TCR_Public/981125.MBX T R O U B L E D   C O M P A N Y   R E P O R T E R
  Wednesday, November 25, 1998, Vol. 2, No. 231

AHERF: Executives Spent Lots of Time and Money on Trips
AUSTIN FOREX: Bankruptcy Bid Rejected By Judge
BENNETT FUNDING: Brothers Plead Guilty
BOSTON CHICKEN: Nasdaq To Discuss Convertible Listing
BREWBAKER'S PUB: University and City May Lose Investment

CAMBEX CORP: Files Quarterly Report
CENTENNIAL COAL: Committee Taps Richards, Layton & Finger
CRIIMI MAE: Reports Morgan Stanley Law Suit to SEC
EQUALNET CORP: Court Postpones Final Hearing on DIP
EQUALNET: Signs Agreement to Purchase S4 Communications

GENESIS MANUFACTURING: Case Summary & 20 Largest Creditors
GEOTEK COMMUNICATIONS: Nextel Seeks 900 MHz Spectrum
HAYES CORP: Alters Fee Structure For Volpe Brown
INTERNATIONAL TESTING: Case Summary & 20 Largest Creditors
KENNY ROGERS: Franchise Management to Buy 83 Restaurants

LAURIAT'S: Bookstore To Emerge From Bankruptcy
MOLTEN METAL TECHNOLOGY: To Auction Operating Assets
PHP HEALTHCARE: Units Convert to Chapter 7 to Liquidate
PRESLEY COMPANIES: WL Homes Submits Revised Proposal
SYQUEST TECHNOLOGY: Petition Lists Debts Of $85 Million

VITALE ENTERPRISES: Committee Seeks Consent Order
WILSHIRE FINANCIAL: Reports Net Loss of $119 Million


AHERF: Executives Spent Lots of Time and Money on Trips
The Pittsburgh Post-Gazette reports on November 23, 1998
that even as its money problems grew, the Allegheny health
system spent hundreds of thousands of dollars to send
executives to the Cayman Islands, Paris, Copenhagen and
other exotic locales to review malpractice cases in
Philadelphia hospitals, a newspaper reported.

Allegheny executives convened at a distant location four
times a year. Each January they went to the Cayman Islands,
where Allegheny's offshore insurance agency is located, to
discuss whether to fight or settle malpractice claims  
against Allegheny hospitals and doctors.  Then 15 to 20
executives would fly to a different country every three
months to discuss malpractice cases, records show.
In all, Allegheny spent $364,000 in travel expenses last
year for its malpractice meetings, the newspaper reported.

Allegheny recently revised its travel policy. Spokesman
Thomas G. Chakurda said the current chief executive,
Anthony Sanzo, would allow only the most essential travel
to Canada and the Caymans.

The newspaper also reported the Allegheny system paid
malpractice premiums to its subsidiary that were far higher
than rates available from commercial insurers.

AUSTIN FOREX: Bankruptcy Bid Rejected By Judge
Bankruptcy petitions for Austin Forex International Inc.
and an affiliate were dismissed Wednesday by a federal
bankruptcy judge. Presented as evidence during the hearing
was a letter from Roy Mouer, a former state securities
commissioner hired as special counsel to Austin Forex,  
warning the company's founder, Russell Erxleben, that
Austin Forex was misleading investors and possibly
violating the law.

On Thursday, Steve Orr, one of Erxleben's attorneys, said
the former football kicker claims he never saw the critical
letter. Erxleben and his attorneys have denied any
wrongdoing.  With the dismissal of the bankruptcy
petitions, a court-appointed receiver continues to run the
companies and is trying to determine what happened to  
investors' money.  (Austin American Statesman-11/21/98)

BENNETT FUNDING: Brothers Plead Guilty
Michael Bennett, brother of the man who prosecutors believe
perpetrated the largest securities fraud in recent history,
pleaded guilty to three counts of conspiracy, perjury and
obstruction of justice on Tuesday in U.S. District Court in

Michael Bennett, appearing before Judge Thomas Griesa,
admitted that he had conspired with his brother to cover up
the fraud and obstruct a U.S. Securities and Exchange
Commission investigation into the matter. He is to be
sentenced Feb. 11.

