January 302003

ENRON

Judge Dismisses Request to Remove Enron Creditor
Counsel

A federal judge ruled that U.S. Bankruptcy Judge Arthur Gonzalez
rightly denied a dissident Enron Corp. creditor's request to remove the
law firm that has been representing the creditors' committee in the
energy company's bankruptcy case, according to Dow Jones Newswires. Exco
Resources Inc., a creditor of Enron North America, asked Judge Gonzalez
to disqualify Milbank, Tweed, Hadley & McCloy LLP last spring,
shortly after the New York firm filed its first monthly statement of
expenses for its work as counsel for the official committee of unsecured
creditors, reported the newswire.

Exco said Milbank had failed to fully disclose the potential
conflicts that could arise from its pre-bankruptcy work for Enron and
several banks of the company. Exco also claimed that Enron creditors
would suffer irreparable harm because Enron might well have claims
against the law firm and its former clients—including Citigroup
Inc. and J.P. Morgan Chase & Co.—in connection with the
now-questionable structured finance deals, the newswire reported. Judge
Gonzalez dismissed Exco's motion after a lengthy hearing in May, saying,
among other things, the disclosure standard Exco wanted to apply to the
creditor counsel was unrealistic, according to Dow Jones. Exco, which is
not on the creditors' panel, subsequently appealed that decision to the
federal court in Manhattan. In an order signed on Tuesday, U.S. District
Judge Barbara Jones wrote that she supports the bankruptcy court's
finding that Milbank's disclosures of its professional relationships
have been 'meaningful, forthright, continuous and sufficiently detailed'
and thus complied with the bankruptcy law. To read the full story, point
your browser to
target='window2'>http://www.wsj.com (subscription required).

Enron Creditors Seeking to Recover $1 Billion Off-book
Assets

Dow Jones Newswires reported that bankrupt Enron Corp. creditors are
trying to recover more than $1 billion from one of the largest financing
structures allegedly used by the energy company to hide debt, fluff up
earnings and raise cash to reinvest. In a Tuesday filing with the U.S.
Bankruptcy Court in Manhattan, the official committee of unsecured
creditors in Enron's chapter 11 case asked for the court's approval to
sue Whitewing LP, Osprey Trust and other entities that together make up
for the so-called Whitewing structure, reported the newswire. The
creditors' committee says the assets that reside in the Whitewing
arrangement should be cast into the Enron estates because 'Whitewing
was, and is, effectively part of Enron,' according to court papers
obtained by Dow Jones. To read the full story, point your browser to
href='http://www.wsj.com/' target='window2'>www.wsj.com
(subscription required).

Court OKs Sale of Asia Global Crossing Assets

The U.S. Bankruptcy Court for the Southern District of New York on
Tuesday approved the sale of substantially all of Asia Global Crossing's
operating subsidiaries, excluding Pacific Crossing Ltd. and related
entities, to Asia Netcom, according to Dow Jones Newswires. Asia Netcom,
a new company organized by Hong Kong-based China Netcom, includes
Newbridge Capital and Softbank Asia Infrastructure Fund, the newswire
reported. The Asia Netcom transaction is expected to close by mid-March.
Following completion of the sale, the company intends to submit a plan
of reorganization to the bankruptcy court for the purpose of selling any
remaining assets and distributing the value among its creditors,
reported Dow Jones.

Bethlehem Steel Unsecured Creditors Oppose Exclusivity

The committee representing Bethlehem Steel Corp.'s unsecured creditors
has asked the U.S. Bankruptcy Court in Manhattan to deny Bethlehem
Steel's request for an extension of its exclusive plan-filing periods,
according to Dow Jones. The committee said the $1.5 billion proposal
Bethlehem Steel is considering from International Steel Group would
provide little, if anything, to unsecured creditors, reported the
newswire. Bethlehem Steel, which has been in chapter 11 since October
2001, recently asked the court to extend this period for the third time,
through July 31, Dow Jones reported. A hearing on Bethlehem Steel's
request is scheduled today before U.S. Bankruptcy Judge Burton R.
Lifland, according to the newswire.

Judge Might Confirm Diamond Brands's Chapter 11 Plan

Judge Randall J. Newsome of the U.S. Bankruptcy Court in
Wilmington, Del., said Wednesday that he would confirm Diamond Brands
Inc.'s proposed chapter 11 reorganization plan, provided the debtor
company revised the document, reported Dow Jones Newswires. The newswire
reported that Diamond Brands said it would revise the plan and proposed
order and submit the documents to the judge late Wednesday, said
Patricia A. Widdoss, an attorney with Skadden Arps Slate Meagher &
Flom, the firm representing the debtor. Judge Newsome can sign an order
confirming the plan without further need of a hearing.

