(Bloomberg) -- Ford Motor Co. Executive Chairman Bill Ford, great-grandson of the company’s founder, said it is in the national interest that the automaker keep operating without federal aid.
“It’s in the country’s interest that Ford remain free of taxpayer money,” Ford said yesterday in an interview in his Dearborn, Michigan, office overlooking the 2,000-acre Rouge factory complex built by Henry Ford. “Anything we can do to minimize the amount of taxpayer money going into the private sector is probably a good thing.”
Ford, 52, said he has talked with members of the Obama administration to ensure the company isn’t hurt by being the only U.S. automaker to forgo federal funds. Chrysler LLC is restructuring in a U.S.-backed bankruptcy, and General Motors Corp. probably also will end up in Chapter 11 by June 1.
The discussions are aimed at “not being disadvantaged from the fact that we’re an independent company, not taking taxpayer money,” Ford said. “That’s in the national interest that that happens.”
His comments reinforced the company’s efforts to distance itself from Chrysler and GM, which received $19.4 billion in emergency loans to stave off collapse. While those automakers restructure in and out of court, Ford Motor has been showcasing projects such as factory investments to support new small cars.
Ford Motor’s strategy on a bailout evolved throughout late 2008, Ford said.
‘Go It Alone’
On Dec. 2, Chief Executive Officer Alan Mulally testified to Congress with the CEOs of GM and Chrysler and appealed for a $9 billion credit line. Within weeks, the second-largest U.S. automaker reversed the decision after deciding it had the cash to “go it alone,” said Ford, who served CEO before he hired Mulally in 2006.
“When we started seeing what the restrictions of taking government money would mean to our ability to operate quickly and strategically, we felt that wasn’t a position we wanted to be in,” Ford said. “We felt we could pull ourselves up by our bootstraps and make it on our own.”
While Ford Motor lost a record $14.7 billion in 2008 and remains at risk from the worst U.S. auto market in 27 years, it’s getting a public-image boost for not taking government aid, said Efraim Levy, a Standard & Poor’s equity analyst.
“Ford is benefiting from its independence,” said Levy, who is based in New York and advises holding the shares. “Consumers don’t resent them for taking their tax dollars to stay alive.”
Mulally’s Gambit
Mulally’s borrowing of $23 billion in late 2006, with all the company’s major assets pledged as collateral, positioned Ford Motor to shun a rescue, Levy said.
“Ford was fortunate enough to get those loans in advance of the credit markets freezing up,” he said. “Take away that liquidity, and Ford would be in the same boat as the other two.”
Ford Motor has more than doubled this year in New York Stock Exchange composite trading as it cut debt by $9.9 billion and won concessions from the United Auto Workers to pare annual labor costs by $500 million. The shares fell 22 cents, or 3.9 percent, to $5.41 at 4:15 p.m. in New York.
Bonds for Ford Motor’s lending arm, Ford Motor Credit, rallied today. Ford Credit’s 7 percent notes due October 2013 rose 3.5 cents to 81.3 cents on the dollar, the highest since June, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The yield was 12.7 percent.
With $21.3 billion in automotive cash at the end of March, Ford Motor is now working to add new, fuel-efficient models and retool factories to wean itself from dependence on fuel-thirsty trucks.
Read more here
Wednesday, May 20, 2009
Tuesday, May 19, 2009
Slim’s America Movil, Telmex to Face Rulings on Power
(Bloomberg) -- America Movil SAB and Telefonos de Mexico SAB, the phone companies controlled by billionaire Carlos Slim, will face rulings within months on whether they have too much power, Mexico’s antitrust regulator said.
The Federal Competition Commission’s final decisions will come in the middle of the summer, or between June and August, Eduardo Perez Motta, the agency’s president, said in an interview. He declined to predict what the ruling will be.
A declaration of dominance by the agency would allow Mexico’s Federal Telecommunications Commission to apply harsher regulations to America Movil or Telmex than their competitors have to follow, Perez Motta said. For instance, the commission could set different amounts for the rates the companies are allowed to charge to connect calls, he said.
“The investigations of dominance that the competition commission is doing can be a factor in helping create a regulation that promotes greater efficiency in the market,” Perez Motta said. “We’re on the path to reaching a conclusion.”
America Movil, Latin America’s largest mobile-phone carrier, has 72.5 percent of Mexico’s wireless customers, with 57.5 million at the end of March. Its biggest competitor, Telefonica SA, had 15.5 million Mexican wireless subscribers.
Telmex, as Mexico’s biggest fixed-line phone company is known, had 17.5 million lines at the end of last quarter, or about 85 percent of the market.
The antitrust agency doesn’t designate a company as dominant solely because of its market share, Perez Motta said. The decision is based on factors such as the ability to influence prices in a market, he said.
Substantial Power
Concepcion Rivera, a spokeswoman for Telmex, declined to comment. Luisa Fernanda White, a spokeswoman for America Movil, said she didn’t have an immediate response.
Slim, 69, won control of Telmex in a 1990 privatization sale. The company spun off its wireless unit in 2001 to form America Movil, which now operates in 18 countries. The holdings in the phone companies have helped Slim become the world’s third-richest man, according to Forbes magazine.
America Movil gained 20 centavos to 24.81 pesos in Mexico City trading at 4 p.m. New York time. Telmex rose 5 centavos to 11.03 pesos. Both companies are based in Mexico City.
The antitrust commission issued a preliminary ruling in June 2008 that America Movil’s Mexican unit had substantial power in the market for completing calls. The commission also made a preliminary ruling in July that Telmex had substantial power in originating, carrying and completing local calls and in wholesale leasing of connections.
Read more here
The Federal Competition Commission’s final decisions will come in the middle of the summer, or between June and August, Eduardo Perez Motta, the agency’s president, said in an interview. He declined to predict what the ruling will be.
A declaration of dominance by the agency would allow Mexico’s Federal Telecommunications Commission to apply harsher regulations to America Movil or Telmex than their competitors have to follow, Perez Motta said. For instance, the commission could set different amounts for the rates the companies are allowed to charge to connect calls, he said.
“The investigations of dominance that the competition commission is doing can be a factor in helping create a regulation that promotes greater efficiency in the market,” Perez Motta said. “We’re on the path to reaching a conclusion.”
America Movil, Latin America’s largest mobile-phone carrier, has 72.5 percent of Mexico’s wireless customers, with 57.5 million at the end of March. Its biggest competitor, Telefonica SA, had 15.5 million Mexican wireless subscribers.
Telmex, as Mexico’s biggest fixed-line phone company is known, had 17.5 million lines at the end of last quarter, or about 85 percent of the market.
The antitrust agency doesn’t designate a company as dominant solely because of its market share, Perez Motta said. The decision is based on factors such as the ability to influence prices in a market, he said.
Substantial Power
Concepcion Rivera, a spokeswoman for Telmex, declined to comment. Luisa Fernanda White, a spokeswoman for America Movil, said she didn’t have an immediate response.
Slim, 69, won control of Telmex in a 1990 privatization sale. The company spun off its wireless unit in 2001 to form America Movil, which now operates in 18 countries. The holdings in the phone companies have helped Slim become the world’s third-richest man, according to Forbes magazine.
America Movil gained 20 centavos to 24.81 pesos in Mexico City trading at 4 p.m. New York time. Telmex rose 5 centavos to 11.03 pesos. Both companies are based in Mexico City.
The antitrust commission issued a preliminary ruling in June 2008 that America Movil’s Mexican unit had substantial power in the market for completing calls. The commission also made a preliminary ruling in July that Telmex had substantial power in originating, carrying and completing local calls and in wholesale leasing of connections.
Read more here
Sunday, May 17, 2009
AIG to launch IPO for Asia crown jewel
(Reuters) - AIG said it would accelerate plans to separate its Asian subsidiary through an initial public offering as the bailed-out U.S. insurer seeks to raise cash and list the unit as soon as possible.
The offering could raise at least $4 billion based on targets set by AIG executives, making it one of the largest Hong Kong IPOs to hit the market in the last two years.
The IPO would allow AIG to raise money to pay back the U.S. government and allow the profitable Asia life insurance subsidiary, American International Assurance Co Ltd (AIA), to break from its ailing parent.
AIG said it has asked for requests for proposal to select global coordinators and bookrunners for the IPO, confirming a Reuters report last Thursday that the company was about to start the process.
The lead manager of the IPO will be The Blackstone Group (BX.N), AIG's global financial adviser for its restructuring.
Hong Kong-based AIA has more than $60 billion of assets under management. During 2008, AIA said it recruited more than 52,000 agents, bumping its representation up to about 250,000 agents, and it has about 20,000 employees across 13 Asian markets.
It's known as AIG's Asia crown jewel, providing coverage to about 20 million customers, or close to a third of AIG's total customer base.
Still, analysts say that even with bright prospects, the IPO faces plenty of obstacles. AIG itself said the offering depends on market conditions and regulatory approvals.
Read more here
The offering could raise at least $4 billion based on targets set by AIG executives, making it one of the largest Hong Kong IPOs to hit the market in the last two years.
The IPO would allow AIG to raise money to pay back the U.S. government and allow the profitable Asia life insurance subsidiary, American International Assurance Co Ltd (AIA), to break from its ailing parent.
AIG said it has asked for requests for proposal to select global coordinators and bookrunners for the IPO, confirming a Reuters report last Thursday that the company was about to start the process.
The lead manager of the IPO will be The Blackstone Group (BX.N), AIG's global financial adviser for its restructuring.
Hong Kong-based AIA has more than $60 billion of assets under management. During 2008, AIA said it recruited more than 52,000 agents, bumping its representation up to about 250,000 agents, and it has about 20,000 employees across 13 Asian markets.
It's known as AIG's Asia crown jewel, providing coverage to about 20 million customers, or close to a third of AIG's total customer base.
Still, analysts say that even with bright prospects, the IPO faces plenty of obstacles. AIG itself said the offering depends on market conditions and regulatory approvals.
Read more here
Thursday, May 14, 2009
Credit Suisse Chief Dougan Owes Interest to Ex-Wife, Court Says
(Bloomberg) -- Credit Suisse Group AG Chief Executive Officer Brady Dougan must pay a year’s worth of interest on a late $7.5 million payment he made to his ex-wife under their 2005 divorce agreement, a Connecticut appeals court ruled.
Dougan, 49, and Tomoko Hamada Dougan, 52, were divorced on June 17, 2005, under an agreement requiring him to pay $7.83 million within 30 days and another $7.5 million by June 16, 2006, according to an opinion released by the appellate panel yesterday in Hartford. Dougan made the second payment 12 days late, triggering a 10 percent interest payment provision.
