Deutsche Bank CEO deserves an earful 27 May 2008 Josef Ackermann has been more optimistic than most of his peers. He will face shareholders on Thursday at the bank s AGM. Jeffrey Goldfarb provides some tough questions Ackermann should be asked to justify his rosy view.
Transatlantic bid fever shows M&A not dead 23 May 2008 Expro and Enodis, two UK firms, have received dizzying cash premiums from US bidders of 65% and 100% respectively. Tight credit may have cooled the M&A market, but where there s industrial logic, or a hot commodity story, sellers can still work up fierce auctions.
Three-way E30bn German bank deal looks ambitious 23 May 2008 Insurer Allianz is proposing that its Dresdner unit merge with Commerzbank to bid for Deutsche Postbank, creating a E30bn German giant. Any consolidation in the country s banking industry is welcome. But even getting two banks together has historically been difficult.
Silverjet hanging by a thread 23 May 2008 The last of the dying breed of allbusiness class airlines is in desperate need of cash after a new investor failed to provide an expected lifeline. It's not clear how long it can survive. But it s a brave soul who would invest in this risky venture with oil at $135 a barrel.
CPDO snafu causes fissure in ratings club 23 May 2008 Standard & Poor s has put Moody s credit rating on watch negative due to the fallout from its CDPO foulup. But S&P s structured finance ratings were also based on fiction. It s not without sin, but it appears nonetheless to be hurling the first stone.
UBS’s measly rights discount should still hold appeal 22 May 2008 The Swiss bank has priced its SFr16bn cash call at a modest 32% reduction. That may appear macho compared to UK peers raising capital with 4050% cuts. But the 20 underwriters are only on the hook for three weeks rather than seven weeks with RBS and even longer for HBOS.
Air France disappoints at a bad time 22 May 2008 The French airline has missed profit expectations when airline investors are rightly spooked by rising fuel costs. Air France might be hedged this year, but profits could plunge next year. A massive E530m provision for pricefixing doesn´t help.
AIG’s mis-steps should put CEO in hot seat 22 May 2008 Martin Sullivan has presided over damage including huge shock losses and a big accounting misstep. Some blame his imperious predecessor, Hank Greenberg. But if Chuck Prince had to quit despite Sandy Weill s troubled legacy at Citigroup, should Sullivan get off the hook?
Canadian court’s BCE upset may someday bite bondholders 22 May 2008 The ruling that bond investors deserve a better deal in the telco s $52bn LBO looks like a big win especially if it derails the buyout. But giving bondholders benefits usually reserved for shareholders means they should share more in the downside, too, if the company defaults.
LSE boss must switch from defence to attack 22 May 2008 Clara Furse has proved an able defender of the London exchange, seeing off half a dozen approaches in four years. But with the shares down 48% this year amid growing competition, reduced trading volumes and more price pressure, she urgently needs to take the fight to her rivals.
Oil companies will have to get used to higher taxes 22 May 2008 Shell s boss says that too high taxes will lead to less investment. True, but disingenuous. Companies are used to paying a hefty share of cash flow to host governments. A healthy tax regime not too high and not too low keeps oil flowing and might prevent expropriation.
Bankers’ moans on mark-to-market are disingenuous 22 May 2008 Banks happily accepted fair value accounting when flush times brought writeups. Now they are whining as asset price declines cause paper losses. Goldman is right to distance itself from the moaning. Using historical prices only in down markets is a bad idea.
UK building societies face tough times ahead 22 May 2008 Nationwide's annual results suggest the UK s largest building society is weathering the credit crunch. But its smaller peers may be in for a rougher ride. Mutual societies face the same rising costs and writedowns as everyone else without the same capacity to raise funds.
Personal view: Shock therapy needed to quell commodity prices 21 May 2008 Oil prices are up 59% since September. That is unjustified by the fundamentals and damaging to global growth. The Fed should raise rates sharply, indicating its determination to bring prices down and squeeze speculators funding costs, says Martin Hutchinson.
Apollo’s exit troubles are risk to icing, not cake 21 May 2008 The buyout firm run by Leon Black is having some trouble with its exits. One IPO recently flopped, and Linens 'n Things has filed for bankruptcy. Apollo is floating another portfolio company, Metals USA. The prospectus reveals that the company has already made a stainless return.