Dow Jones reported that the proposed plan calls for the sale of
substantially all of Diamond Brands's assets to Jarden Corp. for $103.85
million in cash and the assumption of $11.25 million in liabilities. The
company's unsecured creditors unanimously voted in favor of
confirmation, according to court documents. More than 99 percent of the
unsecured creditors of parent Diamond Brands Operating Corp. also voted
in favor of confirmation, Dow Jones reported. The company filed for
bankruptcy protection on May 22, 2001, listing consolidated assets of
about $76.7 million and consolidated debts of about $238.7 million as of
March 31.

Court Lowers Cash Required In Integrated Health DIP Loan

Judge Mary F. Walrath of the U.S. Bankruptcy Court in Wilmington, Del.,
on Wednesday authorized Sparks, Md.-based Integrated Health Services
Inc. to lower the minimum cash balance required for its
debtor-in-possession financing, Dow Jones Newswires reported. The order
frees cash for spending on working capital. The amount of cash
Integrated Health is required to maintain in a segregated account is
reduced to $29.9 million from $40 million, according to court documents,
the newswire reported. The company has $29.9 million in the account now,
Integrated Health said in its motion, according to Dow Jones. CIT
Group/Business Credit Inc., the lender for the $75 million DIP loan,
agreed to the amendment in exchange for a $50,000 amendment fee, which
was also approved Wednesday, the newswire reported. Integrated Health is
also authorized to reimburse the lender for its out-of-pocket expenses,
according to the order. Integrated Health and 437 affiliates filed for
chapter 11 protection on Feb. 2, 2000, listing assets of $3.6 billion
and debts of $4.1 billion.

Heilig-Meyers Gets Eighth Extension to File Chapter 11
Plan

Chief Judge Douglas O. Tice Jr. of the U.S. Bankruptcy Court in
Richmond granted Heilig-Meyers Co. a four-month extension of its
exclusive right to file a chapter 11 reorganization plan, according to
Dow Jones Newswires. The judge extended the extension through May 23.
This is the company's eighth exclusivity extension. The court order,
obtained Tuesday by Dow Jones Newswires, also extends the company's
exclusive period for soliciting plan votes through July 22. The
Richmond-based company filed for chapter 11 protection on Aug. 16, 2000,
listing assets of $1.35 billion and liabilities of $836.3 million as of
May 31, 2000.

US Air Asks Court for More Time to File Plan Unopposed

Bankrupt US Airways Group Inc. has asked the court handling its chapter
11 case to extend by two months the airline's exclusive periods for
filing a reorganization plan, according to court papers filed late
Wednesday by Dow Jones Newswires. The airline filed a reorganization
plan in late December and says it's seeking the exclusivity extension as
a protective measure, reported the newswire. The court recently
authorized the airline to seek creditor votes for its plan. The court
scheduled a plan confirmation hearing for March 18. In Wednesday's
request, US Airways asked the court to further extend the periods
through March 31 and May 30, Dow Jones reported.

Bankruptcy Court Approves Phar-Mor's Liquidation Plan

The U.S. Bankruptcy Court in Youngstown, Ohio, has approved Phar-Mor
Inc.'s liquidation plan, clearing the path for the company's creditors
to vote on the plan, Dow Jones reported. Under the plan, all of the
Youngstown-based company's assets will be sold and the proceeds will be
distributed to creditors, court papers said, according to the newswire.
The company estimates that $65.5 million will be available for
distribution. A confirmation hearing is scheduled for March 11 in
Youngstown. The deadline for voting and objections is March 3, reported
Dow Jones. Phar-Mor filed for bankruptcy in September 2001, listing $345
million in assets and $300 million in debt.

UAL/UNITED

UAL Lawyers Bill $2.4 Million for Three Weeks of
Work

Dow Jones Newswires reported that attorneys managing UAL Corp.'s
bankruptcy filing racked up $2.4 million in fees and expenses during the
first three weeks of the company's proceedings, according to court
documents. According to the newswire, Kirkland & Ellis lawyers and
its paraprofessionals spent about 7,500 hours working on the cases from
Dec. 9, the day the Chicago airline filed for federal bankruptcy
protection, through Dec. 31. The Chicago law firm billed the most for
dealing with issues related to UAL's unions, which generated about
$471,000 in fees. Case administration matters such as organizing,
coordinating and managing the bankruptcy case itself generated about
$323,000 in fees, reported the newswire. The law firm is seeking
compensation for 90 percent of the compensation total, or $2.2 million,
and $127,000 for 'actual and necessary' expenses related to the case,
reported Dow Jones. Judge Eugene R. Wedoff will hear the matter
only if there are objections filed. The objection deadline has been set
for Feb. 17.

