Year: 2009

Mezz debt craze may last a while

11 Nov 2009

Blackstone, TPG and KKR have all tapped mezzanine funds for recent LBOs. The hybrid debtequity financing plugs a gap that burnt banks aren't yet willing to fill. Some buyout firms have mezz funds inhouse, too. And while it's pricier than straight debt, mezz is more flexible.

Imagination hasn’t helped General Electric much

11 Nov 2009

The group s imaginative move into financial services has hobbled it relative to rival United Technologies, which is poised to purchase some of GE s assets. Though the industrial sides of the two companies look remarkably alike, the divergence in their fortunes is striking.

Tech giants no longer respect business borders

11 Nov 2009

HP s $2.7bn purchase of 3Com puts it squarely into Cisco s realm. But Cisco s already gunning after HP in servers. As OracleSun, DellPerot and other deals suggest the traditional frontiers in technology no longer apply. The battlefield is wide open.

Electronic Arts faces another bleak Christmas

11 Nov 2009

The US video game giant s lack of hits has led to a string of disappointing seasons. Worse, technological shift could cannibalise revenues. There's always next year for new games, but figuring out distribution may take longer.

US Senate reform bill forgets lesson of history

10 Nov 2009

Its centrepiece is the creation of a single überregulator for banks. This has its charms. It would avoid giving new power to the Fed and should reduce the risk of regulatory capture. But the experience of Britain s FSA suggests structure alone won t ensure effective regulation.

Bear acquittal backs cock-ups over conspiracies

10 Nov 2009

The case against Bear fund managers Cioffi and Tannin was the closest anything came to a trial over Wall Street's role in the financial crisis. Their acquittal suggests blame isn't easy to apportion. Like Dick Fuld and others with skin in the game, incompetence is no crime.

What is the right way to tax banks?

10 Nov 2009

With the idea of a Tobin tax on financial transactions fading, attention is focussing on forcing banks to pay insurance fees related to their riskiness. This is a promising proposal especially if riskiness is measured by how much a bank relies on hot money.

Oracle-Sun antitrust spat exposes turf sensitivity

10 Nov 2009

The Obama administration s relatively vigorous approach to competition policy is welcome in Brussels. But mutual cooing has turned into squawks now that the European Commission has raised objections over the merger of two US firms. Shared views are one thing, turf is another.

Yell rides market boom with punchy cash call

10 Nov 2009

The heavilyindebted directories business has managed to get underwriting for an equity issue almost twice the size of its market capitalisation. The UK firm has also avoided a rights issue while limiting the fall in its share price to around 4%.

HSBC feels the kick from Eastern recovery

10 Nov 2009

The UKlisted emerging market lender s third quarter profits climbed: bad debts receded, Asian markets picked up and the troubled US business may have seen its worst days. Even if economic tailwinds don t last, HSBC s strong performance looks more sustainable than most.

Axa gets sugar to sweeten Asian deal

10 Nov 2009

In September, the French group said it didn't need to raise capital. But now Axa wants to take full control of the best assets in its majorityowned Asian operation. A E2bn rights issue will allow it to raise the alreadyrejected offer, and to expand in emerging markets.

Greece shouldn’t wait for market discipline

10 Nov 2009

The EU is set to criticise Greece for failing to rein in its budget deficit, which is now expected hit to 12% of GDP double previous estimates. Investors don t care right now, but they will eventually. Greek politicians need to become more forthright and less complacent.

Barclays only dips its toe in dividend waters

10 Nov 2009

A 1p payout isn t a grand gesture. The UK bank s investors might have expected a higher initial postcrisis payout. But while Barclays hit quarterly forecasts and impairments appear to be levelling off, the outlook is still uncertain. There might be more generosity at yearend.

Axa can pay more for Asian minorities

10 Nov 2009

The independent directors of Axa Asia Pacific rejected the offer of a 31% premium to buy out minority holders. The market agreed, and it looks like the right call. Direct control of Asian assets promises good growth for Axa. And it is probably willing to pay up to get it.

System stress test flatters Spanish banks

9 Nov 2009

The Bank of Spain has run the numbers and says the country s banks are profitable enough to write off 40% of loans to property developers. But the exposure to the dodgy loans varies widely. Santander looks fine, but some savings banks could have trouble coping.