The dispute was over what period the interest should cover. Dougan paid $24,999.96 in interest, covering the 12 days he was late. In a 2-1 opinion, the court said he owed interest dating to the time of the divorce agreement, covering another year. The court reversed a ruling by the trial judge, who found the interest provision was unenforceable even though the parties had negotiated and agreed to it.
Dougan “had use of $7.5 million for one year,” according to the majority opinion by Judge C. Ian McLachlan. The bank CEO “could have made that payment at the time of the judgment. Instead, the plaintiff, an investment banker, had the use of the money with the knowledge that he would lose the benefit of no interest for that year if he failed to pay the defendant on time.”
Credit Suisse
An attorney for Dougan, Gary Cohen, didn’t return calls seeking comment. A spokeswoman for Credit Suisse, Victoria Harmon, declined to comment.
Gaetano Ferro, an attorney for Tomoko Hamada Dougan, estimated in an interview that Dougan owes about $970,000 in interest based on the appeals court’s ruling, which sent the case back to the lower court to implement the findings.
Dougan became the first American to serve as sole CEO of Credit Suisse in May 2007 after heading the company’s investment bank for three years. He helped steer Credit Suisse clear of subprime mortgage investments before their collapse froze debt markets and led to $1.46 trillion in writedowns and losses at financial companies worldwide.
After graduating from business school in 1982, Dougan joined Bankers Trust Corp. He worked in the investment banking department and later for the nascent derivatives unit. He moved to London and then to Tokyo, where he built the firm’s bond underwriting division from scratch at the age of 24. He joined Zurich-based Credit Suisse in 1990.
Read more here
Dougan, 49, and Tomoko Hamada Dougan, 52, were divorced on June 17, 2005, under an agreement requiring him to pay $7.83 million within 30 days and another $7.5 million by June 16, 2006, according to an opinion released by the appellate panel yesterday in Hartford. Dougan made the second payment 12 days late, triggering a 10 percent interest payment provision.
The dispute was over what period the interest should cover. Dougan paid $24,999.96 in interest, covering the 12 days he was late. In a 2-1 opinion, the court said he owed interest dating to the time of the divorce agreement, covering another year. The court reversed a ruling by the trial judge, who found the interest provision was unenforceable even though the parties had negotiated and agreed to it.
Dougan “had use of $7.5 million for one year,” according to the majority opinion by Judge C. Ian McLachlan. The bank CEO “could have made that payment at the time of the judgment. Instead, the plaintiff, an investment banker, had the use of the money with the knowledge that he would lose the benefit of no interest for that year if he failed to pay the defendant on time.”
Credit Suisse
An attorney for Dougan, Gary Cohen, didn’t return calls seeking comment. A spokeswoman for Credit Suisse, Victoria Harmon, declined to comment.
Gaetano Ferro, an attorney for Tomoko Hamada Dougan, estimated in an interview that Dougan owes about $970,000 in interest based on the appeals court’s ruling, which sent the case back to the lower court to implement the findings.
Dougan became the first American to serve as sole CEO of Credit Suisse in May 2007 after heading the company’s investment bank for three years. He helped steer Credit Suisse clear of subprime mortgage investments before their collapse froze debt markets and led to $1.46 trillion in writedowns and losses at financial companies worldwide.
After graduating from business school in 1982, Dougan joined Bankers Trust Corp. He worked in the investment banking department and later for the nascent derivatives unit. He moved to London and then to Tokyo, where he built the firm’s bond underwriting division from scratch at the age of 24. He joined Zurich-based Credit Suisse in 1990.
Read more here
Wednesday, May 13, 2009
Real Rate Shock Hits CEOs as Borrowing Costs Impede Recovery
(Bloomberg) -- The highest inflation-adjusted borrowing costs since the 1980s are hindering U.S. companies’ ability to build their businesses.
Customers of Airgas Inc. are reducing purchases of industrial gases such as nitrogen and acetylene because of rising real interest rates, said Chief Executive Officer Peter McCausland. Real rates account for inflation or deflation.
“There is no question” high real rates have aggravated Airgas’s sales decline, he said in an interview.
The climb in rates “really reflects a risk aversion,” said David Rickard, chief financial officer of Woonsocket, Rhode Island-based CVS Caremark Corp. “People are afraid to lend.”
Annualized consumer prices fell by 0.4 percent in March, the first decline in 54 years, and Treasury yields jumped to a five-month high. That pushed real investment-grade corporate borrowing costs to 8.34 percent, the highest level since 1985, according to data compiled by Bloomberg and Merrill Lynch & Co. Price declines accelerated in April to 0.6 percent, according to 28 economists surveyed by Bloomberg.
Rising real yields may deter companies from borrowing to invest in new products or factories because deflation will erode cash flow and make it harder to service debt, said John Lonski, chief economist at Moody’s Capital Markets Group in New York.
Deflation Hurts
“That’s almost guaranteed to delay an economic recovery and perhaps very much risks intensifying the current economic slump,” Lonski said in a telephone interview.
Deflation hurts businesses in two ways. First, it suppresses sales. When prices are falling, buyers have reason to delay purchases and wait for a better deal.
The second way deflation hurts is by increasing real interest rates, making borrowing more expensive. A $100,000 loan at a 5 percent rate with 2 percent deflation translates into a real yield of 7 percent. When prices are going up, the opposite happens. If inflation is 2 percent, the real rate on that loan is 3 percent.
“Deflation hurts borrowers and rewards savers,” said Drew Matus, senior economist at Banc of America Securities-Merrill Lynch in New York, in a telephone interview. “If you do borrow right now, and we go through a period of deflation, your cost of borrowing just went through the roof.”
The last time Americans experienced deflation was when former President Dwight Eisenhower resided in the White House and the Disneyland theme park first swung open its gates in Anaheim, California. The Consumer Price Index declined for 12 straight months beginning September 1954.
Great Depression
The most severe period of deflation in the 20th century happened during the Great Depression, when prices fell 27 percent from the end of 1929 to 1933, causing companies to stop investing and pushing the unemployment rate to about 25 percent. Federal Reserve Chairman Ben S. Bernanke, who studied the Great Depression extensively and published a book on the subject, has said deflation can be more damaging than too much inflation.
“In a period of sufficiently severe deflation, the real cost of borrowing becomes prohibitive,” Bernanke said in a November 2002 speech at the National Economists Club in Washington. “Capital investment, purchases of new homes, and other types of spending decline accordingly, worsening the economic downturn.”
Sticker Shock
Surging refinancing costs are forcing Energy Transfer Partners LP to cancel or avoid pipeline projects that don’t offer returns above 20 percent, Chief Financial Officer Martin Salinas said in an interview. Debt yields have been 2 to 3 percentage points higher than what the Dallas-based company has been used to, he said.
Energy Transfer, the third-largest U.S. pipeline partnership by market value, in April raised $650 million for capital expenditures and to repay bank debt by offering investors a 9 percent interest rate on 10-year bonds, Bloomberg data show. While 0.7 percentage point lower than what the company paid for similar debt in December, the coupon was 2.3 percentage points higher than an offering a year earlier.
“There is definitely some sticker shock,” said Salinas. “We can’t build the project if we can’t cover our cost and get a return on it.”
While the gap between investment-grade bond yields and rates on similarly maturing Treasuries narrowed 158 basis points in the past two months, a jump in benchmark yields and deflation erased most of the improvement, meaning real rates are still near their highest levels since 1985.
Read more here
Customers of Airgas Inc. are reducing purchases of industrial gases such as nitrogen and acetylene because of rising real interest rates, said Chief Executive Officer Peter McCausland. Real rates account for inflation or deflation.
“There is no question” high real rates have aggravated Airgas’s sales decline, he said in an interview.
The climb in rates “really reflects a risk aversion,” said David Rickard, chief financial officer of Woonsocket, Rhode Island-based CVS Caremark Corp. “People are afraid to lend.”
Annualized consumer prices fell by 0.4 percent in March, the first decline in 54 years, and Treasury yields jumped to a five-month high. That pushed real investment-grade corporate borrowing costs to 8.34 percent, the highest level since 1985, according to data compiled by Bloomberg and Merrill Lynch & Co. Price declines accelerated in April to 0.6 percent, according to 28 economists surveyed by Bloomberg.
Rising real yields may deter companies from borrowing to invest in new products or factories because deflation will erode cash flow and make it harder to service debt, said John Lonski, chief economist at Moody’s Capital Markets Group in New York.
Deflation Hurts
“That’s almost guaranteed to delay an economic recovery and perhaps very much risks intensifying the current economic slump,” Lonski said in a telephone interview.
Deflation hurts businesses in two ways. First, it suppresses sales. When prices are falling, buyers have reason to delay purchases and wait for a better deal.
The second way deflation hurts is by increasing real interest rates, making borrowing more expensive. A $100,000 loan at a 5 percent rate with 2 percent deflation translates into a real yield of 7 percent. When prices are going up, the opposite happens. If inflation is 2 percent, the real rate on that loan is 3 percent.
“Deflation hurts borrowers and rewards savers,” said Drew Matus, senior economist at Banc of America Securities-Merrill Lynch in New York, in a telephone interview. “If you do borrow right now, and we go through a period of deflation, your cost of borrowing just went through the roof.”
The last time Americans experienced deflation was when former President Dwight Eisenhower resided in the White House and the Disneyland theme park first swung open its gates in Anaheim, California. The Consumer Price Index declined for 12 straight months beginning September 1954.
Great Depression
The most severe period of deflation in the 20th century happened during the Great Depression, when prices fell 27 percent from the end of 1929 to 1933, causing companies to stop investing and pushing the unemployment rate to about 25 percent. Federal Reserve Chairman Ben S. Bernanke, who studied the Great Depression extensively and published a book on the subject, has said deflation can be more damaging than too much inflation.
“In a period of sufficiently severe deflation, the real cost of borrowing becomes prohibitive,” Bernanke said in a November 2002 speech at the National Economists Club in Washington. “Capital investment, purchases of new homes, and other types of spending decline accordingly, worsening the economic downturn.”
Sticker Shock
Surging refinancing costs are forcing Energy Transfer Partners LP to cancel or avoid pipeline projects that don’t offer returns above 20 percent, Chief Financial Officer Martin Salinas said in an interview. Debt yields have been 2 to 3 percentage points higher than what the Dallas-based company has been used to, he said.
Energy Transfer, the third-largest U.S. pipeline partnership by market value, in April raised $650 million for capital expenditures and to repay bank debt by offering investors a 9 percent interest rate on 10-year bonds, Bloomberg data show. While 0.7 percentage point lower than what the company paid for similar debt in December, the coupon was 2.3 percentage points higher than an offering a year earlier.
