NATIONAL

MORGAN STANLEY MAY SPIN OFF DISCOVER CARD UNIT

Morgan Stanley Chief Executive Officer Philip Purcell, bowing to pressure from shareholders and former executives, plans to spin off the Discover credit card unit to focus on the securities business.

“This is the right time” to consider disposing of Discover, the third-biggest American credit card business, said Mr. Purcell. The 61-year-old CEO, who defended Discover’s fit with the rest of the company at the firm’s March 15 annual meeting, said the firm may spin off Discover because an outright sale would incur too much tax.

Morgan Stanley is exiting a business that it says made up 14% of revenue in the first quarter and which Merrill Lynch & Company analyst Guy Moszkowski estimates has a market value of about $9.6 billion. Mr. Purcell has faced calls to resign by former executives who say profit and share price lag rivals because the CEO hasn’t properly managed units such as Discover.

The firm yesterday named Zoe Cruz, 50, and Stephen Crawford, 40, to its board, expanding the board to 13 people.

– Bloomberg News

KRISPY KREME GETS $225 MILLION IN LOANS FROM CSFB, FUND

Krispy Kreme Doughnuts, the no. 2 American doughnut chain, got $225 million in loans from a group led by Credit Suisse First Boston and hedge fund Silver Point Capital, pulling the company from the brink of bankruptcy.

The financing replaces a $150 million credit line frozen by the company’s lenders after Krispy Kreme, under investigation for accounting fraud, failed to report earnings results on time. The loans will be used to repay about $90 million in debt, pay fees to lenders, and fund operations, the company said yesterday in a statement.

Krispy Kreme, which more than doubled the number of stores in four years, has been in danger of running out of cash after having its first quarterly loss and sales decline last year. The chief executive, Stephen Cooper, a restructuring specialist, began his tenure at Krispy Kreme in January by convincing lenders led by Wachovia Corporation to delay declaring the company’s debt in default.

– Bloomberg News

IN THE COURTS

LIMIT MARTHA STEWART WORKWEEK TO 48 HOURS, PROSECUTORS SAY

Martha Stewart should be limited to working 48 hours a week outside her house in Bedford, N.Y., while under home confinement for her obstruction-of-justice conviction, not the 80 hours she’s asking for, prosecutors said.

Stewart, founder of the house wares, publishing, and broadcasting company that bears her name, wants her home confinement cut from five months to 45 days and permission to work up to 80 hours a week at the Manhattan offices of Martha Stewart Living Omnimedia Incorporated.

She says her company is suffering under the 48-hour week to which she’s restricted. The government opposed both requests, calling her sentence already “lenient.”

A federal appeals court last month ordered Stewart resentenced because the guidelines under which she was punished are no longer binding on judges. The ruling carried out the mandate of the U.S. Supreme Court, which said in January that the guidelines are only advisory. Stewart was released from a West Virginia prison March 4 after completing a five-month term.

“Reducing Stewart’s sentence at this point, because she wants to star in a television series or because she is a busy corporate executive, will send exactly the wrong message to the public – that the wealthy and famous are treated differently than regular citizens,” Assistant U.S. Attorney Michael Schachter said in a letter to the judge.

– Bloomberg News