Permanent capital sorts hedge fund sheep from goats 4 Oct 2007 Winners such as Dexion Absolute and Brevan Howard trade at premiums to NAV and are wellplaced to raise new cash for their listed vehicles. But the losers face a vicious circle: poor performance, discounts and little chance of raising new cash.
Intel and AMD face slower future 4 Oct 2007 Overcapacity has hurt both chip groups. There s little chance pricing pressure will abate given AMD s need to maximise cash flow. The longterm could be worse. Total microprocessor revenues have steadily shrunk since 2003 when chip speeds suddenly plateaued.
£15bn funding package key to Flowers’ bid for Northern Rock 3 Oct 2007 If the financier can pull together enough cash from banks to fund the wholesale money that Rock has to repay in the next year, he will be a credible bidder. Flowers' challenge will then be to strong arm the stricken bank's board into accepting virtually nothing for its equity and persuade the authorities to maintain financial support.
Do LBO break fees protect sellers or buyers? 3 Oct 2007 Break fees are supposed to protect a target's shareholders against a buyout firm getting cold feet. But they seem to be doing the opposite. Instead of encouraging the consummation of deals, they give buyers a way out. In fact, they make some buyout deals look like cheap options.
Deutsche saved by one-offs and stable businesses 3 Oct 2007 Its investment bank made a Q3 loss as a result of E2.2bn of writedowns on LBO loans and CDOs. But the bank's earnings as a whole actually rose from last year: E600m of profits from asset sales, a tax refund and a strong performance by its other businesses like asset management explain the discrepancy.
BAA £11bn refinancing hits turbulence 3 Oct 2007 Refinancing the money Ferrovial borrowed to buy Heathrow's owner last year will be more problematic after the UK regulator came down hard on its allowed returns. Ferrovial can t be blamed for the credit crunch or Heathrow's appalling press. But its reliance on shortterm funding was foolish.
Will Wall Street job-cuts trickle turn into flood? 3 Oct 2007 This is supposedly the worst credit crunch in two decades. But most investment banks have just trimmed their mortgage units, or sacrificed a head honcho or two. If woes persist, they have a long way to go to match the jobs lost on Wall Street in the last slowdown.
Eads’ insider trading scandal shows need for radical cleanup 3 Oct 2007 Massive insider trading at the aerospace group, before Airbus troubles came to light, was companysanctioned and approved by the state, French watchdog AMF says. Even major shareholders Daimler and Lagardere were in. They should get out, and speed up the sale of their remaining stakes. A cleanup of management ranks is also in order.
Luxury stocks may weather retail slump 3 Oct 2007 US retailers are preparing for the worst as the holiday season approaches. Consumers won t stop spending, but they may be more selective. Luxury brands usually hold up better than most. Shares of companies like Polo and Tiffany don t come cheap but they may be worth it.
Black & Decker’s hammered stock may hold value 3 Oct 2007 Every gold rush needs its picks and shovels. Black & Decker prospered by selling tools for the housing boom. But it s suffering now. The real estate slump may get worse before it gets better. But Black & Decker's valuation provides an ample cushion for investors.
Crossrail is important boost for London 3 Oct 2007 After months of armtwisting, the UK government appears to have put in place the financing necessary to build the vital London rail link. The City of London, Canary Wharf and BAA contributed the vital funds. But the whole of London indeed the UK will benefit.
Perella-Xerion deal a sign of the hedge fund times 2 Oct 2007 Xerion, a $400m hedge fund, is selling itself to Perella Weinberg. It s an early sign of a shakeout following the summer market mayhem. Fund founder Daniel Arbess knows investor capital is increasingly going to larger funds. He s right and he won t be the last to sell.
BSkyB should get shot of ITV stake 2 Oct 2007 Now that Britain s competition regulator has said the stake in rival ITV restricts competition, Sky should sell it. Other remedies, like keeping the stake but losing its votes, are less palatable. What's more, Sky has achieved its main goal scuppering a merger of ITV and Virgin Media albeit at significant financial cost.
Banks should turn the tables on loan investors 2 Oct 2007 Distressed debt investors want banks to lend them money to purchase hung LBO loans. It s not clear this makes sense for the banks. They retain downside exposure to the loans while losing the chance to benefit if their price improves. A DIY approach might be better.
Caixa branches out with E20bn Criteria listing 2 Oct 2007 The Barcelona savings bank hopes to raise up to E4bn by listing Criteria, its investment vehicle. The money is earmarked for financial services acquisitions abroad not hitherto an area of expertise. Shareholders will become minority investors in a minority investor. At least, they are being offered a discount to NAV.
