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  T R O U B L E D   C O M P A N Y   R E P O R T E R

     Thursday, October 2, 1997, Vol. 1, No. 29
                       
                   In This Issue


AMERICAN ENTERTAINMENT: Purchase Terms
LOMAS FINANCIAL: Trustee Sues Ex-Officials
MID-AMERICAN WASTE: Amended Plan
MONTGOMERY WARD: Assets and Liabilities
MONTGOMERY WARD: Syndicator Agreements

PAYLESS CASHWAYS: Dallas News Seeks Relief
PAYLESS CASHWAYS: Equity Wants Goldstein
PAYLESS CASHWAYS: Financial Update
PAYLESS CASHWAYS: Third Quarter Financials

                  -------

AMERICAN ENTERTAINMENT: Purchase Terms
--------------------------------------
American Entertainment Group Inc.
and Tel.n.Form Interactive
Communications Corporation (Tel.n.Form)
have agreed to change their
preliminary agreement of August 29, 1997
whereby AETG is to acquire
Tel.n.Form. As amended on
September 18, 1997 AGTG would acquire
100 percent of the issued and outstanding
shares of Tel.n.Form in exchange for
200,000 shares of its preferred stock at
$10.00US per share(formerly 200,000 common
shares at $10.00US per share).  

Upon obtaining approval of AETG’s Chapter
11 Plan of Reorganization and the completion
of satisfactory financing,110,000 preferred
shares are to be redeemed.  The closing of
the transaction is additionally subject to
due diligence and other terms and conditions.  
The parties anticipate an escrow closing on or
about October 15, 1997. Based in San Diego,
California, Tel.n.Form comprises a group of
companies in the business of using
automation and computer technology to
replace repetitive manual business in the automotive
and hotel industries.  Among these
companies is Credit.Link, a service
provided to car dealer that generates
lead information obtained form the
public and transmitted to such dealers
nationwide.  


LOMAS FINANCIAL: Trustee Sues Ex-Officials
------------------------------------------
A bankruptcy trustee is suing former Lomas
Financial Corp.chairman Jess Hay and other former
directors and officers for $300 million,
alleging that lavish spending and reckless
management led to the Dallas mortgage
company's two bankruptcies and eventual
demise.  The suit was filed in State
District Court in Dallas.

The suit contends that after Lomas emerged
from its first
bankruptcy in 1992, the company missed
several opportunities to survive because
of alleged self-dealing and irresponsible
management by Mr. Hay and other top
officers and directors.
       
Also named as defendants are Robert E.
Byerley Jr., formerly a director and
Lomas' senior vice president for finance
and treasurer; James L. Crowson, Lomas' former
senior vice president and general counsel;
Gene Bishop, former vice chairman and
chief financial officer; Paul D. Fletcher,
former vice president-finance; and Michael
E. Patrick, former executive vice
president and chief financial officer.

The suit alleges that after its first
bankruptcy, Lomas spent large sums on
parties and personal"monuments" to the top
executives, including almost $500,000
spent in 1994 to produce and print a
coffee table book called Lomas, The First
One Hundred Years. The suit also says that
executives funded a Lomas"museum" and
spent $250,000 on a going-away party for
Mr. Hay when he retired.

The suit is the latest twist in the
meteoric rise and crash of the once
highflying mortgage company. Under Mr.
Hay, Lomas grew in the 1960s to become the
country's largest mortgage banking firm.
But significant expansions into land
development, life insurance and consumer
banking in the 1980s left the company
burdened with almost $6 billion in debt.
Unable to pay its bills, Lomas filed for
federal bankruptcy protection in 1989.
       
The company shed many of its units and
emerged from bankruptcy in 1992. However,
the suit contends that the top executives
mismanaged the firm by engaging in high-
risk interest rate swaps, as well as
accounting practices allegedly designed to
overvalue its mortgage servicing
portfolio.

The company returned to bankruptcy court
in 1995. It emerged in 1996 with only two
offshoots units still operating, according
to the lawsuit.
  

MID-AMERICAN WASTE: Amended Plan
------------------------------------------
Mid-American Waste Systems, Inc., (MAWS)
had its Amended Joint Liquidating Plan of
Reorganization approved and confirmed on
September 17, 1997, by Judge Peter J.
Walsh of the District of Delaware
Bankruptcy Court.

The cases are to be consolidated and on
the Consummation Date (the business day on
which all conditions to the consummation
of the Plan set forth have been satisfied
or waived and is the effective date of the
Plan), the subsidiaries will be merged
with and into MAWS and their Chapter 11
cases closed.