“There is definitely some sticker shock,” said Salinas. “We can’t build the project if we can’t cover our cost and get a return on it.”
While the gap between investment-grade bond yields and rates on similarly maturing Treasuries narrowed 158 basis points in the past two months, a jump in benchmark yields and deflation erased most of the improvement, meaning real rates are still near their highest levels since 1985.
Read more here
Tuesday, May 12, 2009
FDIC, JPMorgan seek ouster of WaMu stakeholder suit
(Reuters) - U.S. bank regulators filed court papers this week seeking dismissal of a Texas lawsuit that claims JPMorgan Chase & Co (JPM.N) tried to gain an unfair advantage in its $1.9 billion purchase of Washington Mutual Inc's (WAMUQ.PK) bank last year.
In documents filed on Monday in federal court in Galveston, Texas, the Federal Deposit Insurance Corp said the WaMu stakeholders who brought the lawsuit are trying to circumvent the FDIC claims process, and that the suit should be dismissed or moved to a court in Washington D.C.
WaMu collapsed last year, in the largest U.S. bank failure in history. The bank was seized by U.S. bank regulators on September 25 and the FDIC immediately sold its deposits to JPMorgan. The surviving holding company filed for bankruptcy protection a day later.
However, the stakeholders' lawsuit filed in February claims that Washington Mutual's crown jewels were sold to JPMorgan at a fire-sale price that did not properly compensate WaMu's investors. They also claim that JPMorgan acted improperly ahead of the sale by leaking false and harmful information from WaMu's financial records, in an attempt to deflate its value and purchase WaMu's assets on the cheap, according to court papers.
Read more here
In documents filed on Monday in federal court in Galveston, Texas, the Federal Deposit Insurance Corp said the WaMu stakeholders who brought the lawsuit are trying to circumvent the FDIC claims process, and that the suit should be dismissed or moved to a court in Washington D.C.
WaMu collapsed last year, in the largest U.S. bank failure in history. The bank was seized by U.S. bank regulators on September 25 and the FDIC immediately sold its deposits to JPMorgan. The surviving holding company filed for bankruptcy protection a day later.
However, the stakeholders' lawsuit filed in February claims that Washington Mutual's crown jewels were sold to JPMorgan at a fire-sale price that did not properly compensate WaMu's investors. They also claim that JPMorgan acted improperly ahead of the sale by leaking false and harmful information from WaMu's financial records, in an attempt to deflate its value and purchase WaMu's assets on the cheap, according to court papers.
Read more here
Monday, May 11, 2009
Zombie Loans Give Life to Blockbuster Amid Defaults
(Bloomberg) -- Blockbuster Inc., whose shares have plummeted 95 percent since 2004, has made money just once since 1997, and auditors doubt it can pay its bills. Still, JPMorgan Chase & Co. isn’t giving up on the movie-rental chain.
The second-largest U.S. bank by assets extended the Dallas- based company’s line of credit, due to expire in August, while cutting it 29 percent and raising the interest rate.
Citigroup Inc. and Bank of America Corp. are also amending revolving loans to zombie borrowers on the brink of default and others with debt ratings that are among the worst. Lenders are betting the economy will improve enough to keep companies from adding to the $1.4 trillion of writedowns and losses by the world’s largest financial institutions since the start of 2007.
“Banks are still very restricted on capital,” said Neal Schweitzer, senior vice president of corporate finance at Moody’s Investors Service in New York. “This is a way to address the maturity and the upcoming refinancing crunch.”
The Federal Reserve’s stress test showed on May 7 that 10 of the 19 largest U.S. lenders need to raise $74.6 billion in capital to withstand a prolonged recession.
About $100 billion of publicly rated high-yield, high-risk or leveraged loans are due to expire by 2011, with $3.58 billion set to mature by the end of this year, according to Moody’s. This type of credit is rated below investment grade, or less than Baa3 by Moody’s and BBB- by Standard & Poor’s.
“You will see a trend toward extending those revolvers for a year or two to buy time until the market stabilizes,” said Douglas Antonacci, head of new issue loan sales at JPMorgan in New York. The bank was among the nine deemed by the government assessment not to need additional funds.
‘Amend and Extend’
At least 12 non-investment grade U.S. companies have revised their lines of credit in the past two weeks, Moody’s estimated. In a revolving line, money can be borrowed again once it’s repaid.
Eastman Kodak Co., the photography company in Rochester, New York, and Nebraska Book Co., the Lincoln, Nebraska-based owner of 270 college bookstores, are among those that have made modifications this year. Kodak and Nebraska Book’s parent, NBC Acquisition Corp., are both on Moody’s B3Negative list, formerly called the Bottom Rung report, which records the lowest-rated non-financial speculative-grade U.S. companies.
“We are doing a lot of amend and extend,” said Glenn Stewart, head of Americas loan syndication and sales at Bank of America, the biggest U.S. bank by assets. The Charlotte, North Carolina-based lender needs $33.9 billion in capital, according to the government evaluation of how it would fare under “more adverse” conditions than most economists anticipate.
Fleeing Investors
Leveraged loans were one of the hottest parts of the debt market, with about $689 billion issued in 2007, up from about $200 billion in 1996, according to Moody’s. The market peaked as hedge funds and collateralized loan obligation firms began buying the debt from banks and trading it amongst themselves. A CLO is a portfolio of loans sliced into varying degrees of risk.
The money helped finance major purchases during the leveraged buyout boom, including the acquisition of Nashville, Tennessee-based hospital operator HCA Inc. for $33 billion.
After the subprime mortgage market collapsed in the second half of 2007, most investors fled to safer assets. Prices that averaged about 100 cents on the dollar fell to a record low of 59.20 cents in December 2008, according to the S&P/LSTA U.S. Leveraged Loan 100 Index.
The speculative-grade default rate reached 7 percent at the end of the first quarter, up from 4.1 percent at the end of 2008 and 1.5 percent in March of last year, Moody’s said.
Read more here
The second-largest U.S. bank by assets extended the Dallas- based company’s line of credit, due to expire in August, while cutting it 29 percent and raising the interest rate.
Citigroup Inc. and Bank of America Corp. are also amending revolving loans to zombie borrowers on the brink of default and others with debt ratings that are among the worst. Lenders are betting the economy will improve enough to keep companies from adding to the $1.4 trillion of writedowns and losses by the world’s largest financial institutions since the start of 2007.
“Banks are still very restricted on capital,” said Neal Schweitzer, senior vice president of corporate finance at Moody’s Investors Service in New York. “This is a way to address the maturity and the upcoming refinancing crunch.”
The Federal Reserve’s stress test showed on May 7 that 10 of the 19 largest U.S. lenders need to raise $74.6 billion in capital to withstand a prolonged recession.
About $100 billion of publicly rated high-yield, high-risk or leveraged loans are due to expire by 2011, with $3.58 billion set to mature by the end of this year, according to Moody’s. This type of credit is rated below investment grade, or less than Baa3 by Moody’s and BBB- by Standard & Poor’s.
“You will see a trend toward extending those revolvers for a year or two to buy time until the market stabilizes,” said Douglas Antonacci, head of new issue loan sales at JPMorgan in New York. The bank was among the nine deemed by the government assessment not to need additional funds.
‘Amend and Extend’
At least 12 non-investment grade U.S. companies have revised their lines of credit in the past two weeks, Moody’s estimated. In a revolving line, money can be borrowed again once it’s repaid.
Eastman Kodak Co., the photography company in Rochester, New York, and Nebraska Book Co., the Lincoln, Nebraska-based owner of 270 college bookstores, are among those that have made modifications this year. Kodak and Nebraska Book’s parent, NBC Acquisition Corp., are both on Moody’s B3Negative list, formerly called the Bottom Rung report, which records the lowest-rated non-financial speculative-grade U.S. companies.
“We are doing a lot of amend and extend,” said Glenn Stewart, head of Americas loan syndication and sales at Bank of America, the biggest U.S. bank by assets. The Charlotte, North Carolina-based lender needs $33.9 billion in capital, according to the government evaluation of how it would fare under “more adverse” conditions than most economists anticipate.
Fleeing Investors
Leveraged loans were one of the hottest parts of the debt market, with about $689 billion issued in 2007, up from about $200 billion in 1996, according to Moody’s. The market peaked as hedge funds and collateralized loan obligation firms began buying the debt from banks and trading it amongst themselves. A CLO is a portfolio of loans sliced into varying degrees of risk.
The money helped finance major purchases during the leveraged buyout boom, including the acquisition of Nashville, Tennessee-based hospital operator HCA Inc. for $33 billion.
After the subprime mortgage market collapsed in the second half of 2007, most investors fled to safer assets. Prices that averaged about 100 cents on the dollar fell to a record low of 59.20 cents in December 2008, according to the S&P/LSTA U.S. Leveraged Loan 100 Index.
The speculative-grade default rate reached 7 percent at the end of the first quarter, up from 4.1 percent at the end of 2008 and 1.5 percent in March of last year, Moody’s said.
Read more here
Sunday, May 10, 2009
Rothschild Difference With Madoff Becomes Geneva’s Obsession
(Bloomberg) -- There’s more than 250 years separating Baron Benjamin de Rothschild from Bernard L. Madoff.
This isn’t an insignificant issue in Geneva where at least eight banks had about 10 billion Swiss francs ($8.8 billion) with Madoff, who pleaded guilty in March to masterminding a $65 billion Ponzi scheme. Investors are preparing lawsuits against firms that gave their cash to the New York con man. Five Aurelia Finance SA fund managers, who invested with Madoff, were charged last month by a Geneva magistrate for mismanaging client assets.
“Madoff has become a filter for everyone’s perception of whether banks were doing their job,” said Leslie Gaines-Ross, chief reputation strategist at the Weber Shandwick consulting firm in New York and author of “Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation,” (John Wiley & Sons Inc., 2008). “Rothschild is one of the few that is still admired and holds true to its reputation.”
Baron Benjamin, head of the Geneva arm of the Rothschild family that financed the Suez Canal and Wellington’s victory at Waterloo, is betting that heritage will help his firm grow. Rothschild had no investments with Madoff.
Rothschild and Madoff are “poles apart,” said Cedric Tille, a professor at the Graduate Institute in Geneva and a former economist for the Federal Reserve Bank of New York. “Many private banks in Geneva have enough tradition to sell themselves as cool heads who don’t fall for the latest fad.”
‘Look for Safety’
Banque Privee Edmond de Rothschild Group received 1.7 billion francs of new assets in the first quarter. Pictet & Cie. and Mirabaud & Cie., two Geneva-based banks that trace their roots back to the 19th century, also attracted clients after avoiding Madoff, who’s in a Manhattan jail awaiting sentencing on charges that carry a maximum prison term of 150 years.