His brother, Patrick Bennett, former chief financial
officer of the now-bankrupt Bennett Funding Group, is
scheduled to go on trial Dec. 7 in Judge Griesa's
courtroom, charged with 106 counts of securities fraud,
mail fraud, bank fraud, money laundering and concealment of
assets stemming from an alleged nationwide Ponzi scheme in
which 12,000 investors lost more than $700 million  
from 1990 to 1996.

Bennett Funding's business was the purchasing and financing
of office equipment leases. According to the indictment,
the company reported false year-end results and used those
financial statements to get bank loans and  
individual investments and make a securities offering that
raised $40 million.

His attorney, Martin Auerbach, told reporters that Bennett
had entered the plea "to accept responsibility for his
acts," but he did not intend to testify against his
brother. He faces a maximum sentence of 15 years and a
$750,000 fine.

BOSTON CHICKEN: Nasdaq To Discuss Convertible Listing
Boston Chicken Inc. said it will meet with Nasdaq officials
on Dec. 2 to discuss the continued listing of the company's
convertible notes on the Nasdaq exchange. On Nov. 19,
Boston Chicken had a meeting with Nasdaq officials for what
the company believed would be a discussion of the company's
non-compliance with listing requirements for its common
shares. At the hearing, Nasdaq officials informed the fast-
food chain that they also planned to discuss the
advisability of continued listing of the convertible notes
on the exchange. The hearing on the convertible notes was
delayed until Dec. 2 as Nasdaq officials agreed with Boston
Chicken's interpretation of the scope of the hearing.(The
Daily Bankruptcy Review and ABI Copyright c November 24,

BREWBAKER'S PUB: University and City May Lose Investment
The Charleston Daily Mail reports on November 21, 1998 that  
Marshall University and the city of Huntington stand to
lose more than half a million dollars they invested in a
downtown brewpub that filed for bankruptcy earlier this
year, court records indicate.

A Dec. 15 auction at the former Brewbakers Inc. restaurant
in downtown Huntington will be used to repay debts run up
by the microbrewery before it closed, according to a
hearing in federal bankruptcy court.

But the sale is not expected to bring in enough money to
satisfy all the debts, according to statements made during
a Nov. 10 hearing.

Bank One, West Virginia, was the single largest creditor of
Brewbakers Inc., and filed four separate claims totaling
$864,747.79 when the restaurant filed for Chapter 11
bankruptcy earlier this year.  According to the list of
creditors' claims filed with the court, the
restaurant owes Huntington's Department of Development and
Planning  $215,609.53.  Marshall University has two
separate claims against the restaurant, each  
amounting to $147,794.31 for a total of $295,588.62.

The sale of the restaurant's assets is not expected to
raise any more than $860,000, said lawyer Ann Starcher,
representing Brewbakers Inc.

Besides the debts to Marshall and Huntington, the
restaurant owes $399,257.73 to the Internal Revenue
Service, $64,025.67 to the West Virginia Bureau of
Employment Programs and $75,147.34 to the state Tax

CAMBEX CORP: Files Quarterly Report
Cambex Corp. filed its quarterly report with the SEC, for
the Quarter Ended: October 3, 1998.
A complete text filing is available via the Internet at:

CENTENNIAL COAL: Committee Taps Richards, Layton & Finger
The Official Committee of Unsecured Creditors in the case
of Centennial Coal, Inc. and its affiliated debtors, seeks
to retain Richards, Layton & Finger, PA as counsel to the
Official Unsecured Creditors' Committee.

The firm will advise the Committee as to its rights and
duties; advise the Committee in connection with proposals
and pleadings submitted by the debtors or others to the
Court; investigate the actions of the debtors,; advise the
Committee in co0nnection with any plan formulation or
negotiations; consult with the debtor and the debtors'
professionals regarding the case; advocate positions that
further the interests of the unsecured creditors
represented by the Committee.

The firm's professionals' hourly rates range from $340 per
hour to $82 per hour.

