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2024-02-22 | Bloomberg | Mental-Health Cuts by U.S. States Risk Boosting Health Costs | U.S. states looking to balance budgets by cutting mental-health facilities and Medicaid payments risk increasing health-care costs by pushing psychiatric patients into emergency rooms. States trimmed 9.5 percent, or more than $1.6 billion, from their mental-health spending from fiscal 2009 to 2012, according to the National Alliance on Mental Illness. The coming budget year will be worse in some states, with Illinois looking to shutter two psychiatric hospitals and Alabama planning to close all of its except for one serving the elderly and another treating criminal cases. If patients can’t find free or low-cost outpatient psychiatric care due to government cutbacks, they may swamp emergency rooms and raise health-care costs for all patients, said Dr. William Sullivan, an ER physician at University of Illinois Medical Center in Chicago. “Saying that they’re going to save money doing this is kind of short-sighted,” Sullivan said. Patients “just don’t disappear. Their problems don’t get better. They go somewhere for care.” Chicago’s Public Health Department will shutter half its 12 psychiatric clinics by the end of April, and the state will close as many as two hospitals in the coming budget year. The measures are in addition to state trims in Medicaid that Governor Pat Quinn , a Democrat, is expected to announce today in his fiscal 2013 budget address. ‘Catastrophic’ Danger The Alabama Mental Health Department last week announced plans to close four psychiatric hospitals by May 2013. The almost 1,000 patients still in state-run hospitals will be moved to private-care providers or group homes, said James Tucker, associate director for the Alabama Disabilities Advocacy Program. While the shift merely accelerates a longer-term trend of moving the mentally ill out of state facilities, Tucker said it could cause “catastrophic” results for those patients and raise health-care costs. “Alabama could see a significant increase in the number of involuntary civil commitments, so there would actually end up being a need for new hospital beds,” Tucker said. “It could completely backfire. There’s a real threat to patient safety here.” South Carolina Cuts South Carolina , Alabama and Alaska lead the states for mental-health spending cuts since 2009, according to a national report issued in November by the Arlington, Virginia-based National Alliance on Mental Illness. South Carolina has reduced its budget by more than 39 percent, Alabama 36 percent and Alaska more than 32 percent. “We saw cuts on a scale we’ve never seen before,” said Mike Fitzpatrick , NAMI’s executive director. “It was devastating.” Illinois’ mental-health spending declined 12 percent to $520 million in fiscal 2012 from $591 million in 2009, according to NAMI Illinois, a patient advocacy group that’s part of the national alliance. Illinois’ trims were among the deepest cutbacks in the U.S. and reflected worsening care for low-income, jobless and uninsured psychiatric patients across the U.S., said Dr. Michael Wahl, president of the Illinois College of Emergency Physicians. “This is a huge issue that affects access to care to all,” said Wahl, whose group represents more than 1,200 doctors. “It’s like the pebble in the pond. The ripples go out and affect all.” ER Overload More use of ERs by people with mental illness, Wahl said, could mean additional overcrowding and make it harder for doctors to promptly see those who can pay, those with private insurance, and patients with nonpsychiatric illnesses and injuries. It also puts further strain on hospitals already struggling with balance-sheet pressure due to state reimbursement cuts to providers. In July, Illinois plans to close its Tinley Park Mental Health Center in south suburban Chicago. The facility serves only 50 patients yet costs the state more than $20 million a year to operate. Yesterday, Quinn administration officials said they would also seek to close Singer Mental Health Center in Rockford in the fourth quarter of fiscal 2013. Illinois now runs nine mental hospitals. “The state is in terrible financial shape,” said MaryLynn McGuire Clarke, senior director at the Illinois Hospital Association. “Tough times mean tough decisions. But you still hope the most vulnerable among us will get the care they need, because the illness doesn’t go away.” Looking Elsewhere The six Chicago centers slated for closing serve about 5,300 people, most with no health insurance or receiving Medicaid, the joint state-federal health-care program for the poor. Many patients who can’t get care at the remaining clinics will be asked to seek treatment at nongovernment community health centers or with private doctors and therapists. More admissions to emergency rooms could further test the financial health of hospitals, which consider that care a public service and not a money maker, said Wahl, an ER doctor at Evanston Hospital in north suburban Chicago. When psychiatric patients use the ER, costs may include security guards, social workers and sometimes “sitters” to accompany them on a medical floor if a psychiatric bed is unavailable. “You can’t bill for a sitter’s time or security time,” Wahl said. “It’s expected of the hospital. It’s a significant expense. It adds up.” ‘Falling Through Cracks’ A patient who gets treatment at one of the Chicago-run clinics set to close, Jacob Aronov, 56, said he has been going there about 10 years. The closest remaining one is an hour away by elevated train and bus; his current clinic is a short walk from his North Side apartment. He has glaucoma, and the longer trip will be more difficult. Aronov said he worried about interrupting his established therapeutic relationships and finding providers within a reasonable distance who accept Medicaid. “It will make it harder to make an appointment,” he said. “Some of the patients won’t get help, and will wind up falling through the cracks.” Most users of the clinics that are closing can still find care, said Dr. Bechara Choucair, commissioner of the city’s Public Health Department. He acknowledged that some would have to travel farther, but said his office would pay their public transportation. About 1,100 Affected About 1,100 patients cut from the clinics -- mainly those with government insurance -- will be able to go to community mental-health agencies not operated by the city, he said. Some patients who will have to travel farther will wait until problems are serious enough for an ER, said Dr. Leslie Zun, chairman of emergency medicine at Mt. Sinai Hospital in Chicago, who has studied the issue. ERs increasingly can’t find other hospitals to absorb psychiatric patients. The number of inpatient psychiatric beds in Illinois has dropped 28 percent in the past 10 years, according to the state hospital association. A nationwide study by the Lafayette, Louisiana-based Schumacher Group , an ER management firm, found 70 percent of ER administrators say they’re keeping psychiatric patients for at least 24 hours because they can’t be admitted or transferred. Ten percent reported boarding them as long as a week. Governor Quinn warned this month that Illinois might have to “step on the toes” of medical providers and offer still- lower reimbursement rates to trim spending, by about $2.7 billion, his administration has said. Many doctors and counselors already resist taking Medicaid, in part because of relatively low fee schedules and tardy payments, said Fitzpatrick, the NAMI executive director. “If you’re going to cut the reimbursements one more time, fewer docs are going to be willing to take Medicaid clients,” he said. To contact the reporters on this story: Melissa Silverberg and Bob Kazel in Chicago through Fmcroberts1@bloomberg.net To contact the editor responsible for this story: Flynn McRoberts in Chicago at fmcroberts1@bloomberg.net . |
2024-11-29 | Bloomberg | Marshall Wace Fund Returns 18%, to Add Shares of China Insurers, Citigroup | Two global financials funds managed by Marshall Wace LLP, the London-based asset manager founded by Paul Marshall and Ian Wace , have trimmed bets on rising Indian banking stocks, added shares in Citigroup Inc. and Chinese insurers, and expects the European debt crisis to spread. Marshall Wace Global Financials Emerging Growth Fund has cut the net position in India to zero after wagers on the country’s banking stocks to appreciate helped it to an 18 percent return in the first 10 months, said its Hong Kong-based manager Amit Rajpal. HFR Fund-Weighted Composite Index gained 7 percent in the same period. Net position is the difference between bets on rising and falling stocks. The Marshall Wace financials funds are making the changes as the European debt crisis threatens to spread to Portugal and Spain after Greece and Ireland accepted European Union bailouts. The contagion could hurt stock values in countries including India, Brazil and Australia, which have been relying on capital inflows to cover current account deficits, Rajpal said. “In an environment of heightened risk aversion, capital flows will be constrained and compromised,” Rajpal, 37, a former head of Morgan Stanley’s global financials research team, said in an interview. “Brazil is ripe for a correction. In the short term, India may also face stress.” By contrast, stock of Citigroup , the world’s largest multinational emerging market bank, may gain 50 percent over the next six months with the completion of the U.S. government sale of its remaining 12 percent stake , he added. Citigroup is the largest single-stock holding of the emerging growth fund and Marshall Wace Global Financials Market-Neutral Fund , which gained 8.5 percent in the same period, he said, without giving the size of the holding. Citigroup Citigroup Chief Executive Officer Vikram Pandit predicted in June 2009 that Citicorp, the company’s biggest operation by revenue, will derive half of its future business from emerging markets. Citigroup’s emerging markets business is already bigger and more profitable than HSBC Holdings Plc’s, with a balanced mix of consumer, institutional