Posts from Tuesday Feb 21 2012

Wynn Resorts files lawsuit against Okada

Wynn Resorts intensified pressure on its shareholder Kazuo Okada on Tuesday when it filed a lawsuit in Nevada that accused the Japanese billionaire of committing “improper acts” and attempting “to convert Wynn Resorts assets for his own benefit”, the FT reports. The Las Vegas-based casino group, which also operates a casino in Macao, is at loggerheads with Mr Okada, a 20 per cent shareholder and director of the company. Wynn plans to redeem Mr Okada’s stake at a steep discount over a 10-year period, alleging in court papers that the former friend of its founder, Steve Wynn, made unauthorised payments to gaming regulators and violated the US Foreign Corrupt Practices Act. In the lawsuit, filed on Tuesday morning in a district court in Nevada, Wynn alleged that Mr Okada pressed ahead with plans to create a casino in Manila Bay, in the Philippines – despite the company’s objections. “Many doors opened for [Mr] Okada in the Philippines due to his well publicised relationship with … Wynn Resorts,” the company alleged in the filing. It claimed Mr Okada “touted his relationship with and affiliation” with the company “to convince others” that Wynn supported his plan.

Vitol warns crude could pass $150

The world’s largest independent oil trader says oil prices could jump this year to a record high above $150 a barrel because of growing tensions with Iran, the FT reports. Ian Taylor, chief executive of Vitol, said on Tuesday that the commodities trading house’s main scenario was for crude oil prices to remain at around current levels of $120 a barrel for the balance of 2012. But he warned: “Geopolitical risk, especially in the Middle East, creates potential material risk to the upside.” Mr Taylor said oil prices could even surpass the record high of nearly $150 a barrel set in mid-2008. “It is unlikely, but it is possible,” he said when asked whether prices would rise to a new record. The bullish outlook comes as oil executives, traders and policymakers warn about rising prices during International Petroleum Week, the annual gathering of the industry being held this week in London. Brent, the global oil benchmark, hit an eight-month high of $121.42 a barrel on Tuesday, up $1.37 on the day, as supply outages in South Sudan, Yemen, Syria and Libya, and the fear of a significant disruption in Iran, outweighed a slowdown in demand growth.

Alibaba.com’s parent moves to take it private

Alibaba Group, China’s largest ecommerce company, has proposed to take its Hong Kong-listed unit Alibaba.com private amid a shift in strategy that is set to slow the growth of the website, reports the FT. Alibaba Group owns 74 per cent of its listed subsidiary and is 40 per cent owned by Yahoo. The company is offering minority shareholders HK$13.50 per share in cash, a 60.4 per cent premium over the stock’s 60-day average closing price. Trading in Alibaba.com shares has been suspended since February 9 pending the announcement. The group had secured a $3bn loan earlier this week that will help it complete the planned deal. The proposal comes as long-running negotiations with Yahoo over a deal to buy back part of Yahoo’s stake in Alibaba Group have come unstuck. The company’s plan to take Alibaba.com private is not part of a potential Yahoo deal, but driven by its shift in strategy.

Stocks slip despite Greek bail-out deal

Stocks fell in Europe and Asia despite a much-anticipated debt deal sealing a second bail-out for Greece, with even the euro shedding early gains, the FT reports. But on Wall Street the Dow Jones Industrial Average earlier hit its highest mark in more than three years and the S&P 500 closed near its post-financial crisis high. An initial bounce in risk appetite quickly faded as investors digested the bleak state of Greek finances revealed in a sustainability analysis. “The news we have been waiting to hear – a Greek deal has been agreed – was met with a lack of enthusiasm by markets overnight,” said Lauren Rosborough, of Société Générale. “The front page of the FT, ‘Greek nightmare laid bare’, however, has largely undermined the effect of the announcement and we’d expect further consolidation today in asset classes.” Explaining the muted market reaction, she added: “It’s not so much ‘buy the rumour, sell the fact’ as ‘buy the rumour and ignore the fact completely’.” The FTSE All World index fell marginally for the first time in five sessions, while an earlier jump in the euro to a session high of $1.3293 quickly subsided. The single currency was trading nearly flat at $1.3236, down less than 0.1 per cent on the day.