US Treasury lets Fannie slip deeper into care

9 Nov 2009

It rejected the mortgage zombie s plan to sell nearly $3bn of tax credits it can t use to Goldman. It had its reasons, but with Fannie already calling for another $15bn of aid, any sort of market mechanism that reduces the need for government handouts ought to be embraced.

Kraft incites Cadbury holders to rise up

9 Nov 2009

By formalising its £10bn bid the US group is hoping the UK confectioner s shareholders will lobby the board to talk. Without adding a penny yet that s risky. But it also brings in arbs whose view of value is simply a profit. That could shift the outcome in Kraft s favour.

Latest KKR/GA buyout is back to the future

9 Nov 2009

The firms are buying Northrop Grumman s defence consulting division for $1.65bn. The carveout looks like the opportunistic deals that were traditional before buyouts got huge. It has a manageable capital structure too. The new model for LBOs is becoming clearer.

Axa tries for cash-lite $10bn buyout

9 Nov 2009

The French financial group wants full control of the Asian businesses in its 53%owned unit. Its plan: rival AMP buys the whole company, and then Axa buys most of it back. Axa puts up only $1.7bn in cash, but minority holders are unhappy. They get mostly hardtovalue shares.

Socialist US senator proposes most capitalist bill

9 Nov 2009

Bernie Sanders Too Big to Fail act proposes that if a firm is so big that its failure would threaten the system, it should be broken up not protected by a bailout. As simple as it sounds, its explicit tone trumps competing bills in capitalistic clarity.

A still lower dollar could be good for the world

9 Nov 2009

Globalisation should lead to a convergence of US and emerging market labour costs. High US unemployment and stellar productivity growth suggest this may be occurring with painful speed. US wages are too high for the new reality. A less valuable greenback would push them down.

Sprint bets the farm on WiMax standard

9 Nov 2009

The US carrier s customers are melting away. Yet it has scrimped on capex to double down on wireless broadband. Putting another $1bn into cashburning group Clearwire, while a rival technology is catching up, amounts to a binary bet for shareholders.

Ghost of Carr’s last deal haunts Cadbury defence

9 Nov 2009

The chocolatier's chairman plotted the most recent winning UK hostile bid: Centrica s £1.4bn takeover of Venture Production. Now Roger Carr must taste his own dish. Kraft s cheeky hostile offer for Cadbury seems inspired by that very deal.

Primerica’s pseudo-sale emblematic of Citi mess

6 Nov 2009

The megabank is hiving off the insurer, one of Sandy Weill s first acquisitions. But it s not a clean break. Citi is keeping much of Primerica s earnings and will remain a major shareholder for now. It s a fittingly complex way to mark the dismantling of Citi s sprawling empire.

RBS true to form with £1.8bn quarterly loss

6 Nov 2009

The UK bank may have cut its reliance on state loanloss insurance. But while the risks of financial doomsday have lessened, RBS s latest results show why the bank sees its basecase scenario as little improved. Despite some welcome surprises, RBS s stabilisation is tentative.

ICBC should consider buying Standard Chartered

6 Nov 2009

China is spreading its trade tentacles through Asia and Africa. Merging its biggest bank with the emergingmarkets lender would create a financial giant to match. ICBC would gain both assets and expertise. Given the headwinds ICBC faces, now would not be a bad time to pounce.

Productivity surge could signal further jobs gloom

6 Nov 2009

US unemployment has reached 10.2% in spite of a growing economy. Meanwhile, productivity is surging. That s normal in recoveries, but it began early and may continue. If so, jobs may be slow to return and unemployment could reach a record, weakening banks and depressing wages.

BA still struggling for survival

6 Nov 2009

The UK airline is haemorrhaging cash and frantically cutting costs to deal with a probable £1bn fall in sales this year. It is hard to see how BA can pull off its longdiscussed merger with Spain s Iberia in this state. But while progress is slow, BA s fortunes may be bottoming.

Mixed results for private equity in the public eye

6 Nov 2009

Fortress and Blackstone both went public in 2007 in highprofile, overpriced IPOs. Both have since been beaten heavily down. But their thirdquarter earnings underline the larger Blackstone's apparently superior ability to diversify its business and keep investors on side.

Marchionne’s Chrysler blueprint needs a road test

5 Nov 2009

The Fiat boss s plan to take the Motown carmaker out of the wrecker s yard sounds promising. His success in Turin gives him some credibility. But like his statement that the unprofitable firm has boosted its cash by $1.7bn, Marchionne s vision must do more than stand up on paper.