Rehashed Home Depot deal no model for other LBOs 27 Aug 2007 Both the buyers and the seller made concessions to ensure the sale of the DIY chain s wholesale supply unit could proceed. But extending them to other deals will be tough. Some only work because Home Depot is hiving off a subsidiary, not selling itself whole.
Even lawyers can’t help buyout firms wiggle out of deals 24 Aug 2007 Sure, they can bicker endlessly about the details. But material adverse change clauses may only force renegotiations, not break deals. Only the most drastic situations allow buyers to walk away legally. And if they disagree, both parties prefer to negotiate out of court.
City, Wall Street jobs are in the balance 24 Aug 2007 If the uneasy calm returning to markets lasts, investment banks and hedge funds will probably avoid a massive round of job cuts. As such, the worst case for many will be smaller bonuses than last year. But for some, a job hunt could still be on the cards.
ECB will struggle to both give and take away 24 Aug 2007 The central bank provided exceptional threemonth funding to ease the credit crunch. But it's also suggested a rate rise is still on. It s certainly a laudable stance. But it may not be tenable. If funding problems don t go away, there won t be much need to raise rates.
Idled M&A speculators turn to pharma 24 Aug 2007 With easy credit gone, megadeals are out why not turn to cash gushing, underleveraged drug companies? Rumoured deals for Bayer and Wyeth make a bit of sense, though a battle for the latter seems more plausible.
Japanese-Indian relationship needs depth 23 Aug 2007 Tokyo wants India to be a partner and friend". Trade and capital flows between the two countries are still pretty low. But Japan and India have naturally complementary skills and needs. With a bilateral trade deal, the relationship could be hugely deepened.
BoJ should raise rates and bring money home 23 Aug 2007 The Bank of Japan left its rate at 0.5%, even though deflation has gone. That leaves short term rates and savings returns dangerously low. A rise in rates to around 2% would restore a normal rate structure. That would bring Japanese savings home where they could do most good.
Candover deal offers certainty for Stork shareholders 23 Aug 2007 Sure, Candover s E47 offer for the Dutch conglomerate is well below some valuations. Iceland s LME could yet launch a higher offer. But Stork s problems in aerospace make estimates tricky. And with no other bid in a gloomy M&A sector, the devil you know may be preferable.
Who’s got Bear Stearns on its radar screen? 23 Aug 2007 Plenty could snap up the battered broker, but only a handful might try. Spanish, Italian and Chinese banks could be surprise bidders. But Bank of America, Wachovia and Barclays seem likelier suitors. Even so, that doesn t mean a deal is around the corner.
Is Schwarzman the smartest man on Wall Street? 23 Aug 2007 The Blackstone chief s timing surely looks smart. He beat his competitors to the public market. But for now, he s the only one to benefit. For public investors to gain from Blackstone s timing prowess, it needs to use its stock to grow.
Credit crunch probably hasn’t caused enough pain 23 Aug 2007 The central banks decision to flood the markets with liquidity on increasingly attractive terms seems to have averted panic. But without pain, people repeat errors. As a result, the next bubble could be bigger and, if it pops at the wrong time, really damaging.
BofA benefits from a self-fulfilling prophecy 23 Aug 2007 The very act of injecting $2bn of capital shifted the perception of Countrywide s future on a dime and put Ken Lewis in the money. Assuming Countrywide s problems were liquidity, not credit, related this is a brilliant move and may call a bottom of a kind.
Borse Dubai’s reprieve keeps OMX in play 23 Aug 2007 The Swedish regulator did not punish the Emirate group, despite judging that it acted illegally in its $4bn approach to its Nordic rival. Still, Borse Dubai s behaviour may come back to haunt it. That would be a relief for its trumped rival, US operator Nasdaq.
Borse Dubai plays strange game in OMX battle 22 Aug 2007 The Emirate group made the hardtoswallow claim that it was undecided about a bid for its Nordic rival when it bought 28% of the shares. The Swedish regulator will decide if Borse Dubai acted legally. But in any case, the interloper has aggravated resistance to its proposal.
