Merger arbs look at $32bn of opportunity 30 Sep 2008 That s the gap between current and offered value in a dozen big pending deals. In half, the spread is wider than 10%. But in chaotic markets, big deals think financials or Genentech and Lonmin may not close. It s an opportunity, but merger arbs are having trouble playing.
France and Belgium now have to sort Dexia out 30 Sep 2008 The public and projectfinancing bank is being rescued with E6.4bn of new capital two thirds of it from the French and Belgian governments. They will be Dexia s de facto owners. It s up to them to decide what to do with FSA, the bank s US bond insurer.
Tesco shows how to weather a storm 30 Sep 2008 Steady diversification by the UK s biggest retailer is paying off now. First half profits rose 10% while less nimble peers flounder. Tesco s march across countries, products and price points should help it to weather the worsening storm too.
Unicredit tries to tough it out 30 Sep 2008 The Italian bank is now on investors' worry list, even though the home country s sleepy banking system is in pretty good shape, despite baroque politics. The takeover of Germany s HVB has moved from ambitious to risky. Now Unicredit has to show it wasn t foolish.
Fearful markets face more rough days 30 Sep 2008 After Monday s plunge in the stock markets and the total collapse of interbank confidence, the Western financial system looks fragile. Panic threatens to turn a necessary deleveraging into a disaster. Strong action is needed, but the authorities are mostly still playing catchup.
Apollo’s Huntsman debacle could have pain for all 30 Sep 2008 A Delaware court said Apolloowned Hexion can t walk away from its $11bn deal to buy the rival chemical company. Apollo says the combined group would be insolvent. Huntsman disagrees. But Apollo s investors and possibly its banks could take a shellacking in either case.
UK’s Darling should stop dawdling on deposits 30 Sep 2008 The French have guaranteed deposits; so have the Irish. The Brits have spent a whole year debating whether to lift the cap on what s guaranteed from the current £35,000 level. Depositors with more savings than this need reassurance. The UK should just get on with it.
US could buy banks’ preferred stock 30 Sep 2008 The Tarp plan did not help banks directly, raised asset valuation problems and was very costly. A fund investing in the preferred stock of operationally solid banks could supply capital directly, and would probably be cheaper, economically sounder and less risky for taxpayers.
Banks scramble to head off company defaults 30 Sep 2008 With markets closed and over $40bn of US junkrated debt coming due in the next year, corporate defaults are set to spike. Banks are deluged with requests to amend loans. But giving troubled borrowers more breathing room could backfire.
Falling house prices pull Wall St deeper into mire 30 Sep 2008 While Washington and New York obsess over alleviating symptoms of the credit crunch, the underlying cause of the crisis the housing market festers. Prices continued to fall in July and are now 20% off the peak according to the CaseShiller index. There s further to go.
Trichet leaves it to governments to save banks 30 Sep 2008 The president of the European Central Bank has urged the US Congress to approve the Paulson bailout plan. And well he might. Trichet wants the eurozone governments to decide which banks to rescue and how. He wants to stick to his job: the troubled money markets and inflation.
Rate cuts are likely, but take time to help 29 Sep 2008 Markets are expecting synchronised reductions in overnight rates. They ll probably get what they want, as central banks try everything on the menu of confidencebuilders. But the US experience shows even big rate cuts can t do much to alleviate a postbubble financial implosion.
Why is Fortis so desperate to sell ABN Amro? 29 Sep 2008 The Benelux group says it s because it wants to get back to basics. That s hard to swallow, given the dire state of the markets. More plausible is that confidence in Fortis as an owner is lost, or some further capital issue. With ING pulling out, bidders look thin on the ground.
Neuberger buyers get a steal – that may haunt them 29 Sep 2008 Bain and Hellman bought the asset manager for $2.2bn, a third less than the mooted price a few months ago and even below what Lehman paid in 2003. That sounds like a bargain, but it doesn t bode well for the valuations of other fund managers including Neuberger s buyers.
UK makes better fist of B&B than Northern Rock 29 Sep 2008 It hasn t dithered as long before nationalising the bank. And it has found a way of recycling the good bank to the private sector immediately. But this problem could have been dealt with even sooner. And the taxpayer still faces potentially big liabilities with the bad bank.
