RH Donnelley bankruptcy shows it’s not dead yet 29 May 2009 By some measures, the US yellow pages group is in less bad shape than others dependent on local advertising that are clinging onto business as usual, like newspaper operator McClatchy. The difference may be that a debt restructuring might actually keep Donnelley alive.
GM’s unions get better end of stick, again 29 May 2009 Like the government and unsecured bondholders, the UAW has agreed to take some of what it's owed in the form of equity in a restructured GM. As at Chrysler, they stand a better chance of recovering it than Uncle Sam or creditors. Our calculator shows you how.
Magna holds the chips in dramatic Opel poker game 29 May 2009 The Canadian car parts manufacturer seems to have a provisional deal to buy Opel from GM, blessed by the German government. Fiat had earlier stormed out of talks to acquire GM's nearbankrupt European division. If Fiat's move was a bluff, it seems to have failed.
WoodMac looks a bear-market gusher for Candover 29 May 2009 The oncetiny oil research firm has seen turbocharged growth under private equity ownership. Now Wood Mackenzie is for sale at a mooted E750m. That would give Candover a heady IRR and dealstarved buyout firms a rare investment opportunity. It looks very much an isolated case.
Nice-guy politics shouldn’t thwart China-US rebalancing 29 May 2009 Don t expect verbal grenades from Treasury secretary Geithner on his first state visit to Beijing, despite his past swipes at Chinese currency manipulation. It s pointless to lash out after all, supertanker economies take a long time to turn around. But turn around they must.
Arcandor doesn’t deserve state aid 29 May 2009 The German group must refinance E710m by June 12 or face insolvency. With an election looming and 70,000 jobs on the line, the temptation to throw the underperforming group a lifeline is great. But there are plenty of parties to be squeezed before the taxpayer.
Anglo Irish kicks Ireland’s economy while it’s down 29 May 2009 With state borrowing soaring, the last thing the Irish government needs is to pump E4bn into the nationalised Anglo Irish Bank. But the consequences of letting the bank fail altogether could be even more expensive.
Costco offers greenish shoot on US prime 28 May 2009 True, the upmarket US warehouse retailer saw sales fall 5% and missed expectations. But its membership ranks, the key to its profitability, actually grew. This, rather than sales of megaboxes of cereal and plasma screens, is the more telling sign.
Political fear of gas tax risks trillions 28 May 2009 US Energy Secretary Steven Chu s claim that a gas tax is not politically feasible seems wrong on two levels. First, Obama has sufficient support. Second, a gas tax would be a far better way to fight climate change than new CAFE standards and a cap and trade system.
Which EU country could grow this year? 28 May 2009 The surprise answer is Poland. It may be located in the heart of troubled Central Europe. But it avoided the credit boom, ran a prudent economic policy and has competitive industry. What s more, its floating currency and Germany s car scrappage scheme have helped its exports.
Obama revs up antitrust effort by blocking $3.1bn CSL deal 28 May 2009 The administration made clear its more vigorous approach to competition law. It even laid out targeted areas: health, tech, energy, and agriculture. The FTC s move to block the merger of two drug companies is the first taste of what s in store.
Can the US ever make its money back on GM? 28 May 2009 It s doubtful. In exchange for more than $50bn of financing, Uncle Sam gets 72.5% of a postbankruptcy GM. For taxpayers to recoup their dollars, the whittleddown carmaker must be worth at least $70bn a value it never even achieved in its heyday.
UK bank lending decline is no cause for panic 28 May 2009 The UK corporate sector is borrowing less. But it s not clear that the fall is due to banks withholding credit. Demand has fallen too. What matters is that the banks stick to their commitment to make credit available to suitable borrowers should demand pick up.
Hypo fiasco embarrasses a haughty Germany 28 May 2009 German authorities were quick to blame lax oversight elsewhere for the financial crisis especially the UK. But leaks suggest advance warnings on ailing German lender Hypo Real Estate went unheeded. The dithering makes it sound like the country had its own Northern Rock episode.
US homeowners may be poorer than they feel 28 May 2009 The 19% drop in US house prices in the past year looks less dire than the S&P 500 s 40% plunge. But adjusted for leverage, homeowners may have lost more than they think. Throw in price opacity and lack of liquidity in housing, and stocks may provide better shelter.
