(Bloomberg) -- Cevdet Caner, the man at the center of Germany’s biggest real estate insolvency in 15 years, is fighting eviction from his 20 million-pound ($31 million) London townhouse, complete with basement swimming pool.
His group of investment companies called Level One owes 1.5 billion euros ($2 billion) to creditors led by Credit Suisse Group AG, according to estimates by the German administrator. The two main holding companies defaulted and were placed under court administration in August, U.K. filings show, after the group bought 27,000 units of communist-era public housing in the former East Germany over three years, almost entirely with debt.
The battles with creditors are the legacy of the boom years, when banks expanded lending to real estate investors -- even those with limited experience like Caner. Lenders blame him for mismanagement and say about 50 million euros were channeled out of the Level One businesses while they failed to pay utility and tax bills, according to six people who have seen an audit of Level One’s finances. Caner, 35, said he faults the banks for a change of heart after pledging to loan him the money.
“Level One epitomizes all that went wrong in the real estate bubble,” said Christian Koehler-Ma, an administrator of more than 50 Level One companies in Germany. “On one side you have Caner -- a good salesman, charming and intelligent -- who was looking to make money.”
On the other side were the banks, which resold the loans to investors “so they didn’t think about what they were doing as thoroughly as they should have,” he said.
Hedge Fund District
Borrower defaults such as Level One’s and falling property values led banks, insurers and government-sponsored enterprises to write down the value of loans or mortgage investments by $391 billion since September 2007. That’s 27 percent of the total losses in the global financial crisis, data compiled by Bloomberg show.
Caner’s six-story townhouse in London’s Mayfair district, the location of choice for hedge funds, is one front in the war between him and banks that is being fought in courts in Luxembourg, Berlin and Jersey, the Channel Island off the coast of France. He said he spent about 5 million pounds of his own money to buy and renovate the century-old, six-bedroom house in a neighborhood where owners include the billionaire brothers David and Simon Reuben and property investor Simon Halabi.
The property has 11,500 square feet of space if the carriage house at the rear of the garden is included. Caner got planning consent in December to demolish and rebuild this separate building as a garage with a four-bedroom apartment upstairs and a sauna, gymnasium and solarium in the basement.
Mayfair Townhouse
Caner acquired the Mayfair property for 16 million pounds in July 2007, Land Registry records show. In September 2008, the U.K. administrator of Level One Residential (Jersey) Ltd. -- Zolfo Cooper LLP, a former unit of Kroll Inc. -- demanded repayment of about 1.26 million pounds used to purchase the house, according to a March 4 report to creditors from Zolfo Cooper obtained by Bloomberg News.
The company that acquired the property, registered in St. Helier, Jersey, was put in liquidation, a court filing published Jan. 28 shows. The house was valued at 20 million pounds when the real estate brokerage arm of New York-based auction house Sotheby’s tried to find buyers in December and then withdrew it pending a court repossession order, according to the receiver, Jon Gershinson, a partner at Allsop LLP in London.
Caner’s Mayfair townhouse illustrates the lifestyle he enjoyed as money flowed from Level One into Special Opportunity Holdings Ltd., a company owned by two of his private trusts, said four people with knowledge of Level One’s insolvency who declined to be identified because the information is confidential. Katharina Gebsattel, a Frankfurt-based spokeswoman for Credit Suisse, declined to comment.
‘Stupid War’
“It’s a stupid war to try and kill me business-wise and reputation-wise,” Caner said in the wood-paneled boardroom at the townhouse, which he uses as his London office. “I don’t want to lose my investment in this property.”
No company funds were misused, Caner said, citing the money and assets he injected to satisfy lenders and avert his group’s insolvency. The 50 million euros of fees charged to Level One helped pay for his 50-employee asset management team, he said, and the rest was reinvested in the business. It was a typical private-equity fee structure, according to Caner.
“There was no wrongdoing on my side,” he said.
Caner, an Austrian who is the youngest of seven children born to Turkish immigrants, said he began property investing in 2003 after reading that rental incomes easily covered the borrowing costs for buying buildings.
Ran Call Center
Previously he ran CLC AG, a call-center operator he started while at business school in his hometown of Linz, where for two years he was president of the Young Socialists. He gradually sold his CLC stake until the board ousted him in 2002 because of a disagreement over expansion plans, he said. Two years later, CLC filed for insolvency, and creditors got just 1.36 cents for each euro owed, Vienna court documents show.
From late 2004 through 2007, Level One spent 1.85 billion euros buying apartments -- mostly from former East German municipalities -- and 400 commercial properties in Germany, Caner said.
It was a strategy already pursued by larger private-equity firms, including Terra Firma Capital Partners Ltd. in London, and Blackstone Group LP and Fortress Investment Group LLC, both based in New York.
Many investors got stuck after betting mistakenly that homeownership in Germany would rise as it did in the U.K. and the Netherlands when affordable housing was sold by municipalities, said Philip Cropper, London-based managing director of Real Estate Finance at CB Richard Ellis Group Inc.
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Wednesday, May 20, 2009
Tuesday, May 19, 2009
Japanese Bonds to Rally as Bank Deposits Increase, Mizuho Says
(Bloomberg) -- Japan’s 10-year government bonds will rally in coming months as a deepening recession boosts the amount of money held at banks, said Mizuho Securities Co.
Cash will pile up as households save more and companies refrain from borrowing, leaving banks with excess cash they are likely to park in government bonds, said Yasunari Ueno, chief market economist at Mizuho in Tokyo. Japan’s yield curve is set to flatten, with the gap between two- and 10-year bonds narrowing to the least since March, according to a weighted Bloomberg survey of analysts.
“Banks will have to buy 10-year bonds, which are attractive” compared to shorter-dated notes, Ueno said. “Deposits at banks are likely to increase, while demand for business funding declines. Sooner or later, banks will invest in government bonds as opposed to holding idle funds.”
Ten-year yields jumped 25 basis points this year, compared with an increase of half a basis point for two-year securities, according to data compiled by Bloomberg. The spread between the two will narrow to 88 basis points from its current level of 104.5 points, the Bloomberg survey showed. A basis point is 0.01 percentage point.
Ten-year yields advanced 1.5 basis points to 1.42 percent yesterday at Japan Bond Trading Co., the nation’s largest interdealer debt broker. A yield curve is a chart that plots the yields of bonds with the same quality but different maturities.
Read more here
Cash will pile up as households save more and companies refrain from borrowing, leaving banks with excess cash they are likely to park in government bonds, said Yasunari Ueno, chief market economist at Mizuho in Tokyo. Japan’s yield curve is set to flatten, with the gap between two- and 10-year bonds narrowing to the least since March, according to a weighted Bloomberg survey of analysts.
“Banks will have to buy 10-year bonds, which are attractive” compared to shorter-dated notes, Ueno said. “Deposits at banks are likely to increase, while demand for business funding declines. Sooner or later, banks will invest in government bonds as opposed to holding idle funds.”
Ten-year yields jumped 25 basis points this year, compared with an increase of half a basis point for two-year securities, according to data compiled by Bloomberg. The spread between the two will narrow to 88 basis points from its current level of 104.5 points, the Bloomberg survey showed. A basis point is 0.01 percentage point.
Ten-year yields advanced 1.5 basis points to 1.42 percent yesterday at Japan Bond Trading Co., the nation’s largest interdealer debt broker. A yield curve is a chart that plots the yields of bonds with the same quality but different maturities.
Read more here
Sunday, May 17, 2009
AT&T to offer cloud-based storage as a service
(Reuters) - AT&T Inc, the biggest U.S. telephone company, plans to offer Web-based data storage services for corporations using "cloud computing" technologies developed by data storage equipment maker EMC Corp.
The telecommunications giant will join International Business Machines Corp, Amazon.com Inc, Symantec Corp, Iron Mountain Inc and others in offering storage as a service product, which allow companies to use the Internet to transfer information to remote storage facilities.
AT&T said on Monday it will initially run the service from two data centers in the United states, although the company intends to expand overseas.
It is still early days for the industry.
Read more here
The telecommunications giant will join International Business Machines Corp, Amazon.com Inc, Symantec Corp, Iron Mountain Inc and others in offering storage as a service product, which allow companies to use the Internet to transfer information to remote storage facilities.
AT&T said on Monday it will initially run the service from two data centers in the United states, although the company intends to expand overseas.
It is still early days for the industry.
Read more here
Thursday, May 14, 2009
KGI to Buy Taishin Securities for NT$29 Billion
(Bloomberg) -- KGI Securities Co. will acquire the brokerage business of Taishin Financial Holdings Co. for NT$29 billion ($880 million) to become the second-biggest equity brokerage firm in Taiwan.
KGI will pay NT$28 billion in cash and NT$1 billion worth of stock for the acquisition of Taishin Securities, Taishin Futures Co. and its Hong Kong unit Taishin Securities (Hong Kong) Co., Taishin Financial said in an exchange filing today.
Shares of KGI surged 6.7 percent to NT$15.2, a four-day high, as of 9:46 a.m. in local trading. Taishin Financial shares rose 5.7 percent to NT$8.54.
Taishin Financial is the parent of Taishin Securities, while KGI Securities is a unit of Chinatrust Financial Holdings Co. Chinatrust shares gained 4.5 percent to NT$19.60 in Taipei, while the benchmark Taiex index rose 2.1 percent.
Read more here
KGI will pay NT$28 billion in cash and NT$1 billion worth of stock for the acquisition of Taishin Securities, Taishin Futures Co. and its Hong Kong unit Taishin Securities (Hong Kong) Co., Taishin Financial said in an exchange filing today.
