Year: 2009

Wells Fargo may be unlikely Tarp poster child

10 Jun 2009

The US bank complained about being forcefed rescue funds and promised to pay them back fast. So the fact that it wasn t among the first 10 to do raised eyebrows. But Uncle Sam s cash may help it scrape by while it sorts out Wachovia s mortgage mess just as it was meant to do.

US should end bank debt guarantees

9 Jun 2009

With the likes of Goldman and JPMorgan and even stumbling Citi now issuing debt without Uncle Sam s backing, there s little justification for FDIC backing bank bonds. But the TLGP has attractions as a bailout tool. Officials should avoid that siren song and shut it down.

Landline phone decline threatens telecom groups

9 Jun 2009

The abandonment of traditional phones in favour of mobiles is accelerating. US operators could lose more than 8m landlines this year. Wireless divisions won t save telecom companies from margin compression. But those that don t offer mobile service could be in real trouble.

Barclays’ BlackRock deal would scratch what itches

9 Jun 2009

Sure, an all cash deal to buy BGI would be better for the UK bank. But that s not available, and a one percentage point jump in the core Tier 1 ratio is nothing to sniff at. Investors should welcome the evidence that management is addressing the bank s perceived lack of capital.

Swiss sale of UBS stake is tempting but premature

9 Jun 2009

The government can sell its SFr6bn of notes from today. Doing so would tick many boxes: give a psychological boost to UBS staff, send a positive signal to markets and even deliver a nice return to taxpayers. But it may be too soon unless UBS can raise some more capital.

Default isn’t an option for California

9 Jun 2009

Neither is bankruptcy states can t get protection. Stiffing bondholders would only destroy California s credit and deepen future budget woes. There may be some halfmeasures. But the Golden State s only real option is to make big cuts now and balance its books.

Personal View: Why we should care about crowding out

9 Jun 2009

Investors are just starting to worry that current high government borrowing will cut into more productive investment. Martin Hutchinson thinks they should be even more concerned.

Porsche will pay price for Qatar investment

9 Jun 2009

Qatari money would help the auto company shrink its E9bn debt and strengthen its hands in merger negotiations with VW. But for the deal to happen, Porsche will need to come clean about its finances and its founding families may have to let somebody else have voting shares.

Swedish banks may still need more capital

9 Jun 2009

State stress tests suggest the likes of Swedbank and SEB can stay above regulatory minimums even if their eastern European borrowers default in droves. But if the worst does happen, eroded confidence could yet force one or more to the market again.

TPG could redeem itself with Chinese bank sale

9 Jun 2009

The buyout firm lost $1.35bn in five months on an investment in Washington Mutual. Now it may make ten times its investment in China s Shenzhen Development Bank. The annualised return doesn t make up for WaMu losses. But the cash return which investors care about would.

Setanta learns cost of combining hope and promises

9 Jun 2009

The upstart Irish payTV broadcaster has to find £30m by next week to avoid administration. It might just manage something, but the £500m owed to content providers looks crippling. The recession and a halflost auction have been just too much for the company.

US taxpayer makes decent return on Tarp – so far

9 Jun 2009

The bailout was meant to restore faith in banks. Yet the state has made a profit on the first $68bn being returned by banks. But those are the portfolio s winners. Net off the losses from the likes of AIG and Citi and the government will struggle to stay in the black overall.

BlackRock would get more than Barclays from tie-up

8 Jun 2009

The US asset manager may buy the UK bank s fund management unit in a $12bnplus cashandstock deal. Barclays would get some capital help and a hardly strategic 20% stake in a big listed US company. For BlackRock, a little cash would buy both scale and dilution of 45%owner BofA.

Geithner still has too many balls in the air

8 Jun 2009

The US Treasury boss has backpedalled on some plans to make massive structural changes to financial oversight. But extensive, nettlesome issues remain. Obama s team should be trying to rein in expectations and set politically tenable goals before unveiling proposals next week.

Do failed bankers deserve second chances?

8 Jun 2009

The answer is yes but only so long as they have shown adequate contrition and have something genuine to contribute. Andy Hornby, the former HBOS CEO, fits the bill. His appointment as CEO of Alliance Boots will raise some eyebrows, but nobody has a basis to object.

