TCR_Public/970929.MBX   T R O U B L E D   C O M P A N Y   R E P O R T E R

     Monday, September 29, 1997, Vol. 1, No. 26
                   In This Issue

AIR SOUTH: Hearing on Motion to Dismiss/Convert Case
50-OFF STORES: Reorganized Debtors Object to Claims
GUANGZHOU SPECIAL STEEL: China Sells Bankrupt Steelmaker
MONTGOMERY WARD: Details of Paupís Employment Agreement

MONTGOMERY WARD: Wants Out of Selleca License Agreement
PAYLESS CASHWAYS: Debts Exceed Assets, Salaries Listed
PAYLESS CASHWAYS:  Must Pay Check Bounced to Georgia-Pacific
RDM SPORTS: Unsecured Creditors Hire Counsel/Advisor


AIR SOUTH: Hearing on Motion to Dismiss/Convert Case
Air South Airlines, Inc., has scheduled a hearing on October
15, 1997, in Columbia, South Carolina, on the motion filed
by its U.S. Trustee to dismiss the case or to convert the
case from Chapter 11 to Chapter 7.

50-OFF STORES: Reorganized Debtors Object to Claims
The reorganized debtors (LOT$OFF) of 50-Off Stores, Inc.,
have filed objections to certain secured and priority proofs
of claim, which would reduce the companyís presently allowed
claims from $10.873 million to $1.018 million.

LOT$OFF says claimants who bring claims relating to an
executory contract or unexpired lease are not entitled to a
secured or priority claim, but only to a Class 7 or general
unsecured claim. They say personal injury claimants
asserting either secured claims or priority claims should be
classified as Class 7, 8 or 9.

The reorganized debtors say because the plan states that all
prepetition equity shareholder interests have been canceled,  
those prepetition shareholders who filed proofs of claim
have no basis and should be classified as Class 7. Those who
filed priority wage claims have had their prepetition wages
paid, says LOT$OFF, therefore those claims should be
disallowed. Trade venders who asserted priority claims are
not entitled to priority status under section 507, says
LOT$OFF, and should be disallowed and classified as Class 7.
Vendors who filed secured claims have not filed financing
statements or otherwise perfected their security interests,
say the reorganized debtors, and therefore they hold general
unsecured claims and should be classified with Class 7.  

GUANGZHOU SPECIAL STEEL: China Sells Bankrupt Steelmaker
Guangzhou Special Steel Factory, which employed 600 people,
was sold at auction for $6 million US to Guangdong Light
Industrial Mechanical (Group) Co. Ltd., another state
company, according to the Shenzhen-based Securities Times.

The Vancouver Sun reports this appeared to be the first
public auction since communist leaders called for a
restructuring of ailing state industry last week by using
mergers, stock sales, and bankruptcies.

China has declared a growing number of failing companies
bankrupt and has previously held auctions of their assets,
but has moved cautiously on bankruptcies of large and medium
sized firms, fearing that out-of-work employees could create
political unrest.

The factory, which had previously been declared bankrupt,
had assets that included the right to use 33,300 square
metres of land and 20,000 square metres of factory space. It
also owned office buildings and three steel production

November 4, 1997, is the  expiration of debtors' exclusive
period to propose a plan and January 3, 1998, is the expiration of
debtors' exclusive solicitation period.  The deadline for
debtors to assume or reject leases is March 5, 1998.

MONTGOMERY WARD: Details of Paupís Employment Agreement
Montgomery Ward Holding Corp. has hired Thomas J. Paup
as its new executive vice president and chief financial
officer.  According to Bankruptcy Creditors' Service
the salient terms of Mr. Paup's Employment Agreement
dated September 2, 1997, provide for a base salary of
$400,000, short-term bonuses of $50,000 annually,
based upon achievement of goals set by the chairman and
CEO and guaranteed in 1997 and 1998, a hiring bonus
of $50,000, and full participation in all executive
benefit plans.  His employment term is September 22,
1997, until September 22, 2000.

The agreement includes a non-compete clause that says Paup
may not accept employment or contract work from Sears, K-
Mart Corporation, WalMart Stores, Inc., Dayton Hudson
Corporation, or J.C. Penney for a period of one year
following any voluntary resignation.