Officials at Pictet and Mirabaud declined to disclose first-quarter inflows. Pictet, founded a decade before Napoleon’s final defeat in 1815, attracted 17 billion francs of assets last year, three times more than Rothschild.
Geneva’s 140 banks and 700 independent wealth managers employ more than 34,000 people and have about 10 percent of the world’s private assets held outside investors’ home countries.
Rothschild depends on its record of preserving customers’ savings to set itself apart, said Werner Rutsch, co-author of “Swiss Banking -- Where Next?” (Neue Zuercher Zeitung, 2008).
“In difficult times, people look for safety and personalities,” Rutsch said.
Relative Returns
Unlike Geneva-based Union Bancaire Privee and Notz, Stucki & Cie., Rothschild avoided Madoff because “we couldn’t get the visibility we wanted,” said Claude Messulam, who has led the unit on a day-to-day basis since 1994, referring to the lack of information that was available on Madoff’s investment process.
Madoff reported annual returns of 8.5 percent to 11.7 percent during the past five years, according to Notz Stucki. Rothschild’s $746 million Prifund Alpha Uncorrelated dollar fund rose at an annual rate of 5.9 percent in the same period. Funds that invest in other firms’ hedge funds gained 3.47 percent, data compiled by Chicago-based Hedge Fund Research Inc. show.
Rothschild’s conservative approach means the firm has a “window of opportunity” that may last another 12 to 18 months before markets pick up, said Teodoro Cocca, professor of wealth management at Johannes Kepler University in Linz, Austria.
“There are times, like now, when Rothschild and wealth preservation will be more trendy,” Cocca said. “But there will come a time when investors swing back to the greater risk- taking” of Zurich-based banks such as UBS AG and Credit Suisse Group AG, he said.
Hiring in Latin America
Investors pulled 226 billion francs from UBS last year as it posted a record net loss of almost 21 billion francs. UBS oversaw 1.6 trillion francs for clients at the end of the first quarter, 19 times more than Rothschild’s assets, and Credit Suisse managed 667 billion francs, company reports show.
The Rothschild private bank in Geneva, founded in 1953 and controlled by the sixth generation since Mayer Amschel Rothschild and his five sons bankrolled European governments in the 19th century, is optimistic about further inflows.
“I see no reason why that shouldn’t continue,” Messulam said at offices hung with 19th-century oil paintings in the heart of Geneva’s private banking quarter. The company has “benefited from the fears of certain clients at the big banks.”
Rothschild is hiring wealth managers in Geneva, Latin America and Asia to sustain the gains, Messulam said.
Most Expensive Stock
Rothschild, 83 percent-owned by Baron Benjamin and his family, has Europe’s most expensive stock.
The shares have climbed 38 percent to 26,300 francs in Zurich trading since falling to a four-year low on March 9, giving the firm a market value of 2.37 billion francs. The 29- member Swiss Financial Services Index advanced 51 percent in the same period. UBS is valued at 47 billion francs.
Baron Benjamin, 45, is France’s 19th-richest citizen with a net worth of 2.9 billion euros ($3.9 billion), according to Challenges magazine. He’s also the wealthiest living Rothschild.
“In the same way as the Rockefellers or J.P. Morgan, these are well-known people who stood for something which is still valid today,” said Rutsch, the co-author of “Swiss Banking.”
Rothschild’s assets under management fell 18 percent last year to 82.3 billion francs, compared with an average 23 percent decline for the 10 biggest private banks with headquarters in Geneva, data compiled by Bloomberg show. By comparison, Zurich- based EFG International AG’s assets dropped 22 percent to 77.2 billion francs and those of Basel-based Bank Sarasin & Cie. declined 16 percent to 69.7 billion francs.
Read more here
This isn’t an insignificant issue in Geneva where at least eight banks had about 10 billion Swiss francs ($8.8 billion) with Madoff, who pleaded guilty in March to masterminding a $65 billion Ponzi scheme. Investors are preparing lawsuits against firms that gave their cash to the New York con man. Five Aurelia Finance SA fund managers, who invested with Madoff, were charged last month by a Geneva magistrate for mismanaging client assets.
“Madoff has become a filter for everyone’s perception of whether banks were doing their job,” said Leslie Gaines-Ross, chief reputation strategist at the Weber Shandwick consulting firm in New York and author of “Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation,” (John Wiley & Sons Inc., 2008). “Rothschild is one of the few that is still admired and holds true to its reputation.”
Baron Benjamin, head of the Geneva arm of the Rothschild family that financed the Suez Canal and Wellington’s victory at Waterloo, is betting that heritage will help his firm grow. Rothschild had no investments with Madoff.
Rothschild and Madoff are “poles apart,” said Cedric Tille, a professor at the Graduate Institute in Geneva and a former economist for the Federal Reserve Bank of New York. “Many private banks in Geneva have enough tradition to sell themselves as cool heads who don’t fall for the latest fad.”
‘Look for Safety’
Banque Privee Edmond de Rothschild Group received 1.7 billion francs of new assets in the first quarter. Pictet & Cie. and Mirabaud & Cie., two Geneva-based banks that trace their roots back to the 19th century, also attracted clients after avoiding Madoff, who’s in a Manhattan jail awaiting sentencing on charges that carry a maximum prison term of 150 years.
Officials at Pictet and Mirabaud declined to disclose first-quarter inflows. Pictet, founded a decade before Napoleon’s final defeat in 1815, attracted 17 billion francs of assets last year, three times more than Rothschild.
Geneva’s 140 banks and 700 independent wealth managers employ more than 34,000 people and have about 10 percent of the world’s private assets held outside investors’ home countries.
Rothschild depends on its record of preserving customers’ savings to set itself apart, said Werner Rutsch, co-author of “Swiss Banking -- Where Next?” (Neue Zuercher Zeitung, 2008).
“In difficult times, people look for safety and personalities,” Rutsch said.
Relative Returns
Unlike Geneva-based Union Bancaire Privee and Notz, Stucki & Cie., Rothschild avoided Madoff because “we couldn’t get the visibility we wanted,” said Claude Messulam, who has led the unit on a day-to-day basis since 1994, referring to the lack of information that was available on Madoff’s investment process.
Madoff reported annual returns of 8.5 percent to 11.7 percent during the past five years, according to Notz Stucki. Rothschild’s $746 million Prifund Alpha Uncorrelated dollar fund rose at an annual rate of 5.9 percent in the same period. Funds that invest in other firms’ hedge funds gained 3.47 percent, data compiled by Chicago-based Hedge Fund Research Inc. show.
Rothschild’s conservative approach means the firm has a “window of opportunity” that may last another 12 to 18 months before markets pick up, said Teodoro Cocca, professor of wealth management at Johannes Kepler University in Linz, Austria.
“There are times, like now, when Rothschild and wealth preservation will be more trendy,” Cocca said. “But there will come a time when investors swing back to the greater risk- taking” of Zurich-based banks such as UBS AG and Credit Suisse Group AG, he said.
Hiring in Latin America
Investors pulled 226 billion francs from UBS last year as it posted a record net loss of almost 21 billion francs. UBS oversaw 1.6 trillion francs for clients at the end of the first quarter, 19 times more than Rothschild’s assets, and Credit Suisse managed 667 billion francs, company reports show.
The Rothschild private bank in Geneva, founded in 1953 and controlled by the sixth generation since Mayer Amschel Rothschild and his five sons bankrolled European governments in the 19th century, is optimistic about further inflows.
“I see no reason why that shouldn’t continue,” Messulam said at offices hung with 19th-century oil paintings in the heart of Geneva’s private banking quarter. The company has “benefited from the fears of certain clients at the big banks.”
Rothschild is hiring wealth managers in Geneva, Latin America and Asia to sustain the gains, Messulam said.
Most Expensive Stock
Rothschild, 83 percent-owned by Baron Benjamin and his family, has Europe’s most expensive stock.
The shares have climbed 38 percent to 26,300 francs in Zurich trading since falling to a four-year low on March 9, giving the firm a market value of 2.37 billion francs. The 29- member Swiss Financial Services Index advanced 51 percent in the same period. UBS is valued at 47 billion francs.
Baron Benjamin, 45, is France’s 19th-richest citizen with a net worth of 2.9 billion euros ($3.9 billion), according to Challenges magazine. He’s also the wealthiest living Rothschild.
“In the same way as the Rockefellers or J.P. Morgan, these are well-known people who stood for something which is still valid today,” said Rutsch, the co-author of “Swiss Banking.”
Rothschild’s assets under management fell 18 percent last year to 82.3 billion francs, compared with an average 23 percent decline for the 10 biggest private banks with headquarters in Geneva, data compiled by Bloomberg show. By comparison, Zurich- based EFG International AG’s assets dropped 22 percent to 77.2 billion francs and those of Basel-based Bank Sarasin & Cie. declined 16 percent to 69.7 billion francs.
Read more here
Thursday, May 7, 2009
Billionaire Donors Split With Obama on Law That May Hurt Hotels
(Bloomberg) -- Three Chicago billionaires who helped fund President Barack Obama’s election campaign are fighting legislation he backs that would make it easier for unions to organize hotels they own.
Penny Pritzker, Obama’s campaign finance chairwoman and a director of Global Hyatt Corp., has told the president she is opposed to the measure, known as card check, said a person familiar with the situation. Neil Bluhm, a partner in Walton Street Capital LLC, also opposes the bill, the person said. Lester Crown, chairman of Henry Crown & Co., criticized the proposal in an interview.
For the city’s business leaders who nurtured Obama’s White House bid, card check is a gut check on support for their hometown president. Labor, which spent $100 million on Democratic campaigns last year, made it a top priority to enact a bill giving workers bargaining rights based on signing cards instead of winning a secret-ballot election.
Voting privately is “an American prerogative and shouldn’t be overturned,” said Crown, 83, whose family holdings include the Ojai Valley Inn & Spa in Ojai, California, and the Little Nell hotel in Aspen, Colorado. “The recommended legislation is absolutely the wrong thing to do.”
Pritzker, 49, and Bluhm, 71, declined to comment.
The fight over proposed labor-law revisions heated up this week when Senator Tom Harkin, the Iowa Democrat who is the chief sponsor of the card-check provision, said backers don’t have the votes to push it through. He vowed to press ahead with other elements that unions want, such as shortening the time period allowed for elections.
Labor Law ‘Imbalance’
“Many do feel there is an imbalance” in current laws that favors business over labor, he said in an interview. A compromise version may attract support from more lawmakers, Harkin said.
