Year: 2009

BP shows worst may be over for Big Oil

27 Oct 2009

The 47% drop in the oil giant s Q3 earnings was less than feared, thanks to impressive cost control. BP is promising further efficiency gains by the yearend. Longterm strategic issues persist. But for now, BP is reaping the benefits of past investments and a stronger oil price.

Modern finance, not free markets, created crisis

27 Oct 2009

George Soros new foundation will seek an alternative to market fundamentalism . But the false assumptions in modern financial theory abetted by laxity in monetary policy and government meddling in housing should get most blame for the crash of 2008.

RBS should prepare to sell its investment bank

27 Oct 2009

The casino arm of the statecontrolled UK lender is doing roaring trade. But the absurdity of a bank 70% owned by taxpayers competing on bonuses won t end any time soon. And profitability will dip as spreads normalise. A quick sale now would be tough. But RBS should get planning.

New boss aids UBS’ chances of selling Paine Webber

27 Oct 2009

Former Thundering Herd wrangler Bob McCann arrives with impressive credentials but a big challenge. Even he isn t expecting more than modest profitability. That might be sufficient to ensure independence, or a sale, of the broker even if McCann says it s not the goal.

Heineken in Mexican standoff – with itself

27 Oct 2009

The Dutch brewer probably can t finance Femsa's $7.5bnplus price tag with debt alone. To buy its Mexican partner, the familycontrolled brewer would need to issue equity. Rob Cox and Aliza Rosenbaum show how it can do so without the family losing control or spending a euro.

Yell £4bn refinancing plan deserves lender backing

27 Oct 2009

The UK directories group needs 95% creditor support for a deal to extend maturities and tweak covenants on its debt pile, alongside a £500m rights issue. Yell s business model may be challenged, but the new debt structure seems manageable and the alternatives look worse.

Lloyds’ capital wizardry could yield rich rewards

27 Oct 2009

The UK bank appears to need £25bn to exit the state s loanloss insurance scheme, but a rights issue could probably provide only half that. Swapping hybrid debt for convertibles would plug the gap, while diluting the government s stake. But such a plan won t be easy to execute.

China’s fight against market bullies has far to go

27 Oct 2009

Individual customers are taking on China s biggest domestic firms, but the antitrust regime has been more visible in shackling foreigners like CocaCola, ABInbev and GM when they bid for Chinese assets. The halfbaked regulatory framework risks preserving a stodgy state sector.

Germany needs cuts after losing US engine

26 Oct 2009

The new government is thinking of slashing taxes despite a worsening budgetary position. The approach is right. The Germans need to spend, as US consumers aren t. The way to make the tax cuts affordable is to trim big government.

RBS smartly seeks to limit cost of state insurance

26 Oct 2009

The UK bank has tentatively signed up for expensive state insurance that it now might not need. Unlike rival Lloyds, there s no prospect of statecontrolled RBS cancelling the policy outright. But it seems to have devised some sensible ways of making the scheme cheaper.

Asia gains as trade recovers faster than finance

26 Oct 2009

New GDP data from South Korea indicate a vigorous recovery, and economic fundamentals support the case. The trade crash a year ago hurt Asian economies more than, say, the US but now seems to have done less longterm damage than Western financial crisis.

ING split makes good use of crisis

26 Oct 2009

The Dutch group is finally separating insurance from banking, and restructuring further by selling its US online arm. A E7.5bn rights issue will repay half the state s capital and secure loanloss insurance. These are radical shifts. Tough times have set ING on the right path.

Investors should be wary of Argentina’s debt deal

25 Oct 2009

A proposed offer to the $23bn of holdouts from the 2005 forced renegotiation is ungenerous but should get the benchmarked 60% acceptances. With a plausible finance minister and liquid markets, Argentina may then get a new debt deal done. Investors have been here before.

Dole IPO poor omen for LBO re-equitisations

23 Oct 2009

The food company priced its offering below the anticipated range. Investors appeared worried about Dole s debt, among other things. Its performance may serve as a warning to private equity funds hoping to unload assets still lumpy with leverage.

ECB reveals ambitions with hedge-fund intervention

23 Oct 2009

The European Central Bank is urging the EU to soften its proposed hedgefund directive and ensure that it is harmonised with US reforms. The proposals sound sensible. But by sticking its oar in, the central bank is also staking a claim to be Europe s top financial regulator.

