July 1, 2004

Fed Lifts Rates, Pledges
Gradual Course

The Federal Reserve raised U.S.
interest rates for the first time in four years yesterday, boosting them
a quarter percentage point in the first of a likely series of increases
to keep inflation at bay, Reuters reported. The decision by the U.S.
central bank's policy-setting Federal Open Market Committee moves the
benchmark federal funds rate to 1.25 percent. Wednesday's unanimous
decision formally ends an easing cycle that began in 2001 and took the
key rate to 1 percent, its lowest level since 1958. With the economy
gaining momentum, the Fed is expected to move rates up gradually in
several steps this year and into 2005 since the pickup in growth has
brought with it higher prices, the newswire reported.

UNITED AIRLINES

UAL Making Progress In
Aircraft Lessor Talks

United Airlines' bankruptcy
attorney on Wednesday said the company was making progress in talks with
a group of aircraft lessors, but said it was unclear what impact a
potential financing deal for its exit from bankruptcy would have on an
agreement with lessors, Reuters reported. United and the lessors, which
hold leases on 175 planes, have been negotiating the terms of the
aircraft leases for months. James Sprayregen, attorney for
United's parent, UAL Corp., told a bankruptcy judge that the airline,
which has been operating in chapter 11 since December 2002, was trying
to raise capital after being rejected for a big federal loan guarantee
earlier this week. But Sprayregen said it was not clear how long that
process would last or what turns the company's exit capital structure
would take, the newswire reported.

Airline Seeks Funds From
Bank

Now that the government has
firmly rejected United's request for more than $1 billion in loan
guarantees, the airline will be asking its bankers at J.P. Morgan and
Citigroup to fill the gap, the New York Times reported. With the
completion today of J.P. Morgan's merger with Bank One, even more is
riding on United's survival. Bank One issues a credit card tied to
United's frequent flier program. The bank has said it would suffer a big
loss if United went out of business and it had to substitute another
rewards program for those cardholders, the newspaper
reported.

Judge Allows KPMG to
Audit MCI, Get Back Fees

A bankruptcy judge ruled on
Wednesday that accounting firm KPMG could collect about $150 million in
fees from MCI Inc. and continue as the company's auditor despite the
objections of state governments, Reuters reported. A coalition of 14
states had accused KPMG of creating an illegal tax shelter for MCI
before it filed for bankruptcy. The states are seeking more than $2
billion in back taxes.

They contend that because MCI
could sue KPMG to cover any penalties it might have to pay, KPMG was no
longer a neutral auditor under bankruptcy law and should be removed. But
U.S. Bankruptcy Judge Arthur Gonzalez said the states waited too long to
file their claim against KPMG, apparently as part of a strategy to
support their tax claims, the newswire reported.

Qwest Accused of Using
European JV to Boost Results

Trustees of bankrupt network
provider KPNQwest have accused its main owner Qwest of using the joint
venture as a source of 'revenue opportunities' to prop up its own
results and shares, legal filings showed on Wednesday, Reuters reported.
In documents from a lawsuit against Qwest Communications and three
former executives, the trustees say the Netherlands-based company played
a starring role in an elaborate plan to boost revenue through network
capacity swaps that in the end left KPNQwest broke and at creditors'
mercy. The 125-page lawsuit filed in a U.S. District Court in New Jersey
seeks as much as $3 billion in damages and provides one of the most
complete pictures of the sudden collapse of KPNQwest, which had carried
a large part of Europe's Internet traffic before its May 2002
bankruptcy, the newswire reported.

U.S. Judge Postpones Hearing
on Avianca Plan

A bankruptcy judge on Wednesday
postponed a hearing on a plan to allow a Brazilian oil entrepreneur to
take charge of indebted Colombian airline Avianca, Reuters reported.
However, the parties involved still have issues of the 13-point plan to
negotiate before the July 16 hearing before Judge Allan Gropper of the
U.S. Bankruptcy Court for the Southern District of New York. The plan
calls for Brazilian businessman German Efromovich to take a 75 percent
stake in Avianca and Colombia's Coffee Growers' Federation to convert an
$18 million loan that is allowing the carrier to continue operations
into a 25 percent stake. After three years, the Federation will have the
right to sell its stake to Efromovich and recover its investment into
saving Avianca by merging it with now-defunct airline ACES, the newswire
reported.

U.K. Government Says
65,000 Citizens Face Big Pension Losses

Tens of thousands of Britons
face significant losses due to the winding up of underfunded pension
schemes run by insolvent companies, British government data showed on
Wednesday, Reuters reported. Some 65,000 people face losses of 20
percent or more of their pension benefits, while 35,000 face losing half
or more of expected pensions, figures from the Department for Work and
Pensions showed.

Britain's pensions are under
strain from aging workforces, the 2000-03 stock bear market and new
accounting rules. Hundreds of firms have closed pension schemes with
benefits based on final salary to new staff, citing heavy costs, the
newswire reported.