Under the National Labor Relations Act of 1935, employers can demand an election even if more than half of workers sign cards supporting a union. The bill would take away that right, and opponents say it would leave employees open to retaliation if they refuse to sign up.
Since the 1980s, management campaigns have defeated 19 of every 20 organizing efforts, according to Nelson Lichtenstein, a labor historian at University of California at Santa Barbara.
While the U.S. Chamber of Commerce plans to spend about $20 million this year on advertising and lobbying to block card check, labor leaders said they are determined to get a filibuster-proof margin in the Senate.
Read more here
Penny Pritzker, Obama’s campaign finance chairwoman and a director of Global Hyatt Corp., has told the president she is opposed to the measure, known as card check, said a person familiar with the situation. Neil Bluhm, a partner in Walton Street Capital LLC, also opposes the bill, the person said. Lester Crown, chairman of Henry Crown & Co., criticized the proposal in an interview.
For the city’s business leaders who nurtured Obama’s White House bid, card check is a gut check on support for their hometown president. Labor, which spent $100 million on Democratic campaigns last year, made it a top priority to enact a bill giving workers bargaining rights based on signing cards instead of winning a secret-ballot election.
Voting privately is “an American prerogative and shouldn’t be overturned,” said Crown, 83, whose family holdings include the Ojai Valley Inn & Spa in Ojai, California, and the Little Nell hotel in Aspen, Colorado. “The recommended legislation is absolutely the wrong thing to do.”
Pritzker, 49, and Bluhm, 71, declined to comment.
The fight over proposed labor-law revisions heated up this week when Senator Tom Harkin, the Iowa Democrat who is the chief sponsor of the card-check provision, said backers don’t have the votes to push it through. He vowed to press ahead with other elements that unions want, such as shortening the time period allowed for elections.
Labor Law ‘Imbalance’
“Many do feel there is an imbalance” in current laws that favors business over labor, he said in an interview. A compromise version may attract support from more lawmakers, Harkin said.
Under the National Labor Relations Act of 1935, employers can demand an election even if more than half of workers sign cards supporting a union. The bill would take away that right, and opponents say it would leave employees open to retaliation if they refuse to sign up.
Since the 1980s, management campaigns have defeated 19 of every 20 organizing efforts, according to Nelson Lichtenstein, a labor historian at University of California at Santa Barbara.
While the U.S. Chamber of Commerce plans to spend about $20 million this year on advertising and lobbying to block card check, labor leaders said they are determined to get a filibuster-proof margin in the Senate.
Read more here
Wednesday, May 6, 2009
Cisco CEO sees stability after results beat
(Reuters) - Cisco Systems Inc (CSCO.O) posted stronger-than-expected quarterly results and Chief Executive John Chambers said his customers were seeing more stability, adding to hopes that business conditions would soon recover.
His comments, which came a day after similarly optimistic remarks by U.S. Federal Reserve Board Chairman Ben Bernanke, helped shares of the network equipment maker rise 2.5 percent in after-hours trading on Wednesday as investors looked beyond the double-digit fall in sales in the last quarter.
"They are seeing some stabilization, a leveling out, or in other words, they are finally beginning to have something reasonably solid underneath their feet," Chambers said of how Cisco customers are describing their current business.
Cisco, the biggest maker of routers and switches, forecast revenue in the current quarter falling 17 percent to 20 percent from a year earlier. The midpoint of that outlook was slightly better than Wall Street's expectation for a 19 percent decline to $8.36 billion, according to Reuters Estimates.
Revenue and earnings for Cisco's fiscal third quarter ended April 25 were also better than expected. While sales for the quarter fell 17 percent to $8.2 billion, that was higher than Wall Street's average outlook of $8.1 billion.
"I think you could make some fairly broadbased conclusion that the environment appears to be stabilizing and doesn't appear to be getting worse," said Morgan, Keegan & Co analyst Simon Leopold, adding that Cisco's report boded well for the overall market.
"I don't expect a rapid recovery but this is what we need to see happen before we can even consider a recovery."
Cost cuts, underscored by a 12 percent fall in operating expenses to $3.6 billion, bolstered Cisco's bottom line.
Net profit fell to $1.3 billion, or 23 cents a share, from $1.8 billion, or 29 cents a share, a year ago. Earnings excluding items was 30 cents, above the average analyst forecast of 25 cents, according to Reuters Estimates.
Cisco shares rose about 4 percent after the results, before settling at around $20.10, up from their Nasdaq close on Wednesday at $19.61.
Read more here
His comments, which came a day after similarly optimistic remarks by U.S. Federal Reserve Board Chairman Ben Bernanke, helped shares of the network equipment maker rise 2.5 percent in after-hours trading on Wednesday as investors looked beyond the double-digit fall in sales in the last quarter.
"They are seeing some stabilization, a leveling out, or in other words, they are finally beginning to have something reasonably solid underneath their feet," Chambers said of how Cisco customers are describing their current business.
Cisco, the biggest maker of routers and switches, forecast revenue in the current quarter falling 17 percent to 20 percent from a year earlier. The midpoint of that outlook was slightly better than Wall Street's expectation for a 19 percent decline to $8.36 billion, according to Reuters Estimates.
Revenue and earnings for Cisco's fiscal third quarter ended April 25 were also better than expected. While sales for the quarter fell 17 percent to $8.2 billion, that was higher than Wall Street's average outlook of $8.1 billion.
"I think you could make some fairly broadbased conclusion that the environment appears to be stabilizing and doesn't appear to be getting worse," said Morgan, Keegan & Co analyst Simon Leopold, adding that Cisco's report boded well for the overall market.
"I don't expect a rapid recovery but this is what we need to see happen before we can even consider a recovery."
Cost cuts, underscored by a 12 percent fall in operating expenses to $3.6 billion, bolstered Cisco's bottom line.
Net profit fell to $1.3 billion, or 23 cents a share, from $1.8 billion, or 29 cents a share, a year ago. Earnings excluding items was 30 cents, above the average analyst forecast of 25 cents, according to Reuters Estimates.
Cisco shares rose about 4 percent after the results, before settling at around $20.10, up from their Nasdaq close on Wednesday at $19.61.
Read more here
Tuesday, May 5, 2009
Carol Bartz may actually be fixing Yahoo
(Reuters) -- Four months into her fix-it job at Yahoo, CEO Carol Bartz has worked through an impressive checklist.
The 60-year-old executive has moved swiftly to rebuild the Internet company to her specifications, upending the organizational structure, replacing executives and cutting costs including 675 jobs, or 5% of the workforce.
Analysts say that is exactly the kind of shake-up needed at Yahoo, which has seen its sales growth slow and its market share overtaken by Google Inc. in recent years.
For Yahoo's ranks, still shell-shocked from deep cuts in 2008 - including 1,600 axed jobs - the hope that Bartz brings is increasingly mixed with a dose of fear and uncertainty.
Yet broad support remains for Bartz despite the tough talk, canceled holiday parties and forced vacations that have come to define her era.
"We are all sort of wanting to believe in her because we really want to see Yahoo turned around," said one Yahoo insider who wished to remain anonymous for fear of retribution. "But it still doesn't make it any less scary when you don't hear about what's coming up."
With a new round of layoffs under way, and a steady stream of Yahoo sites getting axed, anxiety within the ranks has been exacerbated by what some say is a growing sense of secrecy.
Bartz' famous penchant for tight lips, which initially showed in her emphatic displeasure toward news leaks, is increasingly evident in other aspects of Yahoo's operations. The informal flow of information once common within the company has come to a halt. "Everything is on a need to know basis," the Yahoo source said.
Bartz has taken steps to keep employees in the loop with weekly emails about her activities and changes at the company. But the communiques don't always provide the full picture.
Decisions to shutter parts of the business such as GeoCities, which Yahoo acquired for more than $4 billion in 1999, have not been announced throughout the company. Some employees worry that their project will be next.
"If your property is not making a lot of money, or making a small amount of money, you know you should be looking over your shoulder because you could be the next person to get that tap," said another Yahoo employee who wished to remain anonymous.
Yahoo declined to comment for this story.
Read more here
The 60-year-old executive has moved swiftly to rebuild the Internet company to her specifications, upending the organizational structure, replacing executives and cutting costs including 675 jobs, or 5% of the workforce.
Analysts say that is exactly the kind of shake-up needed at Yahoo, which has seen its sales growth slow and its market share overtaken by Google Inc. in recent years.
For Yahoo's ranks, still shell-shocked from deep cuts in 2008 - including 1,600 axed jobs - the hope that Bartz brings is increasingly mixed with a dose of fear and uncertainty.
Yet broad support remains for Bartz despite the tough talk, canceled holiday parties and forced vacations that have come to define her era.
"We are all sort of wanting to believe in her because we really want to see Yahoo turned around," said one Yahoo insider who wished to remain anonymous for fear of retribution. "But it still doesn't make it any less scary when you don't hear about what's coming up."
With a new round of layoffs under way, and a steady stream of Yahoo sites getting axed, anxiety within the ranks has been exacerbated by what some say is a growing sense of secrecy.
Bartz' famous penchant for tight lips, which initially showed in her emphatic displeasure toward news leaks, is increasingly evident in other aspects of Yahoo's operations. The informal flow of information once common within the company has come to a halt. "Everything is on a need to know basis," the Yahoo source said.
Bartz has taken steps to keep employees in the loop with weekly emails about her activities and changes at the company. But the communiques don't always provide the full picture.
Decisions to shutter parts of the business such as GeoCities, which Yahoo acquired for more than $4 billion in 1999, have not been announced throughout the company. Some employees worry that their project will be next.
"If your property is not making a lot of money, or making a small amount of money, you know you should be looking over your shoulder because you could be the next person to get that tap," said another Yahoo employee who wished to remain anonymous.
Yahoo declined to comment for this story.
Read more here
Monday, May 4, 2009
Boston Globe talks suspended, union says
(Reuters) -- The Boston Globe and its biggest union suspended talks Monday over concessions that parent company The New York Times Co. is seeking to keep the 137-year-old newspaper open.
That leaves the future of New England's largest newspaper in doubt for at least another day, even after the Globe reached agreements with three smaller unions that represent those who print and deliver the paper, according to local media reports.
The Boston Newspaper Guild, which represents some 600 workers including the newsroom staff, is now the sole holdout in talks over cost-cutting. A major sticking point has been lifetime job guarantees that the union wanted to preserve and management wanted to end.
"The negotiations are done today," union President Daniel Totten told reporters in Weymouth, Mass., where talks were held over the weekend.
"We will reconvene in short order," Totten said, according to a report on the Globe Web site.