MAWS will continue to exist as Reorganized
MAWS after the Consummation Date, but
shall not maintain any business operations
or engage in any business activities other
than those activities to implement the
Plan.

Mr. Truesdell is appointed and approved to
serve as the Plan Administrator and the
sole officer and sole director of the
Reorganized MAWS to be compensated from
the Operating Revenue Reserve, effective
September 1, 1997.  He is authorized to
hire WT&A to assist with implementation of
the Plan.

As soon as practicable after the Plan
Administrator exhausts the assets of the
debtors’ estates by making final
distributions of cash under the Plan, he
will dissolve the Reorganized MAWS and
resign as sole officer and director.  All
cash necessary for the Reorganized MAWS to
make payments shall be obtained from the
debtors’ cash balances and the liquidation
of the debtors’ remaining noncash assets,
if any.

The Distribution Date shall be the day --
no sooner than 5 days or later than 15
days -- after the Consummation Date upon
which distributions from the Reorganized
MAWS are made to holders of Allowed Class
1,2,3, and 4 claims.

Classification of Claims:

(Unclassified claims -- Administrative
Claims and Priority Tax Claims -- will be
paid on or as soon as practicable after
the later of the Distribution Date or the
first Periodic Distribution Date, when
they become Allowed and each holder shall
receive full satisfaction in cash equal to
the amount or such other treatment as to
which the debtors or Reorganized MAWS and
holders have agreed.)

Class                         Status          
Vote

1                             Unimpaired      
Not entitled,
Other Priority Claims                         
accepted Plan

2                             Unimpaired      
Not entitled,
Convenience Claims                            
accepted Plan

3
Secured Claims                Impaired        
Entitled
3.01     Barr
3.02     Campbell
3.03     Caterpillar
3.04     Elmore
3.05     Arnold
3.06     Mellon
3.07     Orix
3.08     Palladino Group
3.09     National Union
3.10     L/C
3.11     Reliance
3.12     Illinois EPA
3.13     Ohio EPA
3.14     Pennsylvania DEP
3.15     USF&G/National Union
3.16     INA
3.17     West Virginia DEP
3.18     ERC
3.19     Other   

4
Unsecured Claims              Impaired        
Entitled
4-A     Senior Note, L/C Bank
4-B     Subordinated Note
4-C     General Unsecured

5
L/C Bank Contingent Claims    Impaired        
Entitled

6
Fines, Penalties &
Punitive Damages Claims        Impaired       
Not entitled,
                                              
rejected Plan

7
Securities Claims              Impaired       
Not entitled,
                                              
rejected Plan

8
Intercompany Claims            Impaired       
Not entitled,                                      
rejected Plan


MONTGOMERY WARD: Assets and Liabilities
---------------------------------------=
Montgomery Ward Holding Corp. lists total
scheduled assets of $340,440,749. Total
scheduled liabilities are listed as
$70,291,061.

Montgomery Ward & Co. Inc.’s scheduled
assets are $3,718,077,319. Total scheduled
liabilities are $3,406,260,425.


MONTGOMERY WARD: Syndicator Agreements
--------------------------------------
The debtor seeks to assume six Syndicator
Agreements and pay approximately
$2,000,000 of pre-petition defaults. These
six independent syndicators supply the
debtors with merchandise that is different
from goods avilable in Montgomery Ward
Stores and is characterized by some
uniquqe functionality or attribute.  
Following an annual direct marketing
program calendar, this merchandise is
offered to Montgomery Ward customers by
direct mail in connection with credit card
billing or other direct mailings.  

Each syndicator bears all of the
promotional costs under the terms of a
direct marketing program agreement.
Following the Debtors’ promotion of a
particular type of merchandise during a
given month, Montgomery Ward customers
wishing to purchase goods authorize
payment by means of an additional charge
to their credit card account and the
credit card issuer relays the order
information through a third-party order
processing facility, to the syndicator.  

The syndicator, in turn, ships the
merchandise to the customer.  Following
shipment, the syndicator is paid a
percentage of the total purchase price and
Montgomery Ward retains the balance.  The
debtor’s financial contribution to the
direct marketing program is five full-time
employees.  The program generates a $10
million annual profit.

The six Syndicators are: Media Syndication
Global; United Promotions, Inc.,
Consolidated Merchansdising, Inc. MMB
Company, Inc.; The Hi-Tech Group, Inc. and
Mission Control, Inc.  They are relatively
small enterprises, and have agreed to
compromise the pre-petition defaults under
the direct Marketing Program Agreements
for 75 cents on the dollar if the
agreements are assumed now and the cure
amounts are paid upon assumption.