CRIIMI MAE: Reports Morgan Stanley Law Suit to SEC
On October 21, 1998, CRIIMI MAE Inc.  issued a press
release announcing that it has filed suit against one of
its six secured creditors, Morgan Stanley & Co.  
International, Inc., to retain control of more than $286.8
million face amount of the assets in its estate, currently
protected under Chapter 11 reorganization. In a press  
release dated October 22, 1998, the company  announced
that, in its third lawsuit in one week charging improper
actions by a large secured creditor,  CRIIMI MAE Inc.  
filed suit in the U.S. Bankruptcy Court for the District of  
Maryland, against Merrill Lynch Mortgage Capital Inc.,
demanding that Merrill turnover $3.3 million in
earnings from eight classes of CRIIMI MAE's commercial  
mortgage-backed securities that are collateral for CRIIMI
MAE's borrowings. The company issued a press release on
November 5, 1998, announced the  designation of Banc
One Mortgage Capital Markets, LLC as special servicer on  
approximately $28 billion of CMBS representing 32
commercial mortgage pools,  subject to the consent and
other procedural requirements contained within the  
respective servicing agreements.  (States SEC-11/23/98)

EQUALNET CORP: Court Postpones Final Hearing on DIP
On November 23, 1998 Judge Karen K. Brown entered an order
on the debtor's third motion to postpone the final hearing
on DIP financing,  postponing the final hearing authorizing
the sale of post-petition accounts; use of cash collateral;
the granting of security interests; the granting of
adequate protection and procedures and hearing dates to
December 16, 1998 at 11:30 am, Courtroom 10-A in the U.S.
Courthouse, 515 Rusk Ave., Houston, Texas.  

Pending the conclusion of the hearing the debtor is
authorized to continue to incur debt, use cash collateral
and sell receivables under the terms of the court order of
September 17, 1998.

EQUALNET: Signs Agreement to Purchase S4 Communications
Equalnet Communications Corp.(Nasdaq:ENET) has signed a
definitive agreement to acquire S4 Communications
Corporation. S4, headquartered in Chicago, Ill., with sales  
offices in Illinois and Wisconsin, is projected to have
annual revenue of approximately $3 million in calendar
1998. S4, an Ameritech reseller, derives approximately 40%
of its revenue from local resale and 50% from long distance  
resale, with the balance of its revenue attributable to
value added telecom product offerings.

Mitchell Bodian, Equalnet's president and CEO, said, "The
agreement to acquire S4 provides evidence of Equalnet's
strategy to provide its customers with a bundled
telecommunications service offering, comprising local, long
distance, internet, data, wireless, paging, voice mail, and
conference calling. S4's customers receive a single invoice
and have a single point of contact to handle all their
telecommunications needs. This acquisition will fit well
with our strategy of focusing our efforts geographically
and building concentrations of customer traffic in targeted
geographic locations."

Scott Wilson, president of S4 Communications, remarked, "We
are excited about joining the Equalnet team and
participating in the turn-around that is well under way. We
are establishing a solid platform for integrating other
companies such as ours into the Equalnet family and are
confident that Equalnet can play
a significant role in the continuing consolidation in the
telecom marketplace."

Equalnet will initially issue 642,666 shares of Common
Stock and issue a $.24 million note in exchange for the
stock of S4. The parties anticipate closing the transaction
within the next 60 to 90 days. The transaction is subject
to the completion of due diligence and other closing
conditions. S4 shareholders will have the opportunity to
receive another 400,000 shares of Common Stock if  
certain events occur during the six month period following
the closing date.  The number of shares to be issued in
this transaction will be adjusted upward if the average
daily closing price of the Company's Common Stock for the
three month period ending on December 31, 1998 is less than
$1 per share.

In other matters, Equalnet Communications Corp. announced
results for its first fiscal quarter ended September 30,
1998. In the first quarter, the Company's net loss was $6.2
million, or $0.30 per share, on revenues of $8.4 million.  
This compares to a net loss of $2.1 million, or $0.33 per
share, on revenues of $8.3 million for the same quarter
last year. The results for the most recent quarter included
non-cash depreciation and amortization charges of  
approximately $2.2 million, in comparison with $1.1 million
for the same quarter in the prior year.

