data)
                               (Unaudited)
        
                            3 1/431 1/495  6 1/430 1/495  9 1/430 1/495 12
        1/431 1/495  3 1/431 1/496  6 1/430 1/496
        
        SELECTED BALANCE
         SHEET CAPTION:
        CASH & CASH
        INVESTMENTS     179,110  159,834  145,838  131,437  251,491  162,346
        EQUITY
        INVESTMENTS       2,834    3,187    6,140    5,769    5,811    7,580
        NET FIXED ASSETS 71,985   70,540   68,492   68,137   65,232   63,589
        OTHER ASSETS     64,158   64,567   59,602   54,941   63,150  103,120
        TOTAL ASSETS    318,087  298,128  280,072  260,284  385,684  336,635
        DEBT            267,722  259,979  258,693  257,429  245,718   77,098
        OTHER
         LIABILITIES     36,715   39,847   33,479   32,251   31,271   58,280
        TOTAL
        LIABILITIES     304,437  299,826  292,172  289,680  276,989  135,378
        SHAREHOLDERS'
        EQUITY           13,650   (1,698) (12,100) (29,396) 108,695  201,257
        TOTAL LIABILITIES
         AND SHAREHOLDERS'
         EQUITY         318,087  298,128  280,072  260,284  385,684  336,635
        COMMON STOCK
         OUTSTANDING     58,111   58,014   58,364   58,538   63,952   67,693
        BOOK VALUE
         PER SHARE        $0.23   ($0.03)  ($0.21)  ($0.50)   $1.70    $2.97
        

CONTACT:  Investors, Madeline Hopkins, 610-651-6122, or Paul
        Wulfing, 610-889-4422; or Media, Bruce Carroll, 610-651-6214, all of
        Centocor


KERR REPORTS SECOND QUARTER 1996 RESULTS


        


            LANCASTER, Pa., Aug. 2, 1996  --  Kerr Group, Inc. (NYSE:
        KGM) today reported a loss from continuing operations before unusual
        items of $579,000 or $0.15 per common share for the quarter ended
        June 30, 1996, compared to a loss from continuing operations of
        $943,000 or $0.25 per common share for the quarter ended June 30,
        1995.  Net sales from continuing operations increased to $27,368,000
        in the second quarter of 1996 from $26,189,000 in the same period in
        1995 primarily due to higher sales of prescription packaging
        products and child-resistant closures.  The Company has restated its
        results to present as discontinued operations the Company's Consumer
        Products Business, which was sold in March 1996.
        


            D. Gordon Strickland, President and Chief Executive Officer,
        said the improvement in results from continuing operations before
        unusual items in the second quarter of 1996, as compared to the
        second quarter of 1995, was primarily due to higher gross profit as
        a result of increased sales and lower costs resulting from the
        restructuring of the Company.  In addition, the Company did not
        declare a dividend on its Class B, Series D Preferred Stock during
        the second quarter of 1996. The cumulative amount of undeclared
        dividends as of June 30, 1996 is $207,000.
        


            Mr. Strickland also noted that the loss from continuing
        operations before unusual items in the second quarter of 1996 of
        $579,000 was substantially less than the $3,374,000 loss from
        continuing operations before unusual items in the first quarter of
        1996.  He said the reduction in the amount of the loss was primarily
        due to improved efficiency as a result of increased production, a
        more profitable sales mix, higher net sales and lower costs
        resulting from the restructuring of the Company.
        


            After unusual items, the Company reported a loss from continuing
        operations of $1,120,000 or $0.28 per common share for the quarter
        ended June 30, 1996, compared to a loss from continuing operations
        of $943,000 or $0.25 per common share for the quarter ended June 30,
        1995.  The loss from continuing operations for the quarter ended
        June 30, 1995 includes preferred stock dividends of $207,000.
        


            During the second quarter of 1996, the Company incurred an
        unusual pretax loss of $656,000 ($394,000 after-tax or $0.10 per
        common share) for restructuring costs primarily related to
        relocation of personnel and equipment.  The Company expects to incur
        an additional $1,800,000 ($1,080,000 after-tax or $0.27 per common
        share) for restructuring costs during the remainder of 1996 and
        early 1997.  Accounting rules require these costs to be expensed as
        incurred.
        