Better US trade may have sparked credit woes 22 Aug 2007 It s only a theory, but the fall of the US trade deficit 0.6% of GDP in a year might have sucked liquidity out of markets. If so, the lack of new funds would have taken the air out of the asset price bubble. That s tough on the weakest borrowers, and on traders.
Consumers opt for time away from media 22 Aug 2007 New media is flourishing, but there are only so many hours in the day. So Americans are watching less, but more efficiently. Viewers seem to be keen to take in smaller morsels of digital delight. That s tough on traditional content providers.
Bernanke brings in the big guns 22 Aug 2007 Four big US banks borrowing from the discount window lends credibility to the Fed s strategy for injecting liquidity into markets. The Fed chairman s desire to avoid bailing out excessive risktakers with a Fed funds rate cut seems to be working, so far.
E-trade and Ameritrade pushed into merger talks 22 Aug 2007 Merging the two biggest US discount stock brokers is a nobrainer up to a third of total costs could be cut. Yet both were reluctant. With minority investors pressuring Ameritrade and ETrade s expansion into mortgage lending looking dicey, it s time to reconsider.
Lehman makes subprime exit look easy 22 Aug 2007 That's because the Wall Street firm got into the mortgage business cheaply and early. So it s not costing too much to throw in the towel. But others like Merrill Lynch and Cerberus shelled out a fair whack for their lending platforms. Scaling back would be much more painful.
Private equity won’t save bankers’ bonuses 22 Aug 2007 Buyout houses have loaded up the banks with $330bn of unsellable buyout debts. Now they want to buy some of it at a big discount. But they can t afford to buy very much. And bankers with bonuses in mind may not want to give the buyout barons a good deal.
Ackman chose wise target in Target 21 Aug 2007 Poorly run companies make easy pickings for activists. But they can also leave funds terribly exposed to losses if their efforts flounder. Pershing Square's $2bn Target stake might seem odd given the retailer's strong results, which give Pershing downside protection.
Bernanke should resist political pressure 21 Aug 2007 Chris Dodd hedge fund land s preferred candidate said the Fed boss will use ``all of the tools at his disposal'' to restore stability. But Bernanke must not upset the repricing of risk and weeding out of poor standards by handing the financial industry a rate cut.
LBO underwriters should bite the bullet 21 Aug 2007 Banks that are on the hook to provide $330bn of debt for pending leveraged buyouts don t want to sell it at firesale prices. But while taking a quick hit to move the debt off their books would slash bonuses, it might cauterise a potentially greater wound.
Investors shouldn’t bank on a Buffett put 21 Aug 2007 Speculation that the famed investor could use his $50bn cash pile to buy firms like Countrywide or TXU may titillate investors. But Buffett won t strike unless he can negotiate sweet deals for his shareholders. That will only happen when real distress rears its head.
China’s baby steps won’t stop speculation 21 Aug 2007 The Chinese stock market is up 85% this year. Now a few Chinese investors can buy the same stocks more cheaply in Hong Kong. Interest rates are below real inflation. China continues to let the good times roll.
Second shoe drops in German credit upset 20 Aug 2007 The good news is that other banks look less exposed. Even so, detoxifying smaller positions may tie up valuable capital. The rescue of Sachsen Landesbank bears strong similarities to IKB. Both bet large on arm slength funds investing in commercial paper.
KKR Financial smart to launch rights offering 20 Aug 2007 It s often a sign of distress. But this one, along with a private placement, leaves the LBO firm s credit investing unit well protected. KKR Financial now has enough cash to cover any margin calls and to snap up distressed assets.
The yield curve matters now 20 Aug 2007 A flat yield curve didn t impact lenders too much when hedge funds could borrow in yen and leverage risk spreads. That situation has changed. A flattening yield curve is now another reason for credit growth to slow.
Brawls erupt over margin calls 20 Aug 2007 Hedge funds think their brokerlenders are being stingy when they value illiquid assets for margin calculations. But the funds won't persuade their lenders unless they find higher prices. Pushing back might only delay the inevitable.
Fed shot heard round the world 20 Aug 2007 The emergency 50 basis point cut in the discount rate has redounded in the markets. Investors see rate cuts around the corner. But fundamentals have not altered so much. Growth and liquidity give little scope for lower rates. The Fed shouldn t provide them.