GENESIS MANUFACTURING: Case Summary & 20 Largest Creditors
Debtor:  Genesis Manufacturing Limited LC
         50925 Richard W. Blvd.
         Chesterfield, MI 48051

Court: Eastern District of Michigan

Case No.: 98-58965  Filed: 10/30/98    Chapter: 11

Debtor's Counsel: William E. Schonberg
                  Benesch, Friedlander, Coplan & Aronoff         
                  2300 BP Tower, 200 Public Square
                  Cleveland, Ohio 44114

20 Largest Unsecured Creditors:

   Name                              Nature         Amount
   ----                              ------         ------
Societe Bretone De Fonderie et de
Mecanique                          Trade Debt     2,258,800
CI-South Inc.                      Trade Debt     1,430,400
Funfrap                            Trade Debt       643,700
Paragon Metals                     Trade Debt       295,500
Mansfield Foundry Corporation      Trade Debt       151,800
Wagner Casting Co.                 Trade Debt       145,900
Marks Management Services Inc.     Trade Debt       138,800
Wescast Industries                 Trade Debt       132,500
Klockner Steel Trade Corp          Trade Debt       116,300
Kilian Manufacturing Corp          Trade Debt       105,100
Southern Ductile Casting Co.       Trade Debt        99,100
J. Pitt Steel, Inc.                Trade Debt        80,000
Huron Castings, Inc.               Trade Debt        79,600
American First Aid                 Trade Debt        70,900
Aerotek, Inc.                      Trade Debt        67,600
Horizon Technology Group           Trade Debt        63,800
C&J Tool & Gage Co.                Trade Debt        63,300
Spartan Carbide, Inc.              Trade Debt        37,700
Norton Performance Plastics        Trade Debt        37,600
Houghton International Inc.        Trade Debt        35,300

GEOTEK COMMUNICATIONS: Nextel Seeks 900 MHz Spectrum
With the demise of Geotek Communications Inc. [GOTK],
questions arise regarding the fate of its 900 MHz  
spectrum.  Nextel Communications Inc. [NXTL], it turns out,
has its eye on the frequencies to augment its already
considerable licensed SMR bandwidth, industry sources said.

Nextel recently requested that the U.S. Department of
Justice lift a consent decree entered against Nextel in the
mid-1990s after concerns were raised that Nextel
(previously known as Fleet Call) and its supplier Motorola
Inc. [MOT] would exercise monopoly control over the
frequency band.

Alan Shark, president and CEO of the American Mobile
Telecommunications Association, noted that Geotek continues
to incur charges for its systems, tower sites and base
stations, and would probably like to resolve the sale of  
its spectrum as quickly as possible.

Geotek decided to close down operations recently after
filing for Chapter 11 federal bankruptcy protection from
creditors earlier this year.  The company was unable to
come up with a workable restructuring plan while
in Chapter 11.

Nextel was tight-lipped on the subject of the Geotek
licenses. For Nextel, the question of obtaining the
licenses may be complicated by the 45 MHz "spectrum  
cap" currently imposed by the FCC on all commercial mobile
radio service operators.  But according to an industry
insider, Nextel is "not even near that" amount of spectrum
-- a factor that would augur well for the company's  
chances of getting the consent decree lifted.

Capacity-enhancing technological innovations could be
making the company concerned about wireless competition
from PCS or other sources.

"If Nextel uses the spectrum to relocate people and they
get relocated on good spectrum, then the industry wins,"
said Sharpe Smith, spokesman for the Industrial
Telecommunications Association. "On the other hand, it
could take away spectrum to be used for dispatch service
and put it in the hands of people who only use 10 percent
of the spectrum for dispatch services" and the rest
for  PCS, he said.