Murdoch price war would put FT.com in bind 2 Oct 2007 The mogul's hints that he's going to turn wsj.com into a free site leave FT.com with an unappealing choice. The bold option would be to follow suit but risk losing $20m of revenue immediately. The alternative, which FT.com is adopting, is to tweak its subscription model. That risks losing market share.
Tesco’s empire building pays off 2 Oct 2007 Thanks to the supermarket group s sheer scale, registering the lowest UK likeforlike sales in years looks little more than a blip. As the UK gets more mature, Tesco has to keep moving to retain momentum. But for now, its expansion machine still looks undervalued.
UK Tories only half-right on non-doms 2 Oct 2007 The basic idea of charging 150,000 foreigners for the privilege of living in the UK is sound. But the specific scheme a poll tax of £25,000 per person is neither fair nor economically efficient. Far better to link the charge to the value of their UK residences.
How much should fans pay for Radiohead’s new album? 2 Oct 2007 The British rockers are letting customers pay whatever they want for a copy of their latest album. Early indications are that groupies will pay around $10. But work through the weird economics of the recording industry and Radiohead might be gouging fans who pay that much.
EU shouldn’t ignore Russian gas mess 2 Oct 2007 Statecontrolled Gazprom is welcoming a likely new antiRussian government in the Ukraine with a threat to cut off supply. The EU shouldn t think this mix of politics and economics is merely a postSoviet problem. The best answer is a buyers league, including China.
Dean Foods’ woes show the risks of milking cash flows 2 Oct 2007 The US dairy products giant paid a $2bn dividend when credit markets were strong. That looked sensible for a mature business. A lot of slowgrowing companies have distributed their future cash flows this way. But it can be risky if their prospects decline.
Canada’s TD pays pretty $8.5bn price tag for Commerce 2 Oct 2007 This may be the price for Canadian expansion to the south. But cost synergies easily cover the premium TD is paying. TD may also be able to unlock some capital. But the key will be to improve returns from Commerce s sluggish approach to lending.
Skewed incentives may explain Qatari bravado 2 Oct 2007 State funds like Qatar s are paying top whack for assets like J Sainsbury. Maybe it s just because they can but there could be a less exotic reason. The structure of some of these investments means that if funds overreach, the person driving the investment has less to lose than the one paying for it.
Airbus and Boeing will both be damaged by trade clash 2 Oct 2007 The US and EU look set to emerge with pyrrhic victories in their titfortat disputes over $34bn in alleged illegal subsidies to Boeing and Airbus. Although the WTO will declare both sides guilty, it s emerging Brazilian, Russian, Canadian, and Chinese rivals will win out.
A Moral Look at the Dismal Science 2 Oct 2007 Rich economies are impoverishing themselves by the endless accumulation of objects, argues Edward Hadas. The materialistic urge fuels greed and envy while distracting people from more important activities like love and the pursuit of beauty.
High-tech monopolists face EU price curbs 2 Oct 2007 European Commission regulators may be moving toward a new policy of imposing price cuts on companies that hold dominant market shares or own crucial intellectual property. Mobile phone operators and Microsoft already have felt the pain. Others like Qualcomm, Apple, Google, Rambus and, Intel could suffer similar fates.
Red ink and spilt blood healthy for markets 2 Oct 2007 The mega writedowns announced by UBS and Citi have been taken well because they seem to be owning up to their full losses while being strong enough to take the hit. Executing senior management, as UBS has done, is also cathartic.
Citi’s Nikko deal appears to be a good first step 2 Oct 2007 The bank s acquisition of the rest of Japan s thirdlargest brokerage for a reasonable price gives it a unique position in Japanese finance. Chuck Prince wants to make 60% of Citi s revenues overseas. It needs to crack its losing streak in Japan if it wants to hit that goal.
Sarko half-right as stagflation threatens Europe 2 Oct 2007 French President Nicolas Sarkozy has repeatedly told the European Central Bank to forget about inflation and worry about the too strong euro. Sarko was half right. The euro looks to be depressing growth but inflation has worsened. It s a poisonous mix.
Citi joins UBS with Q3 blow-up 1 Oct 2007 But unlike his Swiss rival, the US megabank s boss Chuck Prince isn t proposing a shakeup in the wake of $3.3bn of credit losses. This can only reinforce investor concerns about the Citigroup model, and its management.