Northwest Airlines zooms 48%; Citigroup spikes 2% on shake-up, break-up rumors; BofA declines

By Ronda Fears

Memphis, Dec. 8 - Wall Street rocked Friday with banking giants Citigroup Corp. and Bank of America Corp. stealing the limelight. It was a bipolar move, though, with players selling Bank of America amid speculation it will make a move for London-based Barclays plc while big bets were placed that something positive is about to happen at Citigroup - either a break-up, or the exit of a top executive.

In perhaps less glamorous circles, Northwest Airlines Corp. - a Pink Sheets stock - saw a whopping 48% gain with volume of 22.8 million shares, nearly seven times the norm, as the bankrupt No. 5 domestic carrier is hiring Evercore Group LLC for strategic advice, confirming speculation it is proactive about a merger or acquisition, possibly even with peer bankrupt carrier Delta Air Lines Inc.

"It was CRAZY today" trading Northwest Airlines, one equity trader remarked, saying there was an enormous amount of short covering.

Northwest Airlines shares (Pink Sheets: NWACQ) marked a $1.59 gain for the day to settle at $4.90, also a new 52-week high.

Eagan, Minn.-based Northwest, the No. 4 domestic carrier, has been pushed higher over the past month or so - since US Airways Group Inc.'s $8 billion-plus bid for Delta emerged - on speculation it could go into play by virtue of the airline sector seeking further consolidation.

Another factor, onlookers say, is that Northwest might pick up some gates that would likely be sold off in the event of a combined Delta, US Airways operation. That angle apparently is part of Evercore's mission, one trader said.

Citigroup event seen near

Adding further intrigue to the Citigroup chatter, there was speculation that Bank of America's former chief financial officer - Alvaro de Molina, who surprised Wall Street a week ago with the announcement of his resignation - is going to take that role at Citigroup.

There was considerable debate about whether Citigroup is considering some sort of divestiture, but a shake-up at the top levels of the No. 1 domestic bank was almost universally seen as a positive event as Wall Street has been disappointed with the bank's performance. There was speculation that Citigroup chief executive Charles Prince would be leaving, as well as chief financial officer Sallie Krawcheck.

Citigroup shares (NYSE: C) hit a new 52-week high Friday, adding $1.14, or 2.25%, to $51.85, eclipsing $51.33 hit Oct. 10.

A Citigroup spokesperson denied that Krawcheck was leaving the bank but declined to confirm she will stay in her current role, which only added fuel to the fire.

"Citigroup is not splitting itself, but the story their CFO is going to depart many consider a plus," one trader said.

Still, an options trader said there were still heavy bets that Citigroup will launch a break-up, although he noted some flagging in that conviction Friday.

"If Citigroup is looking at this [break-up] strategy, some people think the stock could go to at least $60," the trader said. "In any event, it looks like something is going to happen very soon."

He noted a surge in December $52.50 calls, with a whopping 38,610 traded Friday, but added that there was also big volume in the December $52.50 and $55 puts, "so they are hedging their bets."

Bank of America off 1.5%

Shares in Barclays also raced to a new high amid mounting speculation that Bank of America may make a bid for the London-based bank, but arbitrageur traders said there were big bets against such a move by Bank of America.

Bank of America shares (NYSE: BAC) lost 83 cents on the day, or 1.58%, to $51.66.

Barclays shares (London: BARC) gained 23p, or 2.35%, to close at 730p, passing the previous 52-week high of 727.5p.

"BAC is not buying Barclays. They are in the market buying their own shares back," said one trader. "I am pissed at the level it is trading at. They lost $15 billion of market cap on the CFO leaving. It's overdone and the stock is a buy here, but I am not looking to do anything at this point."

A week ago, Dec. 1, Wall Street was surprised by the announcement that Bank of America's chief financial officer, Alvaro de Molina, was resigning and would be replaced Jan. 1 by fellow executive Joe Price, previously head of risk management.

Another trader said the rehashing of Bank of America looking to make a play for Barclays did not make sense so soon after its Nov. 20 news of acquiring U.S. Trust from Charles Schwab Corp. for $3.3 billion cash.

NextWave, Winn-Dixie slip

When-issued shares of NextWave Wireless Inc. and Winn-Dixie Stores Inc. were both lower amid light profit taking, traders said.

"Winn-Dixie especially has just gone off the charts, so you saw a little profits taken off," said a stock trader. "NextWave has made a pretty good run, too, from $6 to over $10 and on that one $10 was supposed to be the ceiling so once it gets past that mark you see more offers."

But the trader noted fairly light volume in both when-issued names.

Winn-Dixie shares (Nasdaq: WINNV) dropped 45 cents on the day, or 2.81%, to $15.54.

NextWave Wireless shares (OTCBB: NXWVV) gained 10 cents, or 0.93%, to $10.80.

NextWave Wireless, which is shifting from a privately held LLC corporate structure to a publicly traded company, has announced it will redeem its $148.5 million of non-recourse secured notes at 103.5 within 30 days.

The notes were issued on April 13, 2005 on the San Diego broadband wireless and other mobile communications provider's exit from bankruptcy, and the funds were originally placed in an escrow account linked to the sale of NextWave Telecom to Verizon Wireless in April 2005.

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