TCR_Public/971013.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 13, 1997, Vol. 1, No. 36


ALLIANCE: Seeks Extension of Time To File Schedules
AQUA VIE: Intends to Merge With  Aqua Vie Advance
ARCA: California Subsidiary Files Reorganization
ARROW: Administrative Expense Bar Date
ARROW: Order Denies Rejection of Agreement

CRAIG: Debtor Opposes Accountants to Committee
FOXMEYER: Avatex Announces Approval of Settlement
FOXMEYER: McKesson Corporation on Rating Watch
FOXMEYER: Trustee Seeks To Settle Chargebacks

FREYMILLER: Motion To Reconsider Claims
JAYHAWK: Confirmation of Joint Plan of Reorganization
KIA:To Seek Court Protection
KOENIG: Court Approves Ernst & Young
MONTGOMERY WARD: Assurance for Utilities

MONTGOMERY WARD: Monthly Operating Report    
PAYLESS CASHWAYS:  Court Approves Disclosure Statement
PAYLESS CASHWAYS: Seeks Real Estate Consultant
STRAIGHT ARROW: Exclusivity Extended

ALLIANCE: Seeks Extension of Time To File Schedules
Alliance Entertainment Corp., et al. seeks a
further extension of time to file schedules, lists
and statements of  its affairs.  The debtors will
present the order to the Court on October 14,

The debtors are hampered by the amount of
documents that must be presented and the
requirement to include the schedules so as to
comply with the electronic filing requirements.  

They estimate that three weeks, through and
including November 5, 1997 would provide
sufficient time to finish preparing and to file
the schedules.

AQUA VIE: Intends to Merge With  Aqua Vie Advance
Aqua Vie Beverage Corp. announced that it has
signed a Letter of  Intent to merge with Aqua Vie
Advance Corp. (AVA), with AVBC to be the surviving

The proposed merger follows 34 months of
bankruptcy proceedings
involving Aqua Vie Beverage Corp. which was the
subject of an involuntary Chapter 11.  The merger is subject to
the approval of the AVBC shareholders.

After being in Chapter 11 for almost three years,
the court entered an order on Sept. 26, 1997
approving the sale of all of Aqua Vie Beverage
Corp.’s assets to Aqua Vie Advance Corp.  The
proposed merger re-establishes the viability of
AVBC and paves the way for the launch of an
entirely new beverage category that took over four
years, $20 million, and the talents of some of the
beverage industry's key experts to fully develop.

Aqua Vie Advance Corp. is a company that was
originally formed by Tom Gillespie, the
founder of Aqua Vie Beverage Corp.,
to acquire the assets of the original Aqua Vie
from the bankruptcy court.  Through AVA, Gillespie
managed the purchase of all of the assets in AVBC,
to include, without limitation, all assets,
tangible and intangible, all non-litigation and
non-shell assets, any net operating tax loss, any
and all litigation claims owned or claimed to be
owned by the estate, and the corporate shell.

In commenting on the merger, Gillespie said, "The
merger is the result of the support and faith of
many of the company's shareholders and its
directors.  Although almost three years have
passed, I believe that the new Aqua Vie Beverage
Corp. will be in many ways stronger now than it
ever was."

ARCA: California Subsidiary Files Reorganization
To ensure uninterrupted operations while
resolving an ongoing dispute with the minority
shareholder of its California subsidiary,
Appliance Recycling Centers of America-California,
Inc. (ARCA California) and its parent company,
Appliance Recycling Centers of America, Inc.
(ARCA) (Nasdaq: ARCI), today announced that ARCA
California has filed a voluntary petition for
relief seeking a reorganization of the subsidiary
under Chapter 11 of the federal bankruptcy act.

