(Bloomberg) -- The Australian Securities and Investments Commission will allow short selling of financial stocks from today after an eight-month ban gave banks, insurers and property-related stocks cover to boost their capital levels.
Macquarie Group Ltd., Goodman Group and Suncorp-Metway Ltd. were among companies that took advantage of the shorting ban to sell shares while shielded from “bear raids,” where successive short sales drive stock prices lower. Financial stocks slumped in Sydney trading.
“Bear raids were a concern in particular for companies with overleveraged balance sheets and vulnerable business models,” said Prasad Patkar, who helps manage about $850 million at Platypus Asset Management in Sydney. “Firms that needed to repair their balance sheets were able to do so without fear of their shares being targeted.”
Australian companies have raised $21 billion in equity sales this year, according to a Financial Times report citing Dealogic research.
ASIC banned short selling of all stocks in September as part of international efforts to contain stock market declines after Lehman Brothers Holdings Inc. collapsed and companies from Babcock & Brown Ltd. to Fortescue Metals Group Ltd. complained their shares were being manipulated. In November, the regulator lifted the ban on all but financial companies.
The prohibition, which was due to expire on May 31, was lifted from 10 a.m. today, the regulator said in an e-mailed statement. Australia’s benchmark stock index has rallied 17 percent since hitting a five-year low on March 6, a day after the financial shorting ban was last extended.
Market Conditions
“ASIC has reviewed market conditions and considers that the balance between market efficiency and potential systemic concern has now moved in favor of the ban being lifted,” it said in the statement. “ASIC will not hesitate to reimpose the ban immediately and without consultation if it considers market conditions warrant such action.”
Australia permanently outlawed so-called naked short selling, with a few exemptions, in November, when it lifted the ban on covered short sales for most non-financial companies. The ban on short selling financial stocks was extended in January and then again in March.
South Korea said on May 20 it would lift a ban on short selling non-financial stocks starting June 1, saying the market had stabilized. Short-sale restrictions on banks, brokerages and other financial shares would continue while those companies raised capital and cleaned up their balance sheets, the Financial Services Commission said.
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Sunday, 24 May 2009
Wednesday, 20 May 2009
Google CEO says won't buy newspaper
(Reuters) - U.S. Internet search engine operator Google (GOOG.O) has decided against acquiring a newspaper, the Financial Times reported, citing the company's chief executive and chairman, Eric Schmidt.
Google had considered buying a news publication but is now unlikely to do so because potential targets are either too expensive or have too many liabilities, the FT quoted Schmidt as saying in an interview with the paper's online edition.
A newspaper acquisition is also unlikely because Google is "trying to avoid crossing the line between technology and content," the paper quoted Schmidt as saying.
There has been speculation that cash-rich Google could take advantage of a dip in advertising revenues to buy out struggling news organisations, with the New York Times (NYT.N) seen as a potential target.
Read more here
Google had considered buying a news publication but is now unlikely to do so because potential targets are either too expensive or have too many liabilities, the FT quoted Schmidt as saying in an interview with the paper's online edition.
A newspaper acquisition is also unlikely because Google is "trying to avoid crossing the line between technology and content," the paper quoted Schmidt as saying.
There has been speculation that cash-rich Google could take advantage of a dip in advertising revenues to buy out struggling news organisations, with the New York Times (NYT.N) seen as a potential target.
Read more here
Obama to sign credit card crackdown into law
(Reuters) - President Barack Obama was expected to sign into law on Friday a package of sweeping new limits on credit card interest rates and fees that won final approval from the U.S. Congress on Wednesday .
In a major victory for the president and congressional Democrats, the House of Representatives voted 361-64 to approve the so-called "credit cardholder bill of rights".
Taking full effect in February 2010, the bill would sharply restrict credit card issuers' ability to raise interest rates on cardholders' existing balances; to charge certain fees; and to slap cardholders with unreasonable penalties.
The bill will hurt the profits of major card issuers such as Citigroup, Bank of America, JPMorgan Chase and Capital One, analysts said.
It represents the first of several reforms on banking and market rules expected from the administration as it tightens regulatory oversight in hopes of preventing another financial crisis like the one now pounding economies worldwide.
A White House official said Obama will sign the bill at a ceremony scheduled for 1500 EDT on Friday.
The bill could hit home with more consumers than any other economic initiative the Obama administration has launched so far, with some experts predicting a broad restructuring of how credit cards are priced, managed and marketed.
Read more here
In a major victory for the president and congressional Democrats, the House of Representatives voted 361-64 to approve the so-called "credit cardholder bill of rights".
Taking full effect in February 2010, the bill would sharply restrict credit card issuers' ability to raise interest rates on cardholders' existing balances; to charge certain fees; and to slap cardholders with unreasonable penalties.
The bill will hurt the profits of major card issuers such as Citigroup, Bank of America, JPMorgan Chase and Capital One, analysts said.
It represents the first of several reforms on banking and market rules expected from the administration as it tightens regulatory oversight in hopes of preventing another financial crisis like the one now pounding economies worldwide.
A White House official said Obama will sign the bill at a ceremony scheduled for 1500 EDT on Friday.
The bill could hit home with more consumers than any other economic initiative the Obama administration has launched so far, with some experts predicting a broad restructuring of how credit cards are priced, managed and marketed.
Read more here
New U.S. derivatives rules could make odd partners
(Reuters) - New U.S. rules for the trading of derivatives could drive market enemies into each other's arms, as dealers and exchanges look to strike more partnerships to yield shared profits from the revamped landscape.
The Obama administration's proposals, announced last week, favor exchange and clearinghouse operators because they require "standardized trades" to move onto exchanges, and require all over-the-counter derivatives to be cleared by regulated central counterparties.
That would effectively transfer a very lucrative business from derivatives dealers, blamed by many for the financial crisis, to exchanges and clearinghouses, which have touted their durability since markets plunged last year.
They have long waged a tug-a-war for control over where derivatives trade, with the dealers' private OTC market mostly dominant. The new regulations may force the dealers and exchanges to work more closely together.
"There were already initiatives underway to have exchanges partner with dealers, and this helps accelerate what was already underway," Matthew Lavicka, managing director of cash equities at Goldman Sachs & Co, which is among the top U.S. derivatives dealers, told Reuters on Wednesday.
Goldman and several other big banks own a 50-percent equity stake in IntercontinentalExchange's clearinghouse for credit default swaps. Dealer backing pushed ICE to the fore of clearinghouses looking to clear U.S. CDS, default-insurance products blamed for worsening the crisis.
The world's biggest exchanges, including CME Group Inc, NYSE Euronext and Nasdaq OMX, have sought partnerships with dealers and other big OTC players who would drive business to their derivative clearinghouses and exchanges.
"You can't just build it and have them come," said Larry Leibowitz, head of U.S. markets and global technology at New York Stock Exchange parent NYSE Euronext. "We've been launched in Europe for a while and people aren't really using it," he said of the company's five month-old European CDS clearer.
OTC MARKET DOMINANT -- FOR NOW
Broker-dealers earn money from trading or facilitating the trade of derivatives, instruments that derive their value from other assets. Because the $194 trillion U.S. OTC market eclipses the $7 trillion exchange-traded market, exchanges have salivated at the prospect of grabbing a bigger slice.
But they have had little success because derivatives are tailored specifically for those who trade them, and exchanges typically trade standardized products for wider consumption.
The Obama administration's plans, meant to avoid a repeat of the financial meltdown that sparked a global recession, could change the equation.
"A lot of what was signaled there was that the administration was trying to get the regulators, the sellside, the buyside and the exchanges all to work together," said Rick Redding, CME Group's managing director of products and services.
"I think directionally, it was telling the market participants they need to work in a more collaborative way to come up with solutions," he said on Wednesday in an interview on the sidelines of a conference hosted by Fox-Pitt Kelton here.
An OTC derivatives trade is a private agreement between two parties. Regulators want to install a clearinghouse between those trades to act as a central counterparty that would guarantee the obligations if any participant defaults.
Read more here
The Obama administration's proposals, announced last week, favor exchange and clearinghouse operators because they require "standardized trades" to move onto exchanges, and require all over-the-counter derivatives to be cleared by regulated central counterparties.
That would effectively transfer a very lucrative business from derivatives dealers, blamed by many for the financial crisis, to exchanges and clearinghouses, which have touted their durability since markets plunged last year.
They have long waged a tug-a-war for control over where derivatives trade, with the dealers' private OTC market mostly dominant. The new regulations may force the dealers and exchanges to work more closely together.
"There were already initiatives underway to have exchanges partner with dealers, and this helps accelerate what was already underway," Matthew Lavicka, managing director of cash equities at Goldman Sachs & Co, which is among the top U.S. derivatives dealers, told Reuters on Wednesday.
Goldman and several other big banks own a 50-percent equity stake in IntercontinentalExchange's clearinghouse for credit default swaps. Dealer backing pushed ICE to the fore of clearinghouses looking to clear U.S. CDS, default-insurance products blamed for worsening the crisis.
The world's biggest exchanges, including CME Group Inc, NYSE Euronext and Nasdaq OMX, have sought partnerships with dealers and other big OTC players who would drive business to their derivative clearinghouses and exchanges.