Shares of KGI surged 6.7 percent to NT$15.2, a four-day high, as of 9:46 a.m. in local trading. Taishin Financial shares rose 5.7 percent to NT$8.54.
Taishin Financial is the parent of Taishin Securities, while KGI Securities is a unit of Chinatrust Financial Holdings Co. Chinatrust shares gained 4.5 percent to NT$19.60 in Taipei, while the benchmark Taiex index rose 2.1 percent.
Read more here
Wednesday, May 13, 2009
Banks sue MBIA over $5 billion restructuring
(Reuters) - A group of major banks including Citigroup Inc, JPMorgan Chase & Co and Barclays Plc has sued MBIA Inc, charging that the bond insurer illegally restructured its operations by moving $5 billion of assets and leaving a key unit effectively insolvent.
The group of around 20 financial institutions and affiliates are seeking to ensure that MBIA pays valid claims on insurance it issued on defaulting bonds, but did not put a value on such claims.
MBIA, along with rival bond insurer Ambac Financial Group Inc, suffered huge losses in the recent financial turmoil as they were hit by claims on insurance policies they issued on repackaged debt, which turned out to be more risky than they assumed.
A spokesman for MBIA, which reported a profit of $697 million last quarter, declined comment on the lawsuit, which was filed on Wednesday in New York State Supreme Court.
Read more here
The group of around 20 financial institutions and affiliates are seeking to ensure that MBIA pays valid claims on insurance it issued on defaulting bonds, but did not put a value on such claims.
MBIA, along with rival bond insurer Ambac Financial Group Inc, suffered huge losses in the recent financial turmoil as they were hit by claims on insurance policies they issued on repackaged debt, which turned out to be more risky than they assumed.
A spokesman for MBIA, which reported a profit of $697 million last quarter, declined comment on the lawsuit, which was filed on Wednesday in New York State Supreme Court.
Read more here
Tuesday, May 12, 2009
Private equity investors waiting to sell: survey
(Reuters) - Investors in private equity funds are prepared to wait a year or two to sell their interests because of a gulf in price, a survey said on Wednesday.
London-based private equity research firm Preqin said 11 percent of the 568 institutional investors in private equity it surveyed want to sell fund interests on the so-called "secondary market" -- which allows investors to sell stakes in funds.
But the survey said that, of those, only 10 percent are looking to sell immediately, while 43 percent want to sell in the next 12 months and 47 percent within 12 to 24 months.
Investors, such as endowment and pension funds, typically commit to invest for the life of a private equity fund. But the sharp falls in equity markets has hit overall portfolios and meant some are over-exposed to other asset classes such as private equity and are looking to sell.
Read more here
London-based private equity research firm Preqin said 11 percent of the 568 institutional investors in private equity it surveyed want to sell fund interests on the so-called "secondary market" -- which allows investors to sell stakes in funds.
But the survey said that, of those, only 10 percent are looking to sell immediately, while 43 percent want to sell in the next 12 months and 47 percent within 12 to 24 months.
Investors, such as endowment and pension funds, typically commit to invest for the life of a private equity fund. But the sharp falls in equity markets has hit overall portfolios and meant some are over-exposed to other asset classes such as private equity and are looking to sell.
Read more here
Monday, May 11, 2009
Law Firm Founder Dreier Pleads Guilty, Faces Life in Prison
(Bloomberg) -- Marc Dreier, the New York law firm founder accused of defrauding hedge funds by selling $700 million in phony promissory notes, might face life in prison after pleading guilty to fraud charges.
Dreier, who turned 59 today, pleaded guilty in federal court in New York to charges of money laundering, conspiracy, securities fraud and wire fraud. Victims of Dreier’s Ponzi scheme lost more than $400 million, according to prosecutors.
“I engineered a scheme to issue and sell fictitious promissory notes purportedly issued by companies in the United States and Canada,” Dreier told U.S. District Judge Jed Rakoff, reading from a prepared text at yesterday’s hearing.
Dreier’s lawyer, Gerald Shargel, has said he will seek leniency for Dreier at his sentencing. Dreier has cooperated with court-appointed bankruptcy trustees to identify assets that can be used to pay victims and creditors, according to Shargel. Rakoff set a sentencing date of July 13.
Shargel said his client didn’t have a plea agreement with prosecutors.
Dreier has been confined to his Manhattan luxury apartment, watched around the clock by armed guards paid for by friends and relatives, a condition of his $10 million bail. Dreier’s former firm, the 250-lawyer Dreier LLP, is being liquidated in U.S. Bankruptcy Court.
Rakoff agreed to let Dreier remain on bail, confined to his apartment, until sentencing.
Arrested in Canada
Dreier was arrested in Toronto on Dec. 2 and charged with impersonating a lawyer with the Ontario Teachers’ Pension Plan. He was released on bail and arrested again Dec. 7 when he returned to New York.
Prosecutors claimed Dreier sold more than 85 phony promissory notes to at least 13 hedge funds and three individuals from 2004 to 2008. Dreier falsely told investors many of the fake notes were issued by New York developer Sheldon Solow, a client of his firm.
Read more here
Dreier, who turned 59 today, pleaded guilty in federal court in New York to charges of money laundering, conspiracy, securities fraud and wire fraud. Victims of Dreier’s Ponzi scheme lost more than $400 million, according to prosecutors.
“I engineered a scheme to issue and sell fictitious promissory notes purportedly issued by companies in the United States and Canada,” Dreier told U.S. District Judge Jed Rakoff, reading from a prepared text at yesterday’s hearing.
Dreier’s lawyer, Gerald Shargel, has said he will seek leniency for Dreier at his sentencing. Dreier has cooperated with court-appointed bankruptcy trustees to identify assets that can be used to pay victims and creditors, according to Shargel. Rakoff set a sentencing date of July 13.
Shargel said his client didn’t have a plea agreement with prosecutors.
Dreier has been confined to his Manhattan luxury apartment, watched around the clock by armed guards paid for by friends and relatives, a condition of his $10 million bail. Dreier’s former firm, the 250-lawyer Dreier LLP, is being liquidated in U.S. Bankruptcy Court.
Rakoff agreed to let Dreier remain on bail, confined to his apartment, until sentencing.
Arrested in Canada
Dreier was arrested in Toronto on Dec. 2 and charged with impersonating a lawyer with the Ontario Teachers’ Pension Plan. He was released on bail and arrested again Dec. 7 when he returned to New York.
Prosecutors claimed Dreier sold more than 85 phony promissory notes to at least 13 hedge funds and three individuals from 2004 to 2008. Dreier falsely told investors many of the fake notes were issued by New York developer Sheldon Solow, a client of his firm.
Read more here
Sunday, May 10, 2009
Stanford’s Cowboy Lawyer DeGuerin Shows ‘No Mercy’
(Bloomberg) -- In a newspaper photo on his law office wall in Houston, Dick DeGuerin stands with Robert Durst, a New York real estate heir who admitted shooting a man and using a paring knife and a hacksaw to cut up the body.
A jury in nearby Galveston voted for acquittal after DeGuerin followed his favorite trial strategy: “Embrace the ugly baby,” he said. “You don’t shrink from the problems in the case, but find a way to turn them to your advantage.”
Now the 68-year-old lawyer is representing fellow Texan R. Allen Stanford, accused of orchestrating an $8 billion Ponzi scheme. The case was brought by “storm troopers” at the U.S. Securities and Exchange Commission who “cremated” his client’s business, DeGuerin said in an interview.
“He’s out of the ‘ride ‘em hard and show no mercy’ school of defense,” said William P. Allison, a criminal law professor at the University of Texas School of Law in Austin. “It’s a reputation he’s worked hard to earn, and what people pay for.”
DeGuerin is a member of an elite group of U.S. criminal lawyers who take high-profile cases and can “charge whatever the market will bear,” Allison said.
Among the attorney’s peers, according to the professor, are Richard “Racehorse” Haynes, who won acquittals for Texas oilman T. Cullen Davis, accused of murdering his 12-year-old stepdaughter and his wife’s boyfriend and of hiring a hit man to kill her and a judge; and the late Johnnie Cochran Jr., who helped defend former Buffalo Bills football star O.J. Simpson when he was tried on charges he killed his wife and her friend.
‘Effective’ Defense
So far, DeGuerin hasn’t been paid for his work for Stanford, the lawyer said. U.S. District Judge David Godbey in Dallas is considering Stanford’s bid to unfreeze at least $10 million in assets, locked up when the SEC sued, to pay his legal bills, which the Stanford Group Co. chief executive officer said in a court filing may exceed $20 million.
The SEC and Stanford Group investors told Godbey on May 4 that they oppose giving the financier access to the money. Stanford responded today in a filing that said he needs it to “effectively defend himself.”
His civil lawyers, with the Houston firm of Nickens Keeton Lawless Farrell & Flack LLP, said in court papers that the financier’s insurance company agreed to pay for his criminal defense if he is charged with a crime.
‘Cheap’ Fees
“I’m not doing this for free,” DeGuerin said in the interview, as he leaned back in a cane-seated desk chair, exposing well-worn elephant hide boots. “This case is a huge undertaking that no lawyer in his right mind would take on. It’s going to be a hard job, but not an impossible one.”
Declining to reveal his typical fee, he called his services “cheap at any price.”
The SEC sued Stanford, 59, and two employees, Laura Pendergest-Holt and James M. Davis, on Feb. 17, saying their sale of certificates of deposit through Stanford International Bank in Antigua was a “massive” fraud.