Edward R. (Jack) Cameron, President and Chief
Executive Officer, said, "This action is a
proactive measure to ensure that business at ARCA
California's appliance recycling center in Los
Angeles will continue uninterrupted while the
dispute with ARCA California's minority
shareholder is settled in an equitable and timely

In a related matter, the Company said it has
reached an interim arrangement with its secured
lender which allows the Company to borrow an
amount comparable to its previous line of credit.  
ARCA and its lender entered into this interim
arrangement in response to legal proceedings
brought by ARCA California's minority shareholder,
which caused the Company's secured note to be

The Company also announced it has entered into an
agreement with Whirlpool Corporation (NYSE: WHR),
the nation's largest manufacturer of major
household appliances, to develop a program for handling
damaged appliances for Whirlpool.  Under the
agreement, the Company will purchase damaged
appliances from Whirlpool, recondition suitable units, and
sell them through ARCA's network of Encore retail stores.  
Cameron said this agreement is expected to provide
Encore with a significant new supply
of high-quality appliances
that can be sold at attractive prices.  
Appliances that cannot be
reconditioned will be recycled in
accordance with all federal, state and local
environmental regulations.

Due partly to below-plan operating results at two
of the Company's recycling centers and lower than expected
recycling revenues, the Company said it will
report a net loss for the
third quarter of 1997.

Near break-even operating
results previously had been anticipated.  
The Company's third quarter performance was
also affected by weak Encore sales during the month
of July.  Encore sales rebounded over the following
two months of the quarter, with the
Company posting record weekly sales toward the
end of September.

ARROW: Administrative Expense Bar Date
In the bankruptcy case of Arrow Transportation Co.
of Delaware, the Court has entered an order
stating that all parties claiming any rights to
payment of an administrative expense under the
U.S. Bankruptcy Code, arising during the period
commencing on June 2, 1997 through and including
October 15, 1997 must file a request for payment
of such claim on or before October 30, 1997 or be
forever barred from making such claim.   

ARROW: Order Denies Rejection of Agreement
The Court has denied the motion of Arrow
Transportation Co. of Delaware seeking to reject
the collective bargaining agreement with Teamsters
Local No. 848.

CRAIG: Debtor Opposes Accountants To Committee
Craig Consumer Electronics, Inc. opposes the
application for authorization to employ Ballenger,
Strike and Associates as accountants and financial
consultants to the Official Committee of Unsecured

The debtor states that due to the precarious
financial position of Craig at this stage of the
reorganization process, the Craig estate is not
able to support the employment of additional
financial advisors. The debtor has offered to make
the information of its financial advisors, Arthur
Andersen available to the committee, which offer is
yet unaccepted.

The electric bicycle, touted two years ago as a
commuting vehicle of the future, has gone the way of the Edsel,
leaving Portland auto dealer Ron Tonkin with about $100,000 in
worthless stock.

Other, much larger, investors say they have lost millions. The
Electric Bicycle Co., which introduced the EV Warrior with great
fanfare in 1995, went bankrupt in mid-September.

The company was founded by Malcolm Bricklin, the ill-fated
entrepreneur who also brought America the Yugo. He also imported
Fiats long after the Italian company had pulled out of the U.S.
market and built a futuristic, gull-winged car that bore his name but
sold poorly.

"I guess I thought he finally had come around and had something
solid," Tonkin said. "The guy's got nine lives, but I think this one
was No. 9."

The bikes originally were priced between $800 and $1,000.

"But when they began selling, Bricklin upped the price to $2,000,"
Tonkin said. "There's just not that big a market for a $2,000

Tonkin accused Bricklin of using his investments to finance a lavish
lifestyle, leaving major backers with huge losses.

Sanyo North America said it had $5.45 million invested in the
company. Malcolm Currie, undersecretary of defense in the Nixon and
Ford administrations and one-time head of Hughes Aircraft and Delco
Electronics, listed $1.5 million in EV Warrior Debt.

Currie's involvement was one of the reasons Tonkin decided to invest
in the bicycle.

"But he was getting his information from Bricklin," Tonkin said. "He
went along just like the rest of us."

Bricklin couldn't be reached for comment. No listing exists for his
company and the phone for his Malibu, Calif.,

Tonkin said he's less concerned about the financial loss than for the
damage done to the reputation of electronic vehicles. He said he
remains a firm believer in alternative sources of fuel and carries a
variety of vehicles in stores throughout Portland.

