Posts from Tuesday Jan 5 2010

How much trouble is Prince Alwaleed’s Kingdom Holding actually in?

There’s an other-worldly aspect to the news release issued by Kingdom Holding on Tuesday.  Let’s start with the title:

In an Unprecedented Move, Prince Alwaleed Grants 180 million from his Citigroup Shares to Kingdom Holding Shareholders at no Cost, With Current Value of SR2.24 billion. Read more

Pimco makes it personal in the UK

Pimco has laid into the UK again – this time having a go, specifically, at the Labour government.

In an interview with Dow Jones Newswires, Scott Mather, head of global portfolio management, said there was an 80 per cent chance of a credit rating downgrade for the UK if the chancellor’s debt reduction plans remain as they are. Read more

CDS report: Kraft’s takeover ambitions hit the buffers

Gavan Nolan of Markit wrote this CDS report

Credit outperformed equity today as European credit indices threatened to break through key resistance levels. The Markit iTraxx Europe tightened by around 1.5bp to hover around the 70bp level, while the Markit iTraxx Crossover index rallied 16bp to 400bp. If breached, it will mark the first time since May 2008. The movement in the Crossover is perhaps more impressive as the last roll produced constituents of a relatively inferior quality (series 11 has been trading well inside S12 since the roll). HiVol built on its rally yesterday and tightened 4bp to close around 95bp. Read more

The Royal Dog bear squeeze

RBS has enjoyed an explosive start to 2010.

Up 10% on Monday, its shares have risen another 10% today. Read more

ADHD, in 140 characters or less

Shire seems to have found the perfect marketing medium to promote its ADHD potion – Twitter, of course.

What better way to promote Vyvanse, a drug aimed at countering hyperactivity and impulsivity, than using a social media tool tailored to hyperactivity and impulsivity? Read more

Cadbury gets creamed by Buffett…

… who also delivers an almighty slapdown to Kraft.

In early afternoon trading on Tuesday, shares in the UK confectioner were hit hard – falling over 4% to 770p Read more

Lunch Wrap

On FT Alphaville Tuesday morning,

- Rescanning Smiths Group. Read more

BarCap’s funding findings

The last of our Barclays Capital’s European bank special is a funding finale.

This is, of course, something which has been mentioned beforeRead more

Markets Live transcript 5 Jan 2010

Live markets commentary from FT.com 

BarCap’s ‘credit surprise’ snapback

A portion of Barclays Capital’s 351-page European bank bonanza published on Tuesday, discusses the possibility of a “credit quality surprise” in 2010. That is, a decline in the number of non-performing loans (NPL), and subsequently, impairment charges taken by the region’s banks.

As the analysts, led by Simon Samuels and Mike Harrison, put it: Read more

BarCap calculates the cost of ‘Too Big To Fail’

Barclays has done a number on European banks. On Tuesday morning it has published a full 351 pages worth of research, in six separate notes, as it started coverage of the sector with the team it poached from Citigroup.

FT Alphaville will be picking out some highlights — to begin with, the notion of ‘Too Big To Fail’ (TBTF). Read more

Rescanning Smiths Group (updated)

On Monday we reflected on the recent performance of Smiths Group, the world leader in airport security and inspection.

Since the failed terrorist attack on a US-bound airplane over Christmas its shares have risen almost 10 per cent as investors have focused on the possibility of full body screening being introduced at airports globally. Indeed, our own prime minister has committed Britain to using the controversial technology. Read more

Further reading

Elsewhere on Tuesday,

- “Don’t blame ME for the financial crisis.” Read more

Pink picks

Comment, analysis and other offerings from Tuesday’s FT,

Investor’s Notebook: A look ahead to 2010
Pimco CEO Mohamed El-Erian, Fund manager Marc Faber and Chairman Morgan Stanley Asia Stephen Roach give their expectations for the year ahead. Read more

Snap news

Breaking pre-market news on Tuesday,

- Nestle says it does not intend to make offer for Cadbury – statementRead more

Cambridge plans bond issue

The University of Cambridge in the UK is planning to raise up to £400m from its first bond issue, following a trend set by US Ivy League institutions to turn to the money markets for funding, reports the Daily Telegraph. Andrew Reid, the university’s finance director, admitted he was worried by the step into the relative unknown but said it was the best way to secure funds for two big building projects. He added that the bond issue would be likely to be a “one off” action, rather than a regular fund-raising technique.

Overnight markets: Up

Asian stocks advanced on Tuesday, reports Bloomberg, led by shipping companies and commodity producers, while oil rose near $82 a barrel and Asian bond risk declined to the lowest level since May 2008 on signs of quickening global economic growth.

Asian markets (Tues)
Nikkei 225 up +37.99 (+0.36%) at 10,693
Topix up +6.00 (+0.92%) at 655.00
Hang Seng up +415.57 (+1.90%) at 22,239 Read more

Factory orders spur markets

Manufacturers around the world appear to be at their most optimistic for almost four years after booking a sharp rise in new orders in December and seeing Asia’s recovery spread to the US and Europe. Surveys of purchasing managers from China to Europe and the US in December, issued Monday, exceeded expectations, sending stock markets higher in advanced economies. Across the world, the combined scores of national purchasing managers’ indices, compiled by JPMorgan, rose to 55 in December, the highest since April 2006, with the index for new orders at a 5½ year high.

Levin: ‘Worst deal of century’

Jerry Levin, who sold Time Warner for AOL shares inflated by the dotcom boom, has marked the 10th anniversary of the disastrous $164bn deal by urging corporate titans to accept responsibility for the recent financial crisis. The former Time Warner chief executive, who up to now had avoided apologising for the billions of dollars destroyed by the deal, on Monday made a mea culpa in an appearance on CNBC, urging business leaders to follow his example. See also FT Alphaville, “Dogeza US style“.