"You can't just build it and have them come," said Larry Leibowitz, head of U.S. markets and global technology at New York Stock Exchange parent NYSE Euronext. "We've been launched in Europe for a while and people aren't really using it," he said of the company's five month-old European CDS clearer.
OTC MARKET DOMINANT -- FOR NOW
Broker-dealers earn money from trading or facilitating the trade of derivatives, instruments that derive their value from other assets. Because the $194 trillion U.S. OTC market eclipses the $7 trillion exchange-traded market, exchanges have salivated at the prospect of grabbing a bigger slice.
But they have had little success because derivatives are tailored specifically for those who trade them, and exchanges typically trade standardized products for wider consumption.
The Obama administration's plans, meant to avoid a repeat of the financial meltdown that sparked a global recession, could change the equation.
"A lot of what was signaled there was that the administration was trying to get the regulators, the sellside, the buyside and the exchanges all to work together," said Rick Redding, CME Group's managing director of products and services.
"I think directionally, it was telling the market participants they need to work in a more collaborative way to come up with solutions," he said on Wednesday in an interview on the sidelines of a conference hosted by Fox-Pitt Kelton here.
An OTC derivatives trade is a private agreement between two parties. Regulators want to install a clearinghouse between those trades to act as a central counterparty that would guarantee the obligations if any participant defaults.
Read more here
Lehman Brothers questioned over securities sales
(Reuters) - Regulators have questioned former Lehman Brothers Holdings (LEHMQ.PK) executives over their marketing of auction-rate securities, the Wall Street Journal reported, citing people with knowledge of the matter.
Prosecutors from the U.S. attorney's office in Brooklyn and Securities and Exchange Commission lawyers have interviewed several former Lehman employees about the securities, to try to determine whether these people defrauded customers, the newspaper said.
Read more here
Prosecutors from the U.S. attorney's office in Brooklyn and Securities and Exchange Commission lawyers have interviewed several former Lehman employees about the securities, to try to determine whether these people defrauded customers, the newspaper said.
Read more here
Fed mulled increasing debt purchases in April
(Reuters) - The Federal Reserve said on Wednesday it saw modest improvements in the U.S. economy last month, but it still saw big risks and left open the possibility of increasing its purchases of mortgage-related and government debt to keep credit flowing and spur recovery.
Despite a pickup in household and business confidence that Fed officials saw helping to steady spending when they met in late April, they viewed the evidence as too tentative to erase risks facing the recession-mired economy.
The policy-makers cut their forecasts for economic growth over the next three years and debated whether they should further ramp up planned purchases of mortgage agency and government securities, minutes of their April 28-29 meeting said.
The Fed in recent months has turned to asset purchases as a means to keep credit flowing since running out of scope to further lower benchmark interest rates after bringing them down to close to zero percent last year.
"Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery," the minutes of the Federal Open Market Committee's meeting said.
"All members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases," they added.
In fresh quarterly forecasts, the Fed projected the U.S. economy would contract by between 1.3 percent and 2.0 percent this year, with the unemployment rate rising to between 9.2 percent and 9.6 percent.
In January, the Fed had forecast a milder contraction of between 0.5 percent and 1.3 percent, with the jobless rate rising to between 8.5 percent and 8.8 percent.
U.S. stocks fell on the gloomier economic forecast, while debt prices rallied on the prospect the Fed could boost its securities purchases.
"The tone of the minutes is a little more optimistic, and the forecasts are a little more pessimistic," said Christopher Low, chief economist for FTN Financial in New York.
The minutes showed the Fed staff last month had offered a sunnier forecast than the policy-makers, with the staff revising up their outlook for economic activity. They anticipated that growth would expand at a rate well above its potential in 2011 and that the unemployment rate would decline significantly.
"Key factors expected to drive the acceleration in economic activity were the boost to spending from fiscal stimulus, the bottoming out of the housing market, a turn in the inventory cycle from liquidation to modest accumulation, and ongoing gradual recovery of financial markets," the minutes said.
Read more here
Despite a pickup in household and business confidence that Fed officials saw helping to steady spending when they met in late April, they viewed the evidence as too tentative to erase risks facing the recession-mired economy.
The policy-makers cut their forecasts for economic growth over the next three years and debated whether they should further ramp up planned purchases of mortgage agency and government securities, minutes of their April 28-29 meeting said.
The Fed in recent months has turned to asset purchases as a means to keep credit flowing since running out of scope to further lower benchmark interest rates after bringing them down to close to zero percent last year.
"Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery," the minutes of the Federal Open Market Committee's meeting said.
"All members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases," they added.
In fresh quarterly forecasts, the Fed projected the U.S. economy would contract by between 1.3 percent and 2.0 percent this year, with the unemployment rate rising to between 9.2 percent and 9.6 percent.
In January, the Fed had forecast a milder contraction of between 0.5 percent and 1.3 percent, with the jobless rate rising to between 8.5 percent and 8.8 percent.
U.S. stocks fell on the gloomier economic forecast, while debt prices rallied on the prospect the Fed could boost its securities purchases.
"The tone of the minutes is a little more optimistic, and the forecasts are a little more pessimistic," said Christopher Low, chief economist for FTN Financial in New York.
The minutes showed the Fed staff last month had offered a sunnier forecast than the policy-makers, with the staff revising up their outlook for economic activity. They anticipated that growth would expand at a rate well above its potential in 2011 and that the unemployment rate would decline significantly.
"Key factors expected to drive the acceleration in economic activity were the boost to spending from fiscal stimulus, the bottoming out of the housing market, a turn in the inventory cycle from liquidation to modest accumulation, and ongoing gradual recovery of financial markets," the minutes said.
Read more here
Tuesday, 19 May 2009
GM bankruptcy plan eyes quick sale to government
(Reuters) - If General Motors Corp files for bankruptcy, as widely expected, its healthy assets will be quickly sold to a new company owned by the U.S. government, a source familiar with the situation said on Tuesday.
The source, who was not cleared to speak with the media and would not be identified, said the U.S. government would pay for the assets by assuming the automaker's $6 billion of secured debt and forgiving the bulk of the $15.4 billion of emergency loans that the U.S. Treasury has provided to GM.
The government is negotiating the terms on which it will assume GM's secured debt and might make an the offer to holders of the debt that is far superior to the one made to Chrysler LLC's secured lenders, the source said.
Chrysler filed for bankruptcy in April and has proposed paying its secured lenders about 28 cents on the dollar.
The new GM is likely to distribute stock in the company to GM's unions in return for concessions on wages and benefits, the source said.
The percentage of stock given to the unions, bondholders and other creditors whose debt is not repaid by new GM has not been determined, the source said.
In addition, the government would extend a credit line to the new company, the source said.
The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.
The government has given GM until June 1 to restructure its operations to lower its debt burden and employee costs as sales have plummeted in recent years.
DELPHI, HENDERSON
GM will likely take on some of the operations of its bankrupt supplier Delphi Corp to make sure it gets needed auto parts throughout its reorganization, according to the source. The company is currently negotiating terms with Delphi's estate, the source said.
Delphi, a former unit of GM, has been operating in bankruptcy since 2005.
The board of the new company would be established with the tacit approval of the government. Fritz Henderson, who took the helm of GM earlier this year after the government pushed out Rick Wagoner, will head the new company, the source said.
Setting up a new company to buy the healthy assets is aimed bringing operations out of bankruptcy as quickly as possible. GM is concerned that consumers might not be willing to make a major purchase from a bankrupt company, fearing it would not honor warranties or provide service.
Chrysler is employing a similar strategy in its bankruptcy. The smaller automaker is selling its operations to a group that will be managed by Italian automaker Fiat and wants to have the strongest operations out of bankruptcy in 60 days.
Read more here
The source, who was not cleared to speak with the media and would not be identified, said the U.S. government would pay for the assets by assuming the automaker's $6 billion of secured debt and forgiving the bulk of the $15.4 billion of emergency loans that the U.S. Treasury has provided to GM.
The government is negotiating the terms on which it will assume GM's secured debt and might make an the offer to holders of the debt that is far superior to the one made to Chrysler LLC's secured lenders, the source said.
Chrysler filed for bankruptcy in April and has proposed paying its secured lenders about 28 cents on the dollar.
The new GM is likely to distribute stock in the company to GM's unions in return for concessions on wages and benefits, the source said.
The percentage of stock given to the unions, bondholders and other creditors whose debt is not repaid by new GM has not been determined, the source said.
In addition, the government would extend a credit line to the new company, the source said.
The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.
The government has given GM until June 1 to restructure its operations to lower its debt burden and employee costs as sales have plummeted in recent years.
DELPHI, HENDERSON
GM will likely take on some of the operations of its bankrupt supplier Delphi Corp to make sure it gets needed auto parts throughout its reorganization, according to the source. The company is currently negotiating terms with Delphi's estate, the source said.
Delphi, a former unit of GM, has been operating in bankruptcy since 2005.
The board of the new company would be established with the tacit approval of the government. Fritz Henderson, who took the helm of GM earlier this year after the government pushed out Rick Wagoner, will head the new company, the source said.
Setting up a new company to buy the healthy assets is aimed bringing operations out of bankruptcy as quickly as possible. GM is concerned that consumers might not be willing to make a major purchase from a bankrupt company, fearing it would not honor warranties or provide service.