The agreements with the other unions included some changes to a system that provides lifetime employment to certain workers, though the unions did not provide specific details. The unions have argued that ending lifetime job guarantees would pave the way for layoffs of senior staff.
Management rejected the Newspaper Guild's offer, which includes a 3.5% pay cut for most employees, an unpaid furlough, an increase in the early retirement age and a reduction in pension and 401(k) contributions, the Globe said.
The two sides have not set a time or location for the next round of talks, said a source who was not authorized to discuss the matter.
The source said it was possible that talks could resume later Monday or on Tuesday.
A New York Times spokeswoman declined to comment.
Read more here
That leaves the future of New England's largest newspaper in doubt for at least another day, even after the Globe reached agreements with three smaller unions that represent those who print and deliver the paper, according to local media reports.
The Boston Newspaper Guild, which represents some 600 workers including the newsroom staff, is now the sole holdout in talks over cost-cutting. A major sticking point has been lifetime job guarantees that the union wanted to preserve and management wanted to end.
"The negotiations are done today," union President Daniel Totten told reporters in Weymouth, Mass., where talks were held over the weekend.
"We will reconvene in short order," Totten said, according to a report on the Globe Web site.
The agreements with the other unions included some changes to a system that provides lifetime employment to certain workers, though the unions did not provide specific details. The unions have argued that ending lifetime job guarantees would pave the way for layoffs of senior staff.
Management rejected the Newspaper Guild's offer, which includes a 3.5% pay cut for most employees, an unpaid furlough, an increase in the early retirement age and a reduction in pension and 401(k) contributions, the Globe said.
The two sides have not set a time or location for the next round of talks, said a source who was not authorized to discuss the matter.
The source said it was possible that talks could resume later Monday or on Tuesday.
A New York Times spokeswoman declined to comment.
Read more here
Sunday, May 3, 2009
IPhone Developers Regroup After ‘Anything Goes’ Era
(Bloomberg) -- IPhone developers, who flocked to Apple Inc.’s App Store in search of a quick profit, are finding it’s getting more difficult to come up with breakout hits.
With more than 35,000 applications now available for the iPhone, consumers are more discerning about what apps they download. A new version of the iPhone operating system due for release in the next few months will have users clamoring for even more sophisticated programs, said Chris James, who runs SnapDat Networks Inc., an iPhone app company in New York.
“The early apps that came out had a distinct advantage because there weren’t a lot of them to compete for attention,” said James, a former Wall Street trader. Now, “you better have a high-quality app or don’t even try.”
Sales of mobile programs industrywide may exceed $25 billion by 2014, with games being the largest category, according to a report this week from Juniper Research in Basingstoke, England. Apple has sold more than 37 million units of the iPhone and iPod Touch, which also runs iPhone apps. The company doesn’t break out sales from the App Store.
For developers, Apple serves as a gatekeeper, reviewing every program before including it on the App Store and deciding which ones to promote. Developers get a 70 percent cut of each program sold, with Apple retaining 30 percent. Free programs are distributed at no cost.
‘Anything Goes’
“Anything goes right now,” said Sean Lyons, whose Los Angeles-based startup, HK Apps, created a $2.99 program that delivers jokes that start with the words “Yo Mama.” Creating a future hit may not be so easy as users demand more features, he said. “Apple is trying to put the better programs out there.”
For apps that aren’t free, prices start at 99 cents. The costliest program, as of yesterday, is a $900 mobile video surveillance app called iRa Pro. It lets people view live video from hundreds of security cameras.
Apple, based in Cupertino, California, rose $1.41 to $127.24 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 49 percent this year.
Apple’s vetting process for apps fueled debate last week after the store began selling “Baby Shaker,” a 99-cent program that let users vent their frustration by shaking on-screen infants.
The company removed the program after a child-welfare group, the Sarah Jane Brain Foundation, called it “horrific.” Apple apologized, saying the application was “deeply offensive” and should never have been offered.
‘Yo Mama’
More than 800,000 developers have downloaded the kit needed to write programs for the iPhone, and users have downloaded more than 1 billion programs.
Apple doesn’t provide many details about the vetting process. In March, when it unveiled a software upgrade for the iPhone, the company said 96 percent of programs get approved. Of those, 98 percent are accepted in seven days or less.
Lyons, 23, spent a week recording 320 jokes for his “Yo Mama Extreme: Voice Edition.” The program reads jokes aloud when people shake the iPhone. Among the offerings: “Yo Mama has so much hair on her upper lip, she braids it!”
Users have downloaded thousands of copies of “Yo Mama Extreme” since its release in March -- even though six other developers began selling similar programs at the same time, Lyons said. Sales have been brisk enough to convince Lyons and his partner that creating iPhone apps could be a full-time job.
Read more here
With more than 35,000 applications now available for the iPhone, consumers are more discerning about what apps they download. A new version of the iPhone operating system due for release in the next few months will have users clamoring for even more sophisticated programs, said Chris James, who runs SnapDat Networks Inc., an iPhone app company in New York.
“The early apps that came out had a distinct advantage because there weren’t a lot of them to compete for attention,” said James, a former Wall Street trader. Now, “you better have a high-quality app or don’t even try.”
Sales of mobile programs industrywide may exceed $25 billion by 2014, with games being the largest category, according to a report this week from Juniper Research in Basingstoke, England. Apple has sold more than 37 million units of the iPhone and iPod Touch, which also runs iPhone apps. The company doesn’t break out sales from the App Store.
For developers, Apple serves as a gatekeeper, reviewing every program before including it on the App Store and deciding which ones to promote. Developers get a 70 percent cut of each program sold, with Apple retaining 30 percent. Free programs are distributed at no cost.
‘Anything Goes’
“Anything goes right now,” said Sean Lyons, whose Los Angeles-based startup, HK Apps, created a $2.99 program that delivers jokes that start with the words “Yo Mama.” Creating a future hit may not be so easy as users demand more features, he said. “Apple is trying to put the better programs out there.”
For apps that aren’t free, prices start at 99 cents. The costliest program, as of yesterday, is a $900 mobile video surveillance app called iRa Pro. It lets people view live video from hundreds of security cameras.
Apple, based in Cupertino, California, rose $1.41 to $127.24 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 49 percent this year.
Apple’s vetting process for apps fueled debate last week after the store began selling “Baby Shaker,” a 99-cent program that let users vent their frustration by shaking on-screen infants.
The company removed the program after a child-welfare group, the Sarah Jane Brain Foundation, called it “horrific.” Apple apologized, saying the application was “deeply offensive” and should never have been offered.
‘Yo Mama’
More than 800,000 developers have downloaded the kit needed to write programs for the iPhone, and users have downloaded more than 1 billion programs.
Apple doesn’t provide many details about the vetting process. In March, when it unveiled a software upgrade for the iPhone, the company said 96 percent of programs get approved. Of those, 98 percent are accepted in seven days or less.
Lyons, 23, spent a week recording 320 jokes for his “Yo Mama Extreme: Voice Edition.” The program reads jokes aloud when people shake the iPhone. Among the offerings: “Yo Mama has so much hair on her upper lip, she braids it!”
Users have downloaded thousands of copies of “Yo Mama Extreme” since its release in March -- even though six other developers began selling similar programs at the same time, Lyons said. Sales have been brisk enough to convince Lyons and his partner that creating iPhone apps could be a full-time job.
Read more here
Tuesday, April 28, 2009
US Justice Department looks into Google books deal
(Reuters) - The U.S. Justice Department is making inquiries about a class action deal that Google Inc struck giving it the right to digitize and sell entire libraries, two experts on digitization told Reuters Tuesday.
Under a proposed settlement last October between Google and the Authors Guild and the Association of American Publishers, Google agreed to pay $125 million to create a Book Rights Registry, where authors and publishers can register works and receive compensation from institutional subscriptions or book sales.
Google's plan is to let readers to search through millions of copyrighted books online, browse passages and purchase copies.
But the deal also would allow Google -- and only Google -- to digitize so-called orphan works, which has raised some eyebrows in antitrust circles. Orphan works are books or other materials that are still covered by U.S. copyright law, but it is not clear who owns the rights to them.
"Essentially, it gives Google a free pass for infringement for selling all these books," said James Grimmelmann, who teaches at the New York Law School. "Publishers (who are part of the settlement) would be happy to share the monopoly with Google."
Grimmelmann said he was part of a recent conference call with Justice Department lawyers, who asked questions about Google's proposed settlement.
Grimmelmann said the Justice Department lawyers did not indicate what their concerns were.
"I have no idea what they're thinking," he said.
Peter Brantley of the Internet Archive, which also digitizes books, said his organization had "multiple conversations" with the Justice Department about the Google plan.
"There are legitimate antitrust issues related to Google's ability to solely commercialize this content," Brantley said, adding he hoped the settlement agreement would be rejected by U.S. District Judge Denny Chin.
Read more here
Under a proposed settlement last October between Google and the Authors Guild and the Association of American Publishers, Google agreed to pay $125 million to create a Book Rights Registry, where authors and publishers can register works and receive compensation from institutional subscriptions or book sales.
Google's plan is to let readers to search through millions of copyrighted books online, browse passages and purchase copies.
But the deal also would allow Google -- and only Google -- to digitize so-called orphan works, which has raised some eyebrows in antitrust circles. Orphan works are books or other materials that are still covered by U.S. copyright law, but it is not clear who owns the rights to them.
"Essentially, it gives Google a free pass for infringement for selling all these books," said James Grimmelmann, who teaches at the New York Law School. "Publishers (who are part of the settlement) would be happy to share the monopoly with Google."
Grimmelmann said he was part of a recent conference call with Justice Department lawyers, who asked questions about Google's proposed settlement.
Grimmelmann said the Justice Department lawyers did not indicate what their concerns were.
"I have no idea what they're thinking," he said.
Peter Brantley of the Internet Archive, which also digitizes books, said his organization had "multiple conversations" with the Justice Department about the Google plan.
"There are legitimate antitrust issues related to Google's ability to solely commercialize this content," Brantley said, adding he hoped the settlement agreement would be rejected by U.S. District Judge Denny Chin.
Read more here
Monday, April 27, 2009
Credit Suisse’s Zhu Said to Start Private-Equity Firm
(Bloomberg) -- Zhu Lei, a managing director in Credit Suisse Group AG’s Beijing office, is leaving to set up his own private-equity firm, a person with direct knowledge of the matter said.
Beijing-based Zhu, 36, plans to raise 9 billion yuan ($1.3 billion) in the local currency for two private-equity funds and $200 million from overseas investors, the person said, asking not to be identified as the fundraising is still in progress. Zhu will focus on investments in China, the person said.