Bank regulator’s scalpel may lack needed precision

23 Oct 2009

BoE deputy Paul Tucker is keener on micro regulation of banks as a way to stop a future crisis than his boss, Mervyn King, who wants to break banks up. Tucker s ideas have merit. But the finetuning required to make them work may be more than regulators can actually deliver.

Surprise 0.4% UK GDP fall points to troubled 2010

23 Oct 2009

A small increase was expected, but GDP fell for the sixth consecutive quarter. The UK government and central bank might want to fight back with more fiscal and monetary stimulus, but the already weak pound means there s not much they can do. The UK s pain is set to continue.

Amazon stock knock becomes badge of honour

23 Oct 2009

The internet retailer reported sparkling earnings. Sceptics always derided Amazon as a retailer in fancy tech clothing. With its stock now trading at an alltime high, and former tech darlings at fractions of theirs, the critique looks like a compliment.

Gartmore IPO looks opportunistic

23 Oct 2009

The UK asset manager is enjoying a boost from rising markets and revitalised retail investors. Staff and its privateequity backers missed out on 2007 s buoyant IPO market, and took solace in a hefty dividend instead. This time, they will want to get a deal done quickly.

Ancestry.com could have trouble reaching posterity

23 Oct 2009

The genealogy website wants to raise $100m in an IPO valuing its current subscribers at about $555 a head and its shares well above recent internal estimates. While retiring baby boomers searching for their ancestors may flock to the site, the valuation seems too high.

BSkyB must maintain financial discipline

23 Oct 2009

The UK payTV operator has demonstrated surprising resilience through the recession, while continuing to invest. The balance sheet is strong, with debt at less than twice its ebitda. Sky should weigh carefully the balance between continued investment and shareholder dividends.

Credit Suisse adjusts well to new reality

22 Oct 2009

The Swiss bank smashed expectations with dazzling Q3 figures. Risk fell, return on equity rose to an industryleading 25% and pay was cut in response to lower fixedincome revenue. But the shares have reacted warily for a reason: the valuation holds little margin for error.

Meriwether asks investors to forgive – again

22 Oct 2009

John Meriwether, the legendary bond trader and cofounder of the notorious LTCM hedge fund, is to start a third fund only months after closing his second. The veteran had better make sure his latest venture is weatherproofed against stormy markets.

KNOC faces tougher oil quest than CNOOC

22 Oct 2009

The Korean state oil company s purchase of Canadian Harvest Energy secures future oil supplies, like recent Chinese deals. With energy security a hot issue everywhere, that makes sense. But Korea can t play as rough as China so KNOC needs to stick mostly to countries it trusts.

UK bank reform: it’s FSA 1, Bank of England 0

22 Oct 2009

Days after the BoE s governor said breakups were the only way to make banks safe, the FSA has set out an intelligent alternative based on capital and liquidity reforms. If only the regulator was pushing its agenda as aggressively and provocatively as Mervyn King.

China’s 9% growth comes with inflationary threat

22 Oct 2009

Beijing has pumped up the economy with spending and lending. It has worked, but now the government needs to find a strategy to tackle mounting inflation. Rate increases could harm the recovery. That leaves awkward restrictions on lending and antispeculative curbs on markets.

Gala Coral bets on just-enough restructuring

22 Oct 2009

Candover, Cinven and Permira piled leverage onto the UK betting firm when they became its third set of privateequity owners after the 2003 buyout. Gala now faces a complex restructuring; but the mooted plan will leave it with heavy debts and betting on an earnings turnaround.

US pay tsar plays with fire

22 Oct 2009

Ken Feinberg will soon unveil his plan to limit pay at Tarpdependent firms. With the best intentions, there could be damaging unintended consequences, like skewed incentives and mass defections potentially creating a mess. Let's hope Feinberg has asked the right questions.

UK commercial property has hit the bottom

22 Oct 2009

The market fell a long way very quickly. But UK commercial realestate prices probably won t drop any further. A wall of money chasing yield in a low interestrate environment should underpin valuations. Still, don t expect the market to bounce back as fast as it corrected.

King’s call for bank break-ups unnecessary

21 Oct 2009

The Bank of England governor thinks breaking banks into utilities and casinos may be needed to solve the too important to fail problem. But such separation would be tricky and have adverse sideeffects. Although the problem is real, there are better solutions.