Chrysler is employing a similar strategy in its bankruptcy. The smaller automaker is selling its operations to a group that will be managed by Italian automaker Fiat and wants to have the strongest operations out of bankruptcy in 60 days.
Read more here
Fiat expansion stirs resentment in Italy's south
(Reuters) - Staring at the locked gates of a Fiat car factory, Mimmo Vacchiano says many families in this poor corner of southern Italy face a stark choice unless its turnstiles reopen.
"If they close this plant, there's nothing else here, only unemployment or the mafia," said Vacchiano, a 48-year-old father of two. "Here, it's not like northern Italy, where you can find another job. We're living in panic."
Pomigliano d'Arco, a town of 40,000 people in the shadow of Mount Vesuvius, relies on Fiat for its lifeblood. In recent decades, industry in the nearby port of Naples has closed, tightening the grip of the ruthless Camorra crime gang on the economy of one of Europe's most depressed regions.
Residents now fear they may pay the price for cash-strapped Fiat's high-stakes strategy to survive the global recession by expanding to become the world's second largest car maker.
Unemployment in Pomigliano already runs at nearly 20 percent and Fiat's temporary closure of the plant -- in a bid to slash costs like other major car makers -- has brought the town to its knees. Fiat employs 5,000 people directly here but the plant provides jobs for 20,000 if suppliers are taken into account.
Fiat agreed last month to take 20 percent of bankrupt No. 3 U.S. auto maker Chrysler and wants to buy the international operations of struggling General Motors, including Germany's Opel. This has raised fears of job cuts in Italy, especially in Pomigliano and at Fiat's Termini Imerese plant in Sicily.
Workers in Pomigliano, among the most militant in Italy, have already clashed with police despite pledges from Fiat and the government that the plant may be downsized but not closed.
"Shutting this plant would cause a revolt," said Vacchiano, standing with angry unionists who say Fiat has refused to talk to them. "If they buy Opel, they'll be doing it with money made off our backs!"
Fiat CEO Sergio Marchionne has said he will only meet unions once he has a clearer idea of the Opel deal. But with Fiat idling the plant for weeks at a time, workers say monthly welfare payments of about 700 euros ($950) are not enough.
On the winding main street, some stores have shut down and in the square men sit idly on park benches. Rubbish litters doorways and washing dries on lines outside apartments where three generations of families live.
In his office in the dilapidated municipal building, Mayor Antonio Dellaratta says Prime Minister Silvio Berlusconi's center-right government has a duty to step in.
"This could bring the local economy to its knees. High unemployment and insecurity would bring this town to collapse," he said. "We're in favor of this Opel merger but production must stay here. We must insist on that because Fiat is Italian."
RISKY MOVE
Founded in 1899 in the industrial town of Turin, Fiat quickly grew to become the country's largest industrial group, transforming the Agnelli family that controls it into the closest thing Italy now has to royalty.
Fiat has factories from Brazil to Poland, luxury brands such as Maserati and Ferrari, and interests in insurance, technology, advertising and publishing, including La Stampa newspaper.
Read more here
"If they close this plant, there's nothing else here, only unemployment or the mafia," said Vacchiano, a 48-year-old father of two. "Here, it's not like northern Italy, where you can find another job. We're living in panic."
Pomigliano d'Arco, a town of 40,000 people in the shadow of Mount Vesuvius, relies on Fiat for its lifeblood. In recent decades, industry in the nearby port of Naples has closed, tightening the grip of the ruthless Camorra crime gang on the economy of one of Europe's most depressed regions.
Residents now fear they may pay the price for cash-strapped Fiat's high-stakes strategy to survive the global recession by expanding to become the world's second largest car maker.
Unemployment in Pomigliano already runs at nearly 20 percent and Fiat's temporary closure of the plant -- in a bid to slash costs like other major car makers -- has brought the town to its knees. Fiat employs 5,000 people directly here but the plant provides jobs for 20,000 if suppliers are taken into account.
Fiat agreed last month to take 20 percent of bankrupt No. 3 U.S. auto maker Chrysler and wants to buy the international operations of struggling General Motors, including Germany's Opel. This has raised fears of job cuts in Italy, especially in Pomigliano and at Fiat's Termini Imerese plant in Sicily.
Workers in Pomigliano, among the most militant in Italy, have already clashed with police despite pledges from Fiat and the government that the plant may be downsized but not closed.
"Shutting this plant would cause a revolt," said Vacchiano, standing with angry unionists who say Fiat has refused to talk to them. "If they buy Opel, they'll be doing it with money made off our backs!"
Fiat CEO Sergio Marchionne has said he will only meet unions once he has a clearer idea of the Opel deal. But with Fiat idling the plant for weeks at a time, workers say monthly welfare payments of about 700 euros ($950) are not enough.
On the winding main street, some stores have shut down and in the square men sit idly on park benches. Rubbish litters doorways and washing dries on lines outside apartments where three generations of families live.
In his office in the dilapidated municipal building, Mayor Antonio Dellaratta says Prime Minister Silvio Berlusconi's center-right government has a duty to step in.
"This could bring the local economy to its knees. High unemployment and insecurity would bring this town to collapse," he said. "We're in favor of this Opel merger but production must stay here. We must insist on that because Fiat is Italian."
RISKY MOVE
Founded in 1899 in the industrial town of Turin, Fiat quickly grew to become the country's largest industrial group, transforming the Agnelli family that controls it into the closest thing Italy now has to royalty.
Fiat has factories from Brazil to Poland, luxury brands such as Maserati and Ferrari, and interests in insurance, technology, advertising and publishing, including La Stampa newspaper.
Read more here
Bank of America raises $13.47 billion in share sale
(Reuters) - Bank of America Corp raised $13.47 billion through a share sale, marking a major step toward meeting the U.S. government's requirements for capital-raising following the recent "stress testing" of the bank.
Including proceeds from the sale of part of its stake in China Construction Bank Corp for $7.3 billion, the bank is now more than half-way toward plugging a $33.9 billion capital shortfall identified by the government.
The bank has issued 1.25 billion shares at an average price of $10.77 each since last Friday, it said in a statement late on Tuesday. Earlier in the day, a source familiar with the transaction said the bank had sold 800 million shares at $10 each on Tuesday alone.
The average price of $10.77 is 4.3 percent below Tuesday's closing price of $11.25. Bank of America shares rose two cents in after-hours trade to $11.27.
The offering by Bank of America comes on the heels of smaller share issuances by other banks ordered to raise capital. This includes offerings of $8.6 billion by Wells Fargo & Co and $4 billion by Morgan Stanley.
As part of Bank of America's stock sale, which brought in gross proceeds of about $13.47 billion, the bank sold 800 million shares at $10 each on Tuesday alone, a person familiar with the transaction earlier told Reuters.
The person was not authorized to speak because terms of the sale are not public.
Read more here
Including proceeds from the sale of part of its stake in China Construction Bank Corp for $7.3 billion, the bank is now more than half-way toward plugging a $33.9 billion capital shortfall identified by the government.
The bank has issued 1.25 billion shares at an average price of $10.77 each since last Friday, it said in a statement late on Tuesday. Earlier in the day, a source familiar with the transaction said the bank had sold 800 million shares at $10 each on Tuesday alone.
The average price of $10.77 is 4.3 percent below Tuesday's closing price of $11.25. Bank of America shares rose two cents in after-hours trade to $11.27.
The offering by Bank of America comes on the heels of smaller share issuances by other banks ordered to raise capital. This includes offerings of $8.6 billion by Wells Fargo & Co and $4 billion by Morgan Stanley.
As part of Bank of America's stock sale, which brought in gross proceeds of about $13.47 billion, the bank sold 800 million shares at $10 each on Tuesday alone, a person familiar with the transaction earlier told Reuters.
The person was not authorized to speak because terms of the sale are not public.
Read more here
Sunday, 17 May 2009
UBS ups wages to stem loss of investment bankers
(Reuters) - UBS, has hiked the salaries of some investment bankers to guard against staff poaching by competitors, Switzerland's largest bank said on Sunday.
"There have been off-cycle salary increases at UBS Investment Bank to retain employees in critical positions," UBS spokesman Andreas Kern said, adding it was usual to adjust compensation to the market environment.
Earlier on Sunday Swiss paper Sonntag reported that hundreds of UBS managing directors at the investment bank, with salaries of around 270,000 Swiss francs ($243,200) on average, were receiving 50 percent higher wages to compensate for the loss of usual bonuses.
UBS, the world's largest wealth manager in terms of assets, declined to comment on the details of the article.
The bank is losing key staff in important areas to competitors and had to react, chairman Kaspar Villiger was reported as saying on Saturday.
Facing public anger over what many regarded as excessive bonuses, UBS undertook a radical overhaul of its executive pay system last year after its bet on risky U.S. assets backfired.
Read more here
"There have been off-cycle salary increases at UBS Investment Bank to retain employees in critical positions," UBS spokesman Andreas Kern said, adding it was usual to adjust compensation to the market environment.