Pendergest-Holt, 35, Stanford’s chief investment officer, was charged with obstruction of justice on Feb. 26 and released on $300,000 bail. She is innocent, said her lawyer, Dan Cogdell of Houston. Davis, 60, the chief financial officer, is in plea negotiations, according to his attorney, David Finn of Dallas.
Stanford denied wrongdoing in an April 21 interview. “I’m not a damn swindler,” he said.
TV News Cameras
He tried to surrender to U.S. marshals in the federal courthouse in Houston on April 30 and was turned away because he hasn’t been criminally charged. DeGuerin escorted him, saying he wanted to prove his client isn’t a flight risk.
Justice Department spokesman Ian McCaleb declined to comment.
DeGuerin said he doesn’t shy away from difficult or notorious clients. He doesn’t run from publicity either, said his friend Tommy Fibich, a Houston plaintiffs lawyer.
“I’d rather be in front of the bulls of Pamplona than between Dick and the TV news cameras,” Fibich said.
One of DeGuerin’s clients was David Koresh, whose mother hired the Houstonian when her son and his followers holed up in Branch Davidian headquarters near Waco, Texas, in 1993.
Federal agents had surrounded the compound, where they said the leader of the religious sect had illegal weapons. Refusing body armor, DeGuerin walked past snipers to talk to his client.
Read more here
A jury in nearby Galveston voted for acquittal after DeGuerin followed his favorite trial strategy: “Embrace the ugly baby,” he said. “You don’t shrink from the problems in the case, but find a way to turn them to your advantage.”
Now the 68-year-old lawyer is representing fellow Texan R. Allen Stanford, accused of orchestrating an $8 billion Ponzi scheme. The case was brought by “storm troopers” at the U.S. Securities and Exchange Commission who “cremated” his client’s business, DeGuerin said in an interview.
“He’s out of the ‘ride ‘em hard and show no mercy’ school of defense,” said William P. Allison, a criminal law professor at the University of Texas School of Law in Austin. “It’s a reputation he’s worked hard to earn, and what people pay for.”
DeGuerin is a member of an elite group of U.S. criminal lawyers who take high-profile cases and can “charge whatever the market will bear,” Allison said.
Among the attorney’s peers, according to the professor, are Richard “Racehorse” Haynes, who won acquittals for Texas oilman T. Cullen Davis, accused of murdering his 12-year-old stepdaughter and his wife’s boyfriend and of hiring a hit man to kill her and a judge; and the late Johnnie Cochran Jr., who helped defend former Buffalo Bills football star O.J. Simpson when he was tried on charges he killed his wife and her friend.
‘Effective’ Defense
So far, DeGuerin hasn’t been paid for his work for Stanford, the lawyer said. U.S. District Judge David Godbey in Dallas is considering Stanford’s bid to unfreeze at least $10 million in assets, locked up when the SEC sued, to pay his legal bills, which the Stanford Group Co. chief executive officer said in a court filing may exceed $20 million.
The SEC and Stanford Group investors told Godbey on May 4 that they oppose giving the financier access to the money. Stanford responded today in a filing that said he needs it to “effectively defend himself.”
His civil lawyers, with the Houston firm of Nickens Keeton Lawless Farrell & Flack LLP, said in court papers that the financier’s insurance company agreed to pay for his criminal defense if he is charged with a crime.
‘Cheap’ Fees
“I’m not doing this for free,” DeGuerin said in the interview, as he leaned back in a cane-seated desk chair, exposing well-worn elephant hide boots. “This case is a huge undertaking that no lawyer in his right mind would take on. It’s going to be a hard job, but not an impossible one.”
Declining to reveal his typical fee, he called his services “cheap at any price.”
The SEC sued Stanford, 59, and two employees, Laura Pendergest-Holt and James M. Davis, on Feb. 17, saying their sale of certificates of deposit through Stanford International Bank in Antigua was a “massive” fraud.
Pendergest-Holt, 35, Stanford’s chief investment officer, was charged with obstruction of justice on Feb. 26 and released on $300,000 bail. She is innocent, said her lawyer, Dan Cogdell of Houston. Davis, 60, the chief financial officer, is in plea negotiations, according to his attorney, David Finn of Dallas.
Stanford denied wrongdoing in an April 21 interview. “I’m not a damn swindler,” he said.
TV News Cameras
He tried to surrender to U.S. marshals in the federal courthouse in Houston on April 30 and was turned away because he hasn’t been criminally charged. DeGuerin escorted him, saying he wanted to prove his client isn’t a flight risk.
Justice Department spokesman Ian McCaleb declined to comment.
DeGuerin said he doesn’t shy away from difficult or notorious clients. He doesn’t run from publicity either, said his friend Tommy Fibich, a Houston plaintiffs lawyer.
“I’d rather be in front of the bulls of Pamplona than between Dick and the TV news cameras,” Fibich said.
One of DeGuerin’s clients was David Koresh, whose mother hired the Houstonian when her son and his followers holed up in Branch Davidian headquarters near Waco, Texas, in 1993.
Federal agents had surrounded the compound, where they said the leader of the religious sect had illegal weapons. Refusing body armor, DeGuerin walked past snipers to talk to his client.
Read more here
Thursday, May 7, 2009
GM burns $10 billion in first quarter as deadline looms
(Reuters) - General Motors Corp said it burned through $10.2 billion in the first quarter as it relied on a federal bailout to ride out a sharp decline in global sales that overwhelmed its cost-cutting efforts.
Revenue dropped by almost half to $22.4 billion as the company cut production by about 900,000 vehicles and worked to run down costly inventories in the United States and Europe.
The results showed the extreme pressure on GM with just four weeks remaining for the embattled automaker to win deals to slash debt and operating costs with its major union and bondholders to avoid bankruptcy.
"Results were awful, as expected, however, GM's cash burn was even worse than we were expecting," Kip Penniman of KDP Investment Advisors said in a note for clients.
Chief Financial Officer Ray Young said there was evidence consumers were scared away from GM cars and trucks because of concern the automaker was headed for bankruptcy.
GM cut $3.1 billion in operating costs in the first quarter, including just over $1 billion in North America, but the latest push in a four-year campaign to cut costs failed to keep pace with the plunge in sales.
"You could not offset the revenue implosion that we experienced here," Young told reporters following release of the quarterly results on Thursday.
GM's North American operations, where it plans to cut 21,000 factory jobs and close and close more than 2,600 dealerships, posted a loss before interest cost and taxes of $2.5 billion.
European operations, which Italy's Fiat SpA has proposed taking over, posted a loss on the same basis of $1.2 billion as vehicle sales in the region dropped 29 percent.
GM still hopes to complete a debt restructuring out of court but is readying plans for what it expects would be a quick bankruptcy if that proves necessary, Young said.
He said GM expects to draw on the experience of Chrysler LLC, which filed for bankruptcy last week under the supervision of the Obama administration.
"We are very, very cognizant of this issue of revenue perishability and how consumers react to the threat of bankruptcy," Young said.
Young said GM would make a decision at the end of this month on whether an offer to extinguish $24 billion in bond debt in exchange for new shares had garnered enough support for the company to avoid a bankruptcy filing.
Read more here
Revenue dropped by almost half to $22.4 billion as the company cut production by about 900,000 vehicles and worked to run down costly inventories in the United States and Europe.
The results showed the extreme pressure on GM with just four weeks remaining for the embattled automaker to win deals to slash debt and operating costs with its major union and bondholders to avoid bankruptcy.
"Results were awful, as expected, however, GM's cash burn was even worse than we were expecting," Kip Penniman of KDP Investment Advisors said in a note for clients.
Chief Financial Officer Ray Young said there was evidence consumers were scared away from GM cars and trucks because of concern the automaker was headed for bankruptcy.
GM cut $3.1 billion in operating costs in the first quarter, including just over $1 billion in North America, but the latest push in a four-year campaign to cut costs failed to keep pace with the plunge in sales.
"You could not offset the revenue implosion that we experienced here," Young told reporters following release of the quarterly results on Thursday.
GM's North American operations, where it plans to cut 21,000 factory jobs and close and close more than 2,600 dealerships, posted a loss before interest cost and taxes of $2.5 billion.
European operations, which Italy's Fiat SpA has proposed taking over, posted a loss on the same basis of $1.2 billion as vehicle sales in the region dropped 29 percent.
GM still hopes to complete a debt restructuring out of court but is readying plans for what it expects would be a quick bankruptcy if that proves necessary, Young said.
He said GM expects to draw on the experience of Chrysler LLC, which filed for bankruptcy last week under the supervision of the Obama administration.
"We are very, very cognizant of this issue of revenue perishability and how consumers react to the threat of bankruptcy," Young said.
Young said GM would make a decision at the end of this month on whether an offer to extinguish $24 billion in bond debt in exchange for new shares had garnered enough support for the company to avoid a bankruptcy filing.
Read more here
Wednesday, May 6, 2009
Cisco sees signs of a turnaround
(CNNMoney.com) -- Cisco Systems Inc. on Wednesday reported a drop in quarterly profit and sales from a year ago, but the network equipment maker said parts of its business are beginning to turn around.
"For the first time in many quarters, many of our global customers are describing business momentum and seeing stabilization," said Cisco Chief Executive John Chambers on a conference call with analysts. "We are going to be very aggressive this year to position ourselves for the eventual upturn."
Chambers cautioned that economic headwinds would continue to pressure the company, but he said he is encouraged by customers' renewed optimism. He said the company has "a very bright future" ahead.
Read more here
"For the first time in many quarters, many of our global customers are describing business momentum and seeing stabilization," said Cisco Chief Executive John Chambers on a conference call with analysts. "We are going to be very aggressive this year to position ourselves for the eventual upturn."