EU should stick to its guns over Germany and Opel 28 May 2009 The EU, prompted by the UK and Belgium, is calling an urgent meeting on Germany s bailout plans for Opel. The fear that German workers might be favoured is legitimate. But Europe already has regulation to prevent this. The EU should simply say that it won t tolerate rule bending.
US basketball is no slam dunk for Chinese cash 28 May 2009 Investors from the Middle Kingdom are buying into the Cleveland Cavaliers home to LeBron James, one of sport s hottest stars. The team could use the capital and marketing deals. But the investment could easily end up another western miss for China if James signs elsewhere.
UK stress tests not super-conservative 28 May 2009 Britain has modelled a severe drop in property prices to test whether banks can weather the storm. Its overall economic assumptions are tougher than the US but not especially bearish. And Barclays has been given leeway to respond to a nightmare scenario only if it occurs.
Lacroix woes point to luxury goods consolidation 28 May 2009 Christian Lacroix s request for creditor protection underscores what can happen to the luxury sector s overleveraged smaller players in a downturn. It also highlights the pressures on the whole sector. Consolidation is needed but don t expect a rush of deals just yet.
AOL needs more than just independence 28 May 2009 The former web highflier is finally being spun off by parent Time Warner. That can t hurt its chances of a renaissance. But it has a long way to go to compete with other internet heavyweights. Its independence may prove the preamble to gradual extinction.
Ignominious end for old-school Pequot 28 May 2009 Art Samberg is shutting his 23yearold hedge fund after assets dwindled amid an inconclusive multiyear insider trading probe. The closure shows how even a long record of betterthanaverage performance couldn t overcome the new world of picky investors and official scrutiny.
Government bonds enter danger zone 28 May 2009 With risk appetites returning, investors are no longer herding to the safety of government paper at just the moment when a torrent of new issuance is hitting the market to fund ballooning deficits. Navigating the danger zone will require skill and luck.
B&B coupon deferral creates CDS confusion 27 May 2009 Providers of credit protection on the UK lender were braced to make big payouts when it was nationalised last year. With B&B now deferring coupon payments, derivatives body ISDA must decide whether the CDS should pay. But changes to UK law could mean the CDS isn t triggered.
Vodafone success could pave way for Bharti-MTN 27 May 2009 The UK telecoms group recently won control of its South African joint venture. The precedent will make it hard for regulators to stop India s Bharti taking effective control of market leader MTN. Ironically, Vodafone s victory could help unite two of its largest rivals.
Rate floors keep iffy borrowers kicking 27 May 2009 Uncertainty and the disappearance of investors looking for absolute returns caused credit to dwindle. Libor floors have kept loans flowing for dodgy credits by luring in nonbank lenders. This is one credit market tweak that deserves commendation.
Diplomacy dilutes Europe’s crisis-prevention plan 27 May 2009 The European Commission sensibly wants to prevent bubbles emerging. But one of its proposed new oversight groups is stuffed with 62 people because everyone needs a seat at the table. The other may pull its punches to avoid offending national sensitivities.
GM bondholders shouldn’t be Obama’s latest scapegoats 27 May 2009 The president may blame their final rejection late last night of the carmaker s debtforequity offer for forcing the carmaker into bankruptcy much as he did with Chrysler s lenders. But the administration s union favouritism doomed both offers from the outset.
US toxic asset plan can’t avoid bank conflicts 27 May 2009 The issue isn t just banks using government leverage to buy their own bad assets through the PPIP. The potential for conflicts extends to buying each others dross. But the scheme won t work if Treasury and FDIC set overly complicated rules. They need to settle for imperfection.
Bank flight to safety threatened by T-bill fall 27 May 2009 US banks have been stuffing themselves with Treasury securities, waiting for lending conditions to improve. That looked smart until the prices of those bonds began to plummet. Unless they hedged their exposures, many could be in for pain.
Rising yields could hurt housing and delay upturn 27 May 2009 The rate at which US home prices are dropping has slowed. But rising interest rates could damp buyers enthusiasm, delaying or even deepening the market bottom. With economic recovery depending on the stabilization of the housing market, that could prolong the recession.