Novartis offers Alcon buy-out

Novartis on Monday offered minority shareholders in US eye-care group Alcon the equivalent of $11.2bn in stock to buy out their shares, after buying 25% of Alcon in 2008, lifting the Swiss pharmaceuticals group’s total acquisition cost to almost $50bn. The deal also triggered speculation about how Nestlé, Alcon’s majority owner, would use the $28.1bn Novartis is paying for its remaining 52%. Nestlé said it would devote some cash to a SFr10bn ($9.7bn) share buy-back. But analysts suggested Nestle could also enter the battle for UK confectioner Cadbury, now facing a hostile bid from Kraft Foods.

Funds cut US, UK bond holdings

The world’s biggest investment funds are cutting exposure to US and UK government bonds amid fears that rising public debt and the withdrawal of government economic support could scupper the global recovery. The funds fear that a big rise in government bond yields, or interest rates, triggered by market concerns about public finances could drive up mortgages and business borrowing costs. Pimco, one of the world’s biggest bond funds, has warned of the effects of record levels of government bond issuance in the US and UK and the end of loose money.

Total in $2.25bn gas deal with Chesapeake

Total on Monday became the third big European energy company to buy into Chesapeake Energy’s US shale gas assets. The French oil producer will pay up to $2.25bn for 25% of Chesapeake’s assets in Texas Barnett Shale, $800m of it in cash and the rest by funding 60% of the project’s costs over the next 5-6 years. BP of the UK and Norway’s Statoil in the past 18 months signed similar deals with Chesapeake. Analysts said the deal’s price – $63,000 per barrel of current production – was in line with recent deals.

RBS sale of Pakistan arm fails

Royal Bank of Scotland’s withdrawal from Asian retail and commercial banking suffered a setback after the collapse of a plan to sell its Pakistani arm. RBS announced in August it would sell a 99.4% stake in its RBS Pakistan subsidiary to MCB Bank, a Pakistani rival, for PKR7.2bn (£53m). However, it said on Monday that the deal had lapsed because it had not received the necessary regulatory approval by end- 2009. Pakistan’s central bank said it had refused to clear the deal due to a dispute over MCB depositing its shares as security. RBS indicated it was seeking a fresh buyer for the unit.

Investors sue Credit Suisse

A group of real-estate investors are suing Credit Suisse for fraud, alleging it extended loans to four luxury resorts on predatory terms to ensure the Swiss bank would control the properties once they defaulted. In a suit filed on Sunday in a US District Court in Idaho, the plaintiffs, led by LJ Gibson and Beau Blixseth, said they are seeking $24bn, including $16bn in punitive damages. The complaint also alleges that property company Cushman & Wakefield conspired with Credit Suisse to defraud investors.

Hutchison mulls telco buy-out

Hutchison Whampoa, the Hong Kong ports-to-retail conglomerate controlled by billionaire Li Ka-shing, is considering a possible buy-out offer to take its loss-making telecoms subsidiary private. Hutchison Telecommunications International (HTIL), an emerging markets-focused telecoms group spun off from Hutchison six years ago, has a market value of about $1.02bn. Its shares were suspended from trading on Monday at HK$1.65 each, as HTIL said a bid from Hutchison, its controlling shareholder with a 60% stake, “may be imminent”.

Tiaa-Cref sells Sudan-linked oil holdings

Tiaa-Cref has become the first large US asset manager to sell stakes in four Asian oil groups over concerns about human rights abuses in Sudan, in a move that will increase pressure on other investors to cut ties with those companies. Tiaa-Cref said on Monday it had divested holdings in Chinese state-controlled oil companies Petrochina, CNPC Hong Kong and Sinopec, and India’s Oil and Natural Gas Corporation.

US pensions face $2,000bn gap

The US public pension system faces a higher-than-expected shortfall of more than $2,000bn that will increase pressure on many states’ strained finances, warned Orin Kramer, chairman of New Jersey’s pension fund. His estimate will fuel investor concerns over the deteriorating finances of US states. Estimates of aggregate funding needs of the US pension system have ranged from $400bn to $500bn but Kramer told the FT that public funds would require more than $2,000bn to meet future obligations.

News Corp restructures Dow Jones

News Corp has unveiled its biggest restructuring of Dow Jones since its $5.6bn takeover of the financial information business in 2007, merging its consumer and enterprise divisions. The reorganisation formalises a process that has accelerated in the past year and will see the departure of Clare Hart, president of the enterprise business. Dow Jones’ enterprise division contributed 60% of group profits shortly before the Bancroft family sold the company to Rupert Murdoch.

Morgan Stanley shuffles top ranks

Morgan Stanley has named Jonathan Pruzan and Eric Bischof co-heads of its financial institutions group, according to an internal memorandum, reports the WSJ. Pruzan and Bischof succeed Ruth Porat, who last month was named chief financial officer. The moves are part of a broader reshuffling by chief executive James Gorman, who officially took over from John Mack on Monday.

Dealer sues Nissan for alleged fraud

A California businessman who until last year was one of Nissan’s biggest US dealers has accused the Japanese carmaker of fraud and breach of contract in the latest sign of tension between struggling dealers and their equally hard-pressed vehicle suppliers. Michael Kahn, owner of Superior Automotive, claimed in a lawsuit filed on Monday that he was forced to close his seven dealerships after Nissan “precipitously” cut off financing. He is claiming $250m.