Chambers cautioned that economic headwinds would continue to pressure the company, but he said he is encouraged by customers' renewed optimism. He said the company has "a very bright future" ahead.
Read more here
Tuesday, May 5, 2009
SEC charges money market fund with fraud
(CNNMoney.com) -- The Securities and Exchange Commission has filed fraud charges against the operators of the Reserve Primary Fund for failing to provide important information to investors and trustees about the fund's exposure to Lehman Brothers.
By bringing the case, the agency is trying to get the company to release the $3.5 billion it is withholding from shareholders until all lawsuits against the company are resolved.
The money market fund "broke the buck" on Sept. 16, the day after Lehman Brothers filed for bankruptcy, meaning its net asset value fell below $1 a share. Investors seek out money market funds as conservative investments because they are designed to maintain their $1 per share value. Companies also rely on them to purchase short-term corporate debt.
The Primary Fund, however, held $785 million in Lehman-issued securities, which lost most of their worth in the bankruptcy, the SEC said. This dragged down the fund's net asset value.
The agency says that the Reserve Management Company Inc., its chairman Bruce Bent Sr., vice chairman and president Bruce Bent II and Resrv Partners Inc. misled investors and "significantly understated" the volume of redemption requests. They also failed to provide trustees with accurate information about the value of the Lehman securities.
Reserve also said it would provide the money needed to maintain the fund's share value when it "had no such intention," according to regulators.
"Fund managers have serious obligations to keep their trustees and investors informed in both good times and bad, and cannot choose to reveal only favorable facts," said James Clarkson, acting director of the SEC's New York regional office.
The company said in a statement that it intends to defend itself vigorously.
"Since we created the money fund in 1970 we have operated and grown our business by putting our shareholders' interests first," said Bruce Bent Sr. "The Lehman Brothers Bankruptcy filing created an unforeseeable and out-of-control condition for many parties and the results were serious...We remain confident that we acted in the best interest of our shareholders."
There are at least 29 different lawsuits pending against the company, according to the SEC. The agency hopes to bring all claimants together in this case and have it settled together.
The Primary Fund is currently being liquidated. Last month, the company said about $46.1 billion, or approximately 90% of fund assets as of Sept. 15, 2008, has been returned to investors. Approximately $4.5 billion remains in the fund, which once had a value of $60 billion.
The fund's independent trustees, who oversee its operations, said in a statement that they would work with the agency.
"The trustees will continue to fully cooperate with the Securities and Exchange Commission to expedite the distribution of the remaining assets to shareholders and to ensure that all decisions are made in the shareholders' best interest," the trustees said.
Read more here
By bringing the case, the agency is trying to get the company to release the $3.5 billion it is withholding from shareholders until all lawsuits against the company are resolved.
The money market fund "broke the buck" on Sept. 16, the day after Lehman Brothers filed for bankruptcy, meaning its net asset value fell below $1 a share. Investors seek out money market funds as conservative investments because they are designed to maintain their $1 per share value. Companies also rely on them to purchase short-term corporate debt.
The Primary Fund, however, held $785 million in Lehman-issued securities, which lost most of their worth in the bankruptcy, the SEC said. This dragged down the fund's net asset value.
The agency says that the Reserve Management Company Inc., its chairman Bruce Bent Sr., vice chairman and president Bruce Bent II and Resrv Partners Inc. misled investors and "significantly understated" the volume of redemption requests. They also failed to provide trustees with accurate information about the value of the Lehman securities.
Reserve also said it would provide the money needed to maintain the fund's share value when it "had no such intention," according to regulators.
"Fund managers have serious obligations to keep their trustees and investors informed in both good times and bad, and cannot choose to reveal only favorable facts," said James Clarkson, acting director of the SEC's New York regional office.
The company said in a statement that it intends to defend itself vigorously.
"Since we created the money fund in 1970 we have operated and grown our business by putting our shareholders' interests first," said Bruce Bent Sr. "The Lehman Brothers Bankruptcy filing created an unforeseeable and out-of-control condition for many parties and the results were serious...We remain confident that we acted in the best interest of our shareholders."
There are at least 29 different lawsuits pending against the company, according to the SEC. The agency hopes to bring all claimants together in this case and have it settled together.
The Primary Fund is currently being liquidated. Last month, the company said about $46.1 billion, or approximately 90% of fund assets as of Sept. 15, 2008, has been returned to investors. Approximately $4.5 billion remains in the fund, which once had a value of $60 billion.
The fund's independent trustees, who oversee its operations, said in a statement that they would work with the agency.
"The trustees will continue to fully cooperate with the Securities and Exchange Commission to expedite the distribution of the remaining assets to shareholders and to ensure that all decisions are made in the shareholders' best interest," the trustees said.
Read more here
Monday, May 4, 2009
‘Great Recession’ Will Redefine Full Employment as Jobs Vanish
(Bloomberg) -- Post-recession America may be saddled with high unemployment even after good times finally return.
Hundreds of thousands of jobs have vanished forever in industries such as auto manufacturing and financial services. Millions of people who were fired or laid off will find it harder to get hired again and for years may have to accept lower earnings than they enjoyed before the slump.
This restructuring -- in what former Federal Reserve Chairman Paul Volcker calls “the Great Recession” -- is causing some economists to reconsider what might be the “natural” rate of unemployment: a level that neither accelerates nor decelerates inflation. This state of equilibrium is often described as “full” employment.
Fallout from the recession implies a “markedly higher” natural rate of unemployment, says Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics. “It was 5.5 percent; maybe it will be 6.5 percent, maybe 7 percent.”
That has implications for policy makers as well as workers. The Obama administration and the Federal Reserve are counting on the jobless rate to fall to a medium-term equilibrium of about 5 percent as the economy recovers. A natural rate significantly above that would drive up the annual budget deficit -- which will top $1 trillion for the first time this year -- by reducing tax revenue and pushing up spending on unemployment benefits.
A higher rate would also require the Fed to make a choice: Accept an economy with more Americans permanently out of work, or try to boost employment at the risk of heating up inflation.
Unemployment Report
The government may report May 8 that the jobless rate jumped to 8.9 percent in April, the highest since 1983, from 8.5 percent in March, according to economists surveyed by Bloomberg.
Laurence Ball, an economics professor at Johns Hopkins University in Baltimore, says unemployment may peak at 10 percent, and “it will be a long time before we see 5 percent” again.
The more time workers spend without a job, the less attractive they become to potential employers, Ball says. That in itself helps keep the unemployment rate elevated.
“If you’re unemployed” for an extended period, “you’re not keeping up with new technology,” he says. “You become discouraged and you change your lifestyle.”
A burst of productivity growth starting in the mid 1990s helped lower the natural rate of unemployment to around 5 percent from 6 percent, as profit-flush companies took on more workers. Now the fear is that will be reversed as industries downsize.
Read more here
Hundreds of thousands of jobs have vanished forever in industries such as auto manufacturing and financial services. Millions of people who were fired or laid off will find it harder to get hired again and for years may have to accept lower earnings than they enjoyed before the slump.
This restructuring -- in what former Federal Reserve Chairman Paul Volcker calls “the Great Recession” -- is causing some economists to reconsider what might be the “natural” rate of unemployment: a level that neither accelerates nor decelerates inflation. This state of equilibrium is often described as “full” employment.
Fallout from the recession implies a “markedly higher” natural rate of unemployment, says Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics. “It was 5.5 percent; maybe it will be 6.5 percent, maybe 7 percent.”
That has implications for policy makers as well as workers. The Obama administration and the Federal Reserve are counting on the jobless rate to fall to a medium-term equilibrium of about 5 percent as the economy recovers. A natural rate significantly above that would drive up the annual budget deficit -- which will top $1 trillion for the first time this year -- by reducing tax revenue and pushing up spending on unemployment benefits.
A higher rate would also require the Fed to make a choice: Accept an economy with more Americans permanently out of work, or try to boost employment at the risk of heating up inflation.
Unemployment Report
The government may report May 8 that the jobless rate jumped to 8.9 percent in April, the highest since 1983, from 8.5 percent in March, according to economists surveyed by Bloomberg.
Laurence Ball, an economics professor at Johns Hopkins University in Baltimore, says unemployment may peak at 10 percent, and “it will be a long time before we see 5 percent” again.
The more time workers spend without a job, the less attractive they become to potential employers, Ball says. That in itself helps keep the unemployment rate elevated.
“If you’re unemployed” for an extended period, “you’re not keeping up with new technology,” he says. “You become discouraged and you change your lifestyle.”
A burst of productivity growth starting in the mid 1990s helped lower the natural rate of unemployment to around 5 percent from 6 percent, as profit-flush companies took on more workers. Now the fear is that will be reversed as industries downsize.
Read more here
Sunday, May 3, 2009
India's recovery hopes grow
India's economy, buffeted by the global meltdown, could start recovering by mid-year amid signs of revival in business confidence, manufacturing and credit growth, economists forecast.
The upbeat outlook, boosted by expectations of a healthy harvest fuelling consumer spending, has driven India's benchmark Sensex share index to a six-month high as fund managers switch their country ratings to "overweight" from "underweight."
The "domestically driven Indian economy will begin to recover palpably from mid-year onwards," Rajeev Malik, economist at Australia's Macquarie Securities, said.
Indices measuring early changes in economic activity and business confidence and forecasts published by global financial houses in recent days suggest that India's economy is set to turn the corner.
However, the potential emergence of a politically unstable ruling coalition after general elections end on May 13 could disrupt the scenario, analysts warn.
