TCR_Public/970902.MBX          T R O U B L E D  C O M P A N Y  R E P O R T E R

               September 2, 1997, Vol. 1, No. 7

                        In This Issue

AIR SOUTH: Airline Files for Bankruptcy
CAMELOT MUSIC: Requests Extension of Exclusive Periods
COUNTY SEAT: Bank Takes Over as Indenture Trustee
FEDERATED D.S.: To Settle Suit Over Debt Collection
FIRST MERCHANTS: Ugly Duckling Upsets Cerberus DIP Pact

MAIDENFORM: Wants More Time to Evaluate Leases
MARVEL: Parties Continue to Negotiate to Reach Global Accord
MONTGOMERY WARD: Motion to Settle Emigres' Class Action Suit
MONTGOMERY WARD: Motion To Sell Yellow Tag Merchandise

PAYLESS: Seeks to Appoint Outside Claims Agent
RDM SPORTS: Company Considers Filing Chapter 11


AIR SOUTH: Airline Files for Bankruptcy
After three troubled years in the air, Air South, based in Columbia, SC,
filed for bankruptcy court protection from its creditors and suspended
flights indefinitely on Thursday, according to the Associated Press.

The airline, which carried about 4,000 passengers a day serving 10 cities
mostly in the Southeast with seven planes, stopped flying at 4:15 p.m. EDT
when the bankruptcy petition was filed, said marketing vice president Tom

Air South has been trying to renegotiate the terms of its leases on five of
its planes and get better terms on $12 million it borrowed from the state
to get started in mid-1994.  It also faces a proposed $162,000 Federal
Aviation Administration fine for alleged inadequate training,
record-keeping, and maintenance manuals.  President John Affeltranger said
the airline would try to fly again, but "it will be anywhere from several
weeks to a month" before a plan is in place.

The largest unsecured creditor is San Francisco-based Hambrecht & Quist,
whose cash infusions have helped keep Air South flying. The airline owes
the investment firm almost $27.5 million.  The Hambrecht & Quist Group
announced that it expects to take a charge against earnings in the
September quarter of approximately $5.5 million after tax, or approximately
$.22 per share, related to its investment in Air South, Inc.

CAMELOT MUSIC: Requests Extension of Exclusive Periods
Camelot Music, Inc., seeks a further extension of its exclusive period
during which to file a plan of reorganization through and including
November 26, 1997, and a concomitant extension of its exclusive period
during which to solicit acceptances of a plan through and including January
25, 1998.  Federal Filings, Inc., reports that the retailer has
substantially completed a stand-alone plan but is exploring, in
consultation with the official creditors' committee and others, the
possibility of a business combination with another retailer.

COUNTY SEAT: Bank Takes Over as Indenture Trustee
State Street Bank & Trust Co. becomes the successor trustee for the 9%
Junior Subordinated Exchange Debentures due 2004 issued by County Seat; the
claim is worth approximately $24 million.  The former successor trustee was
Fleet National Bank, which served until June 30, 1997, when State Street
bought the Fleet corporate trust department.

FEDERATED D.S.: To Settle Suit Over Debt Collection
Federated Department Stores, Inc., has agreed to settle a class-action
lawsuit alleging improper collection of charge-card debt from consumers in
bankruptcy, according to The Wall Street Journal.   Under the settlement,
Federated would pay about $4.5 million to plaintiffs in 36 states.  The
settlement in the lawsuit received preliminary approval from the U.S.
District Court in Boston yesterday.  If the settlement gets final approval,
Federated said it expects it will resolve two other similar class-action

FIRST MERCHANTS: Ugly Duckling Upsets Cerberus DIP Pact
Faced with competing DIP Financing proposals from Cerberus Partners L.P.
and Ugly Duckling Corp. for $10,000,000 of DIP Financing, First Merchants,
with the approval of its creditors' committee, picked Ugly Duckling's DIP
package.  Sealing the pact, and strengthening Ugly Duckling's position in
First Merchants' chapter 11 cases, the Bankruptcy Court in Dallas approved
an agreed order authorizing First Merchants to enter into the Ugly Duckling
DIP Facility.  

MAIDENFORM: Wants More Time to Evaluate Leases
Maidenform Worldwide, Inc., wants to extend the period to assume or reject
110 unexpired nonresidential real estate leases.  The current period
expires September 21, 1997.  Ninety-eight of the properties are retail
outlets and 12 are warehouse and manufacturing facilities and the company's
executive, administrative, and sales offices.

Maidenform maintains that the properties are valuable assets integral to
its continued operations.  Because of the number and national scope of the
leases, the company says it cannot make decisions until a careful analysis
of each property is completed.  It will timely perform all of its
obligations under the leases up to an including the date of confirmation of
its plans of reorganization.  Maidenform would like until this date to
decide whether to assume or reject the leases, but says some individual
leases may be decided before then.

MARVEL: Parties Continue to Negotiate to Reach Global Accord
Marvel Entertainment Group, Inc., announced Friday in a Bankruptcy court
hearing in Wilmington, Delaware, that it is unlikely that a previously
announced agreement in principle between the company, its lenders, and Toy
Biz can be reached.

