Markets live chat transcript for the chat ending at 12:12 on 14 Apr 2008. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: Neil has gone AWOL!
PM: But still
PM: Welcome to Markets Live.
PM: This is FT Alphaville’s daily markets discussion.
PM: Or, Exercise in talking to oneself
PM: Neil has joined me
PM: Just loading himself up
PM: with pixels etc
PM: First — must say a BIG thank you to TB
PM: We received a genuine Tin Hat in the post this morning
PM: We think it is a Brit issue helmet
PM: Ive just tried it on — much to everyone else’s amusement
PM: 
PM: SOmeone turned Neil’s PC off
PM: With this being windows — thats a load time of about 15 mins
PM: Give or take a day
NH: right, finally got the machine working
PM: Oh1 hi there!
NH: what a struggle – 10mins to boot up
PM: Right lets get on!
PM: What’s to of your list Neil?
NH: well, it’s all about China or China-related stuff this morning
PM: ah yes
PM: another day, another China to stake in UK mining company story
NH: and then we have got some large Chinese indices overnight
NH: but first this stake building story
NH: last week it was Billiton
NH: today it is Anglo America
NH: and this time it is Shenhua which is reportedly looking to take a 10% stake in Anglo
NH: for those of you who don’t know Shenhua is a coal mining company
NH: that would appear to have a market capitalisation £120bn
NH: sorry that should $120bn
PM: hmm
NH: and that’s the parent, holding company thing – China Shenhua Energy Co
PM: You have been doing your home work
NH: now, there are links between Anglo and Shenhua
NH: when Shenhua listed Anglo acquired a small stake
NH: However, the story has been denied
NH: and it is a bit more catagoric than the usual denial/non denial statements we get
NH: this went up on Reuters earlier
NH: BEIJING, April 14 (Reuters) – Chinese coal mining giant Shenhua Energy denied a report on Monday that it planned to buy a stake in mining major Anglo American and dashed speculation that it was among a group said to be interested in miner BHP Billiton.
The report in Hong Kong’s South China Morning Post quoted unnamed sources as saying Shenhua was seeking a strategic tie-up with Anglo American and could buy up to 10 percent of the firm, a stake worth $8.7 billion at current market prices, but the talks were at a very early stage.
NH: “The report is not true,” Wang Jinli, deputy general manager of Shenhua’s listed China Shenhua Energy Corp, told reporters on the sidelines of a conference.
He also said Shenhua had no plans to buy into either of the top two global miners, BHP Billiton and Rio Tinto.
Wang said his remarks applied to both the state-owned parent company, China Shenhua Group, and the listed firm.
The same newspaper said in February that Shenhua was seeking a stake in Australia’s Fortescue Metals Group, which is close to breaking BHP and Rio’s duopoly on exporting iron ore by railway out of Australia’s main iron ore province, the Pilbara.
Wang told Reuters that although the company had not ruled out getting into the iron ore business, it had no specific plans to do so.
Shenhua has said it is interested in expanding abroad and has specifically mentioned Australia, Indonesia and Mongolia as possible target countries.
Shares in Shenhua had dropped 1.5 percent in Hong Kong on Monday morning, compared with a 4.3 percent slide in the index of Chinese companies listed in Hong Kong.
NH: and I should mention that the story has had no real impact on the Anglo share price
NH: down 92p at £32.31 – a drop of 2.8%
NH: which is line with the rest of the mining sector
NH: still the story has got analysts chatting
NH: and given the market something to talk about this morning
NH: this went out from Michael Rawlinson earlier
NH: In case you were bored of news stories about Chinese resource M&A, the South China Morning Post today reported that the unlisted parent company of USD116bn Chinese coal company Shenhua is in early stage talks to acquire a 10% stake in Anglo American. This morning Bloomberg is reporting a source at Shenhua describe the story as not being ‘very close to the truth’.
Anglo has close ties to Shenhua, having acquired a small stake in the company at its IPO in June 2005. Given the company has been proactive in its association with the Chinese (it recently signed a JV with the China Development Bank), the press reports may turn out to be credible. The story hints of an offering of new shares (why have talks if the shares were to be acquired?) – at time when Anglo has a very strong balance sheet and prodigious cash flows.
NH: Were Anglo to place equity, we suspect there would be a linked transaction associated either with major capex or an acquisition. It would not be beyond the realm of possibility that this could be linked to the RIO situation (see our note earlier today).