Nevertheless, Swiss bank UBS said its "base case scenario" was for the Indian economy and corporate earnings "to bottom out by the second half of 2009/10 and for full recovery in 2010/11."
There's a "strong likelihood of an upturn in industrial activity by June," UBS economist Philip Wyatt said.
Britain's Barclays Capital has gone so far as to bullishly declare "the slump in activity in emerging Asia is over" - driven by India and China.
"Domestic leading indicators such as business sentiment are showing signs of stabilisation and the next few months of data are likely to see an upturn in most (Asian) countries," it said.
Read more here
The upbeat outlook, boosted by expectations of a healthy harvest fuelling consumer spending, has driven India's benchmark Sensex share index to a six-month high as fund managers switch their country ratings to "overweight" from "underweight."
The "domestically driven Indian economy will begin to recover palpably from mid-year onwards," Rajeev Malik, economist at Australia's Macquarie Securities, said.
Indices measuring early changes in economic activity and business confidence and forecasts published by global financial houses in recent days suggest that India's economy is set to turn the corner.
However, the potential emergence of a politically unstable ruling coalition after general elections end on May 13 could disrupt the scenario, analysts warn.
Nevertheless, Swiss bank UBS said its "base case scenario" was for the Indian economy and corporate earnings "to bottom out by the second half of 2009/10 and for full recovery in 2010/11."
There's a "strong likelihood of an upturn in industrial activity by June," UBS economist Philip Wyatt said.
Britain's Barclays Capital has gone so far as to bullishly declare "the slump in activity in emerging Asia is over" - driven by India and China.
"Domestic leading indicators such as business sentiment are showing signs of stabilisation and the next few months of data are likely to see an upturn in most (Asian) countries," it said.
Read more here
Tuesday, April 28, 2009
Gulfstream, Cessna in 2-Year Slide as CEOs Shun Jets
(Bloomberg) -- Gulfstream and Cessna will need at least two years to revive sales of corporate jets after the public shaming of executives like Elan Corp.’s Kelly Martin.
The Dublin-based drug company chief helped run up a bill of as much as $6 million last year flying to a San Francisco research center in a Gulfstream V. Now he will be lining up at the airport with everyone else after investors campaigned for him to switch to standard airline flights costing $1,000.
With businesses shunning luxury planes costing up to $55 million apiece, manufacturers including Bombardier Inc., General Dynamics Corp. and Dassault Aviation SA are slashing output and shedding 15,000 jobs. Gulfstream maker General Dynamics tomorrow will report the slowest profit growth in more than five years, according to analyst estimates compiled by Bloomberg, and Cessna owner Textron Inc. today said first-quarter profit from continuing operations fell 81 percent.
“Corporate aircraft make commercial airliners look like a safe haven,” said Richard Aboulafia, vice president of the Teal Group aviation consultancy in Fairfax, Virginia. “It’s the market most exposed to the huge downturn in corporate profits and where the economy really hits the tarmac.”
Business-jet deliveries may fall 50 percent this year and next, according to UBS AG. The $22 billion industry has been left reeling after companies and wealthy individuals began scrapping orders and selling business jets last year as the global economy started to contract.
Detroit Three
Pressure to avoid the planes mounted after the CEOs of General Motors Corp., Chrysler LLC and Ford Motor Co. used them to fly to Washington hearings on taxpayer bailouts, prompting Democratic Representative Gary Ackerman of New York to ask: “Couldn’t you all have downgraded to first class?”
GM terminated its leases for two Gulfstream V planes and five Gulfstream IIIs. Royal Bank of Scotland Group Plc Chairman Philip Hampton told shareholders April 3 that keeping its Dassault Falcon 7X jet would be an embarrassment following the company’s rescue by the U.K. government.
The outlook for business-jet manufacturers is bleak. Deliveries, which rose 28 percent last year to 1,138, may fall to less than 600 in 2010, according to New York-based UBS analyst David Strauss. That’s about the level of 2003, when 591 planes were built.
Wichita, Kansas-based Cessna, the largest maker of business jets by aircraft built, is eliminating almost 5,000 posts, or 30 percent of the workforce. The unit last year generated about 40 percent of revenue at parent Textron.
Top Performer
General Dynamics will scrap 1,200 jobs at Savannah, Georgia-based Gulfstream and cut production by one-fifth. The unit was previously the company’s top performer, with an 18.5 percent operating profit margin compared with an average 11 percent at marine, weapons and information-systems divisions.
Textron today said first-quarter profit from continuing operations dropped to $43 million, or 18 cents a share. Excluding some costs, profit was 26 cents a share. Analysts had predicted 1 cent a share. General Dynamics may say profit growth slowed to 3 percent, dropping below 10 percent for the first time since 2003. It lowered the 2009 earnings goal to as little as $6 a share on March 5 from as much as $6.75.
Neither company would comment yesterday prior to announcing their results.
Bombardier, the Montreal-based maker of the Learjet, is cutting almost 4,500 jobs after aerospace sales fell 4 percent in the quarter. The company said April 2 it will deliver 25 percent fewer business jets this year and declined to comment further yesterday.
Read more here
The Dublin-based drug company chief helped run up a bill of as much as $6 million last year flying to a San Francisco research center in a Gulfstream V. Now he will be lining up at the airport with everyone else after investors campaigned for him to switch to standard airline flights costing $1,000.
With businesses shunning luxury planes costing up to $55 million apiece, manufacturers including Bombardier Inc., General Dynamics Corp. and Dassault Aviation SA are slashing output and shedding 15,000 jobs. Gulfstream maker General Dynamics tomorrow will report the slowest profit growth in more than five years, according to analyst estimates compiled by Bloomberg, and Cessna owner Textron Inc. today said first-quarter profit from continuing operations fell 81 percent.
“Corporate aircraft make commercial airliners look like a safe haven,” said Richard Aboulafia, vice president of the Teal Group aviation consultancy in Fairfax, Virginia. “It’s the market most exposed to the huge downturn in corporate profits and where the economy really hits the tarmac.”
Business-jet deliveries may fall 50 percent this year and next, according to UBS AG. The $22 billion industry has been left reeling after companies and wealthy individuals began scrapping orders and selling business jets last year as the global economy started to contract.
Detroit Three
Pressure to avoid the planes mounted after the CEOs of General Motors Corp., Chrysler LLC and Ford Motor Co. used them to fly to Washington hearings on taxpayer bailouts, prompting Democratic Representative Gary Ackerman of New York to ask: “Couldn’t you all have downgraded to first class?”
GM terminated its leases for two Gulfstream V planes and five Gulfstream IIIs. Royal Bank of Scotland Group Plc Chairman Philip Hampton told shareholders April 3 that keeping its Dassault Falcon 7X jet would be an embarrassment following the company’s rescue by the U.K. government.
The outlook for business-jet manufacturers is bleak. Deliveries, which rose 28 percent last year to 1,138, may fall to less than 600 in 2010, according to New York-based UBS analyst David Strauss. That’s about the level of 2003, when 591 planes were built.
Wichita, Kansas-based Cessna, the largest maker of business jets by aircraft built, is eliminating almost 5,000 posts, or 30 percent of the workforce. The unit last year generated about 40 percent of revenue at parent Textron.
Top Performer
General Dynamics will scrap 1,200 jobs at Savannah, Georgia-based Gulfstream and cut production by one-fifth. The unit was previously the company’s top performer, with an 18.5 percent operating profit margin compared with an average 11 percent at marine, weapons and information-systems divisions.
Textron today said first-quarter profit from continuing operations dropped to $43 million, or 18 cents a share. Excluding some costs, profit was 26 cents a share. Analysts had predicted 1 cent a share. General Dynamics may say profit growth slowed to 3 percent, dropping below 10 percent for the first time since 2003. It lowered the 2009 earnings goal to as little as $6 a share on March 5 from as much as $6.75.
Neither company would comment yesterday prior to announcing their results.
Bombardier, the Montreal-based maker of the Learjet, is cutting almost 4,500 jobs after aerospace sales fell 4 percent in the quarter. The company said April 2 it will deliver 25 percent fewer business jets this year and declined to comment further yesterday.
Read more here
Monday, April 27, 2009
UAW to own 55% of Chrysler under restructuring deal: WSJ
(MarketWatch) -- Under an agreement struck between the United Auto Workers union and Chrysler LLC, the union would eventually own 55% of the auto maker's stock once the company is restructured, according to a report late Monday from The Wall Street Journal.
The summary of the agreement also shows that Fiat SpA will "eventually" own 35% of Chrysler, and the U.S. government and Chrysler's secured lenders will own another 10% of the company following its reorganization, the report said
Read more here
The summary of the agreement also shows that Fiat SpA will "eventually" own 35% of Chrysler, and the U.S. government and Chrysler's secured lenders will own another 10% of the company following its reorganization, the report said
Read more here
Thursday, April 23, 2009
American Express profits tumble 56%
(CNNMoney.com) -- Profits at American Express declined by more than half in the latest quarter, the company said Thursday, as spending by cardmembers slowed and credit troubles continued to mount.
The credit card giant also said, however, that it was hoping to soon pay back money it received from the government as part of last fall's financial rescue package.
AmEx said it earned $437 million, or 31 cents a share during the first quarter ending in March, down 56% from $991 million, or 85 cents, during the same period a year ago. Revenues came in at $5.9 billion, down 18% from a year ago.
Analysts were expected a profit of just $142 million, or 12 cents a share, according to Thomson Reuters. But revenues were lower than forecasts of $6.45 billion.
