Judge Quashes Subpoenas in Northwest Case

A federal bankruptcy judge on Wednesday quashed subpoenas that Owl Creek, a hedge fund and shareholder of Northwest Airlines, issued to some of the nation's biggest airlines in seeking information about acquisition talks.

Judge Allan Gropper said the subpoenas were disruptive to Northwest's case and inappropriate since it would reveal trade secrets of competing companies.

Lawyers for an ad hoc equity committee led by Owl Creek Asset Management LP issued subpoenas to at least 11 different parties after failing to secure the information directly from Northwest Airlines Corp.

In filing its own objection to Owl Creek's information request, Delta Air Lines Inc. disclosed it had considered a "business combination" with Northwest. Delta is also under bankruptcy protection.

Delta Chief Financial Officer Ed Bastian told the Associated Press on Wednesday that the two sides have talked. "We did consider and share some information with Northwest, but never entered a stage of negotiations on a combination," he said.

A lawyer for American Airlines Inc. said in court that it has not bid for Northwest. United Airlines parent UAL Corp. and Continental Airlines Inc. were also subpoenaed.

Owl Creek had sought information about any merger talks and Northwest's valuation in an attempt to maximize its own recovery. Shareholders typically receive nothing in bankruptcy cases.

Gropper denied a motion by Northwest to hold Owl Creek in contempt of court and declined to rule on another motion to force Owl Creek to pay legal fees incurred by the debtor as a result of their subpoenas.

A lawyer for the hedge fund, Daniel Goldberg, had asserted in court that Delta and Northwest have both indicated they want to leave bankruptcy as stand-alone companies, leaving open the possibility they could combine once they exit.

"It looks like that's what may be going on here and that's why we're entitled to discovery," Goldberg said.

Delta and Northwest both filed for bankruptcy protection on Sept. 14, 2005.

Delta is further along in its case and has started soliciting creditor approvals of a plan to exit court protection this spring. The Atlanta-based airline rebuffed a hostile takeover offer from US Airways that was withdrawn on Jan. 31.

In addition to any information about merger talks, Goldberg said Owl Creek seeks Northwest's evaluation of what it is worth.

Northwest lawyer Bruce Zirinsky said a preliminary valuation would be included in a disclosure statement to be filed on Thursday. The disclosure statement would be considered at a later hearing and once approved, Northwest would be allowed to begin soliciting votes for its reorgnization plan, the final phase before it could emerge from court protection.

Owl Creek, which said in court papers that it owns a 5 percent stake in Northwest, is leading an effort to establish an official committee of equity holders that would represent it and other shareholders. That request will be considered Feb. 28.

The court set dates for other key hearings in the case. Lawyers said the disclosure statement would be considered on March 26, with a deadline for objections and voting on the reorganization plan due by May 7.

A confirmation hearing for the plan was scheduled for May 16. ___

AP Business Writers Harry Weber in Atlanta and Josh Freed in Minneapolis contributed to this report.

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