We are not sure how Anglo will react to this rumour today – ordinarily a 10% stake build story would see what are cheap shares marked up materially. However, the Chinese stake build could be seen as either as the beginnings of a blocking stake in the company (dampening down fading rumours of an Xstrata or Vale led bid) OR as the start of some more grand M&A move with the Chinese as partners. We are warming up on the Anglo story because of its severe underperformance relative to Rio Tinto and the other diversified majors, but feel that this story isn’t the catalyst to make us buyers yet.
NH: actually Mr Rawlinson has penned an interesting note on BHP this morning
NH: he thinks BHP could bump its offer for Rio before making its regulatory submissions at the end of the month
NH: now, this theory has been doing the rounds in hedge fund circles for a couple of weeks now
NH: in theory BHP can make a higher offer stack up
NH: but I am nore sure they would bump at the moment, given the sickly state of the US economy
NH: anway, worth having a look at this note
NH: as it sort of sums up the mood in the market on this bid
NH: Current offer remains way too low to succeed
Rio continues to stress that its rejection of the offer is entirely based on value,
leaving the door open for BHPB (or another third party) to improve on the existing
terms. Looking at the BHPB bid stand alone, RIO’s share of 2009 earnings pre-any
synergies is c.49%, equivalent to a share ratio of 4.2:1. This is some way off the
current pre-conditional bid level of 3.4:1. We would expect the hostile bidding party
to pay for the vast majority of the synergy benefits on their bid too, so the theoretical
share ratio should be in the range as illustrated in the chart below.
NH: A cash bump is more ‘affordable’ than adding paper
We have looked at the potential for a bump in the offer, and believe there is a strong
rationale for BHPB to improve its bid with a cash component. The current all paper
offer values Rio Tinto at c.£61/share, and under the proposed terms of 3.4:1, we
believe the deal would be 10% accretive to BHP in 2009 based on our earnings
estimates, and including the impact of a $30 billion buyback. The table below shows
the impact the addition of a cash component would have on earnings accretion and
combined company leverage.
Plenty of debt capacity to bump
On a stand alone basis we estimate Rio and BHPB would have a total of US$36.2 in
net debt by year-end 2008, leaving plenty of headroom to accommodate a cash
bump as well as the share buy back while maintaining a conservative leverage
profile.
NH: Earnings accretion to BHPB even with a £15/shr cash bump, but more equity dilutive
Adding £15/share cash would value a revised bid at c.£76/share and remain 7.1%
accretive to BHPB calendar year 2009 earnings including a 5% of cost of goods sold
synergy which is unlikely to be fully realised in year 1.
By contrast, in order to
achieve the same per share valuation in an all paper deal, BHPB would have to offer
an exchange ratio of 4.24:1, resulting in 1.6% earnings dilution and Rio shareholders
owning 49.4% of the combined company. To a Rio shareholder, an all cash bump of
£15/share represents a 25% true value increase above the current terms, while an
14 April 2008 Rio Tinto & BHP Billiton all paper bump to 4.24:1 represents only a 12% increase in true value given the ‘zero sum’ nature of all equity deals. Additionally, as we highlighted in our previous note, any increase in the share ratio above 3.7:1 would risk BHPB losing its Australian status as more newco London line shares would be outstanding than Australia line shares.
NH: A cash-financed bump would preserve earnings accretion and leave a majority of newco shares in Australia.
NH: Do BHP Billiton want to bump now?
We feel the market is finally waking up to the fact that Rio Tinto and BHP Billiton are the two best value mining majors in the UK market at the moment – not least
because XTA/Vale and ENRC/Kazakhmys hoopla has died down and we are
approaching another period of possibly interesting newsflow later this month. We
have quarterly production reports on 16th (RIO) and 23rd (BHPB) April, a BHPB
Petroleum seminar on May 6th and an expectation that BHP Billiton will file
documents with the EU as part of the Phase I investigation in the next few weeks.
The EU Phase I submission is a key milestone, as even BHP Billiton has admitted it
would prefer to present the authorities with a united front – something that would
only be possible if BHP Billiton was in receipt of an agreed bid. So will BHP Billiton
try to bump again to seek an agreed bid ahead of the submission? Certainly the
recently completed UK roadshow by seldom seen Chairman Don Argus and the
reported closing of the $55bn debt package could indicate a readiness to deal.
Several factors could weigh on the BHPB Billiton camp to make them bump again to
get an agreement now:
A united front on anti trust and other nationalistic issues could at a minimum
expedite the regulatory process.
The collapse of the Vale bid for Xstrata and the associated $50bn debt package
(which expired 31st March) has perhaps released a significant slug of
financing availability that could finance a cash bump.