Business for the EV Warrior initially was brisk.

"We had deposits for 70 or 80 based on delivery by Christmas" of last
year, Tonkin said. "We lost almost all of them. In February we still
didn't have bikes, and you can't blame people for wanting their money

FOXMEYER: Avatex Announces Approval of Settlement
In Dallas, Texas on October 10, 1997, the Avatex Corporation (NYSE: AAV) announced that the previously disclosed settlement between it and the
FoxMeyer Corporation Bankruptcy Trustee has received final approval by the United States Bankruptcy Court in the FoxMeyer bankruptcy

The settlement dismissed the pending litigation between the parties and includes a full release of the Trustee's claims against Avatex.

The parties closed the settlement immediately following the Court's approval.

FOXMEYER: McKesson Corporation on Rating Watch
Duff & Phelps Credit Rating  Co. (DCR) has placed
the credit ratings of McKesson Corporation on  
Rating Watch-Down following the announcement of an
agreement to  acquire AmeriSource Health
Corporation.  DCR rates McKesson's  senior notes
'A' (Single-A), its exchangeable subordinate notes
and  trust convertible preferred securities 'A-'
(Single-A-Minus), its  commercial paper 'D-1' (D-
One) and its California Golden State  Finance Co.
commercial paper program 'D-1' (D-One).  

This action  covers approximately $1.0 billion of
outstanding indebtedness.
The company's current credit protection measures
are relatively weak for the current ratings and an
anticipated increase in debt coupled with higher
working capital needs will result in further
downward pressure on McKesson's ratings.  
Considering DCR's review of the proposed capital
structure of the combined entity along with the
anticipated cash flows and priorities for the use
of cash and  barring any future credit impacting
events, it is anticipated that  at closing, the
company's senior notes rating will be lowered from
'A' (Single-A) to 'A-' (Single-A-), its
exchangeable subordinated notes and trust
convertible preferred securities from 'A-'
(Single- A-Minus) to 'BBB+' (Triple- B-Plus) and
the commercial paper
ratings for both McKesson and California Golden
State Finance Co.
from 'D-1' (D-One) to 'D-1-' (D-One-Minus).  DCR
will reevaluate
McKesson's financial profile in the event that
this transaction is not completed.
On September 23, 1997, McKesson announced that it
will acquire AmeriSource for $1.79 billion in stock
plus the assumption of
approximately $532 million in debt.  AmeriSource
is the fourth-largest pharmaceutical distributor
in the United States with annualized sales in
excess of $8.0 billion.  The combined company will
operate under the McKesson name and will have
yearly sales in excess of $26 billion.
Under the terms of the agreement, each AmeriSource
shareholder  will receive 0.71 shares of McKesson
common stock for each share of  McKesson stock.  
The acquisition is structured as a tax-free
transaction and will be accounted for under the
pooling of interest method.  Operationally, this
transaction is projected to provide  McKesson with
significant cost saving opportunities through the
closure of overlapping distribution centers,
elimination of duplicate information systems, back
office consolidations and anticipated gross margin

Projected costs savings are in the range of $120
million annually following  two-year consolidation
period.  These savings will be expected to help  
support the additional debt levels associated with
the completion  of this transaction.  Leverage, as
measured by total adjusted debt- to-capital, is
anticipated to rise to approximately 50 percent
from its current level of 44 percent.  The company
has shown the ability to successfully integrate
previous acquisitions with operating results
meeting or exceeding original projections (i.e.
FoxMeyer, General Medical).  Management has
indicated its intention to integrate AmeriSource
using the same overall strategy.