            During the second quarter of 1996, the Company also incurred
        unusual expenses of $245,000 ($147,000 after-tax or $0.04 per common
        share) to reimburse its unsecured lenders for professional fees
        incurred in connection with the Company obtaining waivers of certain
        covenants and extension of the maturity date of a $5,982,000
        unsecured Note.
        


            The Company had a loss from continuing operations before unusual
        items for the six months ended June 30, 1996 of $3,952,000 or $1.00
        per common share compared to a loss from continuing operations of
        $1,525,000 or $0.41 per common share for the six months ended June
        30, 1995.  The increased loss was primarily due to 1995 cost
        increases, increased reserves for customer rebates and inventory
        obsolescence, and reduced production.
        


            Net sales for the six months ended June 30, 1996 were
        $52,464,000 compared to $53,551,000 in the year ago period.
        


            During the first quarter of 1996, the Company recorded an
        unusual loss of $7,500,000 ($4,500,000 after-tax or $1.14 per common
        share) for the expected costs associated with the restructuring of
        the Company which included moving the corporate headquarters from
        Los Angeles, California to Lancaster, Pennsylvania and the
        relocation of the wide mouth jar operations from Santa Fe Springs,
        California to the Company's existing manufacturing facility in
        Bowling Green, Kentucky. The pre-tax loss consisted of reserves for
        i) severance, workers' compensation and insurance continuation costs
        of $3,000,000, ii) costs associated with subleasing the two
        facilities of $2,300,000, iii) asset retirements of $1,600,000 and
        iv) other costs of $600,000.
        


            The relocation of the Corporate headquarters has been completed
        and the relocation of the wide mouth jar manufacturing operations is
        progressing.  The restructuring is expected to result in annualized
        pre- tax cost savings of approximately $6,500,000 primarily from
        reduced employment costs, lease costs, office expenses,
        manufacturing overhead and freight.  These cost savings are expected
        to be substantially realized in 1997.
        


            The Company obtained an extension of waivers of certain
        financial covenants through August 31, 1996 from the lenders under
        the Senior Notes, the lender under a $5,982,000 unsecured Note and
        the purchaser under the Receivable Agreement, and an extension of
        the maturity date of the unsecured Note to August 31, 1996.  The
        Company has agreed to prepay to the lenders, by August 14, 1996,
        $500,000 in aggregate amount of the outstanding principal of the
        Senior Notes and Note.  There can be no assurance that the Lenders
        will agree to further waivers or extensions of the Note.
        


            Kerr, headquartered in Lancaster, Pennsylvania, is a major
        producer of plastic packaging products.

        

                                KERR GROUP, INC.
               Consolidated Statements of Earnings (Loss) for the
            Three Months and Six Months Ended June 30, 1996 and 1995
                                 (In Thousands)
        
                                   Three Months            Six Months
                                   Ended June 30,        Ended June 30,
                                  1996       1995        1996        1995
                                    (Unaudited)             (Unaudited)
        
        Net sales               $27,368     $26,189    $52,464      $53,551
        Cost of sales            21,297      20,493     44,026       41,522
        Gross profit              6,071       5,696      8,438       12,029
        
        Selling, warehouse, general and
         administrative expense   5,915       5,788     12,299       11,674
        Loss on restructuring (1)     0           0      7,500            0
        Other costs associated
         with restructuring (2)     656           0        656            0
        Financing costs             245           0        245            0
        Interest expense          1,212       1,192      2,571        2,321
        Interest and other income   (90)        (39)      (190)         (85)
           Loss from continuing operations
            before income taxes  (1,867)     (1,245)   (14,643)      (1,881)
        
        Benefit for income taxes   (747)       (509)    (5,857)        (770)
           Loss from continuing
            operations          $(1,120)    $  (736)   $(8,786)     $(1,111)
        
        Discontinued Operations:(3)
         Gain on sale of
          discontinued operations (4) 0           0      1,564            0
         Earnings (loss) from
          discontinued operations     0         451       (133)         439
           Net earnings related to
             discontinued operations  0         451      1,431          439
           Net loss              (1,120)       (285)    (7,355)        (672)
        