  
PAYLESS CASHWAYS: Morning News Seeks Relief
-------------------------------------------
The Dallas Morning News moves the Court
for relief from the automatic stay in
order to begin charging the Debtors a
higher advertising rate for ads placed
post-petition.  Dallas explains that the
Debtor is party to a Contract governing
the Preprint Advertising Sections
distributed in local newspapers.  That
Contract gives Dallas the right to
increase advertising rates on 30-day's
notice.

Dallas relates that the Debtor has taken
the position that the Contract is not
executory, and if it were, it would be
rejected.  The Debtor has told Dallas,
however, that Dallas is required to
continue charging prepetition advertising
rates whether or not the Contract is
executory,assumed,rejected or otherwise
treated.  
Alternatively, Dallas asks the Court for
permission to stop doing business with the
Debtor.  

In a Response to Dallas' Motion, the
Debtor relates that its owes Dallas
$79,000 on account of pre-petition
advertising services.  The Debtor stands
on published bankruptcy court decisions
for the proposition that a creditor
violates the automatic stay by refusing to
enter into cash transactions with a debtor
absent payment of a pre-petition debt
where the creditor's sole motivation is to
collect its pre-petition debt.  The Debtor
senses Dallas' coercion, and urges the
Court to exercise its broad equitable
powers to enjoin Dallas from canceling the
Contract and eliminating the Debtor's
ability to advertise in the Dallas
Metroplex at affordable rates.


PAYLESS CASHWAYS:  Equity Wants Goldstein
-----------------------------------------
The Official Equity Shareholders'
Committee of Payless Cashways, Inc. has
sought and obtained the Court's authority
to retain the St. Louis-based law firm of
Goldstein &
Vouga, P.C. as its counsel in this chapter
11 case.  

The Equity Committee tells Judge Federman
that it contacted a dozen KansasCity-based
law firms, but was unable to retain one of
them because the major Kansas City firms
are conflicted.   

G&V tells the Court that its attorneys
will bill from $125 to $225 per hour
for their services and its paralegals, $50
per hour.


PAYLESS CASHWAYS: Financial Update
----------------------------------

Income from Operation of Business.
Year Ended November 25, 1995        
($128,549,000)
Year Ended November 30, 1996         
($19,078,000)
December 1, 1996 to July 21, 1997    
($16,475,000)

Payments to Creditors within the 90-day
period prior to the Petition  Total:   
$700,192,633


PAYLESS CASHWAYS: Third Quarter Financials
------------------------------------------
Payless Cashways, Inc.the Kansas City-
based building materials specialty
retailer,today reported that it is
beginning its ninth week of its voluntary
Chapter 11 reorganization with nine more
weeks remaining before the confirmation
hearing scheduled on November 19. The
Company also reported financial outcomes
for the third quarter, noting the
complexities of its financial reporting
related to such an extensive
restructuring. Because historical
reporting includes a number of non-routine
charges associated with the Chapter 11
process, information reflecting both
historical reporting and reporting of
operating results excluding non-routine
items is provided. Key results and
developments for the third quarter include
the following:
     *  Same-store sales for the quarter,
excluding 29 closing stores, were down
8.1%, reflecting the impact of the Chapter
11 filing and continuing competitive
pressure.
     *  Earnings before interest, taxes,
depreciation, and amortization(EBITDA) for
the quarter were $17.8 million excluding
non-routine charges.      
     *  Non-routine charges include store
closings ($23.7 million), asset
impairments ($60.5 million), and
reorganization items ($5.1 million).      
     *  Net loss for the quarter of $3.7
million excluding non-routine charges
($65.4 million loss including non-routine
charges) was in line with the financial
plan filed with the Court.
     *  The monthly operating report for
the month ended August 30, 1997, was filed
with the Court today. Same-store sales
were down 9.7% and EBITDA excluding non-
routine charges was $1.4 million.
     *  Liquidity was strong with $36.7
million of available cash at quarter end.
At August 30, 1997, there were no
borrowings under the DIP revolving credit
agreement although $19 million of the $125
million DIP
facility was being used for standby and
documentary (import) letters of credit.      
     *  All covenants required in the DIP
facility for the third quarter 1997 were
met.      
     *  Credit extended by suppliers
(accounts payable) of $18.0 million was
ahead of the financial plan filed with the
Court.
     *  Reclamation claim reconciliations
are on schedule. The Company expects
agreement with its banks and the
creditors' committee on reclamation
procedures and the timing of reclamation
claim payments to be reached this week. It
is anticipated that each supplier who
filed a
reclamation claim with the Company will be
mailed a reclamation reconciliation from
the Company by the end of this week with
instructions for initiating payment of the
claim.      
     *  The confirmation hearing on the
Company's Plan of Reorganization is
expected to take place November 19, which
could result in consummation of the
Chapter 11 case by as early as December 1.