Most importantly, an agreed bid is likely to reduce interloper risk markedly.
Achieving an agreed deal is likely to reduce interloper risk materially for two
reasons. First, an agreed deal takes away the incentive for the target to be
creative and seek out a rival offer. It is likely that any agreed deal will also come
with a non-solicitation clause which makes it difficult for interlopers gain access
to management and data. Second and perhaps more importantly, we feel an
agreed deal will see a re-rating of the combined company – making the value
case for intervention more difficult and crucially giving a handsome profit to
Chalco on their £60/share stake
NH: We see several possibilities for interloper risk – most of which are complex to
achieve, but at current absolute prices for RIO we believe show significant value to
cash acquirers. First, we feel the Chinese (Chalco/Alcoa, Shenhua, the CIC the
China Development bank and even one or two of the steel majors) are credible
potential bidders. The six guidelines from the FIRB regarding investments in
Australia are clearly a challenge to meet, but we understand the Chinese are looking
at them as a set of guidelines by which that they need to adhere to in order to reach
a deal. These are set out below and we feel independence and tax revenue will be
the key ones to meet.
PM: goodness thanks for all that
PM: 
PM: I suspect the miners lead us nicely into the wider market…
NH: they, do weakness in the mining sector has dragged the FTSE 100 down 38.9 points to 5,856.6
Xstrata (XTA:LSE): Last: 3,738, down 118 (-3.06%), High: 3,838, Low: 3,710, Volume: 1.96m
Rio Tinto (RIO:LSE): Last: 5,753, down 147 (-2.49%), High: 5,850, Low: 5,740, Volume: 974.48k
Vedanta Resources (VED:LSE): Last: 2,290, down 75 (-3.17%), High: 2,355, Low: 2,286, Volume: 551.46k
Antofagasta (ANTO:LSE): Last: 751.00, down 20.5 (-2.66%), High: 768.00, Low: 748.00, Volume: 861.92k
NH: and the miners under pressure because commodity prices are under pressure
NH: and they are under pressure because the dollar has rallied
NH: and that was on the back of the comments at G7
NH: about the impact of sharp falls in the dollar
PM: Hmmmm
PM: Dollar rallies on G7 statement.
PM: Its a strange world
PM: Not enough for B Horseshoe tho! 
PM:
NH: right Zulu, I have some comment on this Great Portland rumour for you
NH: here’s the article
NH: http://www.globes.co.il/news/article.aspx?did=1000332857
NH: and here’s the english version
NH: Delek Real Estate in talks to buy UK property co
The target company is one of five largest income-producing property owners in the UK.
Avi Shauly 13 Apr 08 14:42
Sources inform ”Globes” that Delek Group Ltd. (TASE: DLEKG) subsidiary Delek Real Estate Ltd. (TASE: DLKR) is in talks to acquire the controlling interest in one of the UK’s five largest income-producing property companies. Sources at foreign investment banks said that Delek Real Estate subsidiaries plan to buy a substantial bloc of shares in the public company, which is traded on the London Stock Exchange at a market cap of NIS 4.2 billion and has NIS 8 billion in shareholders’ equity. The company has an annual turnover of NIS 2.6 billion.
The target company’s largest shareholder owns just 9% of it, facilitating the acquisition of control. Delek Real Estate is in talks with shareholders who own a quarter of the company altogether.
NH: Delek Real Estate CEO Ilik Rozansky said in response, “As part of the regular business of Delek Real Estate, we periodically consider transactions, and the company notifies the public in accordance with the proper procedures. When we have something to report, we’ll report it.”
NH: and here is some analyst comment
NH: come out of Merrill Lunch this morning
NH: Press from Globes Online suggests this morning suggests that Israeli billionaire Yitzhak Tshuva is in talks to buy a 25% stake in Great Portland. Mr Tshuva’s family control 60% of Delek Global. The source is ‘unidentified bankers’.
Is it plausible?
1. GPOR is said to be the preferred target given the largest holder only has 9%. I believe this IS correct, despite Bloomberg holders showing the largest holder at 21% (through various portfolios).