Earlier on Sunday Swiss paper Sonntag reported that hundreds of UBS managing directors at the investment bank, with salaries of around 270,000 Swiss francs ($243,200) on average, were receiving 50 percent higher wages to compensate for the loss of usual bonuses.
UBS, the world's largest wealth manager in terms of assets, declined to comment on the details of the article.
The bank is losing key staff in important areas to competitors and had to react, chairman Kaspar Villiger was reported as saying on Saturday.
Facing public anger over what many regarded as excessive bonuses, UBS undertook a radical overhaul of its executive pay system last year after its bet on risky U.S. assets backfired.
Read more here
New York, London Exchanges See Rebound in Listings
(Bloomberg) -- Corporate listings are set to rebound as financial markets stabilize and companies seek funding, the heads of the New York and London exchanges said.
“There’s a pretty big pipeline and a lot of pent-up demand,” NYSE Euronext Chief Executive Officer Duncan Niederauer said in an interview today. The supply of companies looking to list looks “very good” and will restart as financial markets stabilize, London Stock Exchange Group Plc CEO Clara Furse said. Neither CEO gave details.
The MSCI World Index has risen 34 percent from the year’s low in March, reflecting increased confidence that government stimulus plans and lower global interest rates will revive the global economy. Bourses are hoping for an end to the drought in initial public offerings, with zero venture capital-backed U.S. startups coming to market in the two quarters ending March 31, the longest halt in least 38 years.
Both Niederauer and Furse spoke in interviews during the Lujiazui Forum in Shanghai, the commercial capital of China, a potential source of new listings amid signs that the world’s third-biggest economy is being revived by the government’s 4 trillion yuan ($586 billion) stimulus package.
NYSE Euronext last year asked Chinese regulators to consider relaxing rules barring companies from listing shares on both the Shanghai Stock Exchange and overseas markets. The company is seeking to meet demand from issuers who want multiple stock listings and investors interested in overseas companies.
China Listing
The bourse has the support of Chinese regulators to list in Shanghai though there is “no timetable yet,” Niederauer said. NYSE Euronext was formed in 2007, bringing together bourses including the New York Stock Exchange, London International Financial Futures & Options Exchange and markets in Paris, Brussels and Amsterdam.
Confidence in the global economy jumped to the highest level in 19 months as central bankers pointed to signs of a revival and stress tests on U.S. lenders reassured investors, the Bloomberg Professional Global Confidence Index for May, a survey of users on six continents, showed.
Federal Reserve Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet are among officials who have signaled the recession may be easing. While job losses are projected to keep climbing, factories are producing more as inventories run down.
Read more here
“There’s a pretty big pipeline and a lot of pent-up demand,” NYSE Euronext Chief Executive Officer Duncan Niederauer said in an interview today. The supply of companies looking to list looks “very good” and will restart as financial markets stabilize, London Stock Exchange Group Plc CEO Clara Furse said. Neither CEO gave details.
The MSCI World Index has risen 34 percent from the year’s low in March, reflecting increased confidence that government stimulus plans and lower global interest rates will revive the global economy. Bourses are hoping for an end to the drought in initial public offerings, with zero venture capital-backed U.S. startups coming to market in the two quarters ending March 31, the longest halt in least 38 years.
Both Niederauer and Furse spoke in interviews during the Lujiazui Forum in Shanghai, the commercial capital of China, a potential source of new listings amid signs that the world’s third-biggest economy is being revived by the government’s 4 trillion yuan ($586 billion) stimulus package.
NYSE Euronext last year asked Chinese regulators to consider relaxing rules barring companies from listing shares on both the Shanghai Stock Exchange and overseas markets. The company is seeking to meet demand from issuers who want multiple stock listings and investors interested in overseas companies.
China Listing
The bourse has the support of Chinese regulators to list in Shanghai though there is “no timetable yet,” Niederauer said. NYSE Euronext was formed in 2007, bringing together bourses including the New York Stock Exchange, London International Financial Futures & Options Exchange and markets in Paris, Brussels and Amsterdam.
Confidence in the global economy jumped to the highest level in 19 months as central bankers pointed to signs of a revival and stress tests on U.S. lenders reassured investors, the Bloomberg Professional Global Confidence Index for May, a survey of users on six continents, showed.
Federal Reserve Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet are among officials who have signaled the recession may be easing. While job losses are projected to keep climbing, factories are producing more as inventories run down.
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Thursday, 14 May 2009
Google eases trademark restrictions on some U.S. ads
(Reuters) - Google Inc (GOOG.O) is lifting restrictions on the use of trademarked terms in its US online advertising system, a move that could increase friction between the Internet giant and brand owners.
The new policy will allow businesses to place trademarked terms directly in the copy of text advertisements that run in the US starting next month, the company announced in a blog post on Thursday.
The move, which Google said will improve the quality of its advertisements, comes as advertisers have begun bidding less money for the individual search terms that their ads appear alongside and as Google's revenue growth slows in the dismal economic climate.
Until now, Google has forbidden companies from placing trademarked terms in their advertising copy unless they owned the trademark or had explicit permission from the trademark owners.
That policy was the equivalent of a supermarket promotion in a Sunday newspaper that only listed generic products like "discount cola" instead of the actual products for sale, Google said in its blog post on Thursday.
The new policy will allow resellers and informational Web sites to use trademarked terms in their copy in certain situations without seeking permission from the trademark owners.
The move represents the second recent loosening of Google's policies on trademark use. Earlier this month, Google said it would allow companies in 190 countries outside the US to bid on trademarked keywords that act as the triggers for their own advertisements.
Google is also facing new legal challenges from trademark owners.
On Monday, Firepond, a Texas software company, filed a trademark infringement suit against Google seeking class action status for all Texas trademark owners.
Brand owners have historically had serious concerns about Google's policy with regards to trademarks, said Eric Goldman, Associate Professor of Law at Santa Clara University School of Law.
Google's latest policy change is "kind of like pouring gasoline on the fire," he said.
The change may help consumers better understand sponsored search results, by allowing the advertiser to reference trademarks in their marketing pitches, Goldman said. But he predicted that the change could spark more legal challenges.
Google Senior Trademark Counsel Terri Chen acknowledged some people might be unhappy with the change, but she said she believed the ads would be well-received overall.
Read more here
The new policy will allow businesses to place trademarked terms directly in the copy of text advertisements that run in the US starting next month, the company announced in a blog post on Thursday.
The move, which Google said will improve the quality of its advertisements, comes as advertisers have begun bidding less money for the individual search terms that their ads appear alongside and as Google's revenue growth slows in the dismal economic climate.
Until now, Google has forbidden companies from placing trademarked terms in their advertising copy unless they owned the trademark or had explicit permission from the trademark owners.
That policy was the equivalent of a supermarket promotion in a Sunday newspaper that only listed generic products like "discount cola" instead of the actual products for sale, Google said in its blog post on Thursday.
The new policy will allow resellers and informational Web sites to use trademarked terms in their copy in certain situations without seeking permission from the trademark owners.
The move represents the second recent loosening of Google's policies on trademark use. Earlier this month, Google said it would allow companies in 190 countries outside the US to bid on trademarked keywords that act as the triggers for their own advertisements.
Google is also facing new legal challenges from trademark owners.
On Monday, Firepond, a Texas software company, filed a trademark infringement suit against Google seeking class action status for all Texas trademark owners.
Brand owners have historically had serious concerns about Google's policy with regards to trademarks, said Eric Goldman, Associate Professor of Law at Santa Clara University School of Law.
Google's latest policy change is "kind of like pouring gasoline on the fire," he said.
The change may help consumers better understand sponsored search results, by allowing the advertiser to reference trademarks in their marketing pitches, Goldman said. But he predicted that the change could spark more legal challenges.
Google Senior Trademark Counsel Terri Chen acknowledged some people might be unhappy with the change, but she said she believed the ads would be well-received overall.
Read more here
Rio Tinto says committed to Chinalco tie-up
(Reuters) - Miner Rio Tinto (RIO.AX) remains committed to a planned $19.5 billion tie-up with Chinese metals firm Chinalco, it said, responding to talk that the deal may be revised to let more shareholders take part in a rights issue.
The latest endorsement of Chinalco, already Rio's (RIO.L) largest shareholder, also comes amid speculation the Australian government could demand revisions, or kill the deal under foreign investment guidelines because Chinalco is state-owned.
Rio Tinto shares were up 7 percent at A$61.66 on Friday, recouping much of a previous heavy slide on market talk it might renegotiate the most controversial part of the deal -- a $7.2 billion issue of convertible bonds to Chinalco.
Speculation had focused on whether Rio would tweak the bonds issue to make it available to all Rio shareholders, not just Chinalco, or on whether the deal could be scrapped and another strategic investor brought in, perhaps rival miner BHP Billiton (BHP.AX) (BLT.L).
"The company remains committed to delivering this strategic partnership," Rio Tinto said in response to a query from the Australian stock market over the movements in its share price.
The deal as it stands would double Chinalco's Rio stake to 19 percent.
The Australian Financial Review newspaper said on Friday Chinalco would consider changing the terms of the convertible bonds, but was adamant the other major element of the tie-up -- $12.3 billion in direct investments in key Rio mining assets -- should remain as agreed in February.