The frequencies could prove attractive to paging carriers
as well, although Paging Network Inc. [PAGE] said it was
not interested in seeking to purchase Geotek's spectrum.
Copyright Phillips Publishing, Inc. Communications Today-

HAYES CORP: Alters Fee Structure For Volpe Brown
The fee structure Hayes proposed for financial advisor and
investment banker Volpe Brown Whelan & Co., which met with
opposition from the official unsecured creditors'
committee, has been altered and the hire of Volpe Brown
approved.  The objection sought limitations for certain
transaction fees Volpe Brown was entitled to under the
contract.  Volpe Brown has subsequently agreed that no fees
will be paid for equity raised from current preferred
shareholders. Additionally, the financial advisor will not
receive a fee for any money that comes from debtor-in-
possession lender NationsCredit Commercial Corp.  The
committee withdrew its objection to paying a fee for money
that exceeded funds already available to Hayes through
NationsCredit. The committee did not object to the monthly
$75,000 retainer contracted for Volpe Brown. (Federal
Filings Inc. 24-Nov-98)

INTERNATIONAL TESTING: Case Summary & 20 Largest Creditors
Debtor:  International Testing Services, Inc.
         2815 Lilac
         Pasadena, Texas 77503

Court: Southern District of Texas

Case No.: 98-41871-H5-11    Filed: 11/09/98    Chapter: 11

Debtor's Counsel: Tony M. Davis
                  Baker & Botts LLP
                  558 Clinton Avenue
                  One Shell Plaza, 910 Louisiana
                  Houston, Texas 77002-4995
                  (713) 229-1234

Total Assets:            $2,435,278
Total Liabilities:       $6,742,308

No. of shares of common stock: 9,377,840 -  150 holders

20 Largest Unsecured Creditors:

   Name                              Nature         Amount
   ----                              ------         ------
Nuevo Energy Co.       Unsecured Noteholder       $597,193
O'Quinn, John M.       Unsecured Noteholder       $562,851
DeJoria, John Paul     Unsecured Noteholder       $366,097
Cooney, John           Unsecured Noteholder       $366,096
Cooney, Robert         Unsecured Noteholder       $366,096
Willowfield Limited    Unsecured Noteholder       $277,597
Mecom, John W.Jr.      Unsecured Noteholder       $272,758
Snadon, Daryl          Unsecured Noteholder       $272,758
Wray, Marcus           Unsecured Noteholder       $256,926
Roten, Bob             Unsecured Noteholder       $181,838
Elwan, Ibrahim         Unsecured Noteholder       $138,798
Walker, Ed             Unsecured Noteholder       $138,798
Marra, Richard         Unsecured Noteholder       $136,379
Ryan, Thad J. Jr       Unsecured Noteholder        $92,532
Frame, Paul A.         Unsecured Noteholder        $92,532
Calver, Horace A.      Unsecured Noteholder        $92,532
Cone, Michael M.       Unsecured Noteholder        $90,919
Floyd, Robert C.       Unsecured Noteholder        $90,919
Moon, Warren           Unsecured Noteholder        $90,919
Dejoria, Eloise        Unsecured Noteholder        $90,919
Interfin Corporation   Unsecured Noteholder        $90,919
Klass, Mark E.         Unsecured Noteholder        $90,919

KENNY ROGERS: Franchise Management to Buy 83 Restaurants
Franchise Management Inc. announced yesterday that it plans
to buy 83 Kenny Rogers Roasters restaurants for an
undisclosed amount, subject to bankruptcy court approval,
according to Reuters. Kenny Rogers is operating under
chapter 11 protection. Franchise Management, which
is the parent of the South Florida hamburger chain Juicy
Lucy's, said the acquisition is a major  step toward it
becoming a multi-concept franchiser. (ABI 24-Nov-98)

LAURIAT'S: Bookstore To Emerge From Bankruptcy
Lauriat's, a Boston-bred bookstore chain now based in
Canton, was one of the largest customers of Bryant Altman,
a wholesaler in Norwood. The top three executives at Bryant
Altman took a 25 percent pay cut in the wake of Lauriat's  
Chapter 11 filing. Said Mark Linnane, a vice president of
Bryant Altman who sits on Lauriat's creditors committee:
"People on the creditors committee were very angry
at  first. They all got stiffed."

Nine months later, though, cautious optimism appears to
have replaced anger. Creditors are continuing to work with
Lauriat's. The retailer (it's owned by CMI Holdings, a
company controlled by ING Equity Partners) is seeking to
emerge  from bankruptcy, as soon as March. But it wants to
have fewer stores and a sharper focus.