        Preferred stock dividends (5) 0         207        207          414
        
          Net loss applicable to
           common stockholders  $(1,120)   $   (492)   $(7,562)     $(1,086)
        
          Net earnings (loss) per common share,
           primary and fully diluted: (5) (6)
             From continuing
              operations       $  (0.28)   $  (0.25)  $  (2.28)     $ (0.41)
             From discontinued
              operations (3)        .00         .12        .36          .12
               Net loss        $  (0.28)   $  (0.13)  $  (1.92)     $ (0.29)
        
            (1) During the first quarter of 1996, the Company recorded an
        unusual loss of $7,500,000 ($4,500,000 after-tax or $1.14 per common
        share) for the expected costs associated with the restructuring of
        the Company which included moving the corporate headquarters from
        Los Angeles, California to Lancaster, Pennsylvania and the
        relocation of the wide mouth jar operations from Santa Fe Springs,
        California to Bowling Green, Kentucky.  The pre-tax loss consisted
        of reserves for i) severance, workers' compensation and insurance
        continuation costs of $3,000,000, ii) costs associated with
        subleasing the two facilities of $2,300,000, iii) asset retirements
        of $1,600,000 and iv) other costs of $600,000.
        
            (2) During the second quarter of 1996 the Company incurred an
        unusual pretax loss of $656,000 ($394,000 after-tax or $0.10 per
        common share) for restructuring costs primarily related to
        relocation of personnel and equipment.  The Company expects to incur
        an additional $1,800,000 ($1,080,000 after-tax or $0.27 per common
        share) for restructuring costs during the remainder of 1996 and
        early 1997. Accounting rules require these costs to be expensed as
        incurred.
        
            (3) The Company sold the manufacturing assets of its Consumer
        Products Business on March 15, 1996 and, accordingly, has reflected
        the results of this discontinued business separately from continuing
        operations in the above table.  The presentation of this business as
        discontinued operations had no effect on net loss, net loss
        applicable to common stockholders and net loss per common share from
        the amounts previously reported.
        
            (4) The gain on the sale of discontinued operations has been
        reduced by $5,800,000 of reserves for i) retiree health care and
        pension expenses of $3,800,000, ii) severance and related costs of
        $1,000,000, iii) professional fees of $500,000, iv) asset
        retirements of $300,000, and v) other costs of $200,000.
        
            (5) The Company did not declare a dividend on its Class B,
        Series D Preferred Stock during the second quarter of 1996.  The
        cumulative amount of undeclared dividends as of June 30, 1996 is
        $207,000.  Under accounting rules, such dividends are not accrued
        until declared.
        
            (6) Weighted average number of common shares outstanding for the
        three months ended June 30, 1996 and 1995 were 3,933,000 and
        3,826,000, respectively.  Weighted average number of common shares
        outstanding for the six months ended June 30, 1996 and 1995 were
        3,933,000 and 3,752,000, respectively.  Fully diluted net earnings
        per common share reflect when dilutive, a) the incremental common
        shares issuable upon the assumed exercise of outstanding stock
        options, and b) the assumed conversion of the Class B, Series D
        Preferred Stock and the elimination of the related dividends.
        Antidilution occurred in the three months and six months ended June
        30, 1996 and 1995.
        
                                KERR GROUP, INC.
                  Condensed Consolidated Balance Sheets as of
                      June 30, 1996 and December 31, 1995
                                 (In Thousands)
        
                                          June 30, 1996    December 31, 1995
                                           (Unaudited)       (As Restated)
        Assets
              Cash and cash equivalents   $   4,080          $  3,904
              Receivables                     8,981             7,154
              Inventories                    15,808            17,748
              Prepaid expenses and other
               current assets                 2,562             3,106
              Current net assets related to
               discontinued operations (1)   11,987            12,847
        
                        Total current assets 43,418            44,759
        
              Property, plant and
               equipment, net                41,606            46,818
        
              Deferred income tax asset      11,981             8,057
              Goodwill and other intangibles  6,409             6,983
              Other assets                    7,436             8,026
              Non-current net assets related
               to discontinued operations (1)     0             4,854
        
