Dynegy failure provides a wake-up call to lenders 8 Nov 2011 The power provider’s partial bankruptcy comes with a twist - creditors exposed to losses ahead of equity investors. Bondholders stand a good chance of turning the tables in court but may have avoided the drama with better protection. It’s a reminder of how much covenants matter.
Crisis anniversary marked with much dead wood 8 Nov 2011 Five years ago today, Meritage became the first notable subprime mortgage lender to fail. Too few heeded this canary in the coal mine. Now, while there are some signs of progress, the mortgage market remains moribund. It’s worth a look back - and forward.
Warburg and Paulson catch falling knife in bakery 8 Nov 2011 Britain’s biggest food producer is now a struggling penny stock. Two of Premier Foods’ largest investors, Warburg Pincus and John Paulson, appear lousy bargain-hunters. Buying a listed stake probably also hindered Warburg in taking private equity’s typical hands-on approach.
New U.S. poverty tally offers budget cuts warning 8 Nov 2011 Revamped poverty data show an extra 3 mln Americans barely scraping by. Yet the figures also suggest that federal programs targeted by cost-cutters do actually help. Trimming help for the poorest risks worsening poverty and stoking the disquiet evident in Wall Street protests.
Fed might actually need maligned savers 7 Nov 2011 Ben Bernanke said last week that low interest rates, which penalize savers, served the greater good of economic growth. But high savings rates correlate with growth over both the long and short term. Bernanke’s discouragement of prudence could yet stymie his objective.
When is a merger-of-equals really a takeover? 7 Nov 2011 One easy way to tell is when the top brass get rich, undeserved paydays. Take NSTAR’s pending $4.7 billion “merger” with Northeast Utilities. NSTAR’s top five executives could feast on $50 mln of payouts from change of control even though they’ll stay, and even run, the place.
Unlikely Mussolini muse guides Wall Street protest 7 Nov 2011 Occupy Wall Street is really a campaign against economic inequality. Ironically, the work of fascist thinker Corrado Gini - he of the coefficient - may be most useful to their cause. Other statistics also show that the top 1 percent is pulling far away from the madding crowd.
BP making a habit of botched M&A 7 Nov 2011 Closing a $7 bln disposal in Argentina is not as urgent today as it was a year ago, when the oil major was reeling from the Gulf of Mexico disaster. But setbacks look bad, coming after the collapse of the Rosneft deal. BP is now stuck with a challenging partner in Buenos Aires.
Groupon makes IPO of scarce shares look cheap 4 Nov 2011 The Internet coupon firm’s stock popped as much as 50 pct. Short-term excitement was assured by signing up most of Wall Street to peddle 6 pct of its stock. Longer term, keeping a valuation approaching $20 bln will require more tangible things like profit.
Fed may now be too pessimistic on U.S. jobs 4 Nov 2011 The U.S. economy added only 80,000 jobs last month. But the private sector did better, and earlier readings were revised up. With labor costs still lower than in 2008, unemployment could decline faster than the central bank thinks. That’s good for the unemployed - and for Obama.
BofA considers right stock swap at wrong time 4 Nov 2011 Exchanging up to $6 bln of common shares and debt for prefs could save the bank some $300 mln a year and lift regulatory capital a bit. Yet the move could be a tactical error for CEO Brian Moynihan. The resulting dilution risks alienating investors at a vulnerable time for BofA.
AIG just can’t resist financial tinkering 4 Nov 2011 The U.S. insurer’s latest idea is to buy back $1 bln of stock. On that scale, it won’t do much damage. But AIG has plenty of external risks and internal business challenges to handle, plus a huge overhang of government-owned shares. The buyback looks like a gimmicky distraction.
Chesapeake’s Utica sales signal shale’s next phase 4 Nov 2011 Fetching a whopping $15,000 an acre for unproven reserves in the Ohio formation takes shale optimism to a new level. Yet environmental and political resistance to fracking remains strong. Low gas prices don’t offer much reassurance either. This new frontier is still plenty risky.
Europe slowdown threatens a still-weak world 4 Nov 2011 However the euro zone’s systemic crisis plays out, the mix of austerity and uncertainty is already pushing Europe into recession. With the U.S. recovery still tentative and emerging markets looking a bit less robust, the threat of global slowdown looms.
Less, not more, better for New England utilities 3 Nov 2011 Too many customers of Northeast Utilities lost power for too long after recent storms. As with banks, risk management and regulation failures are to blame. Towns that run their own utilities offer an alternative; meanwhile, Northeast’s planned $4.7 bln deal needs to be torpedoed.
P&G deal partner probe proves shorts aren’t nuts 3 Nov 2011 Skeptical investors piled into Diamond Foods, agreed buyer of the consumer giant’s Pringles brand, doggedly questioning the firm’s accounting. Further scrutiny uncovered more oddities and led Diamond to investigate. The sound response underscores the value of salty market views.
Kodak’s long-running woes are coming to a head 3 Nov 2011 The once high-flying photo company’s sales continue to slide. Kodak now says it needs to raise cash or sell more intellectual property inside a year if it’s to keep going. But offloading the firm’s crown jewels hasn’t worked in the past. And it may be harder than it appears.
U.S. deficit drama needs to play well overseas 3 Nov 2011 Foreign central banks, among America’s most reliable lenders, have been cutting their exposure to Uncle Sam’s debt since August. As Washington readies “Deficit Debacle: The Sequel” for primetime this month, legislators should keep foreign audiences in mind.
Jefferies’ differences with MF Global are notable 3 Nov 2011 Both Wall Street brokers took advantage of larger rivals’ regulatory pain - and bragged about it. But Jefferies has stressed client, rather than prop, trading. Its finances are clearer too. These are important distinctions getting lost in the panic after MF’s failure.
Jon Corzine becomes poster child of the times 2 Nov 2011 The boss of bankrupt MF Global embodies all that Occupy Wall Street opposes - the elite 1 pct, failed high finance and compromised politics. Meanwhile, Corzine’s liberal agenda helped catalyze the Tea Party. His downfall could yet turn him into the fall guy of the crisis.