2. Capital in Israel is cheap (short term rates are at 3.25% & ML f/cs will fall to 2.5% this year)
3. Israeli banks are awash with liquidity (evident from the ML Israel conference last week).
4. In the UK you need to launch a bid if you move beyond 30%
BUT
5. GPOR is trading at a 18% discount to spot NAV of £5.94. Presumably to find a 25% stake in GPOR the company they would need to SUBSTANTIALLY pay away this discount and some. ML f/c’s GPOR’s NAV will be £4.95 2 years out. Thus if you believe that values will continue to fall (not a GPOR specific view) then the opportunity to get this kind of stake ‘on the cheap’ seems highly unlikely. Regardless on your view of NAV, I suspect any bidder for 25% would have to pay up substantially.
6. I would be more convinced if the rational was to gain access to strategic assets that in stronger markets would be less likely available or if Mr Tshuva thought an acquisition could deliver cost saving synergies.
Summary translation of the article
Sources inform ”Globes” that Delek Group Ltd. (TASE: DLEKG) subsidiary Delek Real Estate Ltd. (TASE: DLKR) is in talks to acquire the controlling interest in one of the UK’s five largest income-producing property companies. Sources at foreign investment banks said that Delek Real Estate subsidiaries plan to buy a substantial bloc of shares in the public company, which is traded on the London Stock Exchange at a market cap of NIS 4.2 billion and has NIS 8 billion in shareholders’ equity. The company has an annual turnover of NIS 2.6 billion.
The target company’s largest shareholder owns just 9% of it, facilitating the acquisition of control. Delek Real Estate is in talks with shareholders who own a quarter of the company altogether.
PM: So that first URL you put up was in hebrew i think
PM: And im rubbish at that
NH: Great Portland shres currently 10.5p better at 482.5p
PM: So this business owns NCP properties — and also various hotels
PM: V british play
NH: while we are on the subject of property companies
NH: one we have been following here for a while is Minerva
PM: Oh yea — developments>?
NH: stock up 5p to 95p this morning
NH: no new story just an upgrade from Merrill
NH: which follows an upgrade from Cazenove last week
NH: here’s the summary of today’s upgrade
NH: But not for the faint hearted
Minerva remains one of the higher beta plays in our UK real estate coverage
universe. In our view, current market pricing of Minerva looks to imply a very
pessimistic outcome for its three legacy projects, Walbrook, St Botolphs and Park
Place, Croydon. Our analysis suggests the share price implies the book values of
Walbrook (£180m), St Botolphs (£97m) are written down to zero and Park Place,
Croydon is written down by £100m to £45m. On this basis the IFRS NAV would
equate to 92p (in line with the share price) but if we include the uplift from
Lancaster Gate and Oden residential projects (kept at historical cost on the
balance sheet) of £85m or 52p (net of tax) the adjusted NAV would equate to
144p. Fundamentally, we believe Minerva is now cheap.
NH: Furthermore, we believe there has been some confusion around how the
construction loans work – consequently we have provided an insight of these
facilities in this note. We do not think the loans are a short/medium term issue but
the risks will increase if either scheme (Walbrook or St Botolphs) is vacant for a
prolonged period after practical completion.
Upgrade to Buy with Price Objective of 110p
The shares are now trading on a 70% discount to our adjusted NAV forecast of
299p. If we apply our two scenarios as outlined in this note the discount would
equate to 15% and 38% respectively. Under both scenarios we give little/no
upside for latter stages of several schemes including Lancaster Gate, Odeon and
the Ram Brewery development. Furthermore, we allow for a substantial write
down to Walbrook, St Botolphs and Park Place Croydon. We think investors
should focus on the adjusted NAV as this encapsulates the value uplift for
projects kept at historical cost on its balance sheet.
PM: Ok — thanks for taht
PM:
PM: can we get round to the little british banks story of the morning?
NH: Of course – Bradford & Bingley
PM: they were down 7 per cent earlier, even though the mortgage lender issued a statement saying it was not plotting a right issue before its annual meeting on April 22.
NH: they have recovered a bit
NH: now off 1p at 166.25p
NH: actually, I am not really surprised by the weakness
NH: because this rights issue story has highlighted once again what a weak position B&B finds itself in
NH: just look at the stats
NH: at the of last year B&B has shareholder equity of £1.2bn
NH: but…
NH: it also had or has
NH: significant exposure to risky assets
NH: and these are principal protected notes, SIVs, CDO’s, CLOs and credit funds of (£1176m at end 2007)
NH: and a further £1.46bn in holdings of AAA-rated mortgage securities and other ABS in its liquidity portfolio
NH: and all of that
NH: compares with tangible equity of £1.1bn.