businesses and geographical breakdown, said Rajpal. “The other U.S. institutions don’t have this footprint to drive growth,” he said. “But the stock is not valued for the footprint, the growth opportunity and return profit that its emerging market business offers. Part of the constraint has been the very heavy pressure on the stock from the ongoing government exit.” The Marshall Wace funds have bought shares in Ping An Insurance (Group) Co. , the nation’s second-largest insurer, and China Pacific Insurance (Group) Co. , the country’s third-biggest listed insurer since the third quarter, said Rajpal. Chinese life insurers’ profits are set to grow as rising interest rates lift investment returns yet yields promised to policyholders are capped at 2.5 percent, he said. China Rates The People’s Bank of China raised benchmark interest rates in October for the first time since 2007 as inflation reached 4.4 percent. Rates could rise another 2.5 percentage points as the government tries to curb rising prices, Rajpal said. The funds have been selling borrowed stocks in banks in European countries including Spain, Portugal, Greece and the U.K., said Rajpal without identifying the stocks. Banks in the first three countries, which will need to make bigger provisions for their lending and write down the value of their bond investments, may need to raise more money to replenish capital, potentially diluting the interests of minority stakeholders and putting governments in control. “Their equity value is severely compromised,” Rajpal said. “They’re trading like normal companies, which give us the opportunities on the short side.” Rajpal is still bullish on smaller emerging markets such as Argentina, Philippines, Thailand, Nigeria, Qatar and Saudi Arabia, which along with India were among the biggest profit contributors to the funds in the first 10 months. The countries run current-account surpluses, have low leverage, liquid and well-capitalized banking systems, he said. The funds have owned shares in Argentina’s Banco Galicia y Buenos Aires SA , Zenith Bank Plc in Nigeria, Riyad Bank in Saudi Arabia. “They’re largely ignored by foreign investors because people are very much focused on the bigger markets,” he added. To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net. To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net |
2024-06-18 | Bloomberg | Emerging Stocks Rise to 5-Week High After Greek Elections | Emerging-market stocks rose, driving the benchmark index (SENSEX) to a five-week high, as concern that Greece may be forced out of the euro eased. The MSCI Emerging Markets Index advanced 1 percent to 934.06 by 4:31 p.m. in New York , the highest level on a closing basis since May 15. Redecard SA, Brazil’s second-biggest card- payment company, led technology shares higher after posting the sharpest increase in four months. The Bovespa rose to the highest since May 21 as Tam SA surged to a five-year high. The BSE India Sensitive Index lost 1.4 percent as policy makers left rates unchanged. Most developing nations’ benchmark gauges advanced after Greece’s New Democracy and Pasok parties won enough seats in parliament to forge a majority government, reducing concern the country was headed toward an exit from the euro. Concern Europe’s debt crisis is deepening curtailed exports and foreign investments to emerging markets. “Investors are feeling relieved that the worst case scenario in Greece is avoided,” said Chu Moon Sung, a Seoul- based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion. “Problems of Europe’s debt crisis and a slowing global economy are still there, and I think investors will keenly watch for governments’ stimulus measures as well as policy cooperation.” Sberbank, Redecard The MSCI Emerging Markets gauge has added 1.9 percent in 2012 and trades at a multiple of 10.1 times estimated earnings, compared with 12 for companies on the developed-nation index, which has gained 2.5 percent this year, according to data compiled by Bloomberg. All 10 industry groups on the MSCI Emerging Markets index (MXEF) gained, with technology, consumer discretionary and industrials leading the advance. OAO Sberbank, Russia’s biggest lender, jumped 2.1 percent in Moscow, lifting the Micex Index by 1 percent to the highest level since May 11. The Bovespa added 0.2 percent as Tam SA, Brazil’s biggest airline, rose 6.8 percent to the highest since December 2007. Redecard added 5.2 percent after a second appraisal of Itau Unibanco Holding SA’s 11.8 billion-real ($5.7 billion) offer to take the company private showed it’s in line with a previous assessment. Egypt’s EGX 30 Index of shares tumbled 3.4 percent after the military curtailed powers of the elected president, extending the benchmark’s drop from this year’s high on March 7 to 22 percent. Rate Unchanged India ’s central bank Governor Duvvuri Subbarao left the key repurchase rate at 8 percent today, a stance that contrasts with rate cuts in Australia and China the last two weeks. Prime Minister Manmohan Singh is grappling with an economy hobbled by record trade and budget deficits, corruption scandals and infighting in the coalition that has stymied his efforts to lure more foreign investment. The gauge had risen as much as 0.9 percent before the Reserve Bank of India left its main repurchase rate at 8 percent. Only four of 25 economists in a Bloomberg News survey predicted the central bank will leave rates unchanged, with 19 expecting a 0.25 percentage-point cut and the remainder a half- point reduction. “This is a shocker,” said D.K. Aggarwal, who manages about $100 million of Indian assets as chairman of New Delhi- based SMC Wealth Management Ltd. “A rate cut was a must because the growth was slowing. The confidence has taken a beating.” The State Bank of India (SBIN) and DLF Ltd., the country’s biggest developer, tumbled in Mumbai after the rate decision. Samsung, Radiant India’s sovereign credit outlook was lowered to negative from stable by Fitch Ratings , which cited the heightened risk of a deterioration in growth potential and limited progress on paring the nation’s budget deficit. Poland’s WIG20 Index fell 0.2 percent in Warsaw while the FTSE/JSE Africa All Share Index (JALSH) rose 1.4 percent in Johannesburg. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong rose 0.8 percent. Exporters led gains in Seoul , with a 2.1 percent advance for Samsung Electronics Co., (005930) Asia’s biggest maker of chips and flat screens. Hyundai Motor Co., South Korea’s biggest carmaker, added 3.5 percent. Taiwan’s Radiant Opto-Electronics Corp. (6176) surged 6.9 percent after the China Times reported Apple Inc.’s new MacBook will bolster the company’s sales. Hon Hai Precision Industry Co., the world’s largest electronics maker, rose 2.4 percent to its highest since May 31. Gross margins will likely recover, said Terry Gou, chairman and founder of the company. He spoke at the annual shareholder meeting today in Taipei. The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose four basis points, or 0.04 percentage point, to 386, according to JPMorgan Chase & Co.’s EMBI Global Index. To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net ; Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net To contact the editors responsible for this story: Allen Wan at awan3@bloomberg.net ; Tal Barak Harif at tbarak@bloomberg.net |
2024-02-17 | Bloomberg | Obama Says Export Aid Will Help U.S. Companies Compete | President Barack Obama promised to boost support for U.S. manufacturers such as Boeing Co. (BA) that face subsidized foreign competition as part of his drive to increase exports. Expanding on proposals he outlined in his State of the Union address last month, Obama announced plans for Export- Import Bank financing for U.S. companies for domestic as well as overseas sales to match foreign competitors’ sources of official funding. The bank will give “American companies a fair shot by matching the unfair export financing that their competitors receive from other countries,” Obama said today at Boeing’s jet factory in Everett, Washington, which has more than 35,000 employees. Obama toured the Boeing plant, providing him with an industrial backdrop for his manufacturing initiatives. Boeing has 85 percent of its $296 billion jetliner backlog from buyers outside the U.S., making the Chicago-based company pivotal to Obama’s plan to double exports by the end of 2014. The aircraft maker plans to increase commercial-jet production by more than 60 percent between 2010 and 2014. The facility just north of Seattle is where Boeing builds wide-body jets. Erected in 1967, it remains the world’s biggest building by volume and houses the production lines for the 747 jumbo jet, 767, 777 and the new 787 Dreamliner, which was Obama’s backdrop. Air Force One, the presidential 747, was assembled there. Boeing a Symbol “The president has embraced U.S. manufacturing, and Boeing is an iconic symbol of U.S. success,” said Harley Shaiken , a labor professor at the University of California at Berkeley. The U.S. lost 1.9 million manufacturing jobs since December 2007, the start of an 18-month recession that was the worst since the Great Depression. “We can’t bring every job back,” Obama said. “But right now, it’s getting more expensive to do business in places like China. Meanwhile American workers have never been more productive, and companies like Boeing are finding out that even when we can’t make things faster or cheaper than China we can make them better.” Obama also named two new members to the President’s Export Council today. Gary Loveman, chief executive officer of casino operator Caesars Entertainment Corp., and Denise Morrison, CEO of Campbell Soup Co., are joining the advisory committee. Assembly Line Obama spoke at the end of the 787 assembly line. He was given a tour of the factory and then appeared to a crowd of hundreds of Boeing workers, stepping down to a stage on the factory floor from a red-carpeted staircase leading from a 787 Dreamliner in the livery of United Continental Holdings Inc., which will be the first U.S. carrier to fly the plane. David Eddines, 57, of Everett, a quality technician on the 787 