Turkish supermarket auction may flunk market test 8 Jan 2008 Potential bidders for Migros Turk have been put off by the $4bn asking price. Global chains can always opt instead to build out their own stores; meanwhile, private equity may struggle to raise the finance. The sellers may have to lower their sights.
When will companies start going bust? 8 Jan 2008 Quite soon, according to Moody s. Globally, the default rate for junkrated companies ended 2007 at a 26year low below 1%. The rating firm thinks that could rocket to nearly 5% by the end of this year. Moreover, it won t take a US recession to make that happen.
Microsoft’s latest deal fuelled by fear 8 Jan 2008 Microsoft s M&A record is one of increasing desperation. On Tuesday it paid $1.2bn for moneylosing Fast Search & Transfer. The 42% premium, coming soon after an investment that valued Facebook at $15bn, reflects Microsoft s fear that its star is being outshined by Google.
BarCap whittles down CEO succession race 8 Jan 2008 The subprime mortgage crisis seems to have scuppered Grant Kvalheim s hopes of running the UK investment bank. Jerry del Missier now seems to be the only candidate to take over when boss Bob Diamond leaves. But in this environment, that s hardly set in stone.
Dong’s E2bn IPO could ring investors’ bells 8 Jan 2008 The Danish government is planning to float 28% of the country s dominant utility. Equity markets are tough, but Dong has lots to offer: a handsoff government and good growth prospects from its North Sea gas and a more open European energy market. It should be an easy sell.
US doesn’t need fiscal boost 8 Jan 2008 Pressure is growing for a tax cut or benefits increase to keep spending up. It s hard to see how the small boost in question would do much good. Quite the contrary. Lax fiscal policy would mean more imports and higher inflation the last things the US needs.
Pressure mounts for Close Brothers 7 Jan 2008 The UK financial group rejected a £9.50 bid, a 25% premium on its vulnerable shares. If it can t drum up a higher offer, management will need to explain how it can create the same value. And it needs to act fast, before it loses more staff.
Rock hedge funds run rings around UK government 7 Jan 2008 SRM Global and RAB Capital have upped their stakes in Northern Rock in an attempt to win a veto over any rescue at next week's EGM. That s cheeky, given the shares should have been wiped out long ago. But given the weakness of the UK hand, their bet may yet pay off.
Starbucks can weather McDonald’s coffee assault 7 Jan 2008 America's biggest fast food chain's decision to serve McFrappuccinos is hardly welcome news for Starbucks. But investors are right to shrug. If Starbucks raises its game in food, it should be able to fight off the challenge. And it retains an edge in cachet.
Darling should leave the UK energy regulator alone 7 Jan 2008 The UK Chancellor s demand for a meeting with Ofgem to explain recent retail price hikes looks like an illjudged political stunt. Putting pressure on an independent regulator risks damaging investor confidence and could hurt consumers in the longterm.
CNET should sell out to Henry Blodget 7 Jan 2008 The Wall Street pariah recently launched a whimsical offer for the $1.3bn internet publisher on his blog. Now four investors have followed suit by amassing a stake with intent to flip the board. As jokey as it sounds, Blodget s onto something: CNET needs a Web 2.0 makeover.
Economics drives Georgian politics 7 Jan 2008 The Caucasus nation has had a strong economy since 2004, so Saakashvili won reelection. As in Ukraine, growth has proved a stronger force than Soviet nostalgia. However, there are signs of the economy overheating, which could reverse both economic and political progress.
Should risk managers take the fall for subprime? 7 Jan 2008 CIBC thinks so it showed its risk honcho the door. But it s easy to make risk managers the scapegoats when trades and strategies go awry. It takes a firmwide commitment to managing risk rather than a handful of guys waving red flags to keep a bank out of trouble.
Iowa result promises long confusing battles 4 Jan 2008 Iowa s distance from the outside world and disconnection from the market triumphs again. Huckabee s win in the Republican primary raises the chances of a contested Republican convention in September. Obama s win removes Clinton s invincibility. Uncertainty is the real winner.
The BV Sovereign Wealth Fund Risk Index 4 Jan 2008 How big a threat are sovereign wealth funds? Breakingviews introduces its new index of the world s top 20 statecontrolled investment funds, ranked for the first time according to their risk to western economic and political interests.