FOXMEYER:  Trustee Seeks To Settle Chargebacks
The Chapter 7 Trustee, Bart A. Brown, Jr., wants
the Court to confirm his
authority to enter into settlements of the
Debtors' chargeback claims, including reclamation
components, in accordance with the procedures laid
down in the Initial Order of January 16, l997.  
The Trustee also wants the
Court to confirm his authority to exercise his
discretion not to compromise on the terms of the
Initial Compromise set down in the Initial Order.  
The Trustee seeks confirmation that he has the
right but not the obligation to accept the Initial

The Trustee explains to the Court that in many
cases the Initial Compromise was premised on
understated amounts owing to the estates.  
Therefore, he concludes, it would be in the best
interest of the estates to recalculate
the numbers in such cases and present a new compromise to
the Court and to creditors.  The Trustee also
seeks the Court's approval for revised
procedures, New Procedures, to calculate
the chargeback claims and different
methods for allocation of chargeback claims vis-a-
vis reclamation claims.

The Trustee believes that the New Procedures will
be more beneficial to
the estates, since these Procedures properly
balance the need to maximize
the estates' assets with the need to bring in
assets quickly and efficiently.

FRETTER: Motion to Extend Exclusivity
The debtors, Fretter, Inc. et al., are seeking an
order extending the joint exclusive periods of the
debtors and the Official Committee of Unsecured
Creditors to file plans of liquidation in these

The debtors are seeking an extension of
approximately 45 days, through and including
December 1, 1997 and extending the debtors’ and
creditors’committee’s exclusive period to solicit
acceptances to such a plan or plans by
approximately 45 days, through and including
January 30, 1998.  

In addition, the debtors are seeking a temporary
bridge order to October 30, 1997, the next hearing
date, since the expiration of the exclusive plan
filing period is October 17, 1997.

The debtors claim that the size and complexity of
these cases together with the debtors’ progress in
these cases make a further extension necessary.

FREYMILLER: Motion To Reconsider Claims
Freymiller Liquidation Corp., f/k/a Freymiller
Trucking, Inc., and the Freymiller Liquidation
Committee are asking the Court to reconsider the
allowance of certain claims.  

A hearing on this motion will be held on November
20, 1997.

The parties to the motion state that the claims in
question became allowed solely by default caused
by the mistake, inadvertence and excusable neglect
of the parties.  According to the parties, there
were problems with the transferal of the data
base in which the claims were listed.

There are 31 claims totaling over $1.15 million.

JAYHAWK: Confirmation of Joint Plan
Jayhawk Acceptance Corporation (Nasdaq: JACCQ)
stated that the U.S. Bankruptcy Court, at Dallas,
announced today that it will enter an Order
confirming the Plan of Reorganization proposed
jointly by the Company and the Official Committee
of Unsecured Creditors in its Chapter 11
Reorganization Proceeding.  The Company expects
the Order confirming the Plan to be entered

KIA:To Seek Court Protection
The financially-strapped Kia Group officially
notified creditor banks of its unswerving position
to seek court protection for debt scheduling

“Kia has decided to refuse creditors' demand that
it file for court receivership. Instead, it will
stick to support the applications filed
for its affiliates, including Kia Motors Corp.,
for court mediation,” a Kia spokesman said of the
Monday deadline ultimatum given by creditors.

The nation's eighth largest conglomerate has so
far defied creditors,filing for court protection
and refusing demands that Kia chairman Kim Sun-
hong step down, in the hopes that it can hang on
until the presidential elections Dec. 18.

In the meantime, the creditor banks of Kia, headed
by Korea First Bank (KFB), said they would not
force court receivership on the Kia subsidiaries,
but at the same time, they would no longer extend
any fresh loans to Kia.

With the continuing confrontation between Kia and
its creditors, more than 200 nearly bankrupt Kia
Motors parts suppliers and subcontractors are
expected to face insolvency sooner or later,
market analysts here said.

The creditor banks were ready to ask Kia part
suppliers and subcontractors to repurchase bills
issued by the Kia subsidiaries before maturity for
fear that they would turn into worthless paper.

More than a dozen Kia subcontractors have been
made insolvent so far in the dragging 80-day-long
Kia crisis because they could not cash promissory
notes by Kia Motors and other subsidiaries of the
automotive Kia Group.