Lauriat's is positioning itself as a superstore
alternative. It aims to be a "neighborhood" bookstore,
catering to well-read customers who prefer good service and
a knowledgeable staff to endless selection.

Creditors' support for Lauriat's stems partly from self-
preservation, at a time when the $8 billion consumer book
industry is consolidating.  Boston Herald-11/23/98

MOLTEN METAL TECHNOLOGY: To Auction Operating Assets
After months of marketing the business, Molten Metal
Technology Inc. is poised to sell its operating assets at a
court-administered auction today.  Specifically on the
block are Molten Metal's "wet waste" business, which
specializes in the packaging and transporting of low-level
radioactive liquid byproducts of nuclear energy facilities,
and its Q-CEP assets, including equipment and patents.  Q-
CEP (quantum catalytic extraction processing) technology
involves treating and disposing of nuclear and mixed wastes
to reduce volume and contain the radioactive material.  As
of yesterday, there were five bids on the table, all of
which took into consideration a $100,000 overbid component.
(Federal Filings Inc. 24-Nov-98)

PHP HEALTHCARE: Units Convert to Chapter 7 to Liquidate
PHP Healthcare Corp. announced yesterday that it converted
the chapter 11 cases of two of its subsidiaries, Pinnacle
Health Enterprises LLCand PHP NJ MSO, to chapter 7 while
the parent continues under chapter 11 protection, according
to Reuters. The conversion, approved by the bankruptcy
court, follows a ruling on Friday from a New Jersey judge
that the state seize the assets of the two subsidiaries to
ensure that 190,000 members would not be denied health
care. The two subsidiaries are controlled by New Jersey
regulators as a result of the judge's order. Pinnacle is a
medical management company for HMOs in New Jersey, while NJ
MSO employed the personnel who managed operations for
Pinnacle. PHP, based in Reston, Va., listed assets of
$252.4 million and liabilities of $279.1 million in its
Oct. 19 bankruptcy petition filed in the District of
Delaware.(ABI 24-Nov-98)

PRESLEY COMPANIES: WL Homes Submits Revised Proposal
The Presley Companies report to the SEC on a Schedule 13-D
that on November 13, 1998, General William Lyon, through
his wholly-owned corporation, William Lyon Homes, Inc. ("WL
Homes"), submitted a revised non-binding proposal to a
special committee of the board of directors of the Company
containing the following terms.  

A wholly-owned subsidiary of the Company would purchase all
or substantially all of the assets of WL Homes for a cash
purchase price of two times (2x) book value and the
assumption of all or substantially all of the liabilities
of WL Homes, subject to the completion of the Offer (as
defined in the next sentence).  WL Homes would make a
tender offer (the "Offer") to purchase between 40% and 49%
of the outstanding Common Stock of the Company for a
purchase price of $0.62 per share.  In the event that more
than 49% of the outstanding Common Stock of the Company is
tendered, WL Homes would purchase a pro rata share from
each tendering stockholder. The Offer is conditioned on the
consent of the material creditors of the Company and WL
Homes and the approval and consent of other third parties.  
Consummation of the transaction is conditioned upon
regulatory approval and the satisfaction of other customary

SYQUEST TECHNOLOGY: Petition Lists Debts Of $85 Million
SyQuest Technology Inc.'s Chapter 11 petition, filed on
Nov. 17 in California, lists assets and liabilities of
about $37 million and $85 million, respectively.  The
petition also estimates that there will be funds available
for distribution to the disk drive maker's unsecured
creditors.  SyQuest signed a letter of intent for the sale
of "substantial assets" to a strategic buyer that is
subject to the parties reaching definitive agreements by
Nov. 25.  Under the agreement, the unnamed buyer would
acquire SyQuest's patents and other intellectual property,
manufacturing and development equipment, finished goods,
work in process and raw material inventory for disk drives
and cartridges while SyQuest would retain all of its
accounts receivable and ownership of its building in
Penang, Malaysia. (Federal Filings Inc. 24-Nov-98)

VITALE ENTERPRISES: Committee Seeks Consent Order
The Official Committee of Unsecured Creditors applies to
the court for an order resolving all claims of and against
Twin County Grocers, inc. and/or its affiliates.