Citing no sources, the business daily said Rio Tinto's director of strategy, Doug Ritchie, was believed to have visited Chinalco officials last week to discuss investors' opposition to the deal and possibly to revise the terms of the bond issue.
Chinalco President Wang Wenfu was believed to be pragmatic over the price of the notes, the newspaper added.
"Anyone who's underweight in Rio will obviously want a massive dilutive rights issue, because it actually helps them," said a fund manager in Australia who owns shares in Rio and BHP and who did not want to be named.
"Perhaps then, you can get into Rio at a much lower price. But if you're overweight Rio, then having a highly dilutive rights issue is just nuts," the manager said.
Read more here
The latest endorsement of Chinalco, already Rio's (RIO.L) largest shareholder, also comes amid speculation the Australian government could demand revisions, or kill the deal under foreign investment guidelines because Chinalco is state-owned.
Rio Tinto shares were up 7 percent at A$61.66 on Friday, recouping much of a previous heavy slide on market talk it might renegotiate the most controversial part of the deal -- a $7.2 billion issue of convertible bonds to Chinalco.
Speculation had focused on whether Rio would tweak the bonds issue to make it available to all Rio shareholders, not just Chinalco, or on whether the deal could be scrapped and another strategic investor brought in, perhaps rival miner BHP Billiton (BHP.AX) (BLT.L).
"The company remains committed to delivering this strategic partnership," Rio Tinto said in response to a query from the Australian stock market over the movements in its share price.
The deal as it stands would double Chinalco's Rio stake to 19 percent.
The Australian Financial Review newspaper said on Friday Chinalco would consider changing the terms of the convertible bonds, but was adamant the other major element of the tie-up -- $12.3 billion in direct investments in key Rio mining assets -- should remain as agreed in February.
Citing no sources, the business daily said Rio Tinto's director of strategy, Doug Ritchie, was believed to have visited Chinalco officials last week to discuss investors' opposition to the deal and possibly to revise the terms of the bond issue.
Chinalco President Wang Wenfu was believed to be pragmatic over the price of the notes, the newspaper added.
"Anyone who's underweight in Rio will obviously want a massive dilutive rights issue, because it actually helps them," said a fund manager in Australia who owns shares in Rio and BHP and who did not want to be named.
"Perhaps then, you can get into Rio at a much lower price. But if you're overweight Rio, then having a highly dilutive rights issue is just nuts," the manager said.
Read more here
Wednesday, 13 May 2009
GM, Chrysler to cut up to 3,000 dealers: sources
(Reuters) - General Motors Corp and Chrysler aim to drop as many as 3,000 U.S. dealers and are expected to begin sending notifications as early as Thursday, three people briefed on the still developing plans said.
GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers -- a third of its roughly 6,000 U.S. dealers, the sources told Reuters.
Chrysler, which filed for bankruptcy on April 30, will also tell up to 1,000 of its 3,189 U.S. dealers it is terminating their franchise agreements, according to the sources who asked not to be identified because the controversial closure plans have not been yet announced.
The moves to shut down auto dealerships underscores how the economic pain caused by the downward spiral of both automakers -- now operating under U.S. government oversight -- is spreading beyond their home base in Detroit.
The development comes as dealer representatives have stepped up lobbying in Washington to try to slow down closures they estimate would cost 200,000 dealership jobs.
The involuntary terminations are also widely expected to prompt a legal challenge from dealers who are independent retail networks protected by state franchise laws.
Chrysler spokeswoman Kathy Graham said the automaker had not announced its dealership closure plans.
"We have not announced anything at this point," she said. "We are not done with our process at this point."
A GM spokesman was not immediately available for comment.
More than 100 members from the National Automobile Dealers Association, a group representing the country's 20,000 new car dealers, met members of the House of Representatives and Senate in Washington on Wednesday, asking them to intervene with the Obama administration's autos task force on planned reductions.
"A rapid cut of dealers is a bad idea," NADA Chairman John McEleney said in a statement.
McEleney said his organization does not oppose dealer consolidation, but believes the administration and the companies are moving too fast.
NADA leaders are scheduled to meet the U.S. auto task force on Thursday.
The task force, headed by former investment banker Steve Rattner, is driving the restructuring of both companies, which are planning to close plants, cut jobs and restructure dealer lineups to establish viability.
Read more here
GM, facing a U.S. government-imposed deadline of June 1 to restructure or file for bankruptcy, is expected to send termination notices to up to 2,000 dealers -- a third of its roughly 6,000 U.S. dealers, the sources told Reuters.
Chrysler, which filed for bankruptcy on April 30, will also tell up to 1,000 of its 3,189 U.S. dealers it is terminating their franchise agreements, according to the sources who asked not to be identified because the controversial closure plans have not been yet announced.
The moves to shut down auto dealerships underscores how the economic pain caused by the downward spiral of both automakers -- now operating under U.S. government oversight -- is spreading beyond their home base in Detroit.
The development comes as dealer representatives have stepped up lobbying in Washington to try to slow down closures they estimate would cost 200,000 dealership jobs.
The involuntary terminations are also widely expected to prompt a legal challenge from dealers who are independent retail networks protected by state franchise laws.
Chrysler spokeswoman Kathy Graham said the automaker had not announced its dealership closure plans.
"We have not announced anything at this point," she said. "We are not done with our process at this point."
A GM spokesman was not immediately available for comment.
More than 100 members from the National Automobile Dealers Association, a group representing the country's 20,000 new car dealers, met members of the House of Representatives and Senate in Washington on Wednesday, asking them to intervene with the Obama administration's autos task force on planned reductions.
"A rapid cut of dealers is a bad idea," NADA Chairman John McEleney said in a statement.
McEleney said his organization does not oppose dealer consolidation, but believes the administration and the companies are moving too fast.
NADA leaders are scheduled to meet the U.S. auto task force on Thursday.
The task force, headed by former investment banker Steve Rattner, is driving the restructuring of both companies, which are planning to close plants, cut jobs and restructure dealer lineups to establish viability.
Read more here
U.S. regulators seek OTC derivatives crackdown
(Reuters) - The Obama administration moved on Wednesday to exert more control over the shadowy over-the-counter derivatives market, now closely linked to the global credit crisis.
Federal regulators proposed subjecting all over-the-counter derivatives dealers -- whose trades are not made through an exchange, making them hard to monitor -- to "a robust regime of prudential supervision and regulation," including conservative capital, reporting and margin requirements.
The plan, sketched out by Treasury Secretary Timothy Geithner and top regulators at a news conference, marks a big step in the administration's push to rewrite rules for banks and financial markets in response to a credit crisis that has sent economies around the globe reeling.
U.S. officials have pumped billions of dollars of taxpayer money into banks and automakers to try to stem the crisis. Last week, they wrapped up "stress tests" at the nations 19 largest banks and told ten of them to raise a combined $74.6 billion.
The Obama administration is now aiming to bolster regulatory oversight of the financial system.
Over-the-counter derivatives are presently difficult to monitor and supervise. Billionaire investor Warren Buffett has called derivatives "financial weapons of mass destruction."
Under current law, they are only loosely policed.
"We're going to require for the first time all standardized over-the-counter derivative products be centrally cleared," Geithner told the news conference.
EXPLOSION IN TRADING
Trading of OTC derivatives, instruments that derive their value from other assets, exploded in size in recent years, with many large firms -- such as mega-insurer American International Group (AIG.N) -- charging into the burgeoning market.
The global market is pegged at about $450 trillion.
When the U.S. real estate bubble burst, firms such as AIG were left with mountains of complex, hard-to-sell financial instruments on their books.
In the United States, four large banks control over 90 percent of the derivatives market: JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), and Goldman Sachs Group Inc (GS.N). All have received taxpayer aid.
Officials did not make clear which agency would be in charge of the crackdown. They said they would work together to prevent "forum shopping" for weak rules. Lawmakers disagree over which agency should oversee OTC derivatives clearing.
Laws enforced by both the Securities and Exchange Commission and Commodity Futures Trading Commission would have to be amended by Congress to accommodate the administration's plans.
Read more here
Federal regulators proposed subjecting all over-the-counter derivatives dealers -- whose trades are not made through an exchange, making them hard to monitor -- to "a robust regime of prudential supervision and regulation," including conservative capital, reporting and margin requirements.
The plan, sketched out by Treasury Secretary Timothy Geithner and top regulators at a news conference, marks a big step in the administration's push to rewrite rules for banks and financial markets in response to a credit crisis that has sent economies around the globe reeling.
U.S. officials have pumped billions of dollars of taxpayer money into banks and automakers to try to stem the crisis. Last week, they wrapped up "stress tests" at the nations 19 largest banks and told ten of them to raise a combined $74.6 billion.
The Obama administration is now aiming to bolster regulatory oversight of the financial system.
Over-the-counter derivatives are presently difficult to monitor and supervise. Billionaire investor Warren Buffett has called derivatives "financial weapons of mass destruction."
Under current law, they are only loosely policed.
"We're going to require for the first time all standardized over-the-counter derivative products be centrally cleared," Geithner told the news conference.
EXPLOSION IN TRADING
Trading of OTC derivatives, instruments that derive their value from other assets, exploded in size in recent years, with many large firms -- such as mega-insurer American International Group (AIG.N) -- charging into the burgeoning market.