Eurozone agrees second Greek bail-out

Eurozone finance ministers reached a long-delayed €130bn second bail-out for Greece early on Tuesday after strong-arming private holders of Greek bonds to take even deeper losses than they had accepted last month, the FT reports. Although Greek bondholders agreed in October to accept a 50 per cent cut in the face value of their bonds in face-to-face negotiations with Nicolas Sarkozy, France’s president, and German chancellor Angela Merkel, they will now be offered a “voluntary” deal with a haircut of 53.5 per cent, eurozone officials said. Charles Dallara, the lead negotiator for bondholders, said: “The biggest benefit here … is we’ve been able to avoid a disorderly default. “From my point of view, this is a solid deal for investors, a fair deal for all parties involved,” added Mr Dallara, the managing director of the Institute of International Finance.

Further further reading

For the commute home,

- Dow 13,000: pity party! Read more

Bean to British pensioners: ‘Just wear it’

Charlie Bean of the Bank of England (deputy governor, monetary policy) has been brave enough to visit Glasgow, telling the Scottish Council for Development and Industry about his quantitative and the economic outlook.

Beyond the colour of explaining how the same man who founded the Bank itself (William Paterson, in 1694) managed to half-ruin Scotland through a madcap Panamanian trade scheme and help force it into union with England, Bean touches on the oh-so-raw modern issue of British pensioners and other conservative savers having to pay a painfully direct price for the antics of our bankers. Read more

US pent-up demand, charted

The second half of last year was puzzling to anyone trying to understand future trends in US consumption. Or at least it was to us.

Spending climbed more quickly than incomes, the savings rate decreased and consumer credit increased. Yet this decline in the savings rate happened against a backdrop of further declines in US home prices, followed a big fall in equities during the summer, and coincided with below-average consumer confidence — all of which you would expect to push the savings rate up, not down. Read more

Rally Monkey gets sucked into the self-referential vortex of psychologically important thresholds

Cue the already-deflating* bubble in a) people pointing out that the Dow hit 13,000, then b) people who point out the irrelevance of the Dow’s crossing 13,000, followed by c) people who get annoyed at people who point out the irrelevance of the Dow’s crossing 13,000 because it’s so bleeding obvious, which of course then leads to — oh hell, never mind.

Here’s the stupid graph of the moment the DJIA crossed 13,000: Read more

PSI, the Greek details [updated]

Some of them, at least. From the Greek finance ministry, and our own thoughts follow the excerpt:

Co-Financing Agreement Read more

StanChart camps out at the securitisation BISTRO – Part 2

In Part 1, FT Alphaville described what ‘synthetic securitisation’ deals done by Standard Chartered in the second half of 2011, looked like:

 Read more

StanChart camps out at the securitisation BISTRO – Part 1

A month ago, FT Alphaville took a closer look at a particular transaction that Barclays completed in order to decrease the amount of regulatory capital it was required to hold against a portfolio of loans.

The transaction is called “synthetic securitisation”. The bank buys protection on the credit risk of part of its own loan portfolio, sold by outside investors. They transfer the risk but the loans themselves physically remain on Barclays’ balance sheet. Read more

Germany doesn’t want more of your eurozone goods

Remember how this eurozone mess largely boils down to a balance of payments problem? The peripherals have current account deficits and the northern countries have surpluses. As the eurozone is a semi-closed/unified economy, it is difficult for the peripherals to pull out of that situation while the northern countries remain determined to be in surplus.

A paper from Deutsche Bank’s Gilles Moec points out some contradictions in this argument — but ultimately, we think, validates it. Read more

Markets Live transcript 21 Feb 2012

Live markets commentary from FT.com 

ECB bond buying halted after eurozone debt rally

The European Central Bank’s government bond purchases came to a halt last week for the first time since August in a sign the emergency debt buying programme is being wound down, reports the FT. The ECB’s inactivity reflects improved market conditions, which have been aided by the central bank’s three-year liquidity operation in December that averted a credit crunch in the eurozone. The ECB has more or less frozen the programme in the past few weeks after eurozone bonds have seen a sharp rally following the offer of three-year loans to the region’s banks on December 8.