Zhu follows Goldman Sachs Group Inc.’s China partner Fang Fenglei who set up a private-equity firm focused on investments in the world’s fastest-growing major economy. Zhu’s departure comes after those of three other senior Credit Suisse executives in Asia-Pacific since February, including Paul Raphael, former head of investment banking in the region.
Josephine Lee, a Hong Kong-based spokeswoman for Credit Suisse, declined to comment. Zhu has resigned though is still with the Zurich-based bank, the person said.
Zhu will seek about 4.5 billion yuan from Chinese investors, including state-owned companies, for each of the two local- currency funds, the person said. One of the funds will focus on industries such as infrastructure and utilities, according to the person.
Zhu joined Credit Suisse in September from Deutsche Bank AG as a Beijing-based managing director covering state-owned companies. He’s responsible for helping government-controlled Beijing Enterprises Holdings Ltd. raise as much as HK$2.18 billion in a convertible bond sale to expand a gas and water pipeline unit.
Read more here
Beijing-based Zhu, 36, plans to raise 9 billion yuan ($1.3 billion) in the local currency for two private-equity funds and $200 million from overseas investors, the person said, asking not to be identified as the fundraising is still in progress. Zhu will focus on investments in China, the person said.
Zhu follows Goldman Sachs Group Inc.’s China partner Fang Fenglei who set up a private-equity firm focused on investments in the world’s fastest-growing major economy. Zhu’s departure comes after those of three other senior Credit Suisse executives in Asia-Pacific since February, including Paul Raphael, former head of investment banking in the region.
Josephine Lee, a Hong Kong-based spokeswoman for Credit Suisse, declined to comment. Zhu has resigned though is still with the Zurich-based bank, the person said.
Zhu will seek about 4.5 billion yuan from Chinese investors, including state-owned companies, for each of the two local- currency funds, the person said. One of the funds will focus on industries such as infrastructure and utilities, according to the person.
Zhu joined Credit Suisse in September from Deutsche Bank AG as a Beijing-based managing director covering state-owned companies. He’s responsible for helping government-controlled Beijing Enterprises Holdings Ltd. raise as much as HK$2.18 billion in a convertible bond sale to expand a gas and water pipeline unit.
Read more here
Thursday, April 23, 2009
Bank of Japan chief says U.S. stimulus not enough
(MarketWatch) -- Japan's central bank chief said Thursday that U.S. stimulus efforts will not be sufficient to revive the economy without additional measures to address ills such as excessive household debt, according to reported comments.
Bank of Japan Gov. Masaaki Shirakawa made the comments in New York ahead of the annual World Bank and International Monetary Fund meetings in Washington, reports said.
Shirakawa nonetheless welcomed stimulus packages being enacted in the U.S. and around the world, according to Agence France-Presse.
But he warned that the U.S. economy "needs to work out excesses" including household over-indebtedness if the economy is to truly become stable again.
Read more here
Bank of Japan Gov. Masaaki Shirakawa made the comments in New York ahead of the annual World Bank and International Monetary Fund meetings in Washington, reports said.
Shirakawa nonetheless welcomed stimulus packages being enacted in the U.S. and around the world, according to Agence France-Presse.
But he warned that the U.S. economy "needs to work out excesses" including household over-indebtedness if the economy is to truly become stable again.
Read more here
Wednesday, April 22, 2009
Yen Advances on Speculation U.S. Banks Will Reveal More Losses
(Bloomberg) -- The yen gained against the euro and dollar for a second day on speculation U.S. banks will reveal additional losses, spurring demand for the Japanese currency as a refuge from the global financial crisis.
The yen rose versus all of the 16 most active currencies on concern the U.S. government will direct banks judged short of capital to say how they will raise extra funds, when it releases results of stress tests on May 4. The pound fell before a report that may show the U.K. economy shrank for a third quarter. Australia’s dollar dropped after the International Monetary Fund said the global recession will be deeper than previously thought.
“The results of the stress tests are likely to be a major concern for the markets,” said Masanobu Ishikawa, Tokyo-based general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Given such risk aversion, the yen and the dollar may be bought.”
The yen climbed to 126.99 per euro as of 12:05 p.m. in Tokyo from 127.48 in New York yesterday. The dollar gained to $1.2986 per euro from $1.3005. Japan’s currency advanced to 97.79 against the dollar from 98.01.
Australia’s dollar dropped to 68.88 yen from 69.14 yen yesterday, and New Zealand’s currency weakened to 54.20 yen from 54.43 yen. The pound declined to 141.38 yen from 142.05 yen.
The yen also advanced after Morgan Stanley, the fifth- biggest U.S. bank by assets posted a larger-than-expected loss yesterday, while Wells Fargo & Co. Chief Financial Officer Howard Atkins said “credit may not have turned yet.”
‘Far From Clear’
“While there is some improvement in profit trends at U.S. banks, it is far from clear if this positive flow will be sustained,” said Masashi Hashimoto, senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender.
The U.S. government would release a bank-by-bank assessment, while the lenders would say how they plan to shore up their finances, according to the person who spoke on condition of anonymity because a decision hasn’t been made.
The Washington-based IMF said in a forecast released yesterday that the world economy will shrink 1.3 percent this year, compared with its January projection of 0.5 percent growth. The IMF predicted expansion of 1.9 percent next year instead of its earlier 3 percent estimate.
The pound fell for a second day versus the yen as the Office of National Statistics may say today that the U.K. economy shrank 1.5 percent in the first quarter, after a 1.6 percent contraction in the fourth quarter, according to a Bloomberg survey of economists.
Read more here
The yen rose versus all of the 16 most active currencies on concern the U.S. government will direct banks judged short of capital to say how they will raise extra funds, when it releases results of stress tests on May 4. The pound fell before a report that may show the U.K. economy shrank for a third quarter. Australia’s dollar dropped after the International Monetary Fund said the global recession will be deeper than previously thought.
“The results of the stress tests are likely to be a major concern for the markets,” said Masanobu Ishikawa, Tokyo-based general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Given such risk aversion, the yen and the dollar may be bought.”
The yen climbed to 126.99 per euro as of 12:05 p.m. in Tokyo from 127.48 in New York yesterday. The dollar gained to $1.2986 per euro from $1.3005. Japan’s currency advanced to 97.79 against the dollar from 98.01.
Australia’s dollar dropped to 68.88 yen from 69.14 yen yesterday, and New Zealand’s currency weakened to 54.20 yen from 54.43 yen. The pound declined to 141.38 yen from 142.05 yen.
The yen also advanced after Morgan Stanley, the fifth- biggest U.S. bank by assets posted a larger-than-expected loss yesterday, while Wells Fargo & Co. Chief Financial Officer Howard Atkins said “credit may not have turned yet.”
‘Far From Clear’
“While there is some improvement in profit trends at U.S. banks, it is far from clear if this positive flow will be sustained,” said Masashi Hashimoto, senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender.
The U.S. government would release a bank-by-bank assessment, while the lenders would say how they plan to shore up their finances, according to the person who spoke on condition of anonymity because a decision hasn’t been made.
The Washington-based IMF said in a forecast released yesterday that the world economy will shrink 1.3 percent this year, compared with its January projection of 0.5 percent growth. The IMF predicted expansion of 1.9 percent next year instead of its earlier 3 percent estimate.
The pound fell for a second day versus the yen as the Office of National Statistics may say today that the U.K. economy shrank 1.5 percent in the first quarter, after a 1.6 percent contraction in the fourth quarter, according to a Bloomberg survey of economists.
Read more here
Monday, April 20, 2009
NUM demands 15% wage hike
Johannesburg - The National Union of Mineworkers (NUM) is demanding a 15% wage increase for its members, firing the first salvo ahead of the start of two-year wage talks for the gold and coal sectors.
"NUM believes it is something the Chamber [of Mines] can afford with ease, given the huge infrastructure development in the country which led to huge demand for coal as well as the gold price and the commodity being a safe haven for investors," the trade union said in a statement released on Monday.
The talks to settle a fresh two-year wage agreement will be held against a backdrop of global economic turmoil and widescale job cuts in the South African mining industry, something the country's largest mineworkers' body has said it will take into account.
NUM submitted its demands to the Chamber of Mines (COM) on Monday morning, ahead of the formal start of wage talks in May.
Demands include that medical aid be given on an employer-employee basis of 70-30, a minimum basic rate for entry level underground workers of R5 000/month, a minimum living-out allowance of R1 500 per month and a home owners' allowance of R5 000 per month or 25% of the monthly repayment of the mortgage.
The gold industry had a tough 2008 and largely missed out on the benefits from a record high gold price of above $1 030 in March as it grappled with the effects of a week-long shut-down in January due to power shortages, and government demands for it to curtail energy usage by 10%. High input costs also ate heavily into margins.
Read more here
"NUM believes it is something the Chamber [of Mines] can afford with ease, given the huge infrastructure development in the country which led to huge demand for coal as well as the gold price and the commodity being a safe haven for investors," the trade union said in a statement released on Monday.
The talks to settle a fresh two-year wage agreement will be held against a backdrop of global economic turmoil and widescale job cuts in the South African mining industry, something the country's largest mineworkers' body has said it will take into account.
NUM submitted its demands to the Chamber of Mines (COM) on Monday morning, ahead of the formal start of wage talks in May.
Demands include that medical aid be given on an employer-employee basis of 70-30, a minimum basic rate for entry level underground workers of R5 000/month, a minimum living-out allowance of R1 500 per month and a home owners' allowance of R5 000 per month or 25% of the monthly repayment of the mortgage.
The gold industry had a tough 2008 and largely missed out on the benefits from a record high gold price of above $1 030 in March as it grappled with the effects of a week-long shut-down in January due to power shortages, and government demands for it to curtail energy usage by 10%. High input costs also ate heavily into margins.
Read more here
Thursday, April 16, 2009
S.Africa Telkom says in Africa partnership with AT&T
(Reuters) - South African fixed-line phone firm Telkom SA Ltd has agreed to work with AT&T to provide IT and telecom services in Africa in a bid to win business from foreign firms expanding on the continent.
Telkom's Chief Executive, Reuben September, told reporters the company had signed a memorandum of understanding with AT&T that would allow the U.S. firm's clients in Africa to use Telkom's Internet-based network on the continent.
Telkom's network -- built by acquiring companies such as Kenya's Africa Online and MWeb Africa -- would be linked to AT&T's global network, helping it win business from AT&T's customers.
Telkom shares traded 0.17 percent lower at 105.90 rand by 1304 GMT, outpacing the JSE Securities Exchange's blue-chip Top-40 index, which was 1.47 percent lower.
