UK growth innings ended by loose shots 22 Aug 2008 While Team GB was getting ready for a stunning Olympics, Economy UK was collapsing. The fall comes after almost sixteen years of steady growth what they would call in cricket a good innings. The country looks set to be in the pavilion now for quite a while.
Cost of turning the GSEs into real banks: $200bn? 22 Aug 2008 Feeble regulators have allowed US mortgage giants Fannie and Freddie to get by with minimal capital. If Treasury secretary Paulson wants them to be as strong as real privatesector banks so he can break them up and sell them off, he may have to inject some $200bn or more.
Once-funny comics won’t leaven Microsoft’s image 21 Aug 2008 The software giant is dogged by a reputation of being a derivative and dull monopoly. Ads by rival Apple that portray itself as hip and Microsoft as clueless hit too close to home. Hiring Jerry Seinfeld, who peaked a decade ago, just reinforces this.
Schaeffler deal leaves Conti shareholders in limbo 21 Aug 2008 The German car parts maker has extracted just a 7% bump on a hardly generous initial offer. Schaeffler has accepted some conditions, but Conti s shareholders have little to be thankful for. Germany's takeover law left them open to a squeeze.
Germany’s bank rescue plan as bad as the rest 21 Aug 2008 Stateowned KfW sold ailing IKB to buyout firm Lone Star for a pittance to close a sad chapter. It s a different approach than was used to save Bear Stearns or Northern Rock. But retaining risk and giving away upside after an E10.5bn bailout hardly makes it a shining example.
Leverage weighs on infrastructure funds 21 Aug 2008 Babcock & Brown has run into trouble. And one of Macquarie s funds is selling assets to pay down debt. That looks like a reasonable precautionary measure. But it shows that even good infrastructure investments can suffer if they have too much debt.
Gold looks like unsafe haven from financial storm 21 Aug 2008 The yellow metal's fortunes waxed as the dollar waned. New investors, disappointed by stocks and property, turned to it as something like a scarce commodity. But gold's high price now looks a bubble ready to be pricked. A slightly firmer US dollar was enough to do the job.
Letter to the Editor: Citi Has Solved Its Capital Issue 20 Aug 2008 Don Callahan, Citigroup chief administrative officer, responds to Rob Cox's Citi too big to succeed.
Debt refinancing is next big challenge for banks 20 Aug 2008 Having struggled through tanking equity markets and tricky capitalraisings, banks now face a new foe refinancing their debt. The cost of doing this peaked in March before falling back. Now spreads are widening again. That could further hit battered margins and share prices.
Einhorn’s tilt at Natixis looks a road too far 20 Aug 2008 The New York fund manager was right in his battle against Lehman, and he s conceptually right in his têteàtête with the French Natixis. But his idea of scrapping a rights issue in favour of selling stakes in parent companies probably won t win out. It s too much, too late.
Exclusive: UBS considers phantom equity 20 Aug 2008 Giving investment bankers phantom equity in their business and doing the same for the private wealth managers and fund managers should, in theory, improve incentives. But how will the phantom stock be valued? Unless that can be answered, the scheme won t fly.
Apollo should keep an eye on KKR’s listing deal 20 Aug 2008 Both private equity firms are listing shares on the NYSE without tapping new public investors. But KKR s offering process which includes buying out its publiclylisted vehicle could have advantages for the partners. Leon Black should keep his eye on rival Henry Kravis deal.
Lehman seeks capital from strangers – a parody 20 Aug 2008 The bank has reportedly approached a bevy of private equity and sovereign wealth funds in its efforts to raise capital. It s starting to look desperate not unlike some of those internet cashraising schemes that cross our desks from time to time.
Even before a rescue, GSE owners lose like Bear’s 20 Aug 2008 Bear Stearns Fedassisted sale for $10 a share saw anyone who held its stock a year ago lose more than 90% of their money. Even before a government rescue, owners of Fannie and Freddie are now in the same boat. Put it down to complacent management, weak regulation and conflicts.
Could BAA be a case of buy high and sell low? 20 Aug 2008 When Ferrovial bought the UK airport operator in 2006, the price was considered rich, even by the era s frothy standards. The Competition Commission has decided the Spanish owner should sell off three airports. There are many bidders, but none of them may be willing to pay up.