American Express (AXP, Fortune 500) shares rose more than 6% in after hours trading, after finishing the session 8% higher.
But a decline in overall spending by cardmembers dragged on the firm's results, as did a boost to the company's reserves to cope for future loan losses. The company said provisions totaled $1.8 billion by quarter's end, up 49% from $1.2 billion a year ago.
Major credit card issuers like AmEx have ramped up their loan loss reserves over the past year amid rising unemployment levels and as more consumers default on their card payments.
AmEx also reported a spike in write-offs, or loans the company believes are not collectable. During the first three months of the year, write-offs soared to 8.5% from 6.7% in the previous quarter.
Read more here
The credit card giant also said, however, that it was hoping to soon pay back money it received from the government as part of last fall's financial rescue package.
AmEx said it earned $437 million, or 31 cents a share during the first quarter ending in March, down 56% from $991 million, or 85 cents, during the same period a year ago. Revenues came in at $5.9 billion, down 18% from a year ago.
Analysts were expected a profit of just $142 million, or 12 cents a share, according to Thomson Reuters. But revenues were lower than forecasts of $6.45 billion.
American Express (AXP, Fortune 500) shares rose more than 6% in after hours trading, after finishing the session 8% higher.
But a decline in overall spending by cardmembers dragged on the firm's results, as did a boost to the company's reserves to cope for future loan losses. The company said provisions totaled $1.8 billion by quarter's end, up 49% from $1.2 billion a year ago.
Major credit card issuers like AmEx have ramped up their loan loss reserves over the past year amid rising unemployment levels and as more consumers default on their card payments.
AmEx also reported a spike in write-offs, or loans the company believes are not collectable. During the first three months of the year, write-offs soared to 8.5% from 6.7% in the previous quarter.
Read more here
Wednesday, April 22, 2009
Penn Stalks Las Vegas as MGM, Harrah’s Battle Debt
(Bloomberg) -- Peter Carlino, chief executive officer of Penn National Gaming Inc., likens himself to a wolf stalking bigger prey.
Armed with $1.48 billion, Carlino says he’s waiting until debt-laden MGM Mirage, Harrah’s Entertainment Inc. and other ailing casino owners are forced to sell properties along the 4.5-mile Las Vegas Strip. Once financial restructuring moves are exhausted and companies face default, he will make his move.
“We’re watching things very closely but will pounce only when the sun, moon and stars align,” Carlino said in an e-mail last month. “Penn National can wait as long as need be to make acquisitions that will be opportunistic and, more importantly, return-focused.”
Penn National, a Wyomissing, Pennsylvania-based racetrack owner that expanded into slots, has cash at a time when the world’s biggest casino operators don’t. Revenue at Strip properties like Harrah’s Caesars Palace and MGM Mirage’s Bellagio has fallen, making it harder for their owners to service debt loads. Boyd Gaming Corp. and Wynn Resorts Ltd. are also in a position to bid for assets.
Penn National is expected to report first-quarter earnings of 34 cents a share tomorrow, excluding some items, on sales of $609 million, the average of analysts’ estimates compiled by Bloomberg.
Carlino’s spending money came as a divorce settlement from Fortress Investment Group LLC and Centerbridge Partners LP, private equity companies that abandoned their takeover of Penn National in July. They paid the gaming company a $225 million breakup fee and invested $1.25 billion in interest-free preferred stock.
‘The Wolf’
Carlino, 62, has been on the prowl for at least six months. “Picture a great plain and a low rise of a hill, the wolf sitting there, staring out at the horizon” and looking for weakness, he said in an Oct. 27 conference call.
Penn National was preparing to bid for Treasure Island when MGM Mirage CEO James Murren accepted a $775 million offer from investor Phil Ruffin in December, Penn Chief Financial Officer William Clifford said in an interview last month.
Ruffin’s bid was far higher than what Penn was willing to pay, Clifford said.
“We’ve passed on everything he’s sold, but he’s managed to sell everything to date,” Clifford said of Murren. “We’re not going to be one of his success stories.”
Penn rose 84 cents to $27.71 at 4 p.m. New York time in Nasdaq Stock Market trading and has gained 30 percent this year. MGM, down 61 percent this year before today, climbed 12 cents to $5.52.
Spare Cash
Las Vegas-based Boyd mothballed a resort under construction on the Strip in August and has $2 billion available to borrow. The company, operator of 16 casinos, offered to buy some assets from Station Casinos Inc., whose owners have proposed a prepackaged bankruptcy.
“We remain interested and focused on our proposal for Station’s assets,” Boyd spokesman Rob Stillwell said yesterday. He wouldn’t say whether Boyd will consider other casino offers.
Wynn Chairman Stephen Wynn, who built the Mirage, Treasure Island and Bellagio, is buying back as much as $1 billion in debt to reduce interest costs.
“We keep a quarter of a billion in case something good comes up, we keep money on the side in addition to that,” Wynn said in the November interview.
Wynn officials couldn’t be reached, Samanta Stewart, a company spokeswoman, said yesterday.
“Wynn has typically been a developer; the acquirers, you would have thought more Boyd and Penn,” Michael Paladino, an analyst at Fitch Ratings, said in a phone interview. “Still, given this environment and that MGM has basically everything up for sale, I don’t think you could discount Wynn potentially looking to take back Bellagio or Mirage.”
Read more here
Armed with $1.48 billion, Carlino says he’s waiting until debt-laden MGM Mirage, Harrah’s Entertainment Inc. and other ailing casino owners are forced to sell properties along the 4.5-mile Las Vegas Strip. Once financial restructuring moves are exhausted and companies face default, he will make his move.
“We’re watching things very closely but will pounce only when the sun, moon and stars align,” Carlino said in an e-mail last month. “Penn National can wait as long as need be to make acquisitions that will be opportunistic and, more importantly, return-focused.”
Penn National, a Wyomissing, Pennsylvania-based racetrack owner that expanded into slots, has cash at a time when the world’s biggest casino operators don’t. Revenue at Strip properties like Harrah’s Caesars Palace and MGM Mirage’s Bellagio has fallen, making it harder for their owners to service debt loads. Boyd Gaming Corp. and Wynn Resorts Ltd. are also in a position to bid for assets.
Penn National is expected to report first-quarter earnings of 34 cents a share tomorrow, excluding some items, on sales of $609 million, the average of analysts’ estimates compiled by Bloomberg.
Carlino’s spending money came as a divorce settlement from Fortress Investment Group LLC and Centerbridge Partners LP, private equity companies that abandoned their takeover of Penn National in July. They paid the gaming company a $225 million breakup fee and invested $1.25 billion in interest-free preferred stock.
‘The Wolf’
Carlino, 62, has been on the prowl for at least six months. “Picture a great plain and a low rise of a hill, the wolf sitting there, staring out at the horizon” and looking for weakness, he said in an Oct. 27 conference call.
Penn National was preparing to bid for Treasure Island when MGM Mirage CEO James Murren accepted a $775 million offer from investor Phil Ruffin in December, Penn Chief Financial Officer William Clifford said in an interview last month.
Ruffin’s bid was far higher than what Penn was willing to pay, Clifford said.
“We’ve passed on everything he’s sold, but he’s managed to sell everything to date,” Clifford said of Murren. “We’re not going to be one of his success stories.”
Penn rose 84 cents to $27.71 at 4 p.m. New York time in Nasdaq Stock Market trading and has gained 30 percent this year. MGM, down 61 percent this year before today, climbed 12 cents to $5.52.
Spare Cash
Las Vegas-based Boyd mothballed a resort under construction on the Strip in August and has $2 billion available to borrow. The company, operator of 16 casinos, offered to buy some assets from Station Casinos Inc., whose owners have proposed a prepackaged bankruptcy.
“We remain interested and focused on our proposal for Station’s assets,” Boyd spokesman Rob Stillwell said yesterday. He wouldn’t say whether Boyd will consider other casino offers.
Wynn Chairman Stephen Wynn, who built the Mirage, Treasure Island and Bellagio, is buying back as much as $1 billion in debt to reduce interest costs.
“We keep a quarter of a billion in case something good comes up, we keep money on the side in addition to that,” Wynn said in the November interview.
Wynn officials couldn’t be reached, Samanta Stewart, a company spokeswoman, said yesterday.
“Wynn has typically been a developer; the acquirers, you would have thought more Boyd and Penn,” Michael Paladino, an analyst at Fitch Ratings, said in a phone interview. “Still, given this environment and that MGM has basically everything up for sale, I don’t think you could discount Wynn potentially looking to take back Bellagio or Mirage.”
Read more here
Monday, April 20, 2009
Japan Eases Recession Pain as Wage Cuts Support Jobs
(Bloomberg) -- Toshio Taniguchi is one of about 10,000 workers at Tokyo-based Renesas Technology Corp. who accepted a pay cut last month to keep the company alive.
“It was tough to swallow,” said Taniguchi, a 62 year-old worker at the company, Japan’s biggest unlisted chipmaker. “But most people are just thankful they still have jobs.”
Japan, the country with the most flexible wage system in the developed world, is slashing pay rather than sacking people, easing the pain of what may be the country’s worst recession since World War II. A longstanding tradition of lifetime employment gives companies such as Toyota Motor Corp. and Renesas little choice, even if millions of workers like Taniguchi have to make do with less.
“Many people are spared a tragic outcome, even if there’s a downside for everybody,” said Robert Feldman, head of Japan economic research at Morgan Stanley in Tokyo. “It helps remove the fear factor.”