Creditors, who extended special loans to Kia when
it brushed with bankruptcy in July, terminated
their two-month-long grace period for Kia's loan
repayments on Sept. 29.

In a related development, the U.S. auto giant Ford
Motor, which holds close to 17 percent of Kia's
shares, recently notified Kia of its decision to
dispatch a two- or three-member delegation to
Korea tomorrow to deliver its official position on
the Kia Group crisis, a Kia spokesman said.

The Ford delegation is likely to deliver its basic
stance to the Seoul government, Kia Motors, and
its creditor banks that it would oppose the Kia's
court receivership.

At the same time, the delegation would request
that the Seoul government guarantee the interests
of foreign shareholders of Kia Motors to the
maximum extent, said the spokesman.

Ford has expressed deep concern over the Ministry
of Finance and Economy's view that the American
motor company could lose at least two-thirds,
estimated at 54 billion won ($59 million) in its
Kia shares, if Kia is placed under court

KOENIG: Court Approves Ernst & Young
The Court has approved and authorized the debtor,
Koenig Sporting Goods, Inc. to employ and retain
the firm of Ernst & Young, L.L.P., as accountants
and financial advisors for the debtor.

MONTGOMERY WARD: Assurance for Utilities
Attorney to the debtor advised the Court that the  
Court's First Day Utility Order was served on 990
Utility Providers.  Of that number, 50 Utility
Providers requested deposits from the Debtors.  In
accordance with the provisions of the First Day
Utility Order, the Debtors now ask the Court to
find that, with respect to the 50 Objecting
     1.  A one-month security deposit;
     2.  A grant of administrative priority for
post-petition Utility
         Service; and
     3.  The ability to discontinue service on 10
day's notice;
constitute adequate assurance of future payment to
Post-Petition Utility
Providers within the meaning of 11 U.S.C. Sec.

Of the 50 Utility Companies requesting deposits,
20 of them consent to the Debtors' current
proposal.  Accordingly, Mr. Linstrom, counsel for
the debtor, explained, the Court is faced with 31
objections saying that the three-part package
being offered by the Debtors does not constitute
adequate assurance of future payment.  "The
question before the
Court is simple," Mr. Linstrom said, "is the
Debtors' offer adequate?"

Mr. Linstrom outlined the structure of the
Debtors' case, indicating that
the Debtors will show the Court that the Debtors'
are financially sound
from a Utility Provider's perspective, given:
     a.  the Debtors' history of prompt payment
for Utility Service;
     b.  $135,000,000 of cash on hand today;
     c.  $900,000,000 of availability today under
the DIP Financing; and
     d.  $4,400,000,000 of assets at book value.

Mr. Linstrom introduced Richard Chesley, Esq., to
the Court for the
presentation of the Debtors' case.  Mr. Chesley
related that the Debtors
would introduce this evidence through the
testimony of the Debtors' Chief
Restructuring Officer, Mr. John L. Workman.

Mr. Chesley presented the Court with dozens of
documentary exhibits,
consisting of the Objectors' own billing records.  
Those exhibits, Mr.
Linstrom indicated, will demonstrate the Debtors'
history of prompt
payment to Utility Companies both prior to and
following the Petition
Date, rebutting the assertions to the contrary by
some of the Objectors.  
One Objecting Utility, Mr. Chesley said, asserts
that the Debtors have
never made a timely payment; that Utility
Company's own billing records
will prove otherwise.  

Judge Walsh interjected that he has read all of
the pleadings filed by the
Debtors and the 30 Objecting Utilities.  In fact,
he has read them 20
times over the past few years in many other
chapter 11 cases.  Judge Walsh suggested that any
decision will be highly focused on the facts,
since he is readily familiar with the law and the
Utility Companies' concerns in this matter.  Judge
Walsh questioned how much money is at issue in
this matter.   Mr. Chesley suspected requested
deposits would total about $4,000,000.  Mr.
Linstrom noted that the Debtors are cognizant of
the amount of money at issue and are convinced
that the Company's cash
resources are more providently used in funding the
Debtors' reorganization
efforts rather than sitting idly to secure utility
usage in a case where
there is virtually no chance of an administrative

Counsel to the Houston Power Companies asked Judge
Walsh for a brief
recess in order to review the exhibits which the
Debtors presented to the
Court.  Judge Walsh consented.

