Posts from Wednesday Sep 22 2010

Louis Dreyfus eyes sell-offs

Louis Dreyfus, the French family-owned conglomerate that owns one of the world’s largest agricultural commodities trading houses, is exploring an initial public offering of some of its businesses, according to people close to the company, reports the FT. The radical review of ownership comes barely a year after the death of Robert Louis-Dreyfus, the heir to the 150-year-old commodities house who made his own fortune as a serial entrepreneur. The talks are at a very early stage and the family members may decide against a sale.

Blockbuster offered new lease of life

Blockbuster, the lossmaking film and games rental chain, is on the brink of another lease of life after reaching agreement with senior debt holders – including Carl Icahn, the billionaire investor – on a “prepackaged” bankruptcy filing and restructuring plan, the FT reports. The company, which operates 5,500 rental stores in the US and Europe, is expected to file for court bankruptcy protection in the coming days to allow it to remain in business and continue a drive to expand its digital and kiosk-based rental business.

Lehman retrieves $60bn for creditors

The bankrupt estate of Lehman Brothers has recovered nearly $60bn in value for creditors since September 2008, but a decision on how to distribute the funds will not be finalised until next year at the earliest, the FT reports. Bryan Marsal, a partner with restructuring firm Alvarez & Marsal and serving as Lehman’s chief executive, presented the bank’s “state of the estate” report in a Manhattan bankruptcy court on Wednesday.

Siemens promises workers jobs for life

Siemens’ German workers have struck a deal that will see their jobs secured indefinitely, in an arresting move that highlights how the financial crisis has triggered a fresh consensus between labour and management in corporate Germany, the FT reports. The engineering group said it had sealed an agreement with its works council and the IG Metall workers’ union that includes a pledge not to make any forced redundancies among its 128,000 German workforce.

Book to expose US rifts on Afghan policy

Top advisers to Barack Obama, US president, have waged bitter battles and turf wars over Afghan policy, according to a new book that reveals some officials doubt whether the present strategy can work, the FT reports. Veteran Washington Post reporter Bob Woodward exposes internal US administration disagreements over Afghanistan that are much deeper than previously reported rifts over the country.

Obama to meet Wen, Kan

President Barack Obama will have a new opportunity to further raise US  pressure on Beijing over its exchange rate policy when he meets Wen Jiabao, the Chinese premier, in New York on Thursday, reports the FT. But US efforts to influence China have not been helped by Obama’s other top-level guest on Thursday, Naoto Kan, the Japanese prime minister, who last week ordered an intervention in the currency market to weaken the yen.

China threatens Japan over jailed captain

Wen Jiabao, China’s premier, has brushed aside Japan’s call for calm in a dispute over a detained Chinese ship captain, threatening retaliation unless Tokyo “immediately” released the man recently picked up in disputed waters, the FT reports. In the first comments on the diplomatic row by a senior Chinese leader, Mr Wen said Japan was “solely responsible” for the “severe damage” done to bi-lateral relations by the incident. The Chinese premier was speaking to a group of Chinese citizens and Chinese-Americans after his arrival in New York on Tuesday to attend meetings at the UN.

PotashCorp files to halt BHP bid

PotashCorp has stepped up its defence against a $39bn hostile bid from BHP Billiton, asking a Chicago court to block the bid and accusing the miner of misleading shareholders, the FT reports. The Canadian potash producer on Wednesday filed a complaint against BHP in a federal court arguing that the larger mining group had made “strategically-timed” statements about the industry designed to drive down the stock price of PotashCorp, as well as making conflicting statements about plans for the business since launching its bid.

Gold rises and dollar falls after QE signal

Gold rose and the dollar fell on investor fears of competitive currency devaluations following the Federal Reserve’s decision to open the door to a new round of quantitative easing in the US, the FT reports. Concerns that large purchases of Treasury debt would undermine the dollar kept the currency under pressure on Wednesday. It has dropped 1.5 per cent on a trade-weighted basis since the Fed’s statement. Spot gold continued its advance to set a fresh record just shy of $1,300 an ounce.