The global market is pegged at about $450 trillion.
When the U.S. real estate bubble burst, firms such as AIG were left with mountains of complex, hard-to-sell financial instruments on their books.
In the United States, four large banks control over 90 percent of the derivatives market: JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), and Goldman Sachs Group Inc (GS.N). All have received taxpayer aid.
Officials did not make clear which agency would be in charge of the crackdown. They said they would work together to prevent "forum shopping" for weak rules. Lawmakers disagree over which agency should oversee OTC derivatives clearing.
Laws enforced by both the Securities and Exchange Commission and Commodity Futures Trading Commission would have to be amended by Congress to accommodate the administration's plans.
Read more here
Tuesday, 12 May 2009
Ford raises $1.4 billion through offering
(Reuters) - Ford Motor Co said on Tuesday that it raised $1.4 billion through a 300 million share offer for $4.75 per share, a move that its chief executive said was an important step toward getting profitable again.
Ford said the proceeds would be used for general corporate purposes, including to fund a portion of its obligation to a union-run fund set up for retiree healthcare expenses.
Selling the stock "is another key step in our plan to transform Ford into an exciting, viable enterprise poised to return to profitability," Chief Executive Alan Mulally said in a statement.
Issuing equity now and possibly funding a larger portion of its retiree obligations with cash would help Ford improve its balance sheet and reduce the potential impact of those obligations on its shareholders, Mulally said.
Ford is the only U.S. automaker that has not sought government aid.
Read more here
Ford said the proceeds would be used for general corporate purposes, including to fund a portion of its obligation to a union-run fund set up for retiree healthcare expenses.
Selling the stock "is another key step in our plan to transform Ford into an exciting, viable enterprise poised to return to profitability," Chief Executive Alan Mulally said in a statement.
Issuing equity now and possibly funding a larger portion of its retiree obligations with cash would help Ford improve its balance sheet and reduce the potential impact of those obligations on its shareholders, Mulally said.
Ford is the only U.S. automaker that has not sought government aid.
Read more here
Oil Companies May Wait for Hedges to End to Go Bargain Shopping
(Bloomberg) -- Quantum Energy Partners, the Houston private-equity firm that put together a $3.5 billion bankroll to go bargain-hunting for acquisitions after oil and natural-gas prices plunged, is waiting for a better time to pounce.
Buyers will accelerate acquisitions late this year and in early 2010 as the hedging contracts that shielded potential takeover targets from tumbling prices expire, said Wil VanLoh, Quantum’s chief executive officer.
“By the first quarter of next year, we’ll be pretty darn active,” VanLoh said in an interview at his downtown office. “Many companies are very well hedged for 2009, so the squeeze hasn’t happened yet. The point of capitulation probably will arrive in the fourth quarter or the first quarter of 2010.”
The record drop in crude prices from 2008’s all-time high hasn’t triggered a surge in takeovers because would-be sellers are demanding mid-2008 valuations, said Michael Bodino, director of research at Sanders Morris Harris Inc. in Dallas. That will change, Bodino and VanLoh said, as hedging contracts drop off, forcing the weakest producers to sell or face bankruptcy.
The number of oil and gas deals last month fell 35 percent from a year earlier, and the value of transactions dropped 60 percent to $5 billion, according to data compiled by Bloomberg. UTS Energy Corp. of Calgary repulsed a third and final takeover bid of C$830 million ($680 million) by Total SA last month, saying the company is worth more.
Time is Wrong
“Now is not a good time to buy because sellers have unrealistically high price expectations,” said Michael Harness, chief executive officer at Osyka Corp., a closely held oil producer in Houston. Harness, a former Amoco Corp. engineer, expects expiring hedges to begin forcing rivals to put oil and gas fields on the auction block as soon as July.
Producers that pre-sold their September 2009 output a year ago locked in a price of $106 a barrel, based on New York Mercantile Exchange futures. If that’s the last month for which they have hedges in place, the best they can hope to get for October production is $58 a barrel, or 45 percent less.
At Quantum, VanLoh and co-founder Toby Neugebauer gathered the managers of their portfolio companies last month to order a halt to acquisition activities on expectations that asset prices will decline more.
“We are still being very, very patient,” VanLoh said in an April 30 interview. “Everything is too expensive, given where prices are going.”
Alberta Acquisition Search
Quantum has invested in 23 companies that later were sold or went public. The firm staked Linn Energy LLC with $15 million in 2003 and took the partnership public in 2006. Houston-based Linn has a market value of more than $2 billion today.
In the Canadian province of Alberta, home to an oil industry that five years ago surpassed Saudi Arabia as the biggest crude exporter to the U.S., cratering stock values and lower energy prices have prompted the C$70 billion ($61 billion) Alberta Investment Management Corp. to step up the search for investment opportunities.
“With commodity prices where they are now, Alberta is looking like it’s going to present a lot of opportunities for us,” Chief Operating Officer Jagdeep Singh Bachher said in a telephone interview.
Edmonton-based AIMCO, as the Crown corporation is known, agreed last month to acquire a 20 percent stake in Calgary-based Precision Drilling Trust, Canada’s largest oil driller. AIMCO’s next move will be to sift through the market wreckage and find companies with assets and management teams most likely to excel even if energy prices remain depressed, said Brian Gibson, senior vice president for public equities at AIMCO.
Read more here
Buyers will accelerate acquisitions late this year and in early 2010 as the hedging contracts that shielded potential takeover targets from tumbling prices expire, said Wil VanLoh, Quantum’s chief executive officer.
“By the first quarter of next year, we’ll be pretty darn active,” VanLoh said in an interview at his downtown office. “Many companies are very well hedged for 2009, so the squeeze hasn’t happened yet. The point of capitulation probably will arrive in the fourth quarter or the first quarter of 2010.”
The record drop in crude prices from 2008’s all-time high hasn’t triggered a surge in takeovers because would-be sellers are demanding mid-2008 valuations, said Michael Bodino, director of research at Sanders Morris Harris Inc. in Dallas. That will change, Bodino and VanLoh said, as hedging contracts drop off, forcing the weakest producers to sell or face bankruptcy.
The number of oil and gas deals last month fell 35 percent from a year earlier, and the value of transactions dropped 60 percent to $5 billion, according to data compiled by Bloomberg. UTS Energy Corp. of Calgary repulsed a third and final takeover bid of C$830 million ($680 million) by Total SA last month, saying the company is worth more.
Time is Wrong
“Now is not a good time to buy because sellers have unrealistically high price expectations,” said Michael Harness, chief executive officer at Osyka Corp., a closely held oil producer in Houston. Harness, a former Amoco Corp. engineer, expects expiring hedges to begin forcing rivals to put oil and gas fields on the auction block as soon as July.
Producers that pre-sold their September 2009 output a year ago locked in a price of $106 a barrel, based on New York Mercantile Exchange futures. If that’s the last month for which they have hedges in place, the best they can hope to get for October production is $58 a barrel, or 45 percent less.
At Quantum, VanLoh and co-founder Toby Neugebauer gathered the managers of their portfolio companies last month to order a halt to acquisition activities on expectations that asset prices will decline more.
“We are still being very, very patient,” VanLoh said in an April 30 interview. “Everything is too expensive, given where prices are going.”
Alberta Acquisition Search
Quantum has invested in 23 companies that later were sold or went public. The firm staked Linn Energy LLC with $15 million in 2003 and took the partnership public in 2006. Houston-based Linn has a market value of more than $2 billion today.
In the Canadian province of Alberta, home to an oil industry that five years ago surpassed Saudi Arabia as the biggest crude exporter to the U.S., cratering stock values and lower energy prices have prompted the C$70 billion ($61 billion) Alberta Investment Management Corp. to step up the search for investment opportunities.
“With commodity prices where they are now, Alberta is looking like it’s going to present a lot of opportunities for us,” Chief Operating Officer Jagdeep Singh Bachher said in a telephone interview.
Edmonton-based AIMCO, as the Crown corporation is known, agreed last month to acquire a 20 percent stake in Calgary-based Precision Drilling Trust, Canada’s largest oil driller. AIMCO’s next move will be to sift through the market wreckage and find companies with assets and management teams most likely to excel even if energy prices remain depressed, said Brian Gibson, senior vice president for public equities at AIMCO.
Read more here
Monday, 11 May 2009
GM exit from the Dow looking more likely
(Reuters) - The potential for changes in the blue-chip Dow Jones industrial average remains high, according to the head of the index's oversight committee, the same day the head of General Motors said bankruptcy had become more likely.
Both GM and Citigroup have needed large infusions of capital from the government to stay alive, and while the automaker edges closer to bankruptcy, Citigroup's capital cushion still remains tenuous.
"The chain of events involving GM and Citi seem to be marching in a certain direction," said John Prestbo, executive director of Dow Jones Indexes and the chairman of the DJI oversight committee.
Monday, Fritz Henderson, the chief executive officer of GM, said it was "more probable" the automaker would need to file for bankruptcy in order to restructure, though there was still a chance it could be avoided.
GM might not be the Dow's only casualty, however, as Citigroup may also be on the chopping block because the financial institution has seen its market capitalization shaved to a fraction of its peak and faces the chance that the government may increase its stake in the company.