Dreamliner assembly line, met the president during his tour of the factory today with Boeing Chief Executive Officer Jim McNerney and commercial-jet President Jim Albaugh. “I found it reassuring that he said America is going to rebound,” Eddines said in an interview after Obama’s speech. “There’s a lot of fixing that needs to take place. There’s a lot of loopholes for companies taking work abroad.” In his State of the Union speech, Obama called for a program to provide credit to companies competing against foreign counterparts that benefit from preferential credit from their governments. Foreign Competition The administration will use existing authority “so that the Export-Import Bank can provide U.S. firms competing for domestic or third-country sales with matching financing support to counter foreign non-competitive official financing that fails to observe international disciplines,” the White House said in a statement released in conjunction with Obama’s Boeing visit. The duopoly in jetliner production shared by Boeing and its larger European rival, Airbus SAS (EAD) , is being challenged by new competitors. Canada’s Bombardier Inc. and China’s Comac are developing new single-aisle planes set to enter service this decade that will compete with the 737 and the A320, the workhorses of the airline industry. John Kvasnosky, spokesman for Boeing Capital Corp., said Obama’s move to increase Ex-Im support was a new initiative. “We’re always encouraged about efforts to support U.S. competitiveness, but we need to understand more about how it would apply in our circumstances,” he said in an interview before the president spoke. Plan Critic Chris Chocola, head of the anti-tax advocacy group Club for Growth, said the aid would just create a “corporate welfare slush fund” for companies with lobbyists, such as Boeing. “Congress should end the federal bank of Boeing, and instead promote more international trade through corporate tax reform and lower tariffs,” Chocola said in a statement. Obama also called for extending the lending authority of the Ex-Im Bank, which may reach its $100 billion ceiling before April. The bank, which is self-sustaining, provides financing to U.S. exporters through loans, loan guarantees and payment insurance. About 3,600 companies benefited last year from its credit. Over the last three years the bank supported the export of about 460 Boeing jets. Boeing and the White House have numerous ties: McNerney is chairman of the President’s Export Council; William Daley left Boeing’s board to become Obama’s chief of staff; John Bryson , also a Boeing director, became Obama’s Commerce secretary in October. NLRB Complaint Boeing was targeted in a 2011 National Labor Relations Board complaint that Republicans said showed the administration’s hostility toward business. The case was dropped after a new union accord helped pave the way for a planned output boost at the biggest U.S. exporter. “It is a love-hate relationship,” with the company and the White House wanting and needing rapport yet clashing over regulations, said Gary Chaison , a labor professor at Clark University in Worcester, Massachusetts. “Boeing becomes incredibly symbolic now after the troubles they’ve been through with the NLRB.” Obama is on the last day of a three-day trip in which he also is raising money for his re-election campaign in California and Washington state. Fundraising Stops He raised more than $6 million from California donors, including money taken in at a fundraising dinner on Feb. 15 co- hosted by actor Will Ferrell and attended by George Clooney. Obama left the Boeing facility for a lunch with 65 people at the home of Costco Wholesale Corp. (COST) co-founder Jeff Brotman and his wife, Susan, in Medina, Washington. Among those who attended were Microsoft Corp. (MSFT) co-founder Bill Gates. Obama also is raising money at a reception later in Bellevue, Washington. Ticket prices for the lunch cost $17,900 and ticket prices for the reception started at $1,000. The campaign expects the two events to bring in at least $1.6 million. Last month, Obama raised $12 million for his re-election campaign, according to disclosures filed today with the Federal Election Commission. Counting money raised for the party at events featuring the president, Obama took in $29.1 million last month. Obama’s major fundraising events solicit donations for both his re-election campaign and the Democratic National Committee. To contact the reporters on this story: Kate Andersen Brower in Everett, Washington at kandersen7@bloomberg.net ; Susanna Ray in Everett, Washington at sray7@bloomberg.net To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net ; Steven Komarow at skomarow1@bloomberg.net |
2024-03-09 | Bloomberg | Barclays Cuts Diamond’s Pay as Lloyds, RBS Award CEOs Stock | Barclays Plc (BARC) cut Chief Executive Officer Robert Diamond ’s remuneration by almost a third last year and froze his salary for 2012 after the lender missed its profitability target. Diamond received 6.3 million pounds ($9.9 million) in salary, bonuses and stock last year, down from 9 million pounds the previous year, the London-based lender said in its annual report today. Barclays said last month it may fail to hit the 13 percent target for return-on-equity by 2013 after it fell to what Diamond said was an “unacceptable” 6.6 percent in 2011. “The board and the committee recognize that our return on equity has to improve,” Alison Carnwath, chairman of the board’s remuneration panel, said in the report. “In order to achieve this, our operating costs need to be reduced. Remuneration has its part to play in that.” Diamond is Britain’s second-best paid bank CEO after HSBC Holdings Plc (HSBA) ’s Stuart Gulliver , who received 7.16 million pounds. Royal Bank of Scotland Group Plc (RBS) and Lloyds Banking Group Plc (LLOY) , Britain’s two government-owned banks, today gave their CEOs about 7 million pounds in stock vesting in 2015 after they declined cash bonuses for 2011 amid political criticism. Prime Minister David Cameron in January urged banks to show “proper regard” in limiting bonuses and demonstrate how pay is related to performance as the government executes the tightest fiscal squeeze since World War II. Barclays Capital Diamond, the former head of Barclays Capital, is now only the third highest-paid executive after two unidentified bankers received 6.7 million pounds and 6.5 million pounds respectively. Officials at Barclays declined to identify the two individuals. Pretax profit at Barclays Capital , the investment banking arm led by Rich Ricci and Jerry Del Missier, fell 32 percent to 2.97 billion pounds in 2011, the lender said last month. The bank reduced bonuses for the 24,000 employees at the investment banking unit by 30 percent to 64,000 pounds a person. Diamond’s package includes a 2.7 million-pound stock bonus and a further 2.25 million pounds depending on how the bank performs in future years. His base salary will remain at 1.35 million pounds. He won’t receive a cash bonus. Barclays made a 5.75 million-pound so-called tax equalization payment on Diamond’s behalf to tax authorities after he relocated to the U.K. from the U.S., the company said. He also received 675,000 pounds in cash instead of a pension contribution and received benefits worth 474,000 pounds including medical insurance, a company car and tax advice. Deferred Bonus In 2011, Diamond also took 3.71 million pounds from a 2008 performance share plan award, based on shareholder returns, and 1.08 million pounds from part of a 2010 performance share plan award. He also took 7.81 million pounds from his executive share award plan, another deferred bonus. The awards vested in March, the bank said in the annual report. Separately, Lloyds gave Chief Executive Officer Antonio Horta-Osorio shares valued at about 3.4 million pounds as part of his long-term incentive plan, the lender said in a statement today. His counterpart at RBS, Stephen Hester , will receive shares valued at as much as 3.6 million pounds under a similar plan, the bank said in its annual report today. Lloyds said it paid its eight top executives a combined 16.2 million pounds last year. The bank gave nine executives a total of 3.89 million pounds of shares vesting over the next three years. Horta-Osorio and the nine executives, including consumer banking chief Alison Brittain and Chief Risk Officer Juan Colombas, will also share in 14.4 million pounds of shares vesting in 2015. U.K. bank executives’ pay is still lower than for their U.S. competitors: JPMorgan Chase & Co. (JPM) CEO Jamie Dimon is likely to receive about $23 million for 2011, people familiar with the plans said in January. Citigroup Inc., the third-biggest U.S. bank, awarded CEO Vikram Pandit $14.9 million. To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net. STRQ To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-03-08 | Bloomberg | Scor Is Said to Be Lead Bidder for Aegon's Transamerica Re Unit Over RGA | Scor SE (SCR) , France ’s largest reinsurer, is in talks to buy Dutch rival Aegon NV (AGN) ’s Transamerica Reinsurance unit, said four people with knowledge of the matter. A deal for the U.S.