CBOE vs CDS

A hat tip to Bloomberg for alerting us (again) to another request from the CBOE to the SEC.

Having recently asked for permission to list same-day options, the CBOE is now seeking to alter the terms under which credit default options (like credit default swaps but standardized, exchange-traded, and cleared by the OCC) can be traded. Read more

CRE-failed bank nexus, ongoing…

FT Alphaville has long been chronicling the damage that non-performing CRE loans have done to the balance sheets of small banks — contributing to an increase in bank failures, tighter lending standards, and a general decrease in credit availability for small and medium-sized businesses.

Unsurprisingly, the balance sheet constraints have also affected the availability of new loans for CRE, land, and development. Not a good sign for a market in which prices and sales volumes have been trending downRead more

US housing update

The FOMC and Larry Summers have been dominating the headlines, but this is also a busy week of news for the US housing market — so here is a brief overview of what we’ve learned so far.

On Monday, the National Association of Home Builders announced that its national housing market index, which tracks the confidence of homebuilders, stayed flat in September and remains near its 25-year lows. Read more

The spirit is willing, but the banks are weak

“We need to … recognise, that in finance and economics, ill-designed policy is a more powerful force for harm than individual greed or error.”

Although perhaps there’s no policy more ill-designed than one that relies upon the judgement (and thus, possible error) of those who conduct policy. Read more

Now! That’s What I Call Capital Increase 2010

Deutsche Bank’s capital increase is turning out to be an increasingly big ‘issue’ for the German banking giant.

First, let’s point out that the bank is even branding the move “Capital increase 2010″ (doth this suggest 2011, 2012 are yet to come?): Read more

Potash sues BHP Billiton

Never mind what the Chinese are or aren’t doing with a counter-bid — here’s an odder twist in the tale of BHP Billiton’s hostile takeover battle concerning PotashCorp.

The target’s now filed a complaint in a Chicago court seeking to prevent BHP from carrying on with its offer, alleging that the company produced ‘false and misleading’ statements relating to its $39bn bid. Read more

Flowers: The decline of a dealmaker

It’s almost enough to make you wonder just how savvy those high-flying uber-deal makers of the 1990s and early 2000s really were — as opposed to how lucky.

Times change and so do the deals. But even with the chips down and the odds distinctly discouraging, a diehard dealmaker is the last one at the casino. So it is that Chris Flowers, one of the financial world’s best-known investors, pushes ever onwards in M&A land. Read more

FSA reopens the Lehman files

Remember the just-who-is-a-sophisticated-investor debate around the Abacus case against Goldman Sachs earlier this year?

Here’s a strange UK coda. Read more

Did nobody ever consider that indexing was dangerous?

Here’s one for a spirited debate.

A new paper from the National Bureau of Economic Research by Jeffrey Wurgler, Nomura professor of finance at New York University, discusses the potentially overlooked perils of indexing. Read more

Mmm, Portuguese yield stew

Oh look, another European debt auction that was never going to fail.

Results from Wednesday’s Portuguese debt auction, via Reuters: Read more

Markets Live transcript 22 Sep 2010

Live markets commentary from FT.com 

The $60m question

Someone, somewhere in Europe appears to have a dollar liquidity problem.

Consider Wednesday’s breaking news: Read more

IBM warns of threat to organic growth

IBM could have to hold off on acquisitions and see its organic growth stunted if it is included on a list of major derivatives users, according to the technology group’s director of global funding, the FT reports. Large companies are lobbying hard to escape being designated “major swap participants” by regulators implementing the Dodd-Frank financial reform act. Such a designation will require companies to post margin against derivatives trades. Of course, there are other threats to growth in the tech sector — customers are turning against Oracle’s relentless bid to build market share in the data center sector, the NYT reports, while Adobe has warned on outlook, reports the WSJ.

