Are US corporate balance sheets really strong? 28 Aug 2007 According to company accounts, S&P 500 companies have cut leveraged almost in half since 2002. Investors take comfort from the caution. Maybe they shouldn t. If financial assets are valued at replacement cost, leverage still looks high. Weak markets could cause big problems.
Rehashed Home Depot deal no model for other LBOs 27 Aug 2007 Both the buyers and the seller made concessions to ensure the sale of the DIY chain s wholesale supply unit could proceed. But extending them to other deals will be tough. Some only work because Home Depot is hiving off a subsidiary, not selling itself whole.
Borse Dubai’s reprieve keeps OMX in play 23 Aug 2007 The Swedish regulator did not punish the Emirate group, despite judging that it acted illegally in its $4bn approach to its Nordic rival. Still, Borse Dubai s behaviour may come back to haunt it. That would be a relief for its trumped rival, US operator Nasdaq.
BofA benefits from a self-fulfilling prophecy 23 Aug 2007 The very act of injecting $2bn of capital shifted the perception of Countrywide s future on a dime and put Ken Lewis in the money. Assuming Countrywide s problems were liquidity, not credit, related this is a brilliant move and may call a bottom of a kind.
Is Schwarzman the smartest man on Wall Street? 23 Aug 2007 The Blackstone chief s timing surely looks smart. He beat his competitors to the public market. But for now, he s the only one to benefit. For public investors to gain from Blackstone s timing prowess, it needs to use its stock to grow.
E-trade and Ameritrade pushed into merger talks 22 Aug 2007 Merging the two biggest US discount stock brokers is a nobrainer up to a third of total costs could be cut. Yet both were reluctant. With minority investors pressuring Ameritrade and ETrade s expansion into mortgage lending looking dicey, it s time to reconsider.
Private equity won’t save bankers’ bonuses 22 Aug 2007 Buyout houses have loaded up the banks with $330bn of unsellable buyout debts. Now they want to buy some of it at a big discount. But they can t afford to buy very much. And bankers with bonuses in mind may not want to give the buyout barons a good deal.
Borse Dubai plays strange game in OMX battle 22 Aug 2007 The Emirate group made the hardtoswallow claim that it was undecided about a bid for its Nordic rival when it bought 28% of the shares. The Swedish regulator will decide if Borse Dubai acted legally. But in any case, the interloper has aggravated resistance to its proposal.
Investors shouldn’t bank on a Buffett put 21 Aug 2007 Speculation that the famed investor could use his $50bn cash pile to buy firms like Countrywide or TXU may titillate investors. But Buffett won t strike unless he can negotiate sweet deals for his shareholders. That will only happen when real distress rears its head.
LBO underwriters should bite the bullet 21 Aug 2007 Banks that are on the hook to provide $330bn of debt for pending leveraged buyouts don t want to sell it at firesale prices. But while taking a quick hit to move the debt off their books would slash bonuses, it might cauterise a potentially greater wound.
KKR Financial smart to launch rights offering 20 Aug 2007 It s often a sign of distress. But this one, along with a private placement, leaves the LBO firm s credit investing unit well protected. KKR Financial now has enough cash to cover any margin calls and to snap up distressed assets.
Nasdaq concedes defeat in LSE battle 20 Aug 2007 The US group wasn t likely to turn its 31% stake in its evergrowing London rival into a takeover. It leaves with a modest profit. But if it now doesn t beat Borse Dubai s $4bn rival bid for Nordic operator OMX, Nasdaq will suffer a serious credibility bashing.
Market dislocation produces $42bn merger arb 17 Aug 2007 That s the total gap between what s being offered in 25 big pending deals and where they now trade. In six deals, spreads are over 10%. Turmoil is undermining confidence in deals like Sallie Mae, ABN, BCE and Sainsbury. This may be an opportunity but only for the bravest.
Countrywide draw-down signals distress 16 Aug 2007 The former mortgage darling has seen the price of insuring its credit rocket after pulling down its full $11.5bn credit line from its banks. That shores it up for now. But with its debt trading in the gutter, it ll be hard to raise new funds unless the mortgage market improves.
Credit spectre haunts bond insurers 16 Aug 2007 The market has pummelled stocks of firms like MBIA and Ambac on fears of big losses on the CDOs they have insured. That s possible, although they ve weathered credit storms before. More troubling may be what the crunch means for their access to capital.
Quality assets are no shield against credit crunch 15 Aug 2007 Especially if your assets don t match liabilities. Look at Thornburg, a US mortgage group whose stock fell 46% due to margin calls. It may make highquality loans, but it uses shortterm debt. That leaves it exposed to lenders whims. And they re running for the exits.
Banks must honour credit commitments 14 Aug 2007 The market for Canadian assetbacked commercial paper is in turmoil after banks declined to provide emergency funding. But the banks should provide liquidity regardless of their legal position. If they don t the credit crunch could get much worse.
KKR’s new IPO prospectus hedges its bets 14 Aug 2007 Turbulent markets forced the buyout shop to slice a 175word essay on the benefits of cheap debt out of the new version of its prospectus. And it has toned down rhetoric throughout. Rather than a platform for sourcing and making investments it s now just a firm .
Forget leveraged buyouts. Blackstone’s big risk is real estate 13 Aug 2007 As a result of deals such as EOP, Blackstone's property group made up half of revenues in the first half of this year. That could be hard to sustain. Commercial real estate is overvalued, financing harder to come by, and new property is flooding the market.
Citi looks well positioned to endure credit pain 13 Aug 2007 The megabank s structured products unit is reportedly down $700m in recent weeks. That puts a spotlight on its rivals performance. Citi can shrug the losses off relatively easily. But if its rivals suffer on a similar scale they could be in a lot more trouble.