-based business, which had a book value of 1.6 billion euros ($2.2 billion) as of 2009, may still be weeks away, said the people, who spoke on the condition of anonymity because the talks are private. Scor has emerged as the lead bidder over Reinsurance Group of America Inc. (RGA) , one of the people said. Scor Chief Executive Officer Denis Kessler has been seeking to expand the Paris-based company’s life-reinsurance business, which helps insurers pool their risks and accounted for about 40 percent of 2010 operating profit. Kessler agreed last month to sell the company’s U.S. fixed-annuity unit to free up capital for its “core” life-reinsurance operations. “We don’t know if Transamerica Re satisfies the acquisition criteria” of Scor, Kessler said today on a conference call with reporters. He declined to comment on whether the company is in talks to buy Transamerica Re. Scor may consider purchasing assets including mortality reinsurance, Kessler said. He didn’t name any takeover targets. Scor may not buy all of Transamerica Re’s assets, one person said last month. The talks may not result in an agreement. A spokesman for Aegon declined to comment. Mortality Assets Any offer by Scor would “be on part of the portfolio and essentially targeted on mortality” assets, said Jean d’Herbecourt, an analyst at CA Cheuvreux in Paris who has an “outperform” rating on Scor. Transamerica Re’s U.S. mortality business portfolio has an estimated value of about $570 million, d’Herbecourt wrote in a Jan. 4 note to investors. Scor fell 3 percent to 20.43 euros in Paris trading as of 3:13 p.m., valuing the company at about 3.84 billion euros. Aegon rose 1.7 percent in Amsterdam trading. Scor today raised its 2010 dividend after reporting fourth- quarter profit rose 64 percent. The company said it estimates about 200 million euros of total costs from natural disasters in Australia and New Zealand this year. Aegon, trying to pay back a 2008 government rescue valued at 3 billion euros, said last month it was in talks with one party on the sale of the reinsurance unit. The Hague-based company raised 903 million euros in a share sale last month, and said that the potential sale of Transamerica would cause 2011 underlying pretax profit to be negatively affected. Sale ‘Flexibility’ Aegon has “flexibility” with regard to the sale of Transamerica Re, Aegon CEO Alex Wynaendts said last month on a conference call. Aegon obtained Transamerica Re as part of the purchase of San Francisco-based Transamerica Corp. in 1999. Transamerica Re was the third-largest U.S. life reinsurer in 2009 with an 18.1 percent market share, trailing Chesterfield, Missouri-based Reinsurance Group of America and Swiss Reinsurance Co., according to the Society of Actuaries. Scor had a 2.9 percent share. To contact the reporters on this story: Zachary Mider in New York at zmider1@bloomberg.net ; Jacqueline Simmons in Paris at jackiem@bloomberg.net ; Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net. To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net |
2024-04-13 | Bloomberg | Swan Insurance of Mauritius Seeking 15% Policy Growth This Year, CEO Says | Swan Insurance Co., Mauritius’s second-largest insurer by market value, plans to boost gross premiums as much as 15 percent in 2011 by selling more policies to consumers, Chief Executive Officer Louis Rivalland said. “The corporate risk market is reaching saturation,” Rivalland said in an April 7 interview in Port Louis , the capital. “In the personal-insurance segment, there’s still progress in margins, which is why the group has positioned itself to be more visible on that side. Through a more consumer- friendly approach, we estimate growth to be between 10 to 15 percent.” Mauritius’s insurance penetration, calculated using premiums as a percentage of gross domestic product, was 2.1 percent in 2009, according to data from the Financial Service’s Commission’s 2010 statistical bulletin. That compares with 8.4 percent in the European Union, according to the Organization of Economic Co-Operation and Development’s website. About 29 percent of Mauritius’s population has life insurance. Swan is the oldest insurance company on the Indian Ocean island nation, having started operations in 1854, Rivalland said. The company provides household and vehicle insurance, while its Anglo-Mauritius Assurance Society Ltd. unit deals with life insurance, pensions, actuarial and investment business. Mauritius Union Assurance Co. (MUA) is the nation’s biggest insurer. Swan’s gross premium income advanced 14 percent to 2.9 billion rupees ($103.9 million) in the year through December 2010, while profit rose 5.2 percent to 203.7 million rupees, according to a statement published on the Stock Exchange of Mauritius’s website on March 31. The insurer plans to expand in Africa following a venture in the Seychelles, an Indian Ocean archipelago, where it operates in partnership with the state-owned pension fund. “We’re working to reduce dependency on our domestic market, by scouting for opportunities in mainland Africa, India and Europe to some extent,” Rivalland said, without giving further details as talks are still ongoing. To contact the reporter on this story: Kamlesh Bhuckory in Port Louis via Johannesburg at 1933 or gbell16@bloomberg.net To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net |
2024-05-09 | Bloomberg | Standard Chartered’s Wasim Sees Singapore Islamic Market Growth | Wasim Saifi, Singapore-based global head of Islamic and consumer banking at Standard Chartered Plc (STAN) , comments on the city-state’s development of Islamic finance in an e-mailed response to questions. Singapore will host the second World Islamic Banking Conference (Asia Summit) from June 8 to June 9. On Singapore’s attempts to grow Islamic finance: “With its role as a major financial centre, Singapore is very well positioned to leverage its considerable talent to help innovate Islamic wealth management. “I believe that once Islamic products are launched in Singapore demand will be created, not only from the domestic population but also from the substantial offshore business which originates from Southeast Asia and South Asia. “However, the build-up of the business is likely to be more gradual than in other Islamic markets in the region and hence banks are probably evaluating whether the opportunity justifies the investment.” On the bank’s plans for Shariah-compliant products in Singapore: “We’re currently focusing our efforts on the creation of Islamic wealth management products which can be offered to our customers in key Islamic markets of South and Southeast Asia , and the Middle East. “We are looking to see how we can work with partners who already work closely with us in the conventional space, and we can use their expertise combined with our Islamic structuring capabilities and our substantial Islamic customer base across several markets to help bridge the current product gaps in the market.” To contact the reporter on this story: Suryani Omar in Jakarta at somar6@bloomberg.net ; To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net |
2024-01-10 | Bloomberg | UniCredit Share Plunge Seen Deterring Banks in Europe From Selling Stock | A 45 percent drop in UniCredit SpA (UCG) shares over four days after Italy’s biggest bank announced a rights offer may deter European lenders from asking investors for help to meet requirements that they replenish capital. “Every bank will be trying to avoid doing a rights issue even more now,” said Peter Braendle, a fund manager at Swisscanto Asset Management in Zurich. “The decline is really amazing. It doesn’t send a good signal.” Shares of Milan-based UniCredit closed at a 23-year low of 2.286 euros yesterday after posting an unprecedented decline since the lender set the terms of its 7.5 billion-euro ($9.6 billion) stock sale on Jan. 4. Today, the shares rose as much as 7.8 percent and were 5.2 percent higher at 2.40 euros at 11:27 a.m. in Milan. The bank is seeking buyers for new shares at a discounted price of 1.943 euros apiece. The offering, which runs through Jan. 27, was guaranteed by a group of 26 underwriters, led by Bank of America Corp. and Mediobanca SpA (MB) , which have agreed to buy any leftover stock. UniCredit decided to sell new shares after the European Banking Authority gave the region’s lenders until June 30 to raise 115 billion euros to increase core Tier 1 capital to 9 percent as a buffer against the sovereign-debt crisis. The EBA set a Jan. 20 deadline for banks to submit money-raising plans to supervisors. Those that fail to raise enough capital on their own will have to turn to their governments, or, as a last resort, the European Financial Stability Facility. ‘Huge Challenge’ The rights to buy new stock rallied 52 percent today after sliding 65 percent yesterday, their first day of trading. Banks are selling profitable businesses and curbing lending to improve capital ratios and avoid government bailouts, even after the European Central Bank provided unprecedented three- year loans to avert a credit crunch. Italian banks borrowed 210 billion euros from the central bank in December from 153.2 billion euros in November, Bank of Italy data shows. Italian banks are struggling to attract foreign capital as debt contagion threatens to engulf the nation and drive the economy deeper into contraction. The lenders’ biggest investors, Italy’s banking foundations, are strapped for cash. “The sharp fall in UniCredit’s stock underscores the huge challenge for Italian and euro-zone banks to raise fresh money from shareholders,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “As long as Italy’s problems loom large in the minds of investors, it will be extremely difficult for other Italian lenders to raise equity.” Santander, Commerzbank UniCredit was told last month by the EBA to raise 8 billion euros in additional capital, the lender said. Banca Monte dei Paschi di Siena SpA , Italy’s third-largest bank, said it has a capital shortfall of 3.3 billion euros. The shares have dropped 24 percent since Jan. 4, valuing the bank at 2.27 billion euros. Unione di Banche Italiane ScpA said it needs 1.4 billion euros, and Banco Popolare SC (BP) requires 2.7 billion euros to comply with the EBA’s target. The credit rating of Italy, along with that of France , Germany and a dozen other euro-zone countries, was put under review for a possible downgrade by Standard & Poor’s on Dec. 5. Spain ’s Banco Santander SA (SAN) , which had a capital shortfall of 15.4 billion euros, the largest under the latest round of EBA stress tests, avoided tapping shareholders in part by exiting profitable operations outside its home market. Santander said yesterday it had plugged the capital gap by selling assets and swapping preferred shares for stock. Commerzbank Outlook Commerzbank AG (CBK) , Germany’s second-largest bank, needs 5.3 billion euros in capital, the most among the six German lenders deemed to have a deficit. The Frankfurt-based firm is fighting to avoid a second taxpayer-funded rescue by lowering costs, disposing of assets and retaining earnings. “Capital raising” is listed as an option, according to slides published late yesterday for a presentation that Eric Strutz , the bank’s chief financial officer, was scheduled to hold in New York. Monte Paschi said in December that the EBA’s target is “not appropriate” for retail banks. The Siena, Italy-based lender is considering measures including the conversion of hybrid bonds to core capital and changes in its accounting methods to meet the threshold. The firm is weighing the sale of assets and securitization transactions for as much as 1.8 billion euros, La Stampa newspaper reported Jan. 3. For some banks, selling stock is complicated by a lack of funds among their biggest shareholders. 