Rio/BHP now need to watch out for Australia

8 Jun 2009

The joint venture between the two miners will strengthen their bargaining power visàvis their biggest customer, China. But shareholders shouldn t celebrate too enthusiastically. The Australian authorities may gobble up a big share of monopoly profits via higher royalties.

Arcandor break up could have E500m shortfall

8 Jun 2009

A guesstimate of the German travel and trade group s sumofparts makes for ugly reading. Arcandor s stake in profitable Thomas Cook doesn t appear enough to offset its other weaknesses. Even in a prepack administration scenario all parties look in line for a haircut.

What, no socialist backlash?

8 Jun 2009

An election in the midst of a deep recession might have been expected to help the left. But throughout Europe, centreright parties made gains. Still, this isn't a vote for unfettered free markets. Sarkozy, Merkel and Berlusconi are all keen on regulation.

Calpers gives private equity, VCs a morsel of hope

8 Jun 2009

The largest US public pension fund is considering raising its allocation to private equity and venture capital. In reality that's just acknowledging the current composition in its funds. But this beats the alternative: dumping stakes at a big discount and reneging on commitments.

US oversight of two-time bailees’ pay is sideshow

8 Jun 2009

The government effectively runs doubledipping Tarp losers like AIG and Citi anyway. The rules and regulatory powers governing financial pay in general are of greater importance. That means avoiding micromanagement and setting clear, enforceable guidelines on pay structure.

US jobs heralds shifts in dollar, yields, oil, rates

8 Jun 2009

Markets have decided that the marked drop in US job losses marks the end of the era of ever more expansionary policies from the Fed. If that s right, higher interest rates may be drawing near. Speculative fervour in commodities and gold may have already been dampened.

Supreme Court right to delay Chrysler deal

8 Jun 2009

The railroading of secured lenders by the Obama administration in the Fiat deal raised troubling questions about the rights of creditors. To have the highest court in the land consider the merits of the argument is good for capitalism not to mention democracy.

US could do some foreign currency borrowing

8 Jun 2009

Raising funds in renminbi, as the CCB chairman just recommended, wouldn t be wise because of China s exchange controls. But funding in euros and yen could reduce crowding out from huge US deficits. If currency risk was kept manageable, the discipline imposed would be valuable.

KKR cuts smart deal to sell IPOs through Fidelity

8 Jun 2009

But it s risky for the US mutual fund giant. KKR will give Fidelity s clients first dibs on its IPOs. That should help the buyout shop s equity syndication business. But Fidelity agreed not to work with other LBO firms and its reputation could be hurt if KKR s deals are duds.

Taiwan’s markets catch China fever

8 Jun 2009

While exports plummet, Taiwan's stock market has boomed. Closer ties with China are a big factor. But China s buying power alone won t cure Taiwan s trade malaise, and may create unwanted sideeffects: too much hot money, and too little restructuring.

Rio snub is latest Chinese setback in global M&A

5 Jun 2009

The Chinese are great at selling to foreigners, but seem to have trouble buying. Chinalco s inability to pay Rio Tinto s $19bn is the latest example. It follows bad investments in Fortis and Blackstone. The problems: naïveté, poor communication and Beijing s alltoovisible hand.

US jobs data suggest Fed should ready the brakes

5 Jun 2009

Job losses in May were sharply lower than in prior months. Meanwhile commodity prices have zoomed up, presaging inflation, and banks look healthier. The rationale for outsized monetary stimulus is wearing thin, and Ben Bernanke needs to prepare to reverse it sooner not later.

Rio’s new deal gives shareholders partial victory

5 Jun 2009

The AngloAustralian miner deserves plaudits for choosing a $15bn rights issue over a pact with a Chinese stateowned firm. But to get a further $6bn, Rio has had to put its best iron ore assets into a joint venture with archrival BHP Billiton a venture it doesn t control.

BHP Billiton comes out on top in Rio deal

5 Jun 2009

For a while, the AngloAustralian miner seemed unable to profit from having a strong balance sheet in a crisis. But painfully indebted Rio Tinto has now turned to its rival for help. BHP gets what looks like the upper hand in a big joint venture at an attractive price.

No need to rush back onto London housing ladder

5 Jun 2009

After falling 24%, the central London housing market has picked up. Supply has increased. Affluent buyers with fat deposits are exploiting supercheap mortgages. There is anecdotal evidence of sealed bids and gazumping. But a sustained period of growth looks unlikely.