ArcelorMittal’s move on Macarthur is expensive but smart 21 May 2008 The steelmaker paid a high price for its 15% stake in the Australian coal producer, valuing the group at $4bn. But with coal prices spiking and ArcelorMittal intent on securing supply, a full takeover could be a smart insurance policy.
The UK’s fiscal ship goes under (rocky) water 21 May 2008 UK government debt, including Northern Rock, has soared to 43% of GDP, breaching the 40% limit long ago set by Gordon Brown. The government will claim the damage is temporary but, even excluding the Rock, public finances look certain to sink.
American Airlines decides less is more 21 May 2008 The US legacy carrier will cut capacity sharply. It's what the whole industry needs to avoid frequent brushes with bankruptcy. But it's a risky move if rivals fill in the gaps rather than following suit. At least American has alreadydepreciated planes that are cheap to ground.
Enel’s Spanish adventure doesn’t look happy 21 May 2008 The Italian utility paid a high price to buy a stake in Endesa with Acciona last year. Now there are signs of increasing tension between the two, and the Spanish have the upper hand. An expensive put option means Enel's Endesa hangover won t go away anytime soon.
Moody’s CPDO debacle highlights structured finance flaws 21 May 2008 The claim that the rating firm knew its tripleA ratings on CPDOs were wrong is another blow for its shredded credibility. But S&P graded them identically. The real culprit is an overreliance on complex computer models by rating agencies and overreliance on them by investors.
Time Warner ups pressure on Comcast 21 May 2008 The media group s decision to separate its cable arm with a ton of leverage raises the bar for Comcast. Its shareholders were already clamouring for Comcast s founding Roberts family to improve its capital structure. This gives activists more ammunition.
Microsoft goes after Google with cash 21 May 2008 Under its new ad system, advertisers only pay when a sale is made. And customers get a cashback incentive for using Microsoft search to shop. This is a compelling offer but it s hard to see how it can mint Googlelike riches for shareholders.
UBS’s $15bn subprime shield not quakeproof 21 May 2008 Despite taking a $7bn hit on the assets it has sold to BlackRock, the Swiss bank is on the hook if they fall another $3.8bn as it is lending BlackRock $11.2bn. Even so, the deal gives a fillip to UBS s detox programme roughly halving the assets scheduled for its bad bank.
Risky Finance: Flogging a dead black swan 21 May 2008 Nassim Taleb s avian metaphor may have helped sell a lot of books but, when it comes to the credit crunch, it lets people off the hook. The time has come to shoot the black swan, writes Nicholas Dunbar.
Even the faithful should now sell Fannie and Freddie 21 May 2008 The mortgage giants spun profits before the crunch. Now US lawmakers want their shareholders to bear a lot of the burden of cleaning up the mortgage mess. If GSEs are predominantly tools of public policy, shareholders should sell maybe to the government itself.
Abertis and Citigroup empty pockets for US toll road 20 May 2008 The Spanish construction group and Citigroup s infrastructure fund have stretched themselves to the limit to pay $12.8bn for the Pennsylvania Turnpike. The pair is targeting returns in the low double digits a level that looks meagre for this kind of deal.
M&S has been punished enough 20 May 2008 The UK retailer's share price has almost halved in a year, largely thanks to poor trading and a major boardroom cockup. That takes the shine off its first £1bn profit in 10 years. But M&S may be more resilient than investors give it credit for.
Is Macquarie’s warning realistic enough? 20 May 2008 The Australian investment bank said achieving record earnings may be a challenge. That s as close to a warning as Macquarie gets. It's good to see the bank lower its sights a bit. But given its reliance on leverage and economic growth, investors should be ready for worse to come.
US road deal shows infrastructure’s edge on LBOs 20 May 2008 Citigroup partnered with Spain's Abertis to buy Pennsylvania's turnpike. It will have a large debt offering and will tap several different markets. The deal won t be easy. But stable cash flow and lower return expectations make these deals more feasible than buyouts.
US farm bill: 1930s socialism without the justification 20 May 2008 The farm bill expands US agriculture subsidies, born in an impoverished world where markets seemed to have failed. The new bill will subsidise the wealthy, provide cash supports even at high prices, damage world trade talks and boost inefficient domestic sugar and cotton cartels.