Chairman and CEO David Stanley said, "We
are very pleased with our progress through
the Chapter 11 process to date. An area of
focus for us continues to be stabilizing
an adequate flow of product on appropriate
terms.
Supplier support, as evidenced by credit
extension, exceeds the level assumed in
the restructuring financial plan, but
falls short of our own expectations. We
intend to emerge from Chapter 11 by the
end of 1997 as a viable company with
annual sales of over $2 billion. While
many of our
large suppliers have recognized the future
potential of this restructured company, we
need more of our suppliers to join them.
That will be the focus of intense vendor
negotiations in the coming weeks. We must
have appropriate commercial terms for
purchasing the product that our 164
continuing stores require in order to
serve our customers."
Net sales for the third quarter were
$632.1 million, a decrease of 12.7% in
total from the third quarter of 1996 and
an 8.7% decrease on a same-store sales
basis. Excluding sales for 29 closing
stores, net sales for the 1997 third
quarter would have decreased 8.1% on a
same-store basis. EBITDA excluding non-
routine charges, a measure of the
Company's operating cash flow, was $17.8
million compared to $37.8 million for the
same period last year.

During the third quarter of fiscal 1997,
the Company recorded $89.3 million of non-
routine charges in connection with its
July 21, 1997, filing of a voluntary
petition to reorganize under Chapter 11 of
the Bankruptcy Code,
the related plan to close 29 stores, and
asset impairment charges related to
certain stores.

The store closing charges of $23.7 million
include real estate disposal and severance
costs of $13.0 million ($8.1 million after
tax) and an additional $10.7 million gross
margin charge for inventory liquidation at
these
stores.

The asset impairment charge of $60.5
million ($43.9 million after
tax),primarily a non-cash charge, includes
the carrying value write-down of
$41.8 million for certain store properties
and leases, which are considered impaired,
and the write-off of $18.7 million of
goodwill, which was established in 1988 as
part of the Company's leveraged buyout and
which is attributable to those stores.

In addition, the Company incurred
reorganization items of $5.1 million ($3.2
million after tax) in the quarter ended
August 30, 1997, which were primarily
professional fees incurred in connection
with the Chapter 11
filing, as well as the write-off of
deferred financing costs related to senior
subordinated notes.

During the third quarter of fiscal 1996,
the Company recorded non-routine charges
for the closing of nine underperforming
stores ($14.0 million pretax), asset
impairment charges ($59.7 million pretax),
and a federal
income tax benefit ($23.7 million) and
related interest income ($4.9 million
pretax).

The Company reported a third quarter 1997
net loss of $65.4 million compared to a
net loss of $22.9 million in the previous
year. The net loss for the 1997 quarter
reflects the $23.7 million of store
closing charges,the $60.5 million asset
impairment charge, and $5.1 million of
reorganization items, previously
discussed. The net loss for the 1996
quarter reflects the $14.0 million store
closing charge, the $59.7 million asset
impairment charge, and the $23.7 million
federal income tax benefit and related
$4.9 million interest income, previously
discussed. Excluding the non-routine
charges recorded in the third quarter, net
loss for the
third quarter of 1997 would have been $3.7
million compared to net income of $3.6
million for the same period of 1996.

Commenting on the third quarter of 1997,
Company Chairman David Stanley said, "Our
energies are focused on moving past this
reorganization period and building the
business to its full potential. Our store
employees are concentrating on taking care
of our customers."

Net sales for the first three quarters of
the year were $1.8 billion, a decrease of
7.9% in total and 4.6% on a same-store
basis from the first three quarters of
1996. EBITDA excluding non-routine charges
decreased to $48.1 million compared to
$91.1 million for the same period last
year.

For the first three quarters of 1997, the
Company reported a net loss of $86.8
million compared to a net loss of $24.6
million in the previous year.
The net loss for the 1997 period reflects
the store closing charge, the asset
impairment charge, and the reorganization
items discussed above. The net loss for
the 1996 period reflects the store closing
charge, the asset impairment charge, and
the federal income tax benefit and the
related
interest income discussed above. Excluding
the non-routine charges, net loss for the
first three quarters of 1997 would have
been $25.1 million compared to net income
of $1.9 million for the same period of
1996.


S U B S C R I P T I O N   I N F O R M A T I O N

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