Fed’s liquidity tsunami will be hard to mop up 29 Sep 2008 Bernanke has cranked open his credit taps to the tune of $630bn. The failure of Paulson s bailout and the persistently frozen interbank markets may make this largesse look necessary. But it could be a long time before the Fed can wean markets off it.
Dubai works overtime to avert property crash 29 Sep 2008 The emirate is pushing to merge its mortgage lenders, and developers look next. Dubai s new real estate fund will also help shore up prices. In a market dominated by government entities and where just 30% of buyers need to take out a mortgage, it s a mighty effort.
Hypo Real Estate wakes up to funding nightmare 29 Sep 2008 Thanks largely to an illjudged acquisition in late 2007, the E395bn German bank has the wrong balance sheet for a credit squeeze: hyperleveraged and almost no deposits. That model is so broken that a E35bn publicprivate loan guarantee may not be enough to ensure survival.
Tarp failure not a complete catastrophe 29 Sep 2008 Investors may have freaked out. But the rescues of Wachovia, WaMu plus recaps of Goldman, Morgan Stanley and others suggest there may be other solutions that involve existing mechanisms and the free market.
Tarp’s 110 pages leave many questions unanswered 29 Sep 2008 The biggest is whether it will work. But with Hank Paulson s $700bn bailout now in a form Congress may reluctantly approve, it s time for the US Treasury to hammer out crucial details like the price at which the government will buy troubled assets. And that s just the start.
Santander in another opportunistic UK swoop 29 Sep 2008 Hot on the heels of the A&L deal, the Spanish banks is paying £600m to get Bradford and Bingley s good bank and none of the toxic stuff. It gets £20bn of deposits and 200 more branches taking Santander s market share in the UK to 10%.
Fortis rescue leaves job half done 29 Sep 2008 Three governments pumped in E11.2bn in exchange for 49% stakes in the group s banking activities. That should shore up capital. But the cause of the collapse still must be sorted. Fortis s ABN Amro purchase is to be unloaded. It will be lucky to get half the E24bn it paid.
Revolving loans could boomerang on banks 29 Sep 2008 Banks have committed up to $6 trillion in loans that haven't been drawn, according to Citigroup research. A large drawdown may not hurt too much borrowed funds are likely to be deposited with banks. But a deep freeze in the commercial paper market could turn the loans toxic.
Mack’s deal looks better than Blankfein’s 29 Sep 2008 John Mack s $9bn investment from MUFJ boosts Morgan Stanley s capital. He gets an alliance, too, while Goldman s deal with Warren Buffett was more about speed and prestige. Mack is giving away a bigger stake than Goldman did, but he appears to be getting a better financial deal.
Pandit snaps up Wachovia for a song 29 Sep 2008 The Citigroup boss is paying less for the Charlottebased bank s huge deposits than JPMorgan paid for WaMu s. And Citi gets other businesses and FDIC help on mortgage losses to boot. But whether the bank can manage this to shareholders advantage is debatable.
Rash of bailouts fail to stop banking crisis 29 Sep 2008 No fewer than six governments were rescuing leading financial institutions over the weekend, and central banks were back on Monday with more liquidity. But money markets remain hypertight. The problem is that after a decade of binging, there s still a gigantic mess to clear up.
Dimon brings WaMu into the fortress 26 Sep 2008 The JPMorgan boss has plucked the US thrift, with its $300bn of assets, from receivership's jaws for $1.9bn. WaMu s loans will need to be written down, but cost savings should help make raising $8bn in equity a doddle, leaving JPMorgan's balance sheet solid.
How the US government handles bank failure 26 Sep 2008 Washington Mutual is the largest US bank failure in history nearly eight times as large as any other. More seem inevitable. Breakingviews.com has compiled a primer on the FDIC, the government agency in charge of managing bank receivership and protecting depositors' cash.
Republican rebels’ plan has advantages over Tarp 26 Sep 2008 The plan calls for insuring toxic securities, not buying them. That looks more taxpayerfriendly. It could also spread risk more equitably and create less moral hazard. But like Paulson s plan, the devil is in the details and success depends on how securities will be valued.
ABN regulators should be ashamed of themselves 26 Sep 2008 If Fortis had stayed out of the E71bn Dutch bank deal, it might have avoided the current capital concerns. Boards, shareholders and managers all messed up. But regulators should never have approved taking E53bn of bank capital off the table in late 2007.