                                           $110,850          $119,497
        
        Liabilities and Stockholders' Equity
              Short-term debt            $    5,982        $    6,500
              Senior debt due 1997 through 2003
               classified as current (2)     46,018            50,000
              Other current liabilities      20,465            18,597
        
                Total current liabilities    72,465            75,097
        
              Accrued pension                16,046            18,318
              Other long-term liabilities     4,477             2,175
        
              Preferred stock                 9,748             9,748
              Common equity before pension
               adjustment                    16,737            24,299
              Excess of additional pension
               liability over unrecognized
               prior service cost, net of
               tax benefits                  (8,623)          (10,140)
        
              Total stockholders' equity     17,862            23,907
        
                                           $110,850          $119,497
        
            (1) The Company sold the manufacturing assets of its Consumer
        Products Business on March 15, 1996 and, accordingly, has reflected
        the net assets and liabilities of this discontinued business
        separately in the above table.
        
            (2) The Company's outstanding senior debt due 1997 through 2003
        was classified as a current liability because the Company was in
        default of certain financial covenants for which the Company had
        received waivers only through August 31, 1996.
        

CONTACT:  Geoffrey A. Whynot, Vice President, Finance and Chief
        Financial Officer of Kerr, 717-390-8439


NIAGARA MOHAWK RATINGS PLACED ON FITCHALERT; EVOLVING TREND -- FITCH FINANCIAL WIRE


        


            NEW YORK, Aug. 2, 1996  --  Fitch Investors Service has
        placed Niagara Mohawk Power Co.'s (NMK) 'BB' rated outstanding first
        mortgage bonds and secured pollution control bonds and 'B+' rated
        preferred stock on FitchAlert status with evolving implications,
        following the company's announced offer to buy out and terminate 44
        above-market power purchase contracts with independent power
        producers (IPPs).  The credit trend formerly was 'declining.'
        FitchAlert denotes that a change in ratings is likely and the
        evolving status indicates that ratings may be either raised or
        lowered depending on the outcome of events within the next six-to-12
        months.
        


            The buyout proposal is part of a plan that would permit NMK to
        reduce its power costs, stabilize its financial condition and
        restructure the company along lines consistent with New York Public
        Service Commission (PSC) policies, with favorable implications for
        NMK's ratings.  However, the proposal is dependent upon its
        acceptance by 19 independent power project developers and their fuel
        suppliers, approval of a multi-year rate stabilization plan by the
        PSC and other regulatory approvals.  In the event that some or all
        of the IPPs do not accept the buyout proposal, NMK may have to
        resort to bankruptcy proceedings to address its economic dilemma.
        The possibility of a Niagara Mohawk bankruptcy filing is the primary
        incentive for the IPPs to come to terms with the company.  A second
        incentive is the possibility that the PSC will bring increased
        pressure to bear upon the power producers; for example, the
        commission could reinstate contractual provisions permitting NMK to
        curtail power deliveries under the contracts.
        


            According to the company, the 44 contracts that would be
        terminated have a present value of around $9 billion; the amount of
        the proposed buyout payments remains confidential at this stage of
        the negotiations. The proposal contemplates that the buyout would be
        accomplished using a combination of cash and new subordinated
        debentures issued by the restructured NMK, which would retain the
        company's gas and electric distribution facilities, electric
        transmission assets and ownership interests in the Nine Mile Point 1
        and 2 nuclear units.  It would also continue to be the obligor of
        NMK's outstanding first mortgage bonds, unsecured debt and preferred
        stock.  Non-nuclear generating units would be spun off into a
        separate generating company, which would not assume any debt of NMK
        and would be capitalized predominantly with equity. Initially, NMK's
        total debt would be significantly increased by the issuance of new
        subordinated debentures, but the debt leverage could subsequently be
        reduced rapidly using increased operating cash flow resulting from
        the termination of the 44 power purchase contracts.  The financial
        outlook for a restructured NMK would be aided if the New York State
        legislature passes a pending bill permitting the securitization of
        intangible regulatory assets, such as the contract buyout payments.
        


CONTACT:  Ellen Lapson, 212-908-0504, John Watt, 212-908-0523, or
        Steve Fetter, 212-908-0555, all of Fitch