During that recess, Messrs. Chesley, Linstrom and
Workman made their
rounds through the Courtroom and succeeded in
brokering a global
settlement with the 30 Objecting Utility Companies
providing that:
     1.  The Debtors will deliver to each
Objecting Utility a check within
         two weeks equal to 45 day's utility
     2.  In 270 days, the Debtors may return to
the Court asking that
         those 45-day Deposits be returned to the
     3.  Pacific Gas & Electric may give notice of
any default on the
         lesser of 10 days or the period specified
under applicable state
         law, and terminate service thereafter;
     4.  Telecommunication Providers may terminate
service in the event of
         a default provided that they give notice
as specified under
         applicable state law;
     5.  Other Utility Providers may discontinue
service in the event of a
         default provided that they give notice as
specified under
         applicable state law to the Debtors and
Debtors' Counsel by fax
         or overnight delivery.  

Each of the Objecting Utilities acknowledged their
consent to this
proposal. Judge Walsh expressed his delight that
the Debtors and the Utility Companies were able to
reach a consensual resolution in this matter.   

MONTGOMERY WARD: Monthly Operating Report
For the fiscal month ended August 30, 1997,
Montgomery Ward Holding Corp. showed Cash & Cash
Equivalents  of $343,000,000.
Total Receivables of $181,000,000 were listed and total
assets of $4,413,000,000

Total liabilities and Equity were $4,413,000,000

The company reported  Net Sales, including leased
and licensed depts. of  $345,000,000 and total
revenues of  $345,000,000.  Total Costs and
Expenses  for the month were $398,000,000.  The
Loss Before Taxes and Reorganization Items  was  
$(53,000,000) and Total Reorganization Items                       
were $16,000,000.  The company’s loss before
income taxes  was $(69,000,000). The Income Tax Benefit  
$(25,000,000) and the Net Loss                                     $(44,000,000).  The Preferred Stock Dividend
Requirement  was zero  and the
Loss Applicable to the Parent  was $(44,000,000)
Net cash provided by operations  was listed at
$138,000,000 and Cash and equivalents at the end of this period
were $343,000,000.

PAYLESS CASHWAYS:  Court Approves Disclosure Statement
Judge Federman approved Payless Cashways' First Amended Disclosure Statement, as modified, of Friday, October 10, 1997.
The Creditors’ Committee and the banks have indicated that they support the Payless Plan.

The debtor plans to mail the plan, the disclosure statement and ballots to creditors on October 17.  Judge Federman has set a confirmation hearing for November 19, 1997.

Under the terms of the Plan, holders of general, allowed
unsecured claims, including trade claims and Senior Subordinated Notes, estimated to total approximately $311.6 million, will
receive 8.3 million shares of common stock in the reorganized

PAYLESS: Seeks Real Estate Consultant
The Debtor seeks the Court's authority to employ
New York-based Retail
Consulting Services as a Retail Estate Consultant
in this case, nunc pro
tunc to September 24, 1997, to review 19 of the
Debtor's real estate leases, document all costs
relative to the 19 Leases, and re-negotiate rental
arrangements with the Debtor's Landlords at these
19 locations.

The Debtor proposes to pay RCS a fee equal to 5%
of the total future
savings achieved by renegotiating rents,
discounted to present value using
an 11% discount rate.

STRAIGHT ARROW: Exclusivity Extended
The Second Interim Stipulation and Order of
Straight Arrow Products, Inc. was approved by the
Court.  The 120 day period is extended until
October 15, 1997 and the 180 day period is
extended until January 15, 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 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

The TCR subscription rate is $575 for six 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 301/951-
       * * *  End of Transmission * * *