Not all Japan’s workers are equally protected. In addition to paring wages for full-timers, companies are cutting temporary staff, a group that makes up more than a third of the country’s 56 million-person workforce. Before the economic bubble burst in the early 1990s, only 20 percent of workers were temporary.
Still, record declines in factory production have yet to trigger job losses of the scale seen in the U.S., where the unemployment rate jumped to 8.5 percent in March from 6.6 percent in October. Japan’s jobless rate is 4.4 percent. About 460,000 Japanese workers have lost their jobs since October, compared with 3.3 million in the U.S.
Half-Capacity
Companies are keeping people even as the volume of work falls. Production lines at the Renesas wafer-processing plants in Gunma and Shikoku are running at less than half-capacity.
“People spend a lot of time cleaning these days,” said Taniguchi, laughing at the lengths people go to in order to stay busy. “We’re cleaning the undersides of desks. We’re cleaning behind the books on shelves. These are huge factories, so there’s no end to the stuff you can find to clean.”
Renesas forecasts a record loss of 206 billion yen ($2.1 billion) in the year ended March 31 and, according to an April 16 Nikkei report, may be married off to NEC Electronics Corp. by parents Hitachi Ltd. and Mitsubishi Electric Corp. Rank-and-file employees will see wage cuts of 10 percent this year; executive pay will drop by 30 percent.
“The company’s survival is at stake,” said Hirotaka Ohno, a spokesman at the chipmaker. “There are no jobs unless you keep the company alive,” he said, adding that no one has been fired, though 600 employees have taken early retirement.
Falling Pay
What makes Japan different is the flexibility of its wage system, according to Randall Jones, head of the Japan desk at the Organization for Economic Cooperation and Development in Paris. With the exception of Japan, average nominal pay in 25 advanced economies has risen virtually every year for almost two decades -- even during recessions, OECD data show. By contrast, Japanese salaries have fallen in seven of the last 10 years.
“Rather than cut workers, they cut wages. In a sense, it’s healthy,” Jones said. “Keeping people on the job is better for the economy than having lots of people go onto unemployment or welfare. There’s a lower burden on society.”
Full-time workers typically get about a quarter of their yearly wages in two lump payments set at the start of each business year. The so-called bonuses give companies room to adjust labor costs when profits fall.
Read more here
“It was tough to swallow,” said Taniguchi, a 62 year-old worker at the company, Japan’s biggest unlisted chipmaker. “But most people are just thankful they still have jobs.”
Japan, the country with the most flexible wage system in the developed world, is slashing pay rather than sacking people, easing the pain of what may be the country’s worst recession since World War II. A longstanding tradition of lifetime employment gives companies such as Toyota Motor Corp. and Renesas little choice, even if millions of workers like Taniguchi have to make do with less.
“Many people are spared a tragic outcome, even if there’s a downside for everybody,” said Robert Feldman, head of Japan economic research at Morgan Stanley in Tokyo. “It helps remove the fear factor.”
Not all Japan’s workers are equally protected. In addition to paring wages for full-timers, companies are cutting temporary staff, a group that makes up more than a third of the country’s 56 million-person workforce. Before the economic bubble burst in the early 1990s, only 20 percent of workers were temporary.
Still, record declines in factory production have yet to trigger job losses of the scale seen in the U.S., where the unemployment rate jumped to 8.5 percent in March from 6.6 percent in October. Japan’s jobless rate is 4.4 percent. About 460,000 Japanese workers have lost their jobs since October, compared with 3.3 million in the U.S.
Half-Capacity
Companies are keeping people even as the volume of work falls. Production lines at the Renesas wafer-processing plants in Gunma and Shikoku are running at less than half-capacity.
“People spend a lot of time cleaning these days,” said Taniguchi, laughing at the lengths people go to in order to stay busy. “We’re cleaning the undersides of desks. We’re cleaning behind the books on shelves. These are huge factories, so there’s no end to the stuff you can find to clean.”
Renesas forecasts a record loss of 206 billion yen ($2.1 billion) in the year ended March 31 and, according to an April 16 Nikkei report, may be married off to NEC Electronics Corp. by parents Hitachi Ltd. and Mitsubishi Electric Corp. Rank-and-file employees will see wage cuts of 10 percent this year; executive pay will drop by 30 percent.
“The company’s survival is at stake,” said Hirotaka Ohno, a spokesman at the chipmaker. “There are no jobs unless you keep the company alive,” he said, adding that no one has been fired, though 600 employees have taken early retirement.
Falling Pay
What makes Japan different is the flexibility of its wage system, according to Randall Jones, head of the Japan desk at the Organization for Economic Cooperation and Development in Paris. With the exception of Japan, average nominal pay in 25 advanced economies has risen virtually every year for almost two decades -- even during recessions, OECD data show. By contrast, Japanese salaries have fallen in seven of the last 10 years.
“Rather than cut workers, they cut wages. In a sense, it’s healthy,” Jones said. “Keeping people on the job is better for the economy than having lots of people go onto unemployment or welfare. There’s a lower burden on society.”
Full-time workers typically get about a quarter of their yearly wages in two lump payments set at the start of each business year. The so-called bonuses give companies room to adjust labor costs when profits fall.
Read more here
Thursday, April 16, 2009
Google beats estimates, acknowledges uncertainty
(MarketWatch) -- Google Inc. on Thursday posted a first-quarter profit that beat analysts' estimates thanks to continued spending by search advertisers and a clampdown on costs, helping bolster the impression that the company is weathering the economic downturn relatively well.
But while Google's shares rose immediately after the earnings announcement, they turned lower in late trading as investors absorbed news of the company's first-ever sequential decline in net revenue since it went public, and heard Chief Executive Eric Schmidt acknowledge that he sees no end in sight for the recession.
Mountain View, Calif.-based Google said its first-quarter net income rose to $1.4 billion, or $4.49 a share, from $1.3 billion or $4.12 a share in the same period a year earlier. The company said net revenue for the period ended in March came in at $4.07 billion. Excluding special items, Google said earnings for the quarter were $5.16 a share.
Analysts on average had expected Google to post earnings excluding special items of $4.93 a share and $4.08 billion in net revenue, according to data from Thomson Reuters.
The size of the difference between Google's actual profit and Wall Street estimates was a surprise, according to Signal Hill Capital Group analyst Todd Greenwald. "It was definitely better than expected on the bottom line," he said.
Schmidt, during a conference call, said that "Google had a good quarter," though he allowed that it's nonetheless "absolutely feeling the impact" of the down economy. The chief executive added "we don't know exactly when" the economy will turn around, while his finance chief, Patrick Pichette, cautioned the company won't necessarily be able to hold costs so low in future quarters.
Google's capital expenditures in the first quarter were $263 million, a significantly smaller portion of its sales than in prior periods. But Pichette called the quarter "the perfect illustration of the lumpiness of our [capital expenditures]," warning analysts against expecting the company to report such modest costs in coming periods.
While Google's net revenue rose compared with the period a year earlier, it also declined from the $4.2 billion reported in the prior period -- marking the first sequential decline since the company went public in 2004. That indicates that while it's held up during the recession better than many peers, Google is also seeing its business affected.
Shares of Google fell slightly to $388 in after-hours trading.
'Very, very conservative'
Google said its paid clicks, or the number of times users clicked on an advertisement and generated revenue for the company, grew 17% in the quarter compared with the period last year.
That beat many analysts' estimates, though Signal Hill's Greenwald noted a growing discrepancy between high paid-click growth and slowing revenue growth, indicating that the prices advertisers are paying per keyword on Google's search service are declining.
While advertisers may want to spend less, Google also indicated that it remains committed to austerity amid the downturn.
Schmidt noted that while Google finished the quarter with nearly $18 billion in cash and equivalents on its books, it is in no hurry to spend it. "Our view at the moment is to remain very, very conservative, and I don't think that will change any time soon," he said.
Pichette, however, emphasized that Google will continue to invest heavily in its core businesses -- and likely more heavily, in some respects, than it did in the first quarter. A project building a new data center in Finland, for example, was only temporarily halted during the quarter by the cold weather in that country, the finance chief said.
Read more here
But while Google's shares rose immediately after the earnings announcement, they turned lower in late trading as investors absorbed news of the company's first-ever sequential decline in net revenue since it went public, and heard Chief Executive Eric Schmidt acknowledge that he sees no end in sight for the recession.
Mountain View, Calif.-based Google said its first-quarter net income rose to $1.4 billion, or $4.49 a share, from $1.3 billion or $4.12 a share in the same period a year earlier. The company said net revenue for the period ended in March came in at $4.07 billion. Excluding special items, Google said earnings for the quarter were $5.16 a share.
Analysts on average had expected Google to post earnings excluding special items of $4.93 a share and $4.08 billion in net revenue, according to data from Thomson Reuters.
The size of the difference between Google's actual profit and Wall Street estimates was a surprise, according to Signal Hill Capital Group analyst Todd Greenwald. "It was definitely better than expected on the bottom line," he said.
Schmidt, during a conference call, said that "Google had a good quarter," though he allowed that it's nonetheless "absolutely feeling the impact" of the down economy. The chief executive added "we don't know exactly when" the economy will turn around, while his finance chief, Patrick Pichette, cautioned the company won't necessarily be able to hold costs so low in future quarters.
Google's capital expenditures in the first quarter were $263 million, a significantly smaller portion of its sales than in prior periods. But Pichette called the quarter "the perfect illustration of the lumpiness of our [capital expenditures]," warning analysts against expecting the company to report such modest costs in coming periods.
While Google's net revenue rose compared with the period a year earlier, it also declined from the $4.2 billion reported in the prior period -- marking the first sequential decline since the company went public in 2004. That indicates that while it's held up during the recession better than many peers, Google is also seeing its business affected.
