Year: 2009

Germany sips a prudent E50bn dose of stimulus

13 Jan 2009

The ruling coalition's twoyear stimulus plan of infrastructure spending, tax relief and carbuying incentives won't prevent recession. But it stands less chance of doing harm than the fiscal frenzy in the UK and US.

Pandit engineers deft start to Citi dismantling

13 Jan 2009

Wedging Smith Barney into a Morgan Stanleyrun JV puts a lower value on the unit than the megabank could have got a year ago. But it frees up some cash and gussies up its capital on an accounting basis. It also keeps a 49% stake and can share in synergies worth some $8bn.

Aegis investors deserve some clarity over strategy

13 Jan 2009

The UK media firm's chief executive walked suddenly in November. Since then the share price has soared on hopes of a sale or breakup. But there has been little from chairman John Napier on where the group is really heading. Investors need to know what they are buying into.

Deutsche should push back against Postbank terms

13 Jan 2009

With bank capital scarce, Deutsche Bank will struggle to justify paying triple the market price for half of Deutsche Postbank. The existing terms are lucrative for Postbank s stateowned top shareholder, but Germany ought to be wary of adding to the load on its banking system.

Yahoo’s ho-hum CEO pick faces steep challenges

13 Jan 2009

The struggling internet company went the safe route by picking Carol Bartz as its new leader. While her experience makes her an adequate choice, she doesn t look like a game changer. But that may be what s needed to conquer the difficulties on Yahoo s horizon.

Spain’s economy needs painful reform

13 Jan 2009

S&P s warning of a possible downgrade to Spain s sovereign rating validates fears among bond investors and economists that the country's boom is giving way to a long and tortuous hangover. Spain must meet the challenge with significant reform, in particular to its labour market.

Halting trade slide may be new priority

13 Jan 2009

Major countries trade volume in November was down around 8%. Some of the decline was due to tight finance, so it may recover. But if trade keeps falling, rescuing it will become the world s top priority the 66% world trade decline is what made the Depression Great.

Debt cliff puts distressed M&A on the table

12 Jan 2009

Advanced Medical Optics was aggressively trying to purchase rivals in 2007. Now, its board has agreed to sell to Abbott Labs at a fire sale price. With more companies facing the prospect of hitting walls of unrefinanceable debt, expect more semiforced sales.

Channel 4’s fate rests with UK government, not BBC

12 Jan 2009

BBC directorgeneral Mark Thompson has hinted he supports a merger of cashstrapped broadcaster Channel 4 with RTLowned Channel 5. He s afraid the BBC might otherwise have to prop up its commercially funded rival. His views may make sense, but Thompson won t have the final say.

Can Uncle Sam be an effective activist shareholder in Citi?

12 Jan 2009

The government appears to be behind plans to hive off Smith Barney and replace the ailing bank s chairman with an Obama man. So far, these moves align the US to shareholders interests. The danger is that in its quest to protect its $45bn investment in Citi, the US overreaches.

New Tarp limits highlight US’s clashing goals

12 Jan 2009

Congress wants to require any bank accepting bailout funds to lend them on, especially to help the tottering US housing market. But regulators are also leaning on banks to deleverage and lower risk. With house values still falling, it will be hard to achieve both goals.

Alitalia farce gets fitting end with Air France deal

12 Jan 2009

The relaunch of Italy s shambolic national carrier is close. A reborn Alitalia is due to take off with Air France having paid a hefty premium for a 25% stake. Berlusconi and Roberto Colannino, the airline s restructuring guru, are clear winners. The loser? The Italian taxpayer.

Impaired vision of UK bank losses

12 Jan 2009

UK banks could have enough capital to absorb losses in a deep recession. But forecast losses are very sensitive to assumptions. And banks don't just need capital to take hits from past loans: they must also make new loans, and win the confidence of investors, says George Hay.

VW’s strength shouldn’t bar it from state support

12 Jan 2009

The German car manufacturer achieved higher sales last year in spite of the global slowdown. Bets on emerging markets and a multibrand strategy paid off. VW may be doing well on its own, but it would distort competition to bar it from state aid packages being offered to rivals.

Heathrow runway comes with welcome safeguards

12 Jan 2009

Few like the idea of more planes over London. But in approving a new Heathrow runway, the UK government has made important concessions to the environmental lobby and its own dissidents, including a limit on flight numbers. Expansion might also make Heathrow more efficient.