United's New Business Plan Under Fire From Pilots

United Airlines's new business plan being criticized by its pilots
union, the Associated Press reported. The union issued a report that
criticizes the plan and pledges to fight it 'by every lawful means
available to us,' reported the newswire. While United declined comment
on the report and has not disclosed details of the plan, a published
report Wednesday said it aims to reduce the number of its pilots and
flight attendants by up to 25 percent and implement a two-tier pay
structure, according to the newswire. The airline, which has posted
heavy losses since mid-2000, filed for chapter 11 bankruptcy protection
on Dec. 9. It is required to compile a new business plan in the first
120 days of bankruptcy to show its lenders how it intends to return to
profitability. A key to United's revised financial strategy is a planned
$2.4 billion reduction in annual labor costs, which the carrier outlined
last month in bankruptcy court, reported AP.

Xcel to Give NRG Creditors New Restructuring Offer Soon

Xcel Energy Inc. soon will present to creditors a new debt-restructuring
plan for its financially troubled power generation and trading unit NRG
Energy Inc., Xcel said Wednesday, Dow Jones Newswires reported. Xcel has
said NRG is likely to end up in bankruptcy court one way or another, but
is trying to negotiate a prearranged bankruptcy deal that would limit
its exposure to the struggling unit while avoiding a long fight in
court, reported the newswire. In November, Xcel offered to infuse NRG
with $300 million and surrender all equity in the unit in return for
immunity against claims from NRG's creditors, Dow Jones reported.
Creditor groups answered with counterproposals requesting 'substantial
additional payments,' Xcel said in its 2002 earnings release Wednesday.
As reported, those claims in part reflect an effort to share in tax
benefits Xcel is expected to reap from NRG's restructuring, the newswire
reported.

PBGC Objects to EOTT Energy Partners Reorganization Plan

The Pension Benefit Guaranty Corp. (PBGC) objected to several aspects of
EOTT Energy Partners L.P.'s proposed chapter 11 reorganization plan,
according to court papers obtained Wednesday by Dow Jones Newswires. The
agency said in an objection filed last week that the plan shouldn't be
approved by the court because it would 'illegally release nondebtors'
and 'impermissibly distribute to equity holders,' reported the newswire.
In its objection, PBGC said equity holders will be receiving
distributions even though unsecured creditors will see only a 52 percent
and 68 percent recovery, Dow Jones reported. A hearing on the plan is
scheduled Tuesday before Judge Richard S. Schmidt of U.S. Bankruptcy
Court in Corpus Christi, Texas. EOTT Energy Partners filed for chapter
11 protection on Oct. 8.

FAO Inc. Negotiating Use of Cash Collateral with Lenders

Bankrupt FAO Inc. said late Wednesday that it is close to reaching a
deal to continue using the cash collateral of its secured lenders to
fund operations, according to Dow Jones Newswires. The company spent
most of the day negotiating the terms of the extension with its lenders,
reported the newswire. FAO said it hopes to have a deal in place before
a hearing to consider approval of its motion for continued cash
collateral use reconvenes today at 1:30 p.m. The hearing began
yesterday. FAO filed for chapter 11 bankruptcy protection on Jan. 13.,
listing assets of $257 million and liabilities of $238 million.

Bankruptcy Judge Orders End to Relief on NTL Shares

U.S. Bankruptcy Court Judge Allan Gropper, who had granted
temporary relief to short-sellers of 'when issued' shares of
Britain-based NTL Inc. to reflect a change in the number of shares
issued, said on Wednesday that he was ending that relief, effective Feb.
5, Reuters reported. The newswire reported that NTL, which emerged from
bankruptcy protection earlier this month, had originally said it would
issue 200 million new shares, but in November it revised its plan and
said it would instead issue 50.5 million shares.

The short-sellers, many of whom were creditors of NTL who received
the newly issued shares under the company's bankruptcy reorganization,
had entered into contracts to sell shares of NTL before the new stock
started trading, Reuters reported. The judge said that parties could
seek relief on a case-by-case basis via a motion for a temporary
restraining order and/or preliminary injunction, the newswire
reported.

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