Year: 2009

UK just doesn’t feel triple-A OK

24 Apr 2009

The rating agencies aren t formally considering a downgrade yet. But the latest government budget showed no concern for the risks of huge deficits. That isn t consistent with a top rating. If ratings accounted for possible inflation, the UK would probably have been cut already.

Lack of made in UK becomes central to crisis

24 Apr 2009

The UK economy contracted by 1.9% in the first quarter. That was worse than expected, and undermines the government s brand new growth forecast. Manufacturing, on which any recovery will depend, plummeted. The government s growth gamble keeps on looking riskier.

Exclusive: Barclays didn’t get A in stress test

24 Apr 2009

The UK bank last month let observers believe that it had passed the FSA s stress test with flying colours. In fact, it passed only because it convinced the regulator that it had credible options to shore up its capital if things got really tough.

Morgan Stanley prop spinoff makes more sense than ever

24 Apr 2009

The bank has been debating the idea for 18 months or more. The credit crunch only increases the rationale if the move derisks the firm and gives it more credit as an asset manager. Meanwhile, UBS's Dillon Read fiasco provides useful pointers.

Skype founders unlikely to find Ebay stand-in for Joost

24 Apr 2009

The pair hit a home run when they sold Skype to Ebay for $3.1bn. Now they re said to be looking to sell online video site Joost. They ll be hard pressed to find an eager buyer. Joost is no Skype and the internet openness bubble has deflated since Ebay s fat payout.

Nomura bucks trend with $7bn mega-loss

24 Apr 2009

As US rivals get back in the black, the Japanese investment bank made its biggest ever annual loss. On top of asset writedowns and equity losses, it's still paying the bill for Lehman Brothers. Such oneoffs are transitory, but Nomura faces a longerterm problem: Japaneseness.

KKR’s annex fund is recognition of over-leverage

24 Apr 2009

That's not to say it's a bad idea. The private equity firm is raising a side fund to pump extra cash into stretched companies in its European fund. It means investors double down on their investment to reduce debt. But like a rights offering, at least it treats them fairly.

Fiat risks coming away empty-handed

24 Apr 2009

Chrysler may not be enough for the Italian automaker and its ambitious boss Sergio Marchionne. He s also interested in taking on GM Europe. The new gambit might be largely aimed at Chrysler s unions and creditors. But Fiat s multiple cashfree offers could end up with no takers.

Diageo buyout of Moët could be bubbly brilliant

23 Apr 2009

For Diageo that is. The world s largest spirits maker used to look boringly low leveraged. But past caution leaves it with the firepower to pay E10bn or more for LVMH s cognacs and champagnes. But that doesn t mean the French fashion house would want to play.

Murdoch gussies up MySpace in bid to keep Google

23 Apr 2009

The social network is considered one of News Corp's savviest buys. But the odds of MySpace renewing its rich advertising contract with Google are dimming. It is falling behind Facebook and it needs to turn around quickly. That explains why MySpace founders just got the boot.

Roche rolls craps on Genentech

23 Apr 2009

Drug companies routinely bet billions on uncertain odds. Roche gambled by spending $47bn on Genentech just before the results of an important clinical trial were announced. It lost. Roche overpaid by billions, but it was a gamble worth taking.

ITV buys time to test advertising recovery

23 Apr 2009

Executive chairman Michael Grade is relinquishing his CEO duties just as it looks like the UK broadcaster will muddle through the advertising slump. But ITV s covfree loan and a planned disposal should be enough to dodge a rights issue and ensure ITV repays debt due in 2011.

Prudence pays off for Credit Suisse

23 Apr 2009

The Swiss group was quicker than rivals to raise capital and aggressively slash holdings of toxic assets. Foresight helped the bank post an impressive SFr2bn quarterly profit and a stunning 23% return on equity. It s not sustainable, but shows less risk can still be rewarding.

Court saves PCCW minorities from themselves

23 Apr 2009

Richard Li s $2.1bn buyout of the Hong Kong telecom he controls met a sudden death, apparently not because it was illegal, but because judges deemed it unattractive. That seems excessively kind to minority shareholders. They shouldn t be protected from their own poor judgement.

Barclays’ back us or sack us strategy pays off

23 Apr 2009

The UK bank s board looked to be toast after a bungled attempt to raise equity from Middle East investors. But six months on, it has been overwhelmingly reelected. After some dicey moments, shareholders are starting to believe in the benefits of staying free from state control.