RWE spends E9bn on neighbourhood shopping

12 Jan 2009

The German utility is to buy Essent, a Netherlands power company, after an allDutch deal was thwarted by competition authorities last year. RWE is exploiting a Dutch market that s more liberalised than Germany s. The twist is that the deal could be blocked on those very grounds.

Conflicts make bank restructuring bonanza a dream

12 Jan 2009

Wall Street s big underwriters thought they had won when an amended US bankruptcy law let them work as restructuring advisers. Now they are stuck in so many messes that they may not be able to. DIP financing fees could make up some slack. But some bankers may be underoccupied.

Short-term boom may yield to long-term gloom

12 Jan 2009

Record US fiscal and monetary stimuli have caused some credit market easing. Shortterm, the economy and stock market may also bounce. But the cost of the stimulus could later cause Treasury market stress, a lightningboltshaped recession and stocks below November's lows.

Peloton founder proves market’s goldfish memory

12 Jan 2009

Last February, Geoff Grant s $2bn fund went spectacularly bust. Now he looks to have secured fresh capital for a new venture. In the past, it wasn t unusual for managers of failed funds to get another chance. But despite an almighty credit crunch, investor memory seems no better.

Turkey’s political crisis could end happily

12 Jan 2009

Investors fear that a showdown with the military will keep the government from completing a critical IMF deal. It s a risk. But for Turkey to prosper, it has to reign in the radical deep state . The current crackdown is untimely, but could mark a breakthrough.

Is Citi’s Pandit finally getting the point?

9 Jan 2009

It has been clear for ages that the bank is too sprawling to be effectively managed. Previous chiefs rejected calls to simplify, break up or hive off some pieces. But talks to merge Smith Barney with Morgan Stanley suggest Vikram Pandit has got the message.

Obama shouldn’t repeat Tarp errors with stimulus

9 Jan 2009

Unemployment is rising fast and the US presidentelect wants to respond in a hurry. But haste can make waste, as the illdefined Tarp plan demonstrates. Congress shouldn t dither, but serious deliberation on means and ends, aside from being democratic, would benefit the economy.

Business kowtows to the new US administration

9 Jan 2009

ExxonMobil is calling for a carbon tax. Citigroup wants to rewrite US bankruptcy law to help mortgage borrowers avoid foreclosure. Such apparently selfless moves aren t surprising a bit of obsequiousness may influence Team Obama more effectively than acting obstreperous.

France turns the screw on its banks

9 Jan 2009

Nicolas Sarkozy wants the country's banks to lend more. His finance minister talks of their failure to assess risk. Another E10bnplus of state capital is in the pipeline but it won t be under the same lenient terms as October s first round.

Bob Rubin leaves Citi with head hung low

9 Jan 2009

Sandy Weill scored a PR coup hiring the former Treasury secretary and Goldman boss as consigliere in 1999. But Rubin s advice didn t prevent Citi lurching from crisis to crisis. And during the credit crunch he has become a lightning rod for criticism of Citi s continuing woes.

Commerz-Dresdner’s rapid fall is a worrying puzzle

9 Jan 2009

It s unclear why the German bank needs as much as E10bn of new capital. Explanations include weak capital ratios amid high market volatility and German economic woes. Of course, CommerzDresdner may just have been slow to write down assets. But if not, the implications are ugly.

Satyam’s $1bn fraud isn’t just an Indian problem

9 Jan 2009

The Indian IT software firm was also supposed to meet US accounting standards. Something clearly went wrong and the excuses are already flowing thick and fast. The history of high profile fraud suggests the accountants, PricewaterhouseCoopers, will find it hard to escape blame.

KKR could take Dollar General public again

9 Jan 2009

Ultradiscount retailer stocks are going gangbusters. That s good news for KKRowned Dollar General. Profits have grown 30% in six months. An IPO could give investors a rare bonus some cash back. But while the returns would be ok, they wouldn t make up for lots of other dogs.

Less to debt revival than meets the eye

8 Jan 2009

It s the best week for selling bonds since May as costs fall and investors return. But most are preearnings deals for defensive companies like drinks and energy firms. They re smart to raise cash early. Yet financials, once the backbone of the market, still need government aid.

Greg Fleming is latest bull to leave the Herd

8 Jan 2009

Merrill s expresident is leaping for the calmer waters of academia. As the engineer of the sale to BofA that saved the firm, this might seem worrying. But like broker chief Bob McCann, he found himself one of many small fish in a vast ocean after his Merrill gig.