Business Notes

After a year of seemingly endless legal trauma for Drexel Burnham Lambert and Michael Milken, each got unexpectedly favorable news last week. Federal Judge Kimba Wood recommended that the former junk-bond king be eligible for parole after serving only 36 to 40 months of the 10-year sentence she imposed on him for securities violations. Wood based her decision on the financial damage done to investors and companies as a result of Milken's confessed misdeeds, which she calculated to be $318,000, less than a day's pay during Milken's highest-flying years and far less than the government's claim of more than $1 million. Milken is scheduled next week to check into a minimum-security prison camp near San Francisco, where he will share a dormitory room with three other inmates.

Since Milken's former employer declared bankruptcy early last year, creditors and other parties have filed an estimated $20 billion of claims against it. The problem, observed Federal District Judge Milton Pollack, who is overseeing Drexel's reorganization, is that the company's assets are worth only $2.8 billion. To avoid costly litigation that would drain the firm's remaining assets, Pollack last week secured a tentative accord from the key parties to slash their claims 90%, to $2 billion. If the agreement stands, Drexel could soon emerge from Chapter 11 and resume business on its own.