NH: B&B also has very high dependence on the wholesale market with a 168% loan/deposit range
PM: And you need to set this against the fact that
PM: B&B doesntneed to have have funding in place till 2009
NH: yep £2bn committed facility
PM: and its tier 1 capital ratio if 8.6%
NH: but let’s not forget what this company does
NH: it specialises in “self cert” and “buy to let” mortgages
NH: it is stating the obvious to say that there is potential for rising impartment charges
NH: and from the figures I have mentioned about, you can see that B&B shareholders equity could be wiped out in the event of another rounds of write downs
NH: anyway, the statement this morning does not rule out a rights issue a some point
NH: and I for one would not be betting on B&B making it through the Great Credit Crisis without tapping shareholders for cash
PM: I agree
NH: but what do you tinknk happened with the Sunday Tel story
NH: unlike them to get something wrong
PM: Well — here’s my scenario
PM: It is a dead cert that B&B have looked at a rights
PM: Some banker has blabbed to Kleinman at the Telegraph on Sunday
PM: He’s gone to B&B who have said NO Comment
PM: He jhas said — right i am printing
PM: They ahve said nothing — until the first edition has come out saying B&B looking at Rights
PM: Felt at B&B goes ballistic
PM: Kleinman says — well all he can do is put a fresh top on the story gong on about Gordon Brown saving the financial world or something
PM: Classic result of attempts to control information flows with regulatory tools done work
NH: Oh, don’t get started on that
PM:
NH: the point is – B&B are in a very weak position
NH: and probably considered a rights issue
PM: Good point from albion below
PM: But what do that analystts think?
NH: this is from Deutsche Bank
NH: B&B has significant risk asset and wholesale funding exposure. B&B has significant exposure to risk assets with holdings of principal protected notes, SIVs, CDO’s, CLOs and credit funds of £1176m at end 2007, and a further £1461m in holdings of AAArated mortgage securities and other ABS in its liquidity portfolio. These compare with tangible equity of £1170m. Dependence on wholesale funding is high given the modest 197 branch network, with 168% loan/deposit ratio towards the top of peer range.
NH: Remain SELLers of B&B
B&B announced at its FY2007 results that it had prefunded maturing term
funding into 2009.
However, earnings and balance sheet measures are at risk via margin compression, lending volumes, and risk asset writedowns.
Each £100m of equity raised at a 30% discount to the current share price,
sees 9% 2008 adj. EPS dilution.
Passing provisions sufficient to eliminate risk assets as an issue for the group would require a higher writeoff, in our view – so far, B&B has written these assets down by 8% through the P&L and reserves. We are reducing our target price to 150p (180p before), and remain with a Sell recommendation.
NH: and this is from Cazenove
NH: Bradford & Bingley – Company denies speculation of rights issue
[BB/ LN BB.L], 167p, Underperform, sector – Neutral
B&B has denied speculation in the weekend press (Sunday Telegraph) that it is considering a rights issue of several £100m ahead of its AGM on Tuesday 22 April. In a statement yesterday, the company said it is not “intending to issue equity capital by way or a rights issue or otherwise” and “in the current market environment, the Board will…continue to monitor closely the balance sheet strength of the business and its funding plans”.
In our view, the group ended 2007 with a solid capital position, having an equity tier 1 ratio of 7.7%.
We expect rising mortgage impairment to constrain profit growth, but it seems unlikely that developments in the mortgage market in the two months since the prelims (13 February) would have given rise to losses significant enough to require additional tier 1 capital. For instance, we estimate £200m of additional capital would absorb 73bp of mortgage losses; in our recent note (attached), we increased our impairment estimates for B&B but to a level well below this (13bp in 2008E and 17bp in 2009E).
B&B has £2.7bn of treasury assets which are likely to have fallen in value recently, based upon other banks’ comments about trading in March. After a £144m pre-tax write-down in 2007, it is likely that B&B will incur further losses – temporary or otherwise – on its treasury book.
Our estimates include a £95m pre-tax write-down in 2008E, which with a flat dividend leads to a small retained loss (£12m) and a 20bp fall in the equity tier 1 ratio to 7.5%.
For additional tier 1 capital to be required, in our view, this ratio would have to fall to c.5% (a higher level than its peers to reflect the narrow business model and higher risk lending), which implies a pre-tax loss of c.£600m or a 22% P&L write-down of the “at risk” treasury assets. The company’s statement suggests this has not been the case.