Zuma enigma is key to South Africa’s future

23 Apr 2009

The presidentelect is from the ANC s left and has faced corruption and other charges. Yet his apparent wish to keep finance minister Manuel suggests economic rationality. South Africa can become Nigeria, Zimbabwe or a larger, richer Ghana. Zuma will get to determine which.

RBS needs to be realistic about Asia price tag

23 Apr 2009

Why is the UK bank taking so long to sell its Asian business? Maybe because the assets in question are disparate and small. RBS's preference for selling them in one go reduces the pool of buyers and increases the red tape. The $1bn pricetag look optimistic.

It’s still Ken Lewis’s fault

23 Apr 2009

Hank Paulson made me do it is no excuse for the BofA boss s disastrous Merrill deal. Despite government pressure to proceed, he could have renegotiated the price once Merrill s losses became clear. Lewis s responsibility was to shareholders who should still show him the door.

VW bailout of Porsche could be price for peace

23 Apr 2009

Luxury carmaker and financial operator Porsche is saddled with debt after building up a majority stake in rival Volkswagen. The prey, VW, could help by buying the predator s car business. But VW s minority holders may chafe at the price of tranquillity using a E8bn cash pile.

Iraqi oil recovery still a mirage

23 Apr 2009

The nation needs foreign help to meet its target of doubling production in five years. Security risks are no longer insurmountable, but the politics may be. A parliamentary committee has pledged to push Shell out before it has even arrived. Even service contracts look risky.

Chrysler’s lenders put US car tsar on the spot

22 Apr 2009

The creditors may think their offer of 35% haircut in return for equity matches what they would get in a bankruptcy filing. But Steve Rattner wants much more. He now has an unpalatable choice: reject the offer and let Chrysler go bankrupt or show weakness ahead of GM talks.

Rattner woes a blow to Obama’s Detroit strategy

22 Apr 2009

The US car tsar is embroiled in controversy over his former money management firm's use of placement agents. This could distract him from crucial negotiations with automakers. With the clock ticking and few obvious replacements, it may put the Obama administration in a fix.

Morgan Stanley Q1 shows cost of reduced risk-taking

22 Apr 2009

Strip out the accounting loss from improved debt spreads and the Wall Street firm would have made money. But its decision not to swing for the fences in trading anymore means lower revenue. That reduces risk but also makes turning a decent profit much harder to do.

Budget leaves UK at risk of financing crisis

22 Apr 2009

What should the chancellor do in the face of a deep recession? Alistair Darling took flight from reality. He resorted to unrealistically optimistic economic assumptions and the pretence that gargantuan deficits would not be a problem. Financial markets may yet change his mind.

Freddie exec’s death shows perils of vilification

22 Apr 2009

Even if David Kellermann s suicide had little to do with his job, the vitriol directed at those toiling at crisiswracked firms can t have helped. Yes, the financial meltdown has cost trillions. But public rage over it can contribute to needless human losses, too.

EU Commission is paper tiger on bank bailouts

22 Apr 2009

The EU wants to force staterescued banks to shrink their balance sheets. That's unrealistic and could push back regional integration as the Bundesbank's Weber fears. Europe deserves a stronger regulatory response to the crisis than the current commission seems able to provide.

UK green budget looks bad value for taxpayer money

22 Apr 2009

The government s £1.4bn green budget is meant to help reduce carbon emissions and create a low carbon economy. Taxpayer money may have been better spent giving indirect support to existing hightech industries that are less speculative.

Japan should forgo $500bn equity crash-mat

22 Apr 2009

A planned emergency fund for buying shares would pad out the market but reinforce banks bad habits. History has left lenders groaning under $200bn of stock, which they don t seem keen to sell. The taxpayers money would be better spent buying shares directly from the banks.

Asian trade figures suggest global decline slowing

22 Apr 2009

Japan s March exports were down 46%, but that still beat February. Overall, Asian trade figures have bounced somewhat, suggesting their previous drop resulted from inventories and finance, not a deeper problem. This is not the end of recession, but maybe the end of its beginning.

Darling understates cost of bank bailout

22 Apr 2009

The UK chancellor says he s being conservative in setting aside £50bn for keeping the banks afloat. But he s not counting the full cost of all the official guarantees and aid especially if the recession deepens. The IMF s £130bn estimate looks more plausible.