January 192005

January 19, 2005

UAL Pilot Leaders Accept New Giveback Proposal

Leaders of the union representing pilots at bankrupt United Airlines
accepted a revised concession agreement with the airline yesterday, and
unanimously recommended its ratification, Reuters reported. The Air Line
Pilots Association said balloting among the carrier’s 6,400 pilots
will begin Thursday and will end on Jan. 31. Leaders of the
union’s executive committee decided to accept terms of a new deal
rather than challenge a judge’s decision in Chicago on Jan. 7 to
throw out the previous agreement worth $180 million in givebacks.
Bankruptcy Judge Eugene Wedoff objected to pension and other provisions
in the old deal that he said gave pilots unfair leverage over the
bankruptcy process, the newswire reported.

Krispy Kreme Picks Turnaround Specialist

Krispy Kreme Doughnuts announced the retirement of its chief
executive yesterday and hired as his successor a specialist in corporate
reorganizations who is already running the Enron Corporation, the
New York Times reported. Stephen F. Cooper has a history of
working with companies that enter bankruptcy protection and reorganizing
their debts, but in an interview last night he voiced confidence that
Krispy Kreme would be different. “Keeping in mind that I have only
been here for eight hours, it looks to me that the company has a
reasonable level of free cash flow, so I see no reason why this should
be a bankruptcy candidate,” he said, the newspaper reported. Read
the full article at
href='http://www.nytimes.com/'>www.nytimes.com.

MCI

A Witness’s Personal Life Is Fair Game in Ebbers Trial

Lawyers for Bernard J. Ebbers, the former CEO of WorldCom accused of
securities fraud, won the right yesterday to introduce personal details
about the prosecution’s main witness, the New York
Times reported. At a hearing held ahead of jury selection, Judge
Barbara S. Jones of the United States District Court in Manhattan said
the defense would be allowed to introduce details about the
“marital infidelities” of Scott D. Sullivan,
WorldCom’s former CFO, because it would help the jury determine
his reliability as a witness. Prosecutors had opposed introduction of
the information. Ebbers’s lead lawyer, Reid H. Weingarten, called
details about Sullivan’s personal life “a piece of the
puzzle.” Read the full article at
href='http://www.nytimes.com/'>www.nytimes.com.

Arthur Andersen Suit to Proceed

A federal judge in New York ruled against a motion to dismiss the
WorldCom Inc. class-action litigation against Arthur Andersen LLP,
concluding that investors suing it had “identified a host of audit
failures,” the Wall Street Journal reported. In her
60-page opinion, Judge Denise Cote of the Southern District Court of New
York, said those failures “would permit a jury to find that there
was an egregious refusal to see the obvious, repeated failures to
investigate the doubtful, and a pattern of acquiescence in improper
accounting practices.” Read the full article at
href='http://www.wsj.com/'>www.wsj.com (subscription required).

Labor Presses Case Against Privatizing Social Security

The AFL–CIO yesterday stepped up its opposition to private
Social Security accounts, accusing Wall Street’s main trade group,
the Securities Industry Association (SIA), of campaigning in favor of
policy changes that would put workers’ retirement at risk while
showering billions of dollars in fees on SIA members, the
Washington Post reported. “Support for privatizing
Social Security creates a conflict of interest for the member firms of
the SIA like those which led to the financial industry scandals of
recent years,” AFL–CIO President John J. Sweeney wrote in a
letter to SIA Chairman Daniel J. Ludeman, the newspaper reported.

Southwest Posts Profit, Misses Estimates

Southwest Airlines Co. reported a decline in fourth quarter earnings
today and predicted continued profitability in early 2005, the
Associated Press reported. The Dallas, Texas–based airline said it
earned $56 million, or 7 cents per share, despite higher fuel prices and
continuing fare wars that are sapping revenues of major carriers.
Analysts surveyed by Thomson First Call had expected profit of 8 cents
per share, which would have matched Southwest’s mark from a year
earlier, when it earned $66 million.

Buyout Group Nears Purchase of NTelos

Quadrangle Capital Partners and Citigroup Venture Capital Ltd. are
close to a deal to buy out telecommunications company NTelos Inc. for
about $750 million, a person familiar with the matter said yesterday,
Reuters reported. NTelos, formerly a rural phone operator, took on
substantial debt to fund an aggressive wireless build-out during the
1990s. The collapse of the telecom market sent the company into chapter
11 bankruptcy protection in March 2003 and it emerged later that year
under the control of its creditors, the newswire reported.

Hedge Funds Dominate Less Liquid Markets-Study

Hedge funds have become powerful players in less liquid markets,
accounting for large chunks of trading in distressed debt, junk bonds
and credit derivatives last year, a new study released yesterday shows,
Reuters reported. According to investment advisors Greenwich Associates,
the loosely regulated investment pools that have become popular with
more conservative investors like pension funds and endowments,
controlled 82 percent of all trading volume in the U.S. distressed debt
market in 2004. The study also shows that hedge funds accounted for
almost a third of all trading in U.S. junk bonds and credit derivatives.
They also dominated exchange traded fund trading, controlling more than
70 percent of all U.S. trading volume, the newswire reported.

Asbestos Mediator’s Unusual Approach: An Arizona Party

Laraine Pacheco, the special master who oversees asbestos litigation
in New York City, has a mediation style that urges lawyers to get
acquainted as individuals, not enemies, the New York Law
Journal reported. To that end, Pacheco is planning a gathering at
her home in Arizona. The e-mail invitation includes a reference to
“settlement conferences in the pool and spa.” Local lawyers,
judges and ethics experts seem divided on the propriety of the event.
href='http://www.law.com/jsp/article.jsp?id=1105968923300'>Read the full
article.