AIG resurrects Japan sell-offs

AIG has resurrected a plan to sell two Japanese life insurance companies to Prudential Financial and is close to agreeing a deal that would help repay taxpayer funds used to save the the beleaguered insurer, the FT reports. People familiar with the matter said Prudential Financial could pay around $4bn in total, after a year of talks. Proceeds of that size would do relatively little to ease the taxpayer bill facing AIG, the WSJ says, but at least this particular deal is likely to be more successful than the insurer’s ultimately doomed bid to sell AIA to the UK’s Prudential for $35.5bn.

Markets — and gold — counting on QE after Fed

To sail upon the great world cruise of QE2, or not? That is the Fed’s question, FT Alphaville observes, following the FOMC’s hint in its latest statement that it is now more likely to buy billions of dollars of Treasuries in order to drive down rates. Even though it’s another step forward in the global devaluation game — the Fed still hasn’t explained how its action will transmit to the real economy. FT Alphaville also has the FOMC statement. Others are instead attacking the Fed for doing too little once again — such as Modeled Behavior and Ezra Klein — and declining to explain why. Not that the gold market is really bothered either way — gold pushed to a fresh nominal high in Europe trading and is targeting $1,300 an ounce, the FT reports.

24 hours in the sovereign debt market

Remember that ‘successful’ Irish bond auction on Tuesday?

Thought not. Read more

Spain PM pronounces Europe’s debt crisis over

The debt crisis afflicting Spain and other European sovereigns has passed, restoring confidence to the market, the Spanish prime minister José Luis Rodríguez Zapatero has told the WSJ. The prime minister added that the Spanish economy would not contract further in the coming quarters. In the mean time — credit default swaps on Ireland pushed to a record wide on Wednesday, according to MarketWatch, while Bloomberg notes that the country still has to convince investors on its plans for bailed-out bank Anglo Irish. While recent auctions of European sovereign debt have gone well, FT Alphaville adds, that’s hardly surprising with central bank buying and the prospect of high returns for yield-hungry investors.

All aboard the QE2 – double or quits

To sail upon the great world cruise of QE2, or not? – that is the Fed’s question.

One thing that is sure, the FOMC’s policy statement on Tuesday opened the door to the option of more quantitative easing in the near future. Read more

JPMorgan’s US acquisitions pack punch

As one-two punches go, the one delivered by JPMorgan Chase to its rivals during the financial crisis will be hard to beat, the FT reports. The twin takeovers of Bear Stearns in March 2008 and WaMu almost exactly two years ago plugged crucial gaps in the bank’s strategy and consolidated its position as a winner of the crisis. But it’s come at a serious long-term cost, the FT adds — JPMorgan got bigger in a slow-growing developed economy at a time when most of its rivals are looking at the emerging markets of Asia and Latin America as drivers of future earnings.

Japan’s Kan threatens more yen moves

Japan stands ready to intervene again in foreign exchange markets, but also plans to put in place broader economic and monetary policies that will help to weaken the yen, Japan’s prime minister Naoto Kan has told the FT. Mr Kan made clear his government was ready to continue to intervene alone if necessary. He also stressed that Tokyo wanted to create a “total” package of measures to expand domestic demand and encourage a more appropriate currency level — including using the yen’s strength to invest in natural resources overseas. The Bank of Japan is also still beating the quantitative easing drum, according to the WSJ — ‘if necessary’, of course.

Sinochem inches toward Potash counterbid

China’s state-owned chemicals group Sinochem has hired Deutsche Bank and Citigroup to advise its on constructing a counter-bid to BHP Billiton’s hostile takeover of PotashCorp, sources have told Reuters. It’s another sign that the Chinese wouldn’t be discouraged by regulatory resistance or the likely need to pool resources within a wider consortium, if they decide upon rivalling BHP – which has so far dismissed talk of serious competition. Chinese bank ICBC is also advising Sinochem, the FT adds — and reports that Sinochem’s motives are less to acquire potash than to stop BHP extending its reach.