Vista makes rival £1.2bn bid for Misys

A US private equity group has made a rival £1.2bn offer for Misys, the banking software company which this month agreed a merger deal with Switzerland’s Temenos, says the FT, citing people close to the deal. Vista Equity Partners is putting forward an indicative offer of about 360p for every Misys share, a 16 per cent premium over Friday’s closing price of 309.6p. The offer is considerably lower than the £1.4bn offer Misys is thought to have received from Fidelity National Information Services, the US banking technology company, last summer.

US and Mexico in landmark oil deal

The FT reports that US and Mexican oil companies are to be given rights to drill in a previously disputed area of the Gulf of Mexico under a landmark deal between the two governments that reflects their eagerness to develop domestic oil and gas production. An area of the gulf along the maritime boundary between the two countries, long left unexplored because of legal uncertainty about rights over its resources, will be made available to US oil groups and Pemex, the Mexican state oil company. The WSJ says that the dispute had lasted for over a decade. US and Mexican officials will work together to ensure safety standards are met. One of the potential drilling sites, close to the US maritime border, is under 9,000 feet of water – twice as deep as was drilled by the Deepwater Horizon rig that was involved in a massive oil spill in 2010.

Apple threat to Proview over iPad dispute

The FT reports that Apple levelled a new legal threat on Monday against the struggling electronics company that has claimed it owns the iPad name in China, as a court in southern China ordered a large retailer to stop sales of the gadget. The festering dispute, which has cast a cloud over Apple’s sales in one of its biggest potential markets, is expected to come to a head in the next two weeks, with a court in Guangdong due to hear the US company’s appeal against an earlier ruling that found against it. Reuters reports that Apple’s troubles in the country will give tablet rivals such as Lenovo and Samsung a chance to gain market share in the country.

US corporates shy to offer guidance

US companies are more uncertain about the future than at any point since the financial crisis, with just one in five of the country’s biggest corporations making any predictions as they published fourth-quarter results. Some 410 companies in the S&P 500 index have reported results so far and just 86 of them offered an earnings per share forecast for the first quarter of 2012. That is on track to be the lowest number since the third quarter of 2009, when companies were still weighing up the impact of the financial crisis, reports the FT. Historically about a third of companies offer earnings guidance each quarter, according to S&P Capital IQ. That fell as low as 15 per cent at the height of the financial crisis, but then recovered. Forecasts started to slip at the end of last year, as the eurozone debt crisis led to concerns about demand in Europe, while this quarter corporate leaders have also expressed caution about emerging markets growth.

Stocks slip despite Greek bail-out deal

Global stock markets slipped for the first time in a week despite a much-anticipated debtdeal sealing a second bail-out for Greece with even the euro shedding early gains. Investors were in classic “buy the rumour, sell the fact” mode as an initial bounce in risk sentiment quickly faded and news of the bleak state of Greek finances revealed in a sustainability analysis was digested, reports the FT’s Global Markets Overview. The FTSE All World index fell 0.2 per cent to 217.39 for its first losses in five sessions while 0.4 per cent gains for the euro as it reached a session high of $1.3293 subsided into losses of 0.1 per cent. Asian stock markets were subdued with the FTSE Asia Pacific index declining 0.3 per cent and the Nikkei 225 Average 0.2 per cent lower, stemming a rally that has seen the Tokyo benchmark rise 6 per cent over the past seven sessions. In commodities markets, spot gold rose 0.3 per cent to $1,740 per troy ounce while Brent crude lost 0.2 per cent to $119.86. Reuters reports that stock index futures are pointing to a higher open in the US this Tuesday as markets reopen after Monday’s Presidents Day holiday.

Eurozone agrees second Greek bail-out

Eurozone finance ministers reached a long-delayed €130bn second bail-out for Greece early on Tuesday after strong-arming private holders of Greek bonds to take even deeper losses than they had accepted last month, the FT reports. Although Greek bondholders agreed in October to accept a 50 per cent cut in the face value of their bonds in face-to-face negotiations with Nicolas Sarkozy, France’s president, and German chancellor Angela Merkel, they will now be offered a “voluntary” deal with a haircut of 53.5 per cent, eurozone officials said. Both Mr Juncker and Christine Lagarde, managing director of the International Monetary Fund, emphasised at a post-meeting press conference that Greece still had to live up to a series of “prior actions” by the end of the month before eurozone governments or the IMF can sign off on the new programme. The bail-out comes with tough new terms, including a permanent team of monitors in Greece to ensure Athens lives up to the terms of the bail-out deal and an escrow account which Greece will ensure always holds three months worth of debt payments. The escrow account will be temporary, however, and Athens has agreed to change its constitution to make debt repayment the top priority in government spending.