David S. Kurtz, attorney for Ward, noted that in addition to
the compensation and benefits outlined in the employment
contract, GECC has agreed to offer Mr. Paup options on
20,000 shares of General Electric stock.  Mr. Kurtz said the
company is having difficulty attracting first-rate talent
and this kicker from GECC was necessary to get Mr. Paup to
agree to work for Montgomery Ward.

MONTGOMERY WARD: Wants Out of Selleca License Agreement
Montgomery Ward Holding Corp. signed a licensing agreement
in January 1997 for the right to develop exclusive lines of
apparel bearing the Connie Selleca name and to use her name,
voice, likeness, and image in marketing those products.
However, Ward says that it has determined, in accordance
with the new business plan, to focus on established brand
names rather than speculate on new brand names.  

Accordingly, the company seeks the court's permission to
reject the agreement with Ms. Selleca, which allowed for
minimum compensation of $2.875 million plus a 3 percent
royalty through 1999.

PAYLESS CASHWAYS: Debts Exceed Assets, Salaries Listed
Payless Cashways Inc.'s bankruptcy schedules show assets of
$1.01 billion and liabilities of $1.02 billion.  According
to the Kansas City Business Journal, the figures differ
slightly from those listed by Payless when it sought refuge
in bankruptcy court on July 21 and listed assets of $1.32
billion and liabilities of $1.05 billion.

"The estimate on the filing date was as of the last report
on May 31; this one is as of July 21," said Payless
bankruptcy lawyer Ben Mann of Blackwell Sanders Matheny
Weary & Lombardi.

Payless is worse off than the figures reflect, because its
assets are worth considerably less on a fair market basis
than their listed book value. For example, a footnote in
Payless' schedules indicates that a recent appraisal valued
Payless real estate at between $198 million and $295
million. But, according to the Kansas City Business Journal,
Payless books list the real estate at $443 million,
reflecting leasehold improvements that likely would not be
recouped if the property were sold.

The company's schedules also show how much it paid lawyers,
accountants, and financial advisers before the filing.
Blackwell Sanders Matheny Weary & Lombardi, as main outside
counsel, received $150,000.  Special counsel, the New York
law firm of Wachtell Lipton Rosen & Katz, was paid $462,740.

Minneapolis-based Houlihan Lokey Howard & Zukin, Payless'
financial adviser, got $592,692. And KPMG Peat Marwick, the
company's accounting firm, received $281,282.

Also listed in the schedules are the total compensation
packages in the last fiscal year for top Payless officers.
Chairman and CEO David Stanley was paid $740,623, including
$650,000 in salary, nearly $50,000 in fringe benefits, and
$16,802 in expenses. In addition, the schedules show that
Stanley is owed $3.25 million in deferred compensation and
retirement benefits.

President and COO Susan Stanton made $630,452 in total
compensation, including $450,000 in salary, $32,232 in
fringe benefits, and $25,812 in expenses.

Paylessís amended reorganization plan deleted an earlier
provision that would have shielded its officers and
directors from personal liability.

PAYLESS CASHWAYS:  Must Pay Check Bounced to Georgia-Pacific
Payless Cashways, Inc., has been asked by Georgia-Pacific
Corporation through the Bankruptcy Court to replace a check
in the amount of $1,487,331 that was dishonored by Paylessís
bank postpetition.  Georgia-Pacific says the debtorís stop
payment order and its bankís action in doing so were not
required or authorized by the Bankruptcy Code. The
unintended effect of the stop payment, says Georgia-Pacific,
was to take its property and deliver it to the Payless
bankruptcy estate, therefore unfairly enriching the estate
with Georgia-Pacificís property.

RDM SPORTS: Unsecured Creditors Hire Counsel/Advisor
In the RDM Sports Groups, Inc., proceedings, Judge W. Homer
Drake of the Northern District of Georgia, Newnan Division,
has approved the hiring of Kilpatrick Stockton L.L.P. as
counsel for the Official Committee of Unsecured Creditors
and Altschuler, Melvoin, and Glasser L.L.P. as the
committeeís financial advisor.

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
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