Don’t be fooled by Darling’s bogus reforms 4 Jan 2008 The UK Chancellor s latest proposals to prevent another Northern Rock debacle contain nothing new. But it suits him as it does the Bank of England and FSA to pretend that new powers are needed. It shifts blame for the mess from their own failures of judgement.
Dimon nips at Pandit’s heels 4 Jan 2008 The JPMorgan chief has already shown Citigroup rivals how to make a success of running a financial conglomerate. Now his firm s threatening to overtake the megabank in stock market value. That wouldn t be an auspicious start to Pandit s reign.
Alternative asset managers are still overpriced 3 Jan 2008 Shares of US alternative asset managers like Blackstone and Fortress have cratered since their flotations. But valuations are still at a big premium to traditional money managers. Higher fees and stronger growth don't fully justify that. The new arrivals are still too expensive.
Default rates likely to rise sharply in 2008 3 Jan 2008 OK, people have been predicting gloom for years. But that may be because their models failed to take account of looser covenants. Citi has a new model that predicts US high yield defaults hitting 5.5% by 2009 even without a recession. Europe won't be that different.
US retailers bloated from big box binge 3 Jan 2008 Retail floor space has grown over 20% in the past decade, and now far exceeds other developed nations per capita. The housing bust, tapped consumers and internet competition are causing indigestion. With December sales down, the consequences of the glut are becoming apparent.
After Iowa: will an independent run for president? 3 Jan 2008 Independent US presidential wannabes are often spoilers or cranks. But if the Iowa caucus results are anything to go by, the 2008 race is wide open. Moreover, there are some credible potential candidates. It s early days, but an independent might bring new ideas for the economy.
Colonial massacre classic tale of double leverage 3 Jan 2008 Spain's second largest property group is in a tailspin not just because it borrowed excessively to invest in overvalued assets; its chairman financed his own 40% stake by borrowing. When prices rise, double leverage multiplies the gains. When they turn, it magnifies the agony.
State Street deserves its record stock price 3 Jan 2008 Sure, the Beantown bank had to set aside $618m to cover its bond fund legal woes. That might not look good for its reputation, but money management is a small part of its business, and it s cranking out earnings elsewhere in a tough market.
DSG pulls plug on UK retailers’ prospects 3 Jan 2008 The struggling electrical retailer's shares fell 20% as it slashed prices of laptops and appliances. The owner of the Dixons chain has plenty of problems of its own, such as the commoditisation of electrical gadgetry. But there's enough here to worry retailers of other kinds too.
Borrowers face high costs reworking debt to avoid default 3 Jan 2008 Lenders are demanding that companies needing to restructure loans pay nearly three times the fees they did back in June, as well as a lot more interest. Squeezing iffy borrowers could push them over the brink. But lenders have good reasons to do so anyway.
Weather Channel’s $5bn price tag is a conversation-starter 3 Jan 2008 The US climatology giant is asking for a lot more than it appears to be worth. But it may reap a windfall anyway. The Weather Channel is one of the last independent basic cable channels and runs the leading weather website. Its auction could attract a lot of interest.
UK credit squeeze has started: official 3 Jan 2008 A Bank of England survey shows how dramatically UK banks mood has changed. Harsh months lie ahead as lending to corporates and households is cut. The BoE will try to respond with more rate cuts but, for now, financial winter has the upper hand.
$100 oil: the price of market history 3 Jan 2008 A US trader has become the first person to pay $100 for a barrel of oil by paying well over the market price. No doubt the $600 trading loss was worth it for the certificate and a place in market history. If so, here are a few other trades he should consider in 2008.
Job cuts underline how Big Oil doesn’t love big oil prices 2 Jan 2008 Shell s costcutting is getting into gear as the black stuff touches a record $100 a barrel. High prices don t boost the majors profits that much. Instead, they squeeze margins and force up costs. Shell s cuts may not be enough to counter rampant cost inflation.
Vinci’s stake in Paris airports shouldn’t make it favourite buyer 2 Jan 2008 The French construction company has bought a 3% stake in stateowned airport operator ADP, hoping to muscle in as the favoured buyer if and when the company is privatised. The French government should make it clear other contenders will have a chance.