That Greek debt sustainability analysis in full

Here it is via a reader (not that one), also in various places on the interwebs.

 Read more

Further reading

Elsewhere on Tuesday,

- Greece’s bailout: mission improbable, not to mention unsustainableRead more

Pink picks

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

Gideon Rachman: The drift towards war with Iran
The question of whether a war will break out over Iran’s nuclear programme has been around for so long that it is easy to become almost blasé, writes the FT’s Gideon Rachman. In 2006 Benjamin Netanyahu, the Israeli prime minister, was already asserting dramatically: “It’s 1938 and Iran is Germany.” This year, however, feels different. The threat of war is much more real. A conflict would begin with an Israeli bombing raid on Iran. But it would be likely swiftly to draw in the US – probably the UK and France, as well, and possibly the Gulf states and Saudi Arabia. sraeli fears are driving the process. Ehud Barak, the Israeli defence minister, has talked of Iran entering a “zone of immunity” – in which its nuclear programme becomes unstoppable – in the coming months. Read more

Snap news

Breaking pre-market news on Tuesday,

-  Albermarle & Bond pre-tax profit up 12 per cent – statement. Read more

Accounts freeze deepens Kingfisher woes

Kingfisher Airline’s woes have deepened with the debt-laden Indian carrier forced to cancel several flights on Monday after tax authorities froze its bank accounts over unpaid service taxes, reports the FT. The airline, which is controlled by Indian billionaire Vijay Mallya, said it was in talks with the authorities to find a solution and stressed that it would struggle to continue unless its bank accounts were unfrozen. “The prime reason for the current disruption in our flight schedules is the sudden attachment [freezing] of our bank accounts by the IT [income tax] department,” Kingfisher said. “This has severely affected our ability to make operational payments leading to the present curtailment.”

 

ECB bond buying halted after eurozone debt rally

The European Central Bank’s government bond purchases came to a halt last week for the first time since August in a sign the emergency debt buying programme is being wound down, reports the FT. The ECB’s inactivity reflects improved market conditions, which have been aided by the central bank’s three-year liquidity operation in December that averted a credit crunch in the eurozone. The ECB has more or less frozen the programme in the past few weeks after eurozone bonds have seen a sharp rally following the offer of three-year loans to the region’s banks on December 8.

Overnight markets: Mixed

Asian stock markets were subdued in spite of eurozone finance ministers agreeing a second bail-out for Greece, but the euro rose against the US dollar on the back of the announcement, says the FT. The FTSE Asia Pacific excluding Japan index was 0.3 per cent lower; while the Nikkei 225 was 0.3 per cent lower, the Hang Seng was down 0.5 per cent and the Kospi was 0.8 per cent lower.

However, the euro jumped on the agreement, rising as high as $1.3293 against the dollar and later trading up 0.1 per cent at $1.3262. The dollar fell against most currencies. Read more

Vista makes rival £1.2bn bid for Misys

A US private equity group has made a rival £1.2bn offer for Misys, the banking software company which this month agreed a merger deal with Switzerland’s Temenos, says the FT, citing people close to the deal. Vista Equity Partners is putting forward an indicative offer of about 360p for every Misys share, a 16 per cent premium over Friday’s closing price of 309.6p. The offer is considerably lower than the £1.4bn offer Misys is thought to have received from Fidelity National Information Services, the US banking technology company, last summer.

 

Lloyds rivals’ executives set to keep bonuses

Executives responsible for mis-selling loan insurance at Royal Bank of Scotland and Barclays look set to keep their past bonuses, ignoring the precedent set on Monday by Lloyds Banking Group, reports the FT. Lloyds stripped Eric Daniels, former chief executive, and 12 other directorsof part of the bonuses they were granted for 2010 as it moved to hold staff accountable for the wide mis-selling of payment protection insurance. It is the first UK bank to alter past decisions on pay since regulators put clawbacks and deferrals at the centre of reforms of bankers’ remuneration.