September said Telkom would also look at ways of collaborating with AT&T on mobile services in Nigeria and sub-Saharan African countries, where South Africa's MTN and Kuwait's Zain are strong.
Thami Msimango, head of Telkom's International business unit, said the deal would allow the company to get the most out of its African assets, after some investors questioned the logic of the purchases.
"Now we can serve more customers," he said. "We are sitting on a beast and we have to unleash it," he said, referring to the company's Africa network.
The agreement would also allow Telkom customers to access AT&T's global virtual private network. AT&T's only presence so far in Africa is in South Africa but it wants to invest further on the continent.
Read more here
Telkom's Chief Executive, Reuben September, told reporters the company had signed a memorandum of understanding with AT&T that would allow the U.S. firm's clients in Africa to use Telkom's Internet-based network on the continent.
Telkom's network -- built by acquiring companies such as Kenya's Africa Online and MWeb Africa -- would be linked to AT&T's global network, helping it win business from AT&T's customers.
Telkom shares traded 0.17 percent lower at 105.90 rand by 1304 GMT, outpacing the JSE Securities Exchange's blue-chip Top-40 index, which was 1.47 percent lower.
September said Telkom would also look at ways of collaborating with AT&T on mobile services in Nigeria and sub-Saharan African countries, where South Africa's MTN and Kuwait's Zain are strong.
Thami Msimango, head of Telkom's International business unit, said the deal would allow the company to get the most out of its African assets, after some investors questioned the logic of the purchases.
"Now we can serve more customers," he said. "We are sitting on a beast and we have to unleash it," he said, referring to the company's Africa network.
The agreement would also allow Telkom customers to access AT&T's global virtual private network. AT&T's only presence so far in Africa is in South Africa but it wants to invest further on the continent.
Read more here
Wednesday, April 15, 2009
Fitch puts big Japan banks on negative watch
(MarketWatch) -- Shares of Japanese banks managed gains early Thursday despite Fitch ratings' announcement earlier that it may cut its assessments of the country's three biggest banks due to concerns about their profitability.
The credit ratings agency said it placed Mizuho Financial Group, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group and some of their subsidiaries on negative ratings watch, indicating it sees a greater potential for cutting their ratings.
"The rating actions reflect Fitch's concern about increasing downward pressure on the major bank groups' individual financial strengths as asset quality, capital quality, and core business profitability continue to be negatively impacted by the macroeconomic recession," Fitch said in a statement.
Despite the action, Mitsubishi UFJ was up 0.4%, Mizuho rose 1%, and Sumitomo Mitsui added 0.8% in the first hour of trading.
Read more at MarketWatch
The credit ratings agency said it placed Mizuho Financial Group, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group and some of their subsidiaries on negative ratings watch, indicating it sees a greater potential for cutting their ratings.
"The rating actions reflect Fitch's concern about increasing downward pressure on the major bank groups' individual financial strengths as asset quality, capital quality, and core business profitability continue to be negatively impacted by the macroeconomic recession," Fitch said in a statement.
Despite the action, Mitsubishi UFJ was up 0.4%, Mizuho rose 1%, and Sumitomo Mitsui added 0.8% in the first hour of trading.
Read more at MarketWatch
India telecom shares lag strong subscriber growth
(MarketWatch) -- India may be the fastest growing market for mobile services in the world, but intense competition and the resulting fall in subscriber rates are slowing down providers' earnings growth and hurting their share performance.
Shares of India's largest mobile operator by subscribers, Bharti Airtel, are down nearly 5% so far in 2009, while those of the second-largest company, Reliance Communications , are about flat. By comparison, the 30-stock Sensex is up more than 16% during the same period.
The underperformance comes despite strong growth in subscriber additions in the world's second-most populous country, where only about a third of the people use a mobile phone.
Indian mobile operators offering services based on the "global system for mobile," or GSM technology, added a record 10.8 million subscribers in March, after bringing in 9.2 million subscribers in February and 9.3 million in January, according to figures released recently by an industry group.
"The trend supports our bullish stance on wireless subscriber growth in India. March subscriber net adds validates our view that Indian telecoms are highly resilient to the otherwise tough macro conditions," Macquarie Research wrote in a report.
Vodafone Essar led the March numbers, adding 2.85 million subscribers during the month. Bharti added 2.81 million, while state-owned Bharat Sanchar Nigam adding 2.5 million, and Idea Cellular grew by 1.42 million.
Reliance Communications, which has a much larger presence with phones using the competing standard CDMA, added 400,223 GSM subscribers during the month. India's CDMA subscriber figures for March have yet to be announced.
Telecom shares were trading higher in Wednesday afternoon trading in Mumbai, with Bharti Airtel stock rising 3%, and Reliance Communications gaining 4.9%, while Idea Cellular jumped 4.4%. The moves came as the overall market bounced off early lows, with the 30-stock Sensex rising 2.5% to 11,235.48.
India's Wednesday gains came in mixed regional market action, with Japan's Nikkei ending down 1.1%, Hong Kong's Hang Seng gaining 0.6%, China's Shanghai Composite advancing 0.4%, Australia's S&P/ASX 200 slipping 0.1% and Taiwan's Taiex sliding 0.3%.
Read more at MarketWatch
Shares of India's largest mobile operator by subscribers, Bharti Airtel, are down nearly 5% so far in 2009, while those of the second-largest company, Reliance Communications , are about flat. By comparison, the 30-stock Sensex is up more than 16% during the same period.
The underperformance comes despite strong growth in subscriber additions in the world's second-most populous country, where only about a third of the people use a mobile phone.
Indian mobile operators offering services based on the "global system for mobile," or GSM technology, added a record 10.8 million subscribers in March, after bringing in 9.2 million subscribers in February and 9.3 million in January, according to figures released recently by an industry group.
"The trend supports our bullish stance on wireless subscriber growth in India. March subscriber net adds validates our view that Indian telecoms are highly resilient to the otherwise tough macro conditions," Macquarie Research wrote in a report.
Vodafone Essar led the March numbers, adding 2.85 million subscribers during the month. Bharti added 2.81 million, while state-owned Bharat Sanchar Nigam adding 2.5 million, and Idea Cellular grew by 1.42 million.
Reliance Communications, which has a much larger presence with phones using the competing standard CDMA, added 400,223 GSM subscribers during the month. India's CDMA subscriber figures for March have yet to be announced.
Telecom shares were trading higher in Wednesday afternoon trading in Mumbai, with Bharti Airtel stock rising 3%, and Reliance Communications gaining 4.9%, while Idea Cellular jumped 4.4%. The moves came as the overall market bounced off early lows, with the 30-stock Sensex rising 2.5% to 11,235.48.
India's Wednesday gains came in mixed regional market action, with Japan's Nikkei ending down 1.1%, Hong Kong's Hang Seng gaining 0.6%, China's Shanghai Composite advancing 0.4%, Australia's S&P/ASX 200 slipping 0.1% and Taiwan's Taiex sliding 0.3%.
Read more at MarketWatch
Tuesday, April 14, 2009
Lehman Sits on Bomb of Uranium Cake as Prices Slump
(Bloomberg) -- Lehman Brothers Holdings Inc. is sitting on enough uranium cake to make a nuclear bomb as it waits for prices of the commodity to rebound, according to traders and nuclear experts.
The bankrupt bank, in the throes of paying off creditors, acquired uranium cake “under a matured commodities contract” and plans to sell it when the market improves “to realize the best prices,” Chief Executive Officer Bryan Marsal said.
Lehman, once the fourth-largest investment bank, has an estimated $200 billion in unsecured liabilities left to pay. The uranium, which may be as much as 500,000 pounds, might fetch $20 million at today’s prices of about $40.50 per pound, said traders who asked not to be named because of the confidential nature of the data. Marsal said the traders’ estimate of Lehman’s uranium holding is “reasonable,” while declining to be more specific.
Uranium has dropped for five straight months from $55 a pound on Dec. 1 on concerns that countries including China and India would delay nuclear power projects because of the global economic crisis, and because Lehman might dump its radioactive material on the market, the traders said.
More than 43 million pounds of uranium-oxide concentrate, or yellowcake equivalent sold on the spot market last year, more than doubling the 2007 trading volume, according to Roswell, Georgia-based Ux Consulting Co.
Illiquid Market
The oversupply in an illiquid market pushed prices down about 30 percent between September and November, spurring sales by speculative investors, such as hedge funds, said John Wong, a fund manager in London at CQS UK LLP, which has $6 billion under management including shares of funds that own uranium.
“What people found out is that this is not like playing copper where it’s a liquid and deep market,” Wong said. “A lot of the funds playing this market have blown up.”
Uranium typically trades through broker-dealers, including MF Global Ltd. and Tullett Prebon Plc, or in direct sales between mining companies and nuclear utilities. Utilities buy processed ore known as yellowcake, which is later converted, enriched and fabricated into fuel rods. The New York Stock Exchange also supports trading in futures contracts, which are not linked to physical delivery.
Read more at Bloomberg
The bankrupt bank, in the throes of paying off creditors, acquired uranium cake “under a matured commodities contract” and plans to sell it when the market improves “to realize the best prices,” Chief Executive Officer Bryan Marsal said.
Lehman, once the fourth-largest investment bank, has an estimated $200 billion in unsecured liabilities left to pay. The uranium, which may be as much as 500,000 pounds, might fetch $20 million at today’s prices of about $40.50 per pound, said traders who asked not to be named because of the confidential nature of the data. Marsal said the traders’ estimate of Lehman’s uranium holding is “reasonable,” while declining to be more specific.
Uranium has dropped for five straight months from $55 a pound on Dec. 1 on concerns that countries including China and India would delay nuclear power projects because of the global economic crisis, and because Lehman might dump its radioactive material on the market, the traders said.
More than 43 million pounds of uranium-oxide concentrate, or yellowcake equivalent sold on the spot market last year, more than doubling the 2007 trading volume, according to Roswell, Georgia-based Ux Consulting Co.
Illiquid Market
The oversupply in an illiquid market pushed prices down about 30 percent between September and November, spurring sales by speculative investors, such as hedge funds, said John Wong, a fund manager in London at CQS UK LLP, which has $6 billion under management including shares of funds that own uranium.
“What people found out is that this is not like playing copper where it’s a liquid and deep market,” Wong said. “A lot of the funds playing this market have blown up.”
Uranium typically trades through broker-dealers, including MF Global Ltd. and Tullett Prebon Plc, or in direct sales between mining companies and nuclear utilities. Utilities buy processed ore known as yellowcake, which is later converted, enriched and fabricated into fuel rods. The New York Stock Exchange also supports trading in futures contracts, which are not linked to physical delivery.
Read more at Bloomberg
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