Shares of Google fell slightly to $388 in after-hours trading.
'Very, very conservative'
Google said its paid clicks, or the number of times users clicked on an advertisement and generated revenue for the company, grew 17% in the quarter compared with the period last year.
That beat many analysts' estimates, though Signal Hill's Greenwald noted a growing discrepancy between high paid-click growth and slowing revenue growth, indicating that the prices advertisers are paying per keyword on Google's search service are declining.
While advertisers may want to spend less, Google also indicated that it remains committed to austerity amid the downturn.
Schmidt noted that while Google finished the quarter with nearly $18 billion in cash and equivalents on its books, it is in no hurry to spend it. "Our view at the moment is to remain very, very conservative, and I don't think that will change any time soon," he said.
Pichette, however, emphasized that Google will continue to invest heavily in its core businesses -- and likely more heavily, in some respects, than it did in the first quarter. A project building a new data center in Finland, for example, was only temporarily halted during the quarter by the cold weather in that country, the finance chief said.
Read more here
Toshiba Posts Smaller-Than-Forecast Operating Loss
(Bloomberg) -- Toshiba Corp., the world’s second- largest maker of flash memory chips, posted a smaller operating loss than the company had forecast after production cuts helped ease a glut and drive up prices of the semiconductors.
The operating loss, or sales minus the cost of goods sold and administrative expenses, was 250 billion yen ($2.5 billion) in the year ended March 31, or 11 percent smaller than the company’s previous 280 billion yen loss projection, Tokyo-based Toshiba said today in a preliminary earnings statement.
The results stoked speculation that production cuts are helping reduce the excess supply that’s driven memory chipmakers to record losses. Prices of flash memory chips, which store songs and data in portable musical players and digital cameras, have surged 75 percent since Jan. 29, when Toshiba last made its earnings projections.
“Flash-memory chip prices can sustain these levels for the time being as long as chipmakers continue to scale back production,” Yuichi Ishida, an analyst at Mizuho Financial Group Inc., said by phone today. “Demand for the chips themselves isn’t likely to rise soon because demand for mobile phones and digital cameras is still weak.”
Toshiba rose 3.8 percent to 330 yen at 12:57 p.m. on the Tokyo Stock Exchange. The preliminary results are in line with figures reported by the Nikkei English News earlier today. The company will have a press briefing at 3 p.m. Tokyo time.
Read more here
The operating loss, or sales minus the cost of goods sold and administrative expenses, was 250 billion yen ($2.5 billion) in the year ended March 31, or 11 percent smaller than the company’s previous 280 billion yen loss projection, Tokyo-based Toshiba said today in a preliminary earnings statement.
The results stoked speculation that production cuts are helping reduce the excess supply that’s driven memory chipmakers to record losses. Prices of flash memory chips, which store songs and data in portable musical players and digital cameras, have surged 75 percent since Jan. 29, when Toshiba last made its earnings projections.
“Flash-memory chip prices can sustain these levels for the time being as long as chipmakers continue to scale back production,” Yuichi Ishida, an analyst at Mizuho Financial Group Inc., said by phone today. “Demand for the chips themselves isn’t likely to rise soon because demand for mobile phones and digital cameras is still weak.”
Toshiba rose 3.8 percent to 330 yen at 12:57 p.m. on the Tokyo Stock Exchange. The preliminary results are in line with figures reported by the Nikkei English News earlier today. The company will have a press briefing at 3 p.m. Tokyo time.
Read more here
Wednesday, April 15, 2009
Japanese Stocks Climb on Chipmaker Merger Talks, Fed Report
(Bloomberg) -- Japanese stocks jumped to a three- month high on speculation consolidation will boost profitability in the computer chip industry and after a U.S. Federal Reserve survey showed economic contraction eased in some regions.
Mitsubishi Electric Corp. jumped 4 percent after its Renesas Technology Corp. affiliate was said to be in merger talks with NEC Electronics Corp., Japan’s third-biggest chipmaker. Nissan Motor Co., the nation’s No. 3 carmaker, rose 3.7 percent as almost half of the regions surveyed in the Fed’s Beige Book said there’s been a “moderation” in economic decline. Steelmakers and shipping lines gained ahead of reports from China on gross domestic product, production and inflation.
The Nikkei 225 Stock Average rose 253.43, or 2.9 percent, to 8,996.39 at the 11 a.m. break in Tokyo, the highest since Jan. 7 and snapping a three-day slide. The broader Topix index gained 16.67, or 2 percent, to 851.92.
“It’s natural when the economy turns south to see these kinds of mergers as a strategy for survival. Making money in semiconductors is difficult in any business climate,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “We aren’t on the path to a legitimate recovery, but we are seeing signs that sentiment is improving.”
The Nikkei has rallied by more than a quarter from a 26- year low on March 10. Shares in the gauge trade at an average of 183 times estimated net income for this year, up from 14 times a year ago, according to index compiler Nikkei Inc.
Read more at Bloomberg
Mitsubishi Electric Corp. jumped 4 percent after its Renesas Technology Corp. affiliate was said to be in merger talks with NEC Electronics Corp., Japan’s third-biggest chipmaker. Nissan Motor Co., the nation’s No. 3 carmaker, rose 3.7 percent as almost half of the regions surveyed in the Fed’s Beige Book said there’s been a “moderation” in economic decline. Steelmakers and shipping lines gained ahead of reports from China on gross domestic product, production and inflation.
The Nikkei 225 Stock Average rose 253.43, or 2.9 percent, to 8,996.39 at the 11 a.m. break in Tokyo, the highest since Jan. 7 and snapping a three-day slide. The broader Topix index gained 16.67, or 2 percent, to 851.92.
“It’s natural when the economy turns south to see these kinds of mergers as a strategy for survival. Making money in semiconductors is difficult in any business climate,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “We aren’t on the path to a legitimate recovery, but we are seeing signs that sentiment is improving.”
The Nikkei has rallied by more than a quarter from a 26- year low on March 10. Shares in the gauge trade at an average of 183 times estimated net income for this year, up from 14 times a year ago, according to index compiler Nikkei Inc.
Read more at Bloomberg
Shock fall in retail sales
SA's retail sales fell a shocking 4.5% in real terms in February from the same month a year ago, fuelling fears that SA is already in a recession and cementing the case for a further 100 basis points in interest rate cuts at the end of April.
The sharp decline in February followed an increase of 1.2% in January and a marginal decline in December. The performance in December and January had raised hopes that a bottom had been seen in retail sales.
But the latest numbers show that consumer confidence returned to the doldrums, despite a 100 basis-point cut in interest rates in February.
Stanlib economist Kevin Lings said the two main reasons for the retail sales decline were that consumers' incomes were falling in real terms, and that they were experiencing job losses.
He said credit card debt was a reliable indicator of consumer spending, and in February consumers had actually reduced their credit card debt.
"That's a rare event indeed, and is more indicative of the mood among consumers than the retail sales figures in December and January."
Lings said the better performance in December and January had been an anomaly. Consumers had probably felt buoyed by the fact that petrol prices had dropped sharply and the first interest rate cut had taken place. But this had been followed by job losses in 2009.
"Coming after very weak manufacturing figures, the February retail sales figures point to negative growth in gross domestic product in the first quarter.
"This supports the argument for another 100 basis-point cut in interest rates at the end of this month," Lings said.
Read more at Fin24
The sharp decline in February followed an increase of 1.2% in January and a marginal decline in December. The performance in December and January had raised hopes that a bottom had been seen in retail sales.
But the latest numbers show that consumer confidence returned to the doldrums, despite a 100 basis-point cut in interest rates in February.
Stanlib economist Kevin Lings said the two main reasons for the retail sales decline were that consumers' incomes were falling in real terms, and that they were experiencing job losses.
He said credit card debt was a reliable indicator of consumer spending, and in February consumers had actually reduced their credit card debt.
"That's a rare event indeed, and is more indicative of the mood among consumers than the retail sales figures in December and January."
Lings said the better performance in December and January had been an anomaly. Consumers had probably felt buoyed by the fact that petrol prices had dropped sharply and the first interest rate cut had taken place. But this had been followed by job losses in 2009.
"Coming after very weak manufacturing figures, the February retail sales figures point to negative growth in gross domestic product in the first quarter.
"This supports the argument for another 100 basis-point cut in interest rates at the end of this month," Lings said.
Read more at Fin24
Tuesday, April 14, 2009
Fed Considering More Disclosure on Emergency Lending Programs
(Bloomberg) -- Federal Reserve officials are considering steps to provide the public with more information about emergency programs aimed at reviving credit and ending the U.S. recession.
The central bank will probably increase disclosure on the collateral it holds against loans to financial firms, while also weighing a full range of options, including possible press conferences, according to people familiar with the matter.
Chairman Ben S. Bernanke has asked an internal committee headed by Vice Chairman Donald Kohn to review ways the central bank can boost transparency after it extended its lender-of-last resort role far beyond banks and doubled its balance sheet to more than $2 trillion to stem the credit crisis.
Read more at Bloomberg
The central bank will probably increase disclosure on the collateral it holds against loans to financial firms, while also weighing a full range of options, including possible press conferences, according to people familiar with the matter.
Chairman Ben S. Bernanke has asked an internal committee headed by Vice Chairman Donald Kohn to review ways the central bank can boost transparency after it extended its lender-of-last resort role far beyond banks and doubled its balance sheet to more than $2 trillion to stem the credit crisis.
Read more at Bloomberg
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