88 Foundations “Monte Paschi cannot ask for money from existing investors, because they haven’t got any,” said Fabrizio Spagna, chairman of Axia Financial Research. “In such a situation, it would be hard to find banks available to underwrite the offer. If the situation of Italian banks should worsen, I expect and hope that Italy intervenes to save the banks.” Fondazione Monte dei Paschi di Siena, which owns 48.4 percent of the bank, had to renegotiate an agreement with creditors last month after the Monte Paschi shares it used as collateral for the loan plunged in value. Italy’s 88 regional foundations, which oversee 49 billion euros of assets, half of which is invested in banks, have backed banks’ capital-raising efforts over the past four years. Italian lenders had called for more time to meet the mid- 2012 deadline for raising the money. The EBA capital measures are inappropriate in their “method, merit and timing,” Giovanni Sabatini, director general of Italy’s banking association, said Dec. 6. Book Value Banks should look to the private, rather than the public, sector to bolster reserves by cutting bonuses, retaining earnings or issuing shares, the EBA said in a Dec. 9 statement. Regulators won’t allow firms to cut lending to companies to meet the 9 percent capital requirement, the agency said. “Only the narrowest of actions” to run down loans and other assets will be allowed, the EBA said. Capital requirements for banks are set as ratios of their reserves compared with assets weighted according to their riskiness. Regulators can make an exception if a bank is transferring part of its loan book to another company, so that overall lending to the real economy isn’t reduced, the EBA said. UniCredit, which holds about 39 billion euros of Italian sovereign debt, will need to convince investors that its current valuation of 0.18 times tangible book value doesn’t reflect the bank’s potential. The stock slide since Jan. 3 was caused by “technical factors” and other issues not directly related to the bank itself, UniCredit Chief Executive Officer Federico Ghizzoni told employees yesterday. UBS AG analysts today upgraded their rating on UniCredit to “buy,” citing the stock’s slide and the bank’s measures to reduce the profitability gap with other lenders, according to a note sent to clients today. UBS is among the group of banks that have guaranteed the offer. “With every quarter that the economy worsens, it reflects on banks’ balance sheets,” said Joao Soares of Bain & Co., who has advised Italian, Irish and Portuguese banks. “We’re in a spiral. As things stand right now the situation is more likely to deteriorate than improve. It would be very beneficial to banks to get more time to raise capital.” To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net ; Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-04-05 | Bloomberg | U.S. Nuclear Output Falls to Lowest in Year as PPL Shuts Plant | U.S. nuclear-power output fell to the lowest level in a year as PPL Corp. (PPL) shut the Susquehanna 2 reactor in Pennsylvania , the Nuclear Regulatory Commission said. Power generation nationwide decreased by 655 megawatts, or 0.9 percent, from yesterday to 76,185 megawatts, or 75 percent of capacity, the smallest amount since April 5, 2010, according to a report today from the NRC and data compiled by Bloomberg. Twenty-four of the nation’s 104 reactors were offline. PPL closed the 1,140-megawatt Susquehanna 2 reactor after it was operating at 88 percent of capacity yesterday. Another unit at the site, the 1,149-megawatt Susquehanna 1, was operating at full capacity. The plant is located in Luzerne County, 50 miles (80 kilometers) northwest of Allentown. Duke Energy Corp. (DUK) started the 1,100-megawatt McGuire 2 in North Carolina and boosted the reactor to 10 percent of capacity. Another unit at the site, the 1,100-megawatt McGuire 1, is operating at full power. The plant is located 15 miles north of Charlotte. Progress Energy Inc. (PGN) said in a statement late yesterday it remained unclear when the 838-megawatt Crystal River reactor in Florida will start up as it conducts an engineering analysis of concrete damage, or “delamination,” in the containment building. “We are doing a careful and systematic review of the new delamination and the options to return the plant to service,” Vincent Dolan, chief executive officer of Progress Energy Florida, said in the statement. “The company cannot estimate a return-to-service date.” Startup Delayed The unit has been shut for repairs since September 2009. The utility said in August that the reactor would start in the fourth quarter of 2010, then in November delayed that until the first quarter of this year. The plant is located 70 miles north of Tampa, Florida. The damage occurred during maintenance to replace steam generators, when crews created an opening in the structure that caused separation of a portion of the concrete at the periphery of the containment building. Raleigh, North Carolina-based Progress spent about $150 million on the repair and $290 million on replacement power costs to Dec. 31, it said in yesterday’s statement. Insurance covered $181 million, the company said. NextEra Energy Inc. (NEE) boosted the 839-megawatt Saint Lucie 1 reactor in Florida to 92 percent of capacity from 80 percent yesterday. Another reactor at the plant, the 839-megawatt Saint Lucie 2, was shut. The station is located about 45 miles north of Palm Beach. Georgia Reactor Southern Co. (SO) increased output from the 1,109-megawatt Vogtle 1 reactor in Georgia to 87 percent of capacity from 80 percent yesterday. The unit is returning from an outage that began March 7. The plant is located 26 miles southeast of Augusta. Another reactor at the site, the 1,127-megawatt Vogtle 2, is operating at full capacity. FirstEnergy Corp. (FE) increased output at the 1,235-megawatt Perry nuclear reactor in Ohio to 86 percent of capacity from 80 percent yesterday. The plant is located on Lake Erie about 35 miles northeast of Cleveland. FirstEnergy is based in Akron, Ohio. Some reactors close for maintenance and refueling during the spring and fall in the U.S., when demand for heating and cooling is lower. The outages can increase consumption of natural gas and coal to generate electricity. The average U.S. reactor refueling outage lasted 41 days in 2009, according to the Nuclear Energy Institute. To contact the reporter on this story: Colin McClelland in Toronto at cmcclelland1@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net . |
2024-02-01 | Bloomberg | Cigarettes Are Safe as Long as You Just Invest: Riskless Return | Tobacco companies handed investors the best returns in the last decade when adjusted for volatility, and analysts at BNY Mellon Wealth Management and Janney Montgomery Scott LLC say that will continue as profits prove resilient amid economic turmoil. The BLOOMBERG RISKLESS RETURN RANKING shows the MSCI World Tobacco Index had the highest return out of 67 groups in the MSCI World Index (MXWO) in the 10 years through 2011. The tobacco gauge, which comprises eight companies including Philip Morris International Inc. (PM) and Japan Tobacco Inc. (2914) , advanced 13.3 percent after taking into account price swings, almost five times the gain of the broader measure. Tobacco stocks brushed off surging volatility during the dot-com tumble, the worst financial crisis since the Great Depression and Europe ’s debt crisis, because smokers are reluctant to scale back when cigarette prices rise or the economy struggles, so companies can give cash back to investors at a stable rate. The industry, which fended off multibillion dollar lawsuits over the past two decades, will weather more regulation and a review of whether to ban menthol, said Murray Kessler, head of Lorillard Inc. (LO) , maker of Newport, the top- selling U.S. menthol cigarette. “Will there be increased smoking restrictions and new rules? Yes,” Kessler said in an interview from Greensboro, North Carolina, where his company is based. “Underneath it all I expect a very stable cash flow and an ability to reward our shareholders.” Beating Retailers Tobacco’s risk-adjusted return over the past decade was 3.6 percentage points more than the next best performer, Internet and catalog retailers, and 4.2 percentage points more than the No. 3 industry, road and rail companies. The MSCI World Index returned 2.8 percent on that basis. The risk-adjusted return, which isn’t annualized, is calculated by dividing total return by volatility, or the degree of daily price-swing variation, giving a measure of income per unit of risk. While Internet retailers produced the highest total return over the past decade, their volatility was more than 50 percent greater than that of tobacco stocks. “Investors are willing to pay a premium for stability,” James Hallisey, a New York-based consumer analyst at BNY Mellon (BK) Wealth Management, which oversees about $168 billion, said in a telephone interview on Jan. 24. “Tobacco stocks with their strong, stable free-cash flow and high dividend yields are attractive” in an environment with “geopolitical risks, commodity inflation and currency fluctuations.” Steady Gains The Chicago Board Options Exchange Volatility Index, or VIX, rose to a 29-month high of 48 last year on Aug. 8 after Standard & Poor’s cut the U.S.’s AAA credit rating. Volatility reached a record in November 2008 after Lehman Brothers Holdings Inc. (LEHMQ) collapsed, resulting in the biggest U.S. bankruptcy. A higher volatility means the price of an asset