RCN Shareholders Oppose
Retention, Bonus Plan

RCN Corp.'s bid for approval to
continue a $3.45 million staff retention and bonus program faces
opposition from some preferred shareholders. In court papers filed
Monday, Wells Fargo & Co. and Vulcan Ventures Inc. said the cable
and telecommunications company hasn't shown that the program serves a
'good business reason' justifying court approval. The shareholders said
the company has failed to justify Chief Executive David McCourt's
entitlement to severance benefits equal to his base salary of $500,000
if he is dismissed from the company for virtually any reason between May
10 and six months following confirmation of RCN's chapter 11
plan.

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Reserved

Nevada Regulators Want
Court to Cancel Enron Power Contracts

Nevada state regulators joined
Tuesday in a federal court effort by two Nevada electric utilities,
alleging market manipulation by Enron Corp. and others, to overturn
hundreds of millions of dollars in high-priced power contracts.
According to an Associated Press article, the state Public Utilities
Commission, in a brief filed with the 9th U.S. Circuit Court of Appeals
in San Francisco, said the Federal Energy Regulatory Commission
(FERC) erred in refusing to review whether prices charged Nevada
Power Co. of Las Vegas and Sierra Pacific Power Co. of Reno were 'just
and reasonable.' 'FERC's failure to honor its single most important
obligation ... has substantially, and justifiably, eroded consumer
confidence in the federal government's willingness to protect them from
the Enrons of the world,' the PUC brief states.

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SEC at Odds on Plan to Let Big Investors Pick
Directors

The head of the Securities and
Exchange Commission said on Wednesday that he had been unable to forge
an agreement among his deeply divided colleagues over a proposal to
permit large shareholders to nominate a limited number of independent
directors to corporate boards, the New York Times reported. The
deadlock is a victory for corporate executives who have fought to kill
the rule and a setback for labor organizations and institutional
investors who have pushed for years to get the commission to adopt it,
the newspaper reported.

Adelphia Jury Heads to Day
Four

Jurors in the fraud trial of
Adelphia Communications Corp. founder John Rigas sought more prosecution
documents on Wednesday, expressed concern about getting paid and ended a
third day of deliberations without reaching a verdict, Reuters reported.
Jurors deciding the case against Adelphia's John Rigas, two of his sons
and another former executive also asked for a transcript of the
prosecution's closing argument, which is not allowed under federal court
rules. U.S. District Judge Leonard Sand told jurors the 'closing is not
evidence and may not be furnished to you,' the newswire
reported.

California Attorney General
Intervenes in Bankruptcy Trial

The California attorney
general's office has intervened in a federal bankruptcy trial in a way
that could help a teenager buy out and shut down the manufacturer of a
semiautomatic handgun with a design flaw that has left the boy paralyzed
from the neck down since the age of 7, the New York Times
reported. In a highly unusual action, Randy Rossi, director of the
firearms division of the California Department of Justice, wrote to a
federal bankruptcy judge in Florida yesterday that Paul Jimenez, the man
the judge tentatively approved to buy the manufacturer, was ineligible
to make guns because he lacked federal and California firearms licenses.
Therefore, Rossi wrote to the judge, Jerry A. Funk of the United States
Bankruptcy Court, he was 'submitting this written objection to the sale'
on behalf of the California attorney general, the newspaper
reported.

Weekly Jobless Claims
Rise Slightly

The number of new people
signing up for jobless benefits rose slightly last week, although the
overall pace of recent applications suggests the labor market remains in
recovery mode, the Washington Post reported. The Labor
Department reported today that new filings for unemployment insurance
rose by a seasonally adjusted 1,000 to 351,000 for the week ending June
26. Economists were forecasting a decrease in claims to around 345,000.
Still, when compared to the same week last year, the latest figures
showed that the pace of layoffs has moderated. A year ago, new
applications for unemployment benefits stood at 427,000. Claims hit a
high last year of 444,000 in the middle of April and have slowly drifted
downward since that time, the newspaper reported.

Parmalat Creditors Ask Judge
To Rule Against Company

Parmalat Finanziaria SpA
bondholders on Wednesday asked a U.S. bankruptcy judge to deny the
bankrupt Italian dairy's request to block creditors from seizing U.S.
assets, Reuters reported. The food group, which is attempting to
restructure under the weight of $17 billion in debt, on Monday asked
U.S. Judge Robert Drain for a so-called Section 304 ruling that would
bar creditors from taking any action against its U.S. assets. In a
filing with the U.S. Bankruptcy Court in New York, the bondholders group
said there hasn't been enough dialogue with Parmalat's advisers to judge
whether its restructuring plan is fair. Parmalat on Monday submitted its
turnaround plan to Italian Industry Minister Antonio Marzano and
approval could come in early July, the newswire reported.