Year: 2009

Lacroix woes point to luxury goods consolidation

28 May 2009

Christian Lacroix s request for creditor protection underscores what can happen to the luxury sector s overleveraged smaller players in a downturn. It also highlights the pressures on the whole sector. Consolidation is needed but don t expect a rush of deals just yet.

AOL needs more than just independence

28 May 2009

The former web highflier is finally being spun off by parent Time Warner. That can t hurt its chances of a renaissance. But it has a long way to go to compete with other internet heavyweights. Its independence may prove the preamble to gradual extinction.

Ignominious end for old-school Pequot

28 May 2009

Art Samberg is shutting his 23yearold hedge fund after assets dwindled amid an inconclusive multiyear insider trading probe. The closure shows how even a long record of betterthanaverage performance couldn t overcome the new world of picky investors and official scrutiny.

Government bonds enter danger zone

28 May 2009

With risk appetites returning, investors are no longer herding to the safety of government paper at just the moment when a torrent of new issuance is hitting the market to fund ballooning deficits. Navigating the danger zone will require skill and luck.

B&B coupon deferral creates CDS confusion

27 May 2009

Providers of credit protection on the UK lender were braced to make big payouts when it was nationalised last year. With B&B now deferring coupon payments, derivatives body ISDA must decide whether the CDS should pay. But changes to UK law could mean the CDS isn t triggered.

Vodafone success could pave way for Bharti-MTN

27 May 2009

The UK telecoms group recently won control of its South African joint venture. The precedent will make it hard for regulators to stop India s Bharti taking effective control of market leader MTN. Ironically, Vodafone s victory could help unite two of its largest rivals.

Rate floors keep iffy borrowers kicking

27 May 2009

Uncertainty and the disappearance of investors looking for absolute returns caused credit to dwindle. Libor floors have kept loans flowing for dodgy credits by luring in nonbank lenders. This is one credit market tweak that deserves commendation.

Diplomacy dilutes Europe’s crisis-prevention plan

27 May 2009

The European Commission sensibly wants to prevent bubbles emerging. But one of its proposed new oversight groups is stuffed with 62 people because everyone needs a seat at the table. The other may pull its punches to avoid offending national sensitivities.

GM bondholders shouldn’t be Obama’s latest scapegoats

27 May 2009

The president may blame their final rejection late last night of the carmaker s debtforequity offer for forcing the carmaker into bankruptcy much as he did with Chrysler s lenders. But the administration s union favouritism doomed both offers from the outset.

US toxic asset plan can’t avoid bank conflicts

27 May 2009

The issue isn t just banks using government leverage to buy their own bad assets through the PPIP. The potential for conflicts extends to buying each others dross. But the scheme won t work if Treasury and FDIC set overly complicated rules. They need to settle for imperfection.

Bank flight to safety threatened by T-bill fall

27 May 2009

US banks have been stuffing themselves with Treasury securities, waiting for lending conditions to improve. That looked smart until the prices of those bonds began to plummet. Unless they hedged their exposures, many could be in for pain.

Rising yields could hurt housing and delay upturn

27 May 2009

The rate at which US home prices are dropping has slowed. But rising interest rates could damp buyers enthusiasm, delaying or even deepening the market bottom. With economic recovery depending on the stabilization of the housing market, that could prolong the recession.

Santander inches towards closure on Madoff

27 May 2009

The Spanish bank is handing back $235m that it redeemed from the disgraced investment manager 90 days before his arrest. In doing so, it has made its peace with Madoff's litigious trustee. Others in the firing line won t find it easy to follow suit.

Overvalued euro weighs on fragile zone

27 May 2009

Recession in the eurozone is far deeper than in the US. Germany s GDP decline is enormous. Meanwhile, competitiveness and fiscal pressures are terrible in Ireland, Spain and other smaller economies. The strains in the zone are likely to mount.