Negotiations are currently under way between Marvel and its lenders
regarding alternative resolutions for the company's reorganization.  If a
settlement cannot be reached with its bank group, it may be necessary to
seek other forms of bankruptcy protection or to dismiss the chapter 11
proceeding.  The court instructed the parties to continue their settlement
dialogue, and with the consent of the lenders, permitted Marvel access to
its cash collateral through September 16, 1997.

Toy Biz, Inc. announced that a number of significant business issues remain
unresolved in its negotiations with Marvel and its senior secured lenders
concerning a the proposal to combine Marvel and Toy Biz.  Company president
and CEO Joseph Ahearn said, "Toy Biz continues to be willing to discuss the
proposed combination of Toy Biz and Marvel if it can be accomplished on
terms that are fair to Toy Biz and its shareholders."

Under the proposed arrangement, Marvel and Toy Biz would have combined in a
transaction which provided the stockholders of Toy Biz, other than Marvel,
with 49% of the common stock of the combined entity and would have provided
Marvel's equity holders, including the unsecured creditors, with 51% of the
common stock of the combined entity.

Marvel is continuing its efforts to reduce overhead, consolidate
operations, and refocus activity in its key areas including film and
television, Internet and new media activities, licensing, and publishing.

Marvel issued a statement saying factors that could cause financial
performance to differ from forward-looking statements of future financial
performance made by or on the company's behalf include:

    (i) the ability of the Company to successfully
        reorganize in bankruptcy and the timing and outcome  
        of such bankruptcy proceedings;

   (ii) the ability of the Company to obtain an additional
        or new DIP loan or other financing;

  (iii) continued weakness in the comic book market which   
        cannot be overcome by the Company's new editorial   
        and production initiatives in comic publishing;

   (iv) continued general weakness in the trading card

    (v) the failure of fan interest in baseball to return to
        traditional levels that existed prior to the 1994
        baseball strike thereby negatively affecting the
        Company's baseball card business;

   (vi) the effectiveness of the Company's changes to its
        trading card and publishing distribution;

  (vii) a decrease in the level of media exposure or     
        popularity of the Company's characters resulting in
        declining revenues based on such characters;

(viii) the lack of continued commercial success of
        properties owned by major licensors which have
        granted the Company licenses for its sports and
        entertainment trading card and sticker businesses;

   (ix) unanticipated costs or delays in completing projects
        associated with the Company's new ventures including
        media, interactive software, and on-line services
        and theme restaurants;

    (x) consumer acceptance of new product introductions,
        including those for toys; and

   (xi) imposition of tariffs or import quotas on toys
        manufactured in China as a result of a deterioration
        in trade relations between the U.S. and China.

MONTGOMERY WARD: Motion to Settle Emigres' Class Action Suit
Montgomery Ward & Co., Inc., wishes to settle a class action lawsuit filed
prior to its petition date in which garment workers in California alleged
that Montgomery Ward and its co-defendants in the suit subjected them to a
variety of unlawful labor and employment practices, such as
working long hours for minimal pay.

According to the Bankruptcy Creditor's Service, Montgomery Ward says
protracted litigation would divert time and energy from its reorganization
plans.  A settlement, with no admission of liability, has been negotiated
in which the defendants will pay an aggregate amount of $2 million in full
satisfaction of the asserted claims.  Ward's share of the settlement would
be 10 percent or $200,000.

MONTGOMERY WARD: Motion To Sell Yellow Tag Merchandise
Montgomery Ward & Co., Inc., wants to sell all "yellow tag merchandise" to
P.A.R.  Group Asset Recovery, saying that the sale will provide the maximum
possible recovery for this merchandise and is, therefore, in the best
interests of their estates.

The company, reports the Bankruptcy Creditor's Service, began liquidating
the yellow tag merchandise (damaged, old, or returned items) in its stores,
then decided to sell it as a single lot to a third party.  P.A.R.  has
agreed on a price of approximately $9.5 million for all saleable yellow tag
merchandise; Montgomery Ward estimated to the court that liquidation of
this merchandise in the stores would yield about $7.6 million.

The proposed sale will be subject to competitive bidding.  

PAYLESS: Seeks to Appoint Outside Claims Agent
Payless Cashways, Inc.  has proposed to hire the Poorman-Douglas
Corporation to act as its official claims agent to distribute claims
notices and forms, and to maintain, process, and docket proofs of claim
received directly from creditors.  While Payless has not yet filed its
schedules of assets and liabilities, the company says it anticipates "what
may be an overwhelming number of claims." The appointment of an outside
agent, it says, will allow efficient and expeditions processing of claims.

RDM SPORTS: Company Considers Filing Chapter 11
RDM Sports Group, a manufacturer of sports and fitness equipment, has
closed its Opelika, AL, plant and is considering whether to file for
Chapter 11 bankruptcy protection.  RDM employed about 1,400 workers at the
DP Fitness plant during its peak season and had about 1,000 full-time
permanent employees.  Columbus-based Char-Broil, a grill manufacturer, will
buy the 906,000-square-foot warehouse on 107 acres in Opelika and use it
for storage and distribution.  Terms of the sale were not disclosed, but
RDM could continue to lease the facility through August 1998.

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., Princeton, NJ, and Beard Group, Inc., Washington
DC.  Debra Brennan and Rebecca A. Porter, Editors.

Copyright 1997.  All rights reserved.  This material is copyrighted and any
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