PM:
NH: and a few questions below on why HBOS has bucked the trend
NH: shares up 12.5p at 519.5p
NH: best performance in the FTSE 100
PM: terrific
NH: all I can put it down to is short covering
PM: just a bit of a squeeze
NH: down 11.5% in the past week
PM: whoa
PM: 11.5%
NH: big fall
NH: and I suspect a few shorts being closed this morning
PM:
PM: Off at a tangent for a mo
PM: Technical analysis — for a change
PM: We cant do charts here — but we can put up some quality commentary from the likes of Richard Crossley — from NCB
PM: Widely followed
NH: and aside from the fact that it is very good I like the headline
NH: Immelt(down)
NH: Generally weaker trends across the major equity centres,
minus 2½% – 3½% or so on the week, marked weakness in
the Far Eastern markets overnight.
All against a background of continuing resource-based price
strength, new highs in crude oil (initial, stress initial,
objectives now raised here last week to WTI $120 – $125)
and continuing investor focus on the themes of foodstuff
price inflation, the latter probably at least as portentous a
theme as was that of financial turmoil last year, that
theme of financial turmoil continuing in full flow so far this
year, albeit with the occasional short-lived respite.
All, therefore, as it should be.
NH: In Friday’s American session, minus 1½% and closing
around the day’s lows, the most closely-watched sectors,
Financials- and consumer confidence-relateds, performed in
line with the broad indices.
Leadership on the downside lay with General Industrials,
minus 9%, the day’s volume in the sector around four times
the last month’s average, this largely reflecting marked
weakness in General Electric, the second largest cap. stock
in the world, minus 16% on the day in massive volume of
350m., sevenfold the recent average.
NH: The Housebuilders fell 2½%, in process making a five day
loss of 10% or so, as shown below :
NH: At the other end of the performance spectrum, note new
highs in the stock below :
NH: As commented in Friday’s note, strength in this one is
bearish, the inverse of investors’ acknowledgement of
an increasingly hostile retail environment.
NH: In UK. equities, minimal index change, minus 1% on the
week, the fact that Mines rose 5% on the week, General
Retailers fell by 5% on the week, giving all the information
necessary.
The three weakest FTSE. stocks were Alliance & Leicester,
Icap and Next, all minus 8%, perfectly reflecting the theme
here of weakness in prospect in the Financials- and
consumer confidence-relateds.
As commented in Friday’s note, and many times over
recent months, the conjuncture of all the themes
referred to above augurs badly for market levels.
PM:
PM: Straight to cakeslice below — asking about Enodis trading at a discoutn to the Mani terms
PM: We actually dont think this is an extreme discount
PM: Terms are 258p a share
PM: market price is currently 243p
NH: no – i think the stock should be trading a bit lower actually
NH: and that’s because this deal will go to a Phase II EU enquiry
NH: which the company says won’t close till October
NH: so the return is 15p in 6 months
NH: and the reason for this indepth inquiry is ice machines
PM: Ice machines!
NH: yep – the Eno and MTW control the world market in ice machines
PM: of course they do
PM: Neil has gone off to prove the matter
PM:
NH: I reckon the merged company would have 80% of the world ice machine market
PM: you reckon do you ?
NH: i do
NH: so the reason there is a discount is that you will not get the money till Oct
PM:
NH: getting some interesting early calls on Wachovia
PM: Carlomagno put the flashes up earlier
NH: and unlike UBS, this stock does not seem if it is going to rally on news of the cash call
NH: Wachovia:
* early indications -8%
* Widespread deterioration in all their portfolios, including home
equity,
mortgages & commercial real estate.
* Looks like most of the increased reserving just used to offset ongoing
deterioration in portfolio, rather than over reserving.
* Co saying they will raise $7bn thru stock & prefs – common public
offering
* Preannounced Q1 net loss of $350m.
* Cutting dividend.
* Increasing reserve build by $2bn.
* Saying they will raise equity via common stock & prefs
* This story was leaked over weekend in WSJ – but no details yet of size
etc of capital raising
PM: No UBS effect there
NH: more of a B&B effect
PM:
PM: Someone earlier asked about Partygaming
PM: I know it is widely followed — and some people are feeling real pain
PM: We dont have much direct insight — certainly not that extends to comparing it with 888
PM: But here is a note from Numis — passed on by Rob Orr
PM: PartyGaming yesterday evening delivered an upbeat presentation to Numis sales, which reaffirmed
our view, that the group remains well placed to capitalise on the strong structural
growth of the online gaming market. We think the recent PartyGaming share price sell off is
unjustified and we anticipate that the group’s Q1 trading update, which is scheduled for the
23 April, will help reassure the market and act as a positive share price catalyst. We reiterate
our BUY recommendation and 12 month base case target price of 42p.