can swing dramatically in a short period of time, increasing the potential for unexpected losses compared with a security whose price moves at a steady rate. Cash flow from operations at tobacco companies has gained at a more stable pace than at peers. Cash flow from operations growth in the non-tobacco companies in the past 5 years was almost twice as volatile as in the tobacco industry, according to data compiled by Bloomberg. They were also more profitable and returned more money to investors. Tobacco companies globally with at least $1 billion in market value had a median dividend yield of 5.1 percent in their latest fiscal years, compared with 1.5 percent for non- tobacco companies. The gross margin was 45 percent for the tobacco companies, and 34 percent for others. Threefold Gain The global tobacco gauge more than tripled in the last decade on an absolute basis, even as the S&P GSCI Index (SPGSCI) of 24 raw materials surged 281 percent and the global economy suffered a contraction in 2009. The MSCI World, which tracks equities in developed nations, advanced 18 percent during the same time, excluding dividends, the fourth-smallest return in a 10-year period since 1970, Bloomberg data show. Bears say valuations are stretched and prices may become vulnerable. The tobacco index’s price-earnings ratio is 15.9, compared with the full measure’s multiple of 13.4. The group rallied 27 percent last year as investors sought dividend-paying stocks insulated from Europe’s debt crisis, according to Christopher Growe , an analyst at Stifel Nicolaus & Co. in St. Louis. ‘Not as Cheap’ “It’s hard to sit here and argue that” tobacco stocks are cheap, Dmitry Khaykin, a New York-based fund manager who helps oversee $4.5 billion for the Large-Cap Value Strategy Fund at Clearbridge Advisors, a unit of Legg Mason Inc. (LM) “They’re still very attractive given the stability of the business and compared with the alternatives in the marketplace but they’re certainly not as cheap as they used to be.” The four largest U.S.-based tobacco companies -- Philip Morris , Altria Group Inc., Reynolds American Inc. (RAI) and Lorillard |
2024-05-21 | Bloomberg | CertusBank Buys Two Failed Lenders as 2011 Bank Toll Reaches 43 | CertusBank, a South Carolina lender run by former Bank of America Corp. and Wachovia Corp. executives, acquired two shuttered Georgia lenders and Columbia Banking System Inc. (COLB) bought one in Washington as property price declines continue to imperil community banks. Columbia Banking, the $4.3 billion lender based in Tacoma, Washington, purchased Summit Banking Co., and CertusBank bought Macon-based Atlantic Southern Bank and First Georgia Banking Co., of Franklin, according to statements yesterday on the Federal Deposit Insurance Corp. website. The three failures drained $445.7 million from the FDIC deposit-insurance fund. “We’re truly excited for CertusBank to extend its presence into Georgia and northeast Florida ,” Milton H. Jones Jr., CertusBank’s Chairman and Chief Executive Officer, said in a statement. “Our footprint covers some of the most economically diverse and promising cities in the country, and we look forward to being an integral part of the communities we serve.” Banks are closing under stress from commercial real estate loans, tied to property values that fell as much as 45 percent from the October 2007 peak through last August, according to Moody’s Investors Service. More than 360 lenders have been closed since the start of 2008, including 43 this year, the FDIC said. Columbia Banking purchased more than $142 million in assets from Burlington’s Summit Banking, which was closed by state regulators, the FDIC said. Columbia paid a 0.75 percent premium for more than $130 million in deposits. $1.4 Billion CertusBank, of Easley, South Carolina , picked up more than $1.4 billion in deposits when Georgia banking officials closed First Georgia and Atlantic Southern, according to the FDIC. With the acquisitions, CertusBank has $1.8 billion in assets and at least 32 branches, including 25 in Georgia, six in South Carolina and one in Florida, according to the statement and FDIC data. CertusBank is owned by Blue Ridge Holdings Inc., which is run by Jones and was seeking $1 billion to buy failed banks last year. The group bought CommunitySouth Bank & Trust of Easley in January. Jones retired from Bank of America in September 2009 as Georgia market president. Blue Ridge’s organizers also included Edward Brown III, former president of corporate and investment banking at Bank of America; Walter Davis, former executive vice president of retail credit and direct lending at Wachovia, and Charles Williams, former chief administrative officer of Bank of America’s capital markets unit. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-07-19 | Bloomberg | Reinsurance Group Falls as Australia Claims Fuel Loss | Reinsurance Group of America Inc ., the reinsurer formerly owned by MetLife Inc. fell the most since October as it swung to a loss on higher-than-expected costs from disability coverage in Australia. Reinsurance Group dropped 7.3 percent to 67.95 at 4:15 p.m. in New York. The Chesterfield, Missouri-based company has climbed 27 percent this year. The second-quarter net loss was $49.6 million, compared with profit of $141.1 million a year earlier, the company said in a statement yesterday. Results included costs of $184 million to increase claims liabilities in Australia. The company had previously said results would be posted on July 25. “The charge was particularly surprising and disappointing given management’s expectation from the May investor day that Australia would post a modest profit in 2013,” Keefe, Bruyette and Woods analysts led by Jeffrey Schuman said in a research note today. They cut their price target to $74 a share from $81. Chief Executive Officer Greig Woodring said the company would be “extremely selective” in the Australia group market as it works with insurers to assess the risks. Reinsurers help primary carriers shoulder losses. “We have just completed a comprehensive claims analysis within the last week, and that analysis indicates a more dramatic deterioration than we previously anticipated,” Woodring said in the statement. “The current environment makes it very difficult to price new business with any degree of confidence.” To contact the reporter on this story: Megan Hickey in New York at Mhickey18@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-01-20 | Bloomberg | Talanx Agrees to Purchase KBC’s Polish Insurance Division for $1 Billion | Talanx AG bought Poland ’s Towarzystwo Ubezpieczen i Reasekuracji Warta SA from KBC Group NV for 770 million euros ($999 million), beating rivals in a bid to expand in eastern Europe’s largest insurance market. When the purchase is completed in the second half of 2012, Talanx’s Japanese partner Meiji Yasuda Life Insurance Co. (0017) will take over 30 percent of Warta, Poland’s second-largest insurer, the Hanover, Germany-based firm said in a statement today. Talanx, Germany ’s third-biggest insurer led by Chief Executive Officer Herbert Haas, sold a 300 million-euro bond to Meiji Yasuda (0017) in 2010, which will be converted into shares in case of an initial public offering the German insurer has been considering for more than a decade to fund international expansion. Poland, central and eastern Europe ’s biggest economy, accounts for 40 percent of insurance premiums in the region. “Through the acquisition of Warta we are participating to a much greater extent in the further development of this highly dynamic insurance market,” Talanx management board member Torsten Leue said. “We are making a decisive step to reach our strategic growth target.” KBC rose as much as 10 percent in Brussels trading and was up 4 percent at 12.04 euros at 12:14 p.m., giving the company a market value of 4.3 billion euros. Other Bidders Vienna Insurance Group AG (VIG) and Zurich Financial Services AG (ZURN) were the leading bidders for Warta, according to a Dec. 14 report by Polish newspaper Rzeczpospolita, while Talanx, Allianz SE (ALV) , Assicurazioni Generali SpA (G) were also shortlisted. Vienna Insurance CEO Guenter Geyer said in October that he was interested in Warta. Warta is the second Polish takeover announced by Talanx within two months, after the company said in December that it will pay 912 million zloty ($275 million) for a controlling stake in the insurer Europa SA. Meiji Yasuda will buy a stake in Europa from minority shareholders in a public offer. The German insurer is seeking to expand its retail business in markets such as South America , eastern Europe and Turkey, as well as its industrial insurance arm. The company’s past acquisitions include Deutsche Postbank AG’s insurance units, which it bought for 550 million euros in 2008, the 2005 purchase of Brazilian property and casualty insurer HSBC Seguros and the 2006 takeover of Turkey ’s Ihlas Sigorta AS. Investment Plans Talanx will continue working with Warsaw-based Warta’s existing management team, CEO Haas said. “We plan to invest further in the business, maintaining each of the subsidiaries and further improving the service and product offer to the clients,” he said in the statement. Warta, Poland’s second-largest insurer after state- controlled PZU SA, has 1.5 million clients and premiums of 3.6 billion zloty in the first nine months of last year. Earnings at Polish insurers fell 13 percent to 5.21 billion zloty over that period. The acquisition is among the biggest in Poland’s financial- services market after Banco Santander SA, Spain ’s biggest bank, last year completed a purchase of Bank Zachodni WBK SA for 2.9 billion euros. KBC, the recipient of 7 billion euros in Belgian government rescue funds during the financial crisis, last year got European Commission approval to sell Warta as well as its 80 percent stake in Kredyt Bank SA. KBC Capital Boost The sale of Warta is expected to release almost 700 million euros in capital for KBC based on figures at the end of September, the company said in a separate statement. The sale will boost KBC’s earnings by about 300 million euros at the time of closing of the transaction, the Brussels-based company said. “Taking the decision to divest Warta was a very difficult one, especially in view of its profitable growth in recent years,” said Jan Vanhevel, CEO of KBC. “This divestment releases a significant amount of capital and further strengthens the KBC group, with its focus on its core bancassurance expertise and markets and with its reduced risk profile.” Talanx, owner of a 50.2 percent stake in Hannover Re (HNR1) , is fully owned by German mutual insurer HDI Haftpflichtverband der Deutschen Industrie VaG. It is working with Deutsche Bank AG (DBK) on an IPO as it forges ahead with plans for a share sale this year, three people with knowledge of the matter said earlier this month. The Frankfurt-based bank will help prepare the listing alongside Rothschild, which was mandated in April as the IPO adviser. An IPO may raise between 1 billion euros and 1.5 billion euros, depending on market conditions, and would take place in the second quarter at the earliest, some of the people said. To contact the reporters on this story: Oliver Suess in Munich at osuess@bloomberg.net ; Marta Waldoch in Warsaw at mwaldoch@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net |