Read more here
Both GM and Citigroup have needed large infusions of capital from the government to stay alive, and while the automaker edges closer to bankruptcy, Citigroup's capital cushion still remains tenuous.
"The chain of events involving GM and Citi seem to be marching in a certain direction," said John Prestbo, executive director of Dow Jones Indexes and the chairman of the DJI oversight committee.
Monday, Fritz Henderson, the chief executive officer of GM, said it was "more probable" the automaker would need to file for bankruptcy in order to restructure, though there was still a chance it could be avoided.
GM might not be the Dow's only casualty, however, as Citigroup may also be on the chopping block because the financial institution has seen its market capitalization shaved to a fraction of its peak and faces the chance that the government may increase its stake in the company.
Read more here
Thursday, 07 May 2009
DJ to double investment in India
Dow Jones has major expansion plans for India and will double its investment in its Indian operation in each of the next two years, the company said today.
“India is an increasingly important market for us. The opportunities are significant and will only continue to grow as the Indian market becomes more and more hungry for high-quality business news and information,” Dow Jones vice-president, Mr Bruce MacFarlane said in a release.
Read more here
“India is an increasingly important market for us. The opportunities are significant and will only continue to grow as the Indian market becomes more and more hungry for high-quality business news and information,” Dow Jones vice-president, Mr Bruce MacFarlane said in a release.
Read more here
Wednesday, 06 May 2009
Ford May Suffer as Chrysler Shutdowns Reach Suppliers
(Bloomberg) -- Ford Motor Co., the only self- sufficient U.S. automaker, may be hobbled should prolonged shutdowns at Chrysler LLC and General Motors Corp. lead to failures of essential partsmakers.
Ford, launching three critical models, is at risk of periodic shutdowns if suppliers it shares with GM and Chrysler collapse, analysts said. GM is closing 14 North American plants for as much as nine weeks this summer and Chrysler, which filed for court protection from creditors on April 30, plans to close its factories until emerging from Chapter 11 in a month or two.
“There’s definitely potential for sporadic shutdowns at Ford,” said Mike Wall, supplier analyst at industry consultant CSM Worldwide in Northville, Michigan. The idling of plants at Chrysler and GM “is going to shoot a significant amount of stress through the supply chain.”
Ford is vulnerable because of the interwoven nature of the auto-supply network. Ford shares 70 percent of its suppliers with GM and 64 percent with Chrysler, according to CSM. Asian- based automakers share 59 percent with Chrysler and 58 percent with GM. The loss of a single part can close a plant, Wall said.
“Our ability to unilaterally carry the supply base through this, we just can’t do it,” Ford Executive Chairman Bill Ford told reporters today at a Wayne, Michigan Ford factory. “We’ve spent a lot of time talking to the Automotive Task Force about keeping the viability of the supply base. This is a major issue.”
‘Fluid Situation’
Toyota Motor Corp. and Honda Motor Co. may also be disrupted if suppliers who lose business during the GM and Chrysler shutdowns can no longer afford to stay in business, said Craig Fitzgerald, a supplier consultant at Plante & Moran in Southfield, Michigan.
Chrysler purchasing chief Scott Garberding said in court documents that the failure of suppliers to the Auburn Hills, Michigan-based automaker would “cause severe production problems” for other carmakers, “including GM and Ford.”
Ford doesn’t anticipate production disruptions in the next 30 days, said Todd Nissen, a spokesman for the Dearborn, Michigan-based automaker.
“We don’t see any short-term issues with continuing production,” said Nissen. “Beyond that, we’re all looking at the same things. It’s a fluid situation.”
GM, the largest U.S. automaker, has until June 1 to meet a government-imposed deadline to negotiate concessions with labor and lenders or file for bankruptcy. GM is operating on $15.4 billion in government loans and requested $11.6 billion more.
‘Really Worried’
“Take a supplier with 50 percent GM and 50 percent Ford, if GM files, suddenly their book of business is cut in half,” said Keith Francis, managing director at restructuring firm Hydra Professional in Farmington Hills, Michigan. “Ford, which has positioned itself to stay out of the bailout, has increased risk with its supply base because of what’s happening.”
Ford, Toyota and other automakers are probably “really worried” about the fallout from the production shutdowns and managing their supply bases, John Plant, the chief executive officer of TRW Automotive Holdings Corp. said on a conference call today.
The Livonia, Michigan-based company, the world’s largest supplier of vehicle-safety equipment, managing distress among its own suppliers because of the drop in vehicle production, Plant said.
Ford rose 41 cents, or 7 percent, to $6.26 at 4:00 p.m. in New York Stock Exchange composite trading. Ford has more than doubled this year. GM fell 19 cents, or 10 percent, to $1.66. GM has declined 48 percent this year.
Read more here
Ford, launching three critical models, is at risk of periodic shutdowns if suppliers it shares with GM and Chrysler collapse, analysts said. GM is closing 14 North American plants for as much as nine weeks this summer and Chrysler, which filed for court protection from creditors on April 30, plans to close its factories until emerging from Chapter 11 in a month or two.
“There’s definitely potential for sporadic shutdowns at Ford,” said Mike Wall, supplier analyst at industry consultant CSM Worldwide in Northville, Michigan. The idling of plants at Chrysler and GM “is going to shoot a significant amount of stress through the supply chain.”
Ford is vulnerable because of the interwoven nature of the auto-supply network. Ford shares 70 percent of its suppliers with GM and 64 percent with Chrysler, according to CSM. Asian- based automakers share 59 percent with Chrysler and 58 percent with GM. The loss of a single part can close a plant, Wall said.
“Our ability to unilaterally carry the supply base through this, we just can’t do it,” Ford Executive Chairman Bill Ford told reporters today at a Wayne, Michigan Ford factory. “We’ve spent a lot of time talking to the Automotive Task Force about keeping the viability of the supply base. This is a major issue.”
‘Fluid Situation’
Toyota Motor Corp. and Honda Motor Co. may also be disrupted if suppliers who lose business during the GM and Chrysler shutdowns can no longer afford to stay in business, said Craig Fitzgerald, a supplier consultant at Plante & Moran in Southfield, Michigan.
Chrysler purchasing chief Scott Garberding said in court documents that the failure of suppliers to the Auburn Hills, Michigan-based automaker would “cause severe production problems” for other carmakers, “including GM and Ford.”
Ford doesn’t anticipate production disruptions in the next 30 days, said Todd Nissen, a spokesman for the Dearborn, Michigan-based automaker.
“We don’t see any short-term issues with continuing production,” said Nissen. “Beyond that, we’re all looking at the same things. It’s a fluid situation.”
GM, the largest U.S. automaker, has until June 1 to meet a government-imposed deadline to negotiate concessions with labor and lenders or file for bankruptcy. GM is operating on $15.4 billion in government loans and requested $11.6 billion more.
‘Really Worried’
“Take a supplier with 50 percent GM and 50 percent Ford, if GM files, suddenly their book of business is cut in half,” said Keith Francis, managing director at restructuring firm Hydra Professional in Farmington Hills, Michigan. “Ford, which has positioned itself to stay out of the bailout, has increased risk with its supply base because of what’s happening.”
Ford, Toyota and other automakers are probably “really worried” about the fallout from the production shutdowns and managing their supply bases, John Plant, the chief executive officer of TRW Automotive Holdings Corp. said on a conference call today.
The Livonia, Michigan-based company, the world’s largest supplier of vehicle-safety equipment, managing distress among its own suppliers because of the drop in vehicle production, Plant said.
Ford rose 41 cents, or 7 percent, to $6.26 at 4:00 p.m. in New York Stock Exchange composite trading. Ford has more than doubled this year. GM fell 19 cents, or 10 percent, to $1.66. GM has declined 48 percent this year.
Read more here
Tuesday, 05 May 2009
Chrysler Bankruptcy May Not Dent Economy as Cutbacks Were Set
(Bloomberg) -- Chrysler LLC’s bankruptcy may not rattle the U.S. economy even as the automaker idles all assembly plants for at least 30 days while it reorganizes.
Though the decision will reduce workers’ earnings and force suppliers to reduce or halt operations, Chrysler probably would have had to shut down temporarily anyway, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
“There’s no economic difference between Chapter 11 and the restructuring they would have done outside of bankruptcy,” Zandi said in an interview. “Chrysler, its employees, dealerships, and suppliers are going to end up in the same place whether they go through bankruptcy or not.”
Chrysler, which filed for the fifth-biggest U.S. bankruptcy last week, already had been reducing payroll and closing factories because of the industry’s slump. The third-largest U.S. automaker now will combine with Fiat SpA, a move that will require a retooling of manufacturing processes and products that probably was also inevitable, according to Zandi.
Zandi estimates a one-month shutdown of Auburn Hills, Michigan-based Chrysler’s assembly lines would idle about 45,000 workers at the company and its suppliers. That would result in about $7.5 billion in lost output, which would shave about 0.02 percent from 2009 growth.
Not Like 1970
That’s a minor dent compared with what happened in a similar period in 1970, when the U.S. was also in recession and General Motors Corp. was hit by a 67-day nationwide strike. GDP fell 4.2 percent in the fourth quarter of that year, following the walkout.
