TCR_Public/971006.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, October 6, 1997, Vol. 1, No. 31
                   In This Issue

AIR SOUTH: Shorter Period Sought
COLOR TILE: Counsel Seeks Withdrawal
COUNTY SEAT: Seeks Rejection of Lease
FOXMEYER: Avatex Will Pass Dividends
INTERLINE RESOURCES: Involuntary Petition

LEVITZ: Meeting of Creditors
MARVEL: Seeks Compromise and Settlement
MONTGOMERY WARD: Bank Group Objects
ORBIT: Bankruptcy Judge Approves Sale
POCKET: National Telecom Makes Bid

SILAS CREEK:Seeks Extension of Exclusivity
US BRASS: Disclosure Statement Approved


AIR SOUTH: Shorter Period Sought
Aviation Sales Operating company d/b/a
Aviation Sales Company (ASC) is seeking
modification of the automatic stay issued
in the case of Air South Airlines, Inc.,
Debtor, and to shorten the sixty day
period for the trustee or debtor to accept
or reject the lease.

ASC is the lessor of certain aircraft
parts leased to debtor.  The debtor has
failed to make regular monthly payments
and is in arrears for a total in excess of
one million dollars. ASC believes that the  
debtor has no intention of resuming its
business affairs and therefore has no
reason to maintain possession of the
leased aircraft parts. The cost to cure
the defaults under the lease is in excess
of the value of the lease.   

COLOR TILE: Counsel Seeks Withdrawal
Cleary, Gottlieb, Steen & Hamilton, seeks
withdrawal as co-counsel to the debtors, Color
Tile on consent.  Cleary Gottlieb served as
bankruptcy co-counsel for the debtors from
the petition date through the date of the
closing of the Global Settlement.  

The components of the Global Settlement
structure are being implemented, and
Cleary Gottlieb and the debtors have
jointly concluded that it is now
appropriate for Cleary Gottlieb to
withdraw as bankruptcy co-counsel.  

In an effort to minimize professional
fees, Young, Conaway, Stargatt & Taylor
will serve as sole bankruptcy counsel, for
the final winding up of the affairs of the

COUNTY SEAT: Seeks Rejection of Lease
County Seat, Inc., County Seat Stores,
Inc. and CSS Trade Names, Inc. seeks
authority from the Bankruptcy Court to
reject the lease for its corporate
headquarters located in Dallas, Texas.

Based on County Seat’s revised business
strategies and future operation, County
Seat will no longer operate a corporate
office in the Dallas area.  Specifically,
the debtors recently opened office space
in New York City, N.Y. and together with
their office space in Minneapolis, Mn.
County Seat is able to relocate all
corporate functions to those two

FOXMEYER: Avatex Will Pass Dividends
Avatex Corporation, formerly FoxMeyer
Health Corporation announced that it has  
determined not to make its next quarterly
cash dividend payments that are scheduled
for October 1997 on either the Company’s
$5.00 cumulative convertible preferred
stock or its $4.20 cumulative exchangeable
series A preferred stock.

INTERLINE RESOURCES: Involuntary Petition
On July 29, 1997 Genesis Petroleum, Inc.,
and Petroleum Systems, Inc., filed an
involuntary petition under Chapter 7 of
the Bankruptcy Code against Interline
Resources Corporation in the United States
Bankruptcy Court for the District of Utah.  
Interline filed a motion to dismiss the
petition as being improperly filed.  The
court did not enter an order for relief
under Chapter 7 of the Bankruptcy Code
based upon the petition.  

On September 26, 1997, at the request of
Interline Resources Corporation, it became
a debtor in possession under Chapter 11 of
the Bankruptcy Code.  Under Chapter 11,
Interline may continue its full operation
as a debtor in possession. Management
intends to continue with operations,
cooperate with its creditors and file a
plan with the Bankruptcy Court that will
permit it to reorganize and provide for
payment of creditors and preserve the
interests of its shareholders.

LEVITZ: Meeting of Creditors
A Meeting of Creditors in the Levitz
Furniture Incorporated, Chapter 11
bankruptcy case will be held on October
30, 1997 at 11:00 AM, 844 King Street,
room 2313, Wilmington Delaware 19801
United States Trustee Meeting Room.

MARVEL: Seeks Compromise and Settlement
A hearing will be held on October 24, 1997
at 9:00 AM for a motion of the debtors,
Marvel Holdings, Inc. et. al. for entry of
an order approving the Compromise and
Settlement among the debtors, the
postpetition lenders, the prepetition
lenders and other parties-in-interest.

Specifically, the settlement represents a
compromise of the disputed issues relating
to the Entertainment Bank Indebtedness  
and the claims and interests of the
Assignees that, absent such consensual
resolution, would have greatly complicated
the Entertainment Debtors’ reorganization
efforts, and could jeopardize the
continuing viability of the Entertainment

In part, the  settlement provides for the
joint and several claims of the Fleer
Lenders of $485,000,000 to be

MONTGOMERY WARD: Bank Group Objects
The Dai-Ichi Kangyo Bank, Ltd., the Fuji
Bank, Ltd., The Long-Term Credit Bank,
Ltd., The Sakura Bank, Ltd., and The Sanwa
Bank, Ltd (the “Bank Group”) object to the
motion of the debtors, Montgomery Ward
Holding Corp., et al., authorizing them to
implement a consigned jewelry program.

In their objection, the bank argues that
the debtors seek to prefer certain of
their prepetition creditors over their
bank lenders and other creditors.  They  
complain that the debtors seek authority
to pay, in full, the claims of certain
creditors that arose prior to the debtors’
bankruptcy filings.  