2024-12-22 | Bloomberg | MBIA Ratings Cut By S&P on Higher Potential CDO Losses | MBIA Inc. and two bond insurance units, had their ratings cut by Standard & Poor’s, which cited “significantly higher” projections of potential losses and uncertainty that the company’s split of its businesses will hold up in court. MBIA Insurance Corp.’s credit ratings were cut four levels to B from BB+, dropping them to five steps below investment- grade. Ratings for National Public Finance Guarantee Corp., the unit MBIA created to split off its municipal bond guarantees in an effort to jumpstart that business, was reduced two levels to BBB from A, and parent MBIA Inc.’s rating was lowered to B- from BB-, the New York-based rankings firm said today in a statement. A measure of MBIA Insurance’s potential losses in a “stressed environment” from guarantees on residential and commercial mortgage debt “are now significantly higher than previously projected and significantly exceed the company’s capital resources,” S&P analysts led by Dick Smith in New York said in the statement. S&P cut the municipal bond insurer because of litigation from banks and policyholders challenging MBIA’s split of the business from its guarantees on mortgage debt. “As long as that litigation is unresolved, we believe there is a risk that the two companies could be required to be recombined or that National would be required to bolster MBIA Insurance’s capital,” the analysts wrote. MBIA spokesman Kevin Brown said the company is confident it will win the court case, “ultimately leading to National re- establishing its leadership position in the public finance market.” In an e-mailed statement, he said, “The rating action on National was driven by the rating of MBIA Insurance Corp. rather than any material negative change at National itself.” The rankings firm increased its projections for potential CDO losses after adjusting the methods it uses to assess the debt. “However, these loss expectations do not require immediate cash outflows, and the company has adequate liquidity for the next few years,” the S&P analysts wrote. To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-05-10 | Bloomberg | Euro Holds Near Three-Month Low on Greece Stalemate | The euro traded 0.2 percent from a more-than three month low as Greece remained divided on forming a new government, stoking concern that another election could set the stage for the country’s exit from the currency union. The 17-nation euro remained lower, extending its longest losing streak since 2008, before French data that may show industrial production declined in March as the region’s debt crisis weighed on growth. Demand for the yen was supported after Japan posted a second monthly current-account surplus. The Australian dollar traded near the weakest level this year before the statistics bureau releases jobs data for April. “The market has started anticipating Greece’s exit from the euro,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “Investors are also concerned that the Greek shock will spread to other periphery nations like Spain. Selling pressure for the euro remains intact.” The euro was little changed at $1.2939 as of 10:22 a.m. in Tokyo from $1.2929 yesterday, when it touched $1.2912, the lowest level since Jan. 23. The shared currency added 0.1 percent to 103.08 yen from yesterday, when it fell to 102.76, the least since Feb. 16. The yen was little changed at 79.67 per dollar from yesterday when it strengthened 0.3 percent. Australia ’s dollar bought $1.0056 from $1.0051 yesterday, when it fell as much as 1 percent to $1.0021, the weakest since Dec. 20. Evangelos Venizelos , Greece’s Pasok party leader and former finance minister, said he’ll try to form a government when he receives a three-day mandate from President Karolos Papoulias today. Pasok yesterday rejected terms for a government set by Alexis Tsipras of Greece’s anti-bailout Syriza party which then gave up its bid to build a coalition. Greece Exit Euro-area leaders from the European Central Bank ’s Joerg Asmussen to German Finance Minister Wolfgang Schaeuble raised doubts that Greece can stay in the monetary union. “If Greece decides not to stay in the euro zone, we cannot force Greece,” Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels. Asmussen, a member of the ECB’s executive board, told Handelsblatt on May 8 that for Greece “there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone.” More than 50 percent of investors in a Bloomberg poll predict the 17-nation euro area is on the verge of losing one of its members as deadlock in Greece’s political turmoil threatens to push the debt crisis to new depths. Fifty-seven percent of the 1,253 investors, analysts and traders who are Bloomberg subscribers said at least one country will abandon the euro by year-end. French Debt The majority of respondents to the May 8 survey identified deterioration in Europe as a large threat to the world economy and were less willing to buy French debt as President-elect Francois Hollande takes power. In France , industrial production probably fell 0.6 percent in March from the previous month, when it gained 0.3 percent, according to economists surveyed by Bloomberg. The national statistics office Insee in Paris will announce data today. The euro has weakened 4 percent over the past six months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.5 percent, and the yen dropped 1.3 percent. ‘Risk-Off Environment’ “The market is likely to stay in a risk-off environment because of uncertainty in Europe, and the bias is for haven currencies to be bought, such as the dollar and yen,” said IG Markets’ Ishikawa. Japan’s Nikkei 225 Stock Average (NKY) fell 0.4 percent, after earlier dipping below 9,000 for the first time in three months. The yen traded as strong as 79.61 per dollar after Japan released trade data for March. The nation had a current-account surplus of 1.59 trillion yen ($20 billion) for the month, the Ministry of Finance said today in Tokyo. The median economist estimate in a survey by Bloomberg News was for a surplus of 1.43 trillion yen. Gains in the yen were limited as the currency’s 14-day relative strength index against the euro rose to 72 yesterday, above the 70 level some traders see as signaling an asset may reverse direction. To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net ; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net |
2024-01-08 | Bloomberg | Hotel Deals Forecast to Rise in ’13 on Debt Availability | Hotel deal volume probably will rise to $32 billion globally this year as sovereign-wealth investors, mutual funds and insurance companies provide the most debt for transactions since 2007, Jones Lang LaSalle Hotels said. Alternative lenders will provide senior and mezzanine debt following cutbacks by large banks, helping to increase lodging deals by an expected 6.7 percent, the real estate services firm said in its annual “Hotel Investment Outlook” report. “When a hotel asset is trying to secure debt, there’ll be five-plus offers from lenders, as compared to one or two a year ago,” Mark Wynne-Smith, Jones Lang LaSalle Hotels’ London-based chief executive officer, said in a telephone interview. “There’s a lot of competition again.” Private-equity firms and real estate investment trusts will continue to be the most active hotel buyers, especially in the U.S., where about 50 percent of transactions are expected to take place this year, Wynne-Smith said. Europe will be the second most active region, followed by Asia , he said. Transaction volume, which is forecast to be 74 percent less than 2007’s record $122.3 billion, remains damped by hotel owners’ reluctance to put a large number of properties up for sale and “risk reversing the price recovery,” Wynne-Smith said. He said deals probably will climb to about $50 billion by 2016, “a more realistic level” for a healthy market. “I think 2007 was a one-time fluke,” Wynne-Smith said. “Looking back to before the peak, transaction volumes of $50 to $70 billion in very good years were much more realistic. I believe that’s our future.” Jones Lang LaSalle Hotels is a unit of Chicago-based Jones Lang LaSalle Inc. (JLL) , the second-largest publicly traded commercial property broker, after Los Angeles-based CBRE Group Inc. (CBG) To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net |