A bankruptcy at GM, which faces a June 1 U.S. deadline to prove it can survive without a court restructuring, would probably take a more severe toll on the economy. GM sold twice as many new cars and trucks in the U.S. last year as Chrysler, and had almost 5 times as many employees worldwide.
Auto production makes a much smaller contribution to GDP now than it did three decades ago. Car, truck and parts manufacturing accounted for 0.7 percent of value-added to U.S. gross domestic product in 2007, the last year for which figures were available. Durable goods manufacturing, which includes autos, accounted for 13.4 percent of GDP in 1970, and made up 6.4 percent in 2008.
GDP declined 6.1 percent January through March, in part because inventories fell $103.7 billion. Analysts surveyed by Bloomberg before the Chrysler announcement forecast output to fall 2 percent in the current quarter.
Up to Court
The effects of Chrysler’s bankruptcy would slightly more than double if the shutdown went on for two months, and increase proportionately if a resumption in production were delayed, Zandi said. It may be hard to disentangle Chrysler’s impact from GM’s previously announced plans to idle 13 U.S. assembly plants from mid-May into July to pare inventory.
“A lot in terms of the economic implications is going to depend on whether the court requires an adjustment at different speed than what it was before,” said Mike Montgomery at IHS Global Insight, an economic consulting firm in Lexington, Massachusetts. “The production level over the next six months was expected to be so lean to clean up the inventories that the bankruptcy considerations aren’t as important.”
For parts producers, Chrysler’s production line halt will likely mean “chaos,” said Jim Gillette, director of supplier analysis for CSM Worldwide, a consulting firm in Grand Rapids, Michigan.
Chrysler has more than 150 major suppliers, he said, many of whom do work for other auto companies as well. As part of the bankruptcy, the administration is providing $1.5 billion to Chrysler’s suppliers, including Magna International Inc.,BorgWarner Inc., Visteon Corp., Denso Corp. and American Axle & Manufacturing Holdings Inc., to help prevent halts in production as the company reorganizes.
Read more here
Though the decision will reduce workers’ earnings and force suppliers to reduce or halt operations, Chrysler probably would have had to shut down temporarily anyway, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
“There’s no economic difference between Chapter 11 and the restructuring they would have done outside of bankruptcy,” Zandi said in an interview. “Chrysler, its employees, dealerships, and suppliers are going to end up in the same place whether they go through bankruptcy or not.”
Chrysler, which filed for the fifth-biggest U.S. bankruptcy last week, already had been reducing payroll and closing factories because of the industry’s slump. The third-largest U.S. automaker now will combine with Fiat SpA, a move that will require a retooling of manufacturing processes and products that probably was also inevitable, according to Zandi.
Zandi estimates a one-month shutdown of Auburn Hills, Michigan-based Chrysler’s assembly lines would idle about 45,000 workers at the company and its suppliers. That would result in about $7.5 billion in lost output, which would shave about 0.02 percent from 2009 growth.
Not Like 1970
That’s a minor dent compared with what happened in a similar period in 1970, when the U.S. was also in recession and General Motors Corp. was hit by a 67-day nationwide strike. GDP fell 4.2 percent in the fourth quarter of that year, following the walkout.
A bankruptcy at GM, which faces a June 1 U.S. deadline to prove it can survive without a court restructuring, would probably take a more severe toll on the economy. GM sold twice as many new cars and trucks in the U.S. last year as Chrysler, and had almost 5 times as many employees worldwide.
Auto production makes a much smaller contribution to GDP now than it did three decades ago. Car, truck and parts manufacturing accounted for 0.7 percent of value-added to U.S. gross domestic product in 2007, the last year for which figures were available. Durable goods manufacturing, which includes autos, accounted for 13.4 percent of GDP in 1970, and made up 6.4 percent in 2008.
GDP declined 6.1 percent January through March, in part because inventories fell $103.7 billion. Analysts surveyed by Bloomberg before the Chrysler announcement forecast output to fall 2 percent in the current quarter.
Up to Court
The effects of Chrysler’s bankruptcy would slightly more than double if the shutdown went on for two months, and increase proportionately if a resumption in production were delayed, Zandi said. It may be hard to disentangle Chrysler’s impact from GM’s previously announced plans to idle 13 U.S. assembly plants from mid-May into July to pare inventory.
“A lot in terms of the economic implications is going to depend on whether the court requires an adjustment at different speed than what it was before,” said Mike Montgomery at IHS Global Insight, an economic consulting firm in Lexington, Massachusetts. “The production level over the next six months was expected to be so lean to clean up the inventories that the bankruptcy considerations aren’t as important.”
For parts producers, Chrysler’s production line halt will likely mean “chaos,” said Jim Gillette, director of supplier analysis for CSM Worldwide, a consulting firm in Grand Rapids, Michigan.
Chrysler has more than 150 major suppliers, he said, many of whom do work for other auto companies as well. As part of the bankruptcy, the administration is providing $1.5 billion to Chrysler’s suppliers, including Magna International Inc.,BorgWarner Inc., Visteon Corp., Denso Corp. and American Axle & Manufacturing Holdings Inc., to help prevent halts in production as the company reorganizes.
Read more here
Monday, 04 May 2009
Amazon expected to lift wraps on large-screen Kindle
(MarketWatch) -- Amazon.com is widely expected to lift the wraps on a new large-screen Kindle device this week, which could be the first in a line of electronic reading devices geared toward newspapers and textbooks.
The online retail giant has scheduled a news conference for Wednesday -- 10:30 Eastern -- at Pace University in New York City.
Amazon did not disclose details about the event, but the New York Times reported over the weekend that the company is expected to unveil the latest version of its Kindle e-book reader. This device would reportedly have a larger screen optimized for newspapers, magazines and textbooks.
The Times also said that the newspaper's parent company is expected to be one of Amazon's partners in providing content for the device, citing unnamed sources.
Shares of Amazon were trading up nearly 2% at $80.50. The stock is up 60% since the first of the year.
A new Kindle designed for newspapers could be the first of many such devices. Two newspaper publishing companies -- News Corp. and privately held Hearst Corp. -- have disclosed plans to develop similar e-reader devices. A Silicon Valley startup called Plastic Logic is also developing a large-screen e-reader device geared toward newspapers.
Read more here
The online retail giant has scheduled a news conference for Wednesday -- 10:30 Eastern -- at Pace University in New York City.
Amazon did not disclose details about the event, but the New York Times reported over the weekend that the company is expected to unveil the latest version of its Kindle e-book reader. This device would reportedly have a larger screen optimized for newspapers, magazines and textbooks.
The Times also said that the newspaper's parent company is expected to be one of Amazon's partners in providing content for the device, citing unnamed sources.
Shares of Amazon were trading up nearly 2% at $80.50. The stock is up 60% since the first of the year.
A new Kindle designed for newspapers could be the first of many such devices. Two newspaper publishing companies -- News Corp. and privately held Hearst Corp. -- have disclosed plans to develop similar e-reader devices. A Silicon Valley startup called Plastic Logic is also developing a large-screen e-reader device geared toward newspapers.
Read more here
Sunday, 03 May 2009
Buffett: Government doing right
Billionaire Warren Buffett said on Saturday that the US government is taking the correct actions to help the economy recover.
Buffett spoke briefly before the opening of the annual meeting for his Berkshire Hathaway, expected to draw an audience of roughly 35 000 people.
"The government is doing the right things," Buffett said. "They're acting in a countercyclical manner."
But Buffett said he can't predict how quickly the economy and the markets will improve. He said last fall that the US faced an "economic Pearl Harbor."
Buffett and his partner, Charlie Munger, were expected to spend more than five hours answering questions at the Berkshire meeting. In the exhibit hall on Saturday morning, Buffett was mobbed by shareholders seeking photos of the billionaire CEO as he walked between exhibits for subsidiaries Justin Boots and Dairy Queen.
The meeting began as usual with a humorous movie, but instead of the traditional comical cartoon, Berkshire offered a reassuring message from animated versions of its products.
An animated Mrs. See of See's Candy told the crowd that it didn't seem right to have a humorous cartoon when so many things in the world don't seem sweet. And a talking Dairy Queen ice cream treat said the security of the company's balance sheet would help it withstand any blizzard.
Read more here
Buffett spoke briefly before the opening of the annual meeting for his Berkshire Hathaway, expected to draw an audience of roughly 35 000 people.
"The government is doing the right things," Buffett said. "They're acting in a countercyclical manner."
But Buffett said he can't predict how quickly the economy and the markets will improve. He said last fall that the US faced an "economic Pearl Harbor."
Buffett and his partner, Charlie Munger, were expected to spend more than five hours answering questions at the Berkshire meeting. In the exhibit hall on Saturday morning, Buffett was mobbed by shareholders seeking photos of the billionaire CEO as he walked between exhibits for subsidiaries Justin Boots and Dairy Queen.
The meeting began as usual with a humorous movie, but instead of the traditional comical cartoon, Berkshire offered a reassuring message from animated versions of its products.
An animated Mrs. See of See's Candy told the crowd that it didn't seem right to have a humorous cartoon when so many things in the world don't seem sweet. And a talking Dairy Queen ice cream treat said the security of the company's balance sheet would help it withstand any blizzard.
Read more here
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