Further, the Bank Group argues that the
debtors may not pay general prepetition
unsecured claims to the Jewelry Consignors  
in order to secure postpetition purchases.
“If this Court permits the Debtors to pay
the Jewelry Consignors’ prepetition claims
in exchange for their agreement to
continue to provide postpetition goods to
the debtors, then no rational basis will
exist for preventing other prepetition
creditors from withholding postpetition
goods and services unless debtors make
payments against such creditors’
prepetition claims.”  

ORBIT: Bankruptcy Judge Approves Sale
A federal bankruptcy judge approved the
purchase of Orbit I.G. Trading Company by
a new company, Orbit Acquisition, LLC.  
Orbit Acquisition will operate under the
name Orbit USA.

“We are pleased that the new company will
be able to service Orbit I.G.’s
customers,” said Linda McFarland, former
chairman and chief executive officer of
Orbit I.G. and current vice president of
sales and marketing for Orbit USA.  “The
new company will be able to offer improved
quality and customer service,” she said.

Orbit USA represents the first major
expansion of the company’s majority
shareholders, John and Hui Chiang, the
majority shareholders of MagiTech
Corporation, outside their primary market
in northern Ohio.  Both Orbit USA and
MagiTech are privately held companies.  

“Several other companies had pursued Orbit
I.G., but MagiTech offered the best fit.  
Orbit I.G. had grown rapidly because it
excelled at sales and marketing.  MagiTech
had grown more slowly but with greater
efficiency and without indebtedness
because it excelled at operations and
customer service.  Our relationship with
MagiTech will help Orbit USA reduce
delivery times and improve quality control
and technical support, McFarland said.

Creditors filed an involuntary petition
for relief against Orbit I.G. under
Chapter 7 of the bankruptcy code on June
4, 1997.  On June 30, the Chapter 7 case
was converted to Chapter 11.  

POCKET: National Telecom Makes Bid
Stamford, Conn.-based National Telecom PCS
(NatTel),in partnership with investor
White River Partners, plans to buy C-
block PCS licensee Pocket Communications
out of bankruptcy for $1.5 billion.

NatTel and White River said that they will
file an emergency motion in U.S.
Bankruptcy Court proposing a Chapter 11
reorganization plan under which Pocket
would merge with NatTel in conjunction
with  an initial investment by  White
River of up to $25 million.

Pocket's unsecured creditors would receive
NatTel stock; NatTel, with help from White
River, would assume installment payments
for the remaining $1.3 billion owed by
Pocket for 43 licenses in markets
such as Chicago, Detroit, Dallas-Ft.
Worth, St.Louis, New Orleans, Las Vegas,

Last year, NatTel filed a petition with
the FCC to deny Pocket licenses, alleging
violations of certain auction rules.
NatTel said that proceeding, still
pending, would be dismissed under NatTel’s
proposed plan.

One week before the Pocket bankruptcy
filing, NatTel also filed an antitrust
lawsuit against Pocket claiming collusion
in the  C-block auction and seeking more
than $1.1 billion in damages. That suit
also would be dismissed, under the
proposed plan according to NatTel.

SILAS CREEK: Seeks Extension of Exclusivity
Silas Creek Retail Inc. and Silas Creek
Retail, LP d/b/a Piece Goods Shops Home
Center, Piece Goods shops Fabrics &
Crafts, Northwest Fabrics & Crafts, and
Inside Out Decorating Center, seek entry
of an order extending the exclusive
periods during which the debtors may file
a plan of reorganization and solicit
acceptances to the plan.  

The hearing on the motion will be held at
the Bankruptcy Court for the District of
Delaware on October  15, 1997 at 2:30 PM.
The objection deadline is October 10,

The debtors request the entry of an order
extending the proposal period through and
including January 6, 1998, and extending
the solicitation peered through and
including March 7, 1998.

The debtors believe that the request is
realistic in view of the size and
complexity of these cases as well as the
progress made to date by the debtors in,
among other things, preparing their
business for sale.    The debtors have
determined that a sale of their assets
would best effectuate a quick resolution
of these Chapter 11 cases, and thereby
maximize the value of the debtors’
business and the recoveries of creditors.  
A sale motion is pending before the
court and will be heard on October 15,
1997, for sale to the prospective
purchasers ABC Fabrics, Inc.  

US BRASS: Disclosure Statement Approved
Zurn Industries, Inc. announced that the
United States Bankruptcy Court for the
Eastern District of Texas has approved the
disclosure statement filed by United
States Brass Corporation (US Brass) in its
Chapter 11 bankruptcy.  The decision
clears the way for the disclosure
statement and the proposed plan of
reorganization, also filed by US Brass, to
be sent to US Brass creditors for voting.  
Eljer Manufacturing, Inc., parent
corporation of US Brass, and Eljer
Industries, Inc., owner of Eljer
Manufacturing and subsidiary of Zurn are
also proponents of the proposed plan of

The Official Polybutylene Claimants
Committee has indicated that it supports
approval of the plan which contains
proposed settlements with Shell Chemical
Company and Hoechst Celanese.  Both
companies manufactured resin used in a
problematic polybutylene plumbing system
that was manufactured by US Brass, and
contributed to the filing in Chapter 11
by US Brass.

The parties have until January 5, 1998 to
file claims or object to the plan.  The
confirmation hearing has been set for
January 13, 1998 at 9:00 AM in Plan,

Announcing the Court’s approval, Zurn
Chairman and CEO Robert R. Womack said,
“We are pleased that the US Brass
proceedings are now moving toward a
satisfactory resolution acceptable to all
parties involved.  We have every
confidence that the proposed plan of
reorganization will be confirmed and that
US Brass will emerge from bankruptcy as a
valued contributor to Zurn Industries.  
The terms of the proposed settlement
remain consistent with the parameters on
which the Eljer acquisition was based.

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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