UK banks keep on lending to property 20 Aug 2008 Despite an increasingly grisly UK real estate market, bank loans to the sector rose 30% in the last year. Only a bit of that balance sheet growth is new, though. The rest is involuntary some banks didn t stop lending in time. That could hurt as the UK economy slows.
Will Saks be next on Baugur’s shopping list? 20 Aug 2008 The Icelandic investment firm has long coveted the US luxury retailer. Its recent lowball bid for Woolworths in the UK shows it s on the prowl for retail assets. Saks' dismal results and slumping stock could give Baugur an opportunity to snap it up for a bargain price.
US county’s woes are sign of unprecedented strain 19 Aug 2008 Jefferson County s nearbankruptcy stems from foolish financing choices. Other municipalities have related problems. But falling house prices could cause even more trouble. Most vulnerable to potential bankruptcy are places that had housing bubbles and high property taxes.
Should Bernanke countenance a bit of inflation? 19 Aug 2008 Recent surprise increases in US prices beg the question. Usually, inflation is thought too destructive for the Fed to tolerate. But given the Fed s competing mandates, Bernanke and Co. might condone rising prices, even just a bit, if they help pull housing out of its spiral.
Commodity downswing may not kill inflation 19 Aug 2008 It s a nice story: slowing growth has burst the commodity bubble and as fuel and food prices fall, inflation will fade away. That will leave room for rate cuts. But such a happy ending is far from certain. Once inflation is established, rooting it out takes more than a slowdown.
Lehman bidders may find themselves looking in the mirror 19 Aug 2008 The troubled Wall Street firm may sell a stake in its investment management arm. Buyers are likely to drive a hard bargain. But most share a similar business model or set of assets or both. Any argument for a lower valuation for Lehman s unit could reflect back on their own.
Musharraf’s resignation may dim Pakistan’s growth prospects 18 Aug 2008 Though it avoids the trauma of an impeachment, it may be further bad news for Pakistan s economy. The new government quarrels internally and is increasing taxes and handouts. Inflation has trebled and currency reserves have fallen. Its period of stable growth may be at an end.
The pound will keep heading down 18 Aug 2008 The UK needs a weaker pound to rebalance its burst bubble economy and has begun to get what it needs. But the pronounced fall against the euro has so far done little to ease the UK s trade deficit. The pound looks set to fall much further which is not good news for inflation.
Welcome to the UK: nation of failing shopkeepers 18 Aug 2008 Baugur s reported lowball offer for Woolworths Retail only reinforces the reasoning behind the sector s low valuations. UK retail is structurally crippled. Oversupply and erratic management are shuttering this putative nation of shopkeepers. For better offers, look elsewhere.
Permira sends bleak signal for private equity 15 Aug 2008 The buyout firm is paying a premium for a majority stake in Murdochowned digital TV firm NDS, but it s not getting much for its money. With scant leverage and partial control, this $3.7bn deal looks like an LBO only without the L or the B.
Sirius may pay for 18-month merger delay 15 Aug 2008 The satellite radio company was forced to raise money on onerous terms to complete its merger with rival XM. The potential synergies justified doing so. Unfortunately, Sirius debt load gives it limited time to deliver the goods.
Will YouTube or Facebook be first to make money? 15 Aug 2008 Online video and social networking have both enjoyed huge growth and attracted top talent. But neither of their leading lights can seem to monetise hordes of users. Even so, in the race to wring dollars from Web 2.0, YouTube looks likely to win.
Apollo’s investors should ask questions on several fronts 15 Aug 2008 The buyout firm s Amsterdamlisted vehicle wrote down its Harrah s investment by 25% last quarter. Some of its other portfolio companies aren t doing well either. Investors should ask how Apollo plans to make the fund succeed.
Tax havens are finding life more taxing 15 Aug 2008 Liechtenstein says it will ensure that tax evaders don t abuse its banking secrecy. The tiny principality s retreat is another sign that cashstrapped governments are squeezing tax havens. That pressure may grow as economies slow. But tax evasion will never die.
Merrill’s Montag will need to be a one-man herd 15 Aug 2008 The broker s new sales head started on the job just before a hiring freeze. But his $40m pay for just five months could go to add 412 employees, at Merrill s current average rate. That s a lot of missing desks, but if Montag brings back profits, he would do the work of hundreds.