Danone’s E3bn cash-call shows need to reposition

26 May 2009

The French water and yogurt company wants to cut debt while maintaining the flexibility to make acquisitions. It got overleveraged when it bought babyfood maker Numico two years ago, and is exposed to a shrinking mineralwater market. Danone needs to adapt to a changed world.

Ex-mortgage salesman tries rebirth as savvy buyer

26 May 2009

Stanford Kurland made a mint as the number two at lender Countrywide. Now he s looking for $750m to bankroll picking over the wreckage of the mortgage market. Sure, he should be equipped to find bargains for investors. But he and his colleagues will make the more certain return.

Don’t be fooled: Facebook’s not worth $10bn now

26 May 2009

That s the headline number for Digital Sky s $200m investment. But the Russian internet group is getting preference shares with undisclosed rights. While $10bn could be a target, DST's planned offer for common stock held by employees will say more about Facebook's value today.

Fiat still offers best option for GM Europe’s Opel

26 May 2009

German lawmakers deciding on Opel s fate should set aside politics and get real about the auto industry s terminal overcapacity. Sergio Marchionne s proposed threeway merger of FiatChryslerOpel is risky and audacious. But it is also Opel s best chance of longterm survival.

Bharti tries to get MTN on the cheap

26 May 2009

The proposed cashandshares swap between the Indian and South African telecoms groups is fearfully complex. But, on the basis of information so far released, it would give Bharti effective control in exchange for only a modest premium for MTN shareholders.

California: the four-state solution

26 May 2009

Readers responded in droves to Martin Hutchinson s provocative suggestion that California s financial problems could be eased by breaking it into four smaller states. Breakingviews presents a collection of the most noteworthy comments.

Warner debt deal kicks off EMI countdown

25 May 2009

The US music group s $1.1bn refinancing last week has shaken off pesky debt covenants and extended its maturities. It s now in pole position to pounce on debthobbled rival EMI, whose lenders at Citi would love to unload. The dance music to a deal has begun.

Korean investors too sanguine on geopolitical risk

25 May 2009

Nuclear tests to the north and the death of an expresident barely ruffled South Korea s markets. The events may not derail the nation s tentative stabilisation, but they do have some troublesome implications.

Wall Street turns its back on incentive pay

25 May 2009

Predictably, Morgan Stanley is raising the salaries for its top dogs. Rivals will surely follow. This looks to be an unfortunate byproduct of the vilification of bonuses by hipshooting legislators and regulators. Unlike incentive pay, salaries are sticky and lack incentive.

British Airways switches to survival mode

22 May 2009

The UK airline has axed its dividend following results that are as gloomy as they come. BA is burning cash. Its response cutting capacity, capex and costs will need to be brutal if it is to work. In the meantime, the hopedfor deal with Iberia looks further away than ever.

Private equity firms cash in on FDIC woes

22 May 2009

The consortium buying Florida s BankUnited will receive $12.7bn in troubled assets for a cash outlay of just $900m. The FDIC will assume much of any resulting losses. The deposit insurance agency s fiscal straits and heavy workload are forcing it to conduct fire sales.

No respite for Spanish banks

22 May 2009

A recent slowdown in the increase in bad loans looks like a blip. The true picture of nonperforming loans is worse than the headline data suggest, and the green shoots rally among Spain s domestic banks is premature.

What ever happened to the live rock album?

22 May 2009

The economics of the music industry and emergence of web video have made recorded concert albums nearly obsolete Coldplay is even giving its latest away. Rob Cox reminisces.

Citi keeps shareholder dilution crown

22 May 2009

Shares in Fifth Third and Regions Financial took a pounding as the two troubled US regional banks filled their stress testmandated capital needs. GMAC s owners are on the ropes, too. But Citi, which is more than quadrupling its share count, leaves them all in its wake.

Would California work better as four states?

21 May 2009

UK would benefit from a snap election

21 May 2009

With both the IMF and S&P warning about the country s finances, the UK needs to get a grip on the situation. Gordon Brown says calling an election in a recession would cause chaos. The truth is nobody is likely to take tough decisions before an election is out of the way.