Twin County Grocers, Inc. ("Twin") filed proofs of claim
totaling $64,274,420.  Twin has also asserted postpetition
secured claims which it alleges are due to it under a
financing order.  The debtors, through the Responsible
Officer and the Committee have filed a Disclosure Statement
and a joint consolidated Chapter 11 plan of orderly
liquidation.  Creditors holding allowed general unsecured
claims shall receive 28% of the Unsecured Distribution
Fund. Twin shall receive $750,000. With the balance of the
Twin Payment to be paid by the estate as the balance of the
fund is paid to all holders of unsecured claims.  Twin
shall not receiv emore than 72% of the Unsecured
Distribution Fund.

WILSHIRE FINANCIAL: Reports Net Loss of $119 Million
Wilshire Financial Services Group Inc. (NASDAQ: WFSG)
reports a net loss of $119.0 million or $10.82 per share
(diluted) for its third quarter ended September 30, 1998.  
The loss was primarily the result of adverse market
conditions, which caused a charge due to market value
adjustments and other provisions totaling $104.5  
million to securities and loans held by the Company and
interest rate hedges as  of September 30, 1998. The Company
also announced that it has reached agreement with a
majority of its 13% and 13% Series B noteholders to
exchange their  publicly traded debt of $184.2 million for

The results for the quarter compare with net income of $7.1
million or $0.80 per share (diluted) for the same period in
1997. For the nine months ended September 30, 1998, the
Company reported a net loss of $111.8 million or $10.58
per share (diluted), compared to net income of $12.2
million or $1.47 per share  (diluted) during the same
period in 1997.

"Since August, and more significantly since October 12,
1998, the Company has been significantly and negatively
impacted by various market factors," said Andrew A.
Wiederhorn, Chairman and Chief Executive Officer of
Wilshire Financial Services Group. "These factors resulted
in a dramatic reduction in market valuations and liquidity
for certain of the Company's mortgage-backed securities and
loans, as well as a reduced availability of borrowings for
those  assets, thereby significantly reducing the Company's

Mr. Wiederhorn continued, "As a result of these market
conditions, and the consequent `flight to quality' the
Company was compelled to initiate the disposition of a
significant amount of assets to meet equity calls by
lenders and to increase liquidity. The downward pressure on
prices and the Company's need to sell assets to meet these
equity calls resulted in the Company disposing of certain
assets at prices that resulted in significant losses for  
the quarter and the nine months ended September 30, 1998."

Subsequent to September 30, 1998 and beginning the week of
October 12, 1998, the Company sold a significant amount of
its assets to meet collateral calls, primarily from certain
affiliates of Salomon Smith Barney Inc., and to reduce  
outstanding debt. Management believes that had the Company
not been forced to sell these assets, but rather held these
assets until market conditions stabilized, the Company's
losses would have been far less severe.

In order to address the liquidity concerns and improve the
Company's financial condition, management entered into
discussions with an unofficial committee of holders of a
majority of the Company's $184.2 million in  
outstanding publicly issued notes and its financial
advisors, Houlihan Lokey Howard & Zukin, and legal
counselors, Latham and Watkins, concerning a restructuring
of the Company's obligations under the notes. Following
extensive  discussions, the Company and the unofficial
committee agreed today to a  restructuring of the Company
whereby (i) the noteholders would exchange their  notes for
common stock in the Company; (ii) existing holders of
common stock  would receive warrants or highly diluted new
common stock in exchange for their  holdings; and (iii)
pending consummation of the restructure, the noteholders  
would forbear from declaring certain defaults which
resulted from the net  losses incurred by the Company and
actions taken by the Company to meet these  calls.


The Meetings, Conferences and Seminars column appears in
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Bond pricing, appearing each Friday, is supplied by DLS
Capital Partners, Dallas, Texas.

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 Lexy Mueller, Editors.   

Copyright 1998.  All rights reserved.  ISSN 1520-9474.  
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or publication in any form (including e-mail forwarding,
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