2024-05-10 | Bloomberg | Goldman Sachs Shorts Spanish Debt, Buys Italy’s | Goldman Sachs Group Inc. (GS) , the fifth- biggest U.S. bank by assets, positioned itself for a decline in the value of Spanish government bonds and a rally in Italian sovereign debt during the first quarter. The firm’s “market exposure” to Spanish government bonds shifted to a negative $446 million in March from a positive $151 million in December, the New York-based firm disclosed in a quarterly regulatory filing. For Italian sovereign debt, the exposure surged to $2.51 billion in March from $210 million in December, according to the filing. Goldman Sachs discloses the firm’s credit and market stance for Italy, Greece , Ireland, Portugal and Spain each quarter because those five countries are viewed by investors as Europe ’s riskiest. Concern about the continent’s financial crisis has reignited since the end of the quarter as Greek voters balked at austerity measures and Spain prepared a fourth attempt to overhaul its financial system. “Credit exposure” shows the risk from a default or credit deterioration of the counterparty or borrower, and “market exposure” is the potential loss tied to price changes. Total credit exposure to the five nations fell 14 percent in the first quarter to $2.52 billion from $2.93 billion, according to the filing. Total market exposure more than quadrupled to $2.68 billion from $585 million. Spanish Securities In Spain, Goldman Sachs’s market exposure to credit derivatives on sovereign debt was negative $515 million at the end of March, compared with negative $550 million at the end of December. The total market exposure on Spanish sovereign debt was negative $961 million at the end of March, more than double the negative $399 million at the end of December. By contrast, Goldman Sachs’s market exposure to non- sovereign Spanish securities climbed to $911 million from negative $45 million at the end of December. The firm had $1.46 billion of non-sovereign Spanish bonds and $234 million of equities, offset by a negative $782 million from credit derivatives , according to the filing. Derivatives include credit-default swaps, which act like insurance to reimburse a bondholder when a borrower fails to meet its obligations. Goldman Sachs’s credit exposure to Spanish government debt fell to $68 million in March from $88 million in December, while the firm’s position in non-sovereign Spanish debt climbed to $571 million from $423 million, according to the filing. The firm had “market exposure” of $2.51 billion on Italian government bonds and $170 million on credit derivatives at the end of March. Italian Markets Market exposure to non-sovereign Italian securities was negative $285 million at the end of March, as a negative $907 million exposure from credit derivatives more than offset $367 million of non-sovereign Italian bonds and $255 million in Italian equities. Total credit exposure to Italy fell to $1.17 billion in March from $1.23 billion at the end of December. While sovereign credit exposure to Italy rose to $302 million from $259 million, non-sovereign credit exposure slid to $867 million from $966 million. The yield on Spanish 10-year bonds, which move in the opposite direction of prices, was little changed at 5.33 percent at the end of March compared with 5.34 percent at the end of December. It has since surged to 5.97 percent. Italy’s 10-year bond, after dropping to a yield of 5.10 percent from 7.03 percent in the quarter, has since risen to 5.50 percent. Yields on two-year Spanish debt have climbed to 3.51 percent from 2.47 percent at the end of March, while two-year Italian bonds are yielding 2.95 percent compared with 2.86 percent. To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . |
2024-10-01 | Bloomberg | Weil on Finance, P.M.: Government Closes, Life Goes On | Greetings, View fans. Time for more fun with annotated links. Here you go. The boom-bust-flip phenomenon New York Times economics reporter Catherine Rampell has a good piece today about the housing market's resurgence and how corporate investors that bought at the trough are making a killing. Nice stat here, from Redfin, an online real estate listings site: "Of the 87,062 foreclosures in the last five years that were bought by corporate investors and have been flipped, about a quarter were sold for at least $100,000 more than what the investor originally paid." Carl Icahn had Tim Cook over for dinner last night Icahn said it was "a cordial dinner" with Cook, the chief executive officer of Apple Inc. (The intrigue!) "We pushed hard for a 150 billion buyback. We decided to continue dialogue in about three weeks." So in the old days of corporate raiders, big investors used to buy new stakes, call up companies and demand to be paid greenmail to go away. Now some of them are dubbed "activists," and they call companies and demand large share buybacks to go away. As long as Icahn gets paid, he'll be happy. A New Jersey auditor gets whacked Paul Gillis, who writes the China Accounting Blog, has a good piece about the Securities and Exchange Commission's settlement with a New Jersey accounting firm, Patricio & Zhao, which was banned from auditing U.S.-listed companies for three years because of shoddy work for a Chinese reverse-merger called Keyuan Petrochemicals. He notes the Public Company Accounting Oversight Board inspected the firm a few years ago and found lots of problems, "yet until yesterday the firm continued to audit U.S. listed companies. And it was the SEC, not the PCAOB, which pulled the plug" on the firm. Plus, "we don't even know if the PCAOB was in the process of jerking P&Z's registration," because of federal secrecy laws. "Congress needs to remove these restrictions and allow the PCAOB to warn the investing public of substandard audits," he writes. And he's right. Jeffrey Gundlach becomes an ATM for bond-fund investors From Alexis Leondis of Bloomberg News: "Jeffrey Gundlach's DoubleLine Total Return Bond Fund, which has beaten 97 percent of rivals over the past three years, had its biggest net withdrawals as investors continued to flee bonds for the fourth straight month. Clients pulled an estimated $2.1 billion from the $35.1 billion fund in September, according to research firm Morningstar Inc." They figure the Fed has to start tapering its bond purchases sometime, even if it waits until after Ben Bernanke leaves office. Good thing we have the Onion on a day like today The nation has survived the government shutdown's first day and the start of Obamacare. The Onion, America's finest news source, has a Q&A explaining how the new health insurance exchanges work. For instance, how will your day-to-day life be affected under this plan? Easy: "Imagine a world with one big safety net there to catch you. Now get out there and buy that motorcycle!" (Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.) |
2024-08-30 | Bloomberg | Blackstone Said Near Takeover of Dutch Developer Multi | Blackstone Group LP (BX) ’s real estate unit is close to completing a restructuring of Multi Corp. that would give it full ownership of the debt-laden European mall developer, said two people with knowledge of the situation. Blackstone, the biggest manager of private-equity property funds, has amassed more than 90 percent of Multi’s 900 million euros ($1.2 billion) of corporate debt and a similar share of its equity in the past 15 months, according to the people, who asked not to be named because the discussions are private. The New York-based firm is in talks to buy the rest of Multi’s loans and stock from a German lender, one of the people said. Once the purchase is complete, Blackstone plans to forgive the debt and use Multi to snap up shopping malls and other retail properties across Europe. Blackstone believes Multi is in a position to capitalize on a wave of retail-property sales triggered by Europe’s economic woes, the person said. Peter Rose, a Blackstone spokesman, declined to comment on Blackstone’s investment in Multi. Multi representatives didn’t respond to an e-mail sent after regular business hours yesterday. Multi, based in Gouda, the Netherlands, owns and manages real estate throughout Europe, and the bulk of its assets are in Turkey. The largest Turkish mall landlord, Multi owns the country’s two largest retail centers, both in Istanbul, along with six malls in other cities, according to this person. Approval Won Blackstone last month won approval from the European Commission and Turkish antitrust authorities to take over Multi, and no additional government support is needed for the deal to go through, the person said. After it gains control of the company, Blackstone would merge Multi’s properties with three Turkish malls it bought last year from Dutch real estate owner Redevco BV. It paid about 200 million euros for those properties, the person said. Blackstone also would fold into Multi a 500 million-euro portfolio of retail properties it owns in Poland. If a pending deal for Blackstone to buy a group of Italian malls goes through, Multi would absorb those too, according to the person. Blackstone has paid about 500 million euros for the Multi debt and equity, the person said. It’s the second restructuring for Multi in less than two years. In December 2011, a Morgan Stanley (MS) real estate fund that had acquired the company in 2006, at the peak of the market, agreed to cede its equity stake to Multi’s lenders. The accord kept Multi’s 900 million euros of corporate debt and almost 1 billion euros of property loans intact. Blackstone, which began to acquire Multi’s corporate loans in June 2012, has now bought out the stakes of 10 of the 11 banks that financed the 2006 buyout, the people said. Those lenders included NIBC Bank NV and ING Groep NV (INGA) of the Netherlands, Germany ’s Hypo Real Estate Holding AG and U.K. banks Royal Bank of Scotland Plc and Lloyds Banking Group Plc. To contact the reporter on this story: David Carey in New York at dcarey13@bloomberg.net To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net |
2024-06-18 | Bloomberg | Fernandes Says Tune Can Repeat AirAsia’s Budget Success | As AirAsia Bhd. (AIRA) prepares to more than triple its fleet, Chief Executive Officer Tony Fernandes says he wants to match the growth of his budget airline with discount hotels, mobile phones and financial services. Tune Group , the closely held parent company of Fernandes and business partner Kamarudin Meranun, may sell stock in some of the units by the end of next year, Fernandes said. Initial public offerings are also planned for AirAsia’s Indonesian budget arm and long-haul unit AirAsia X Sdn., he said. AirAsia is the world’s fastest-growing traded airline by sales in the past five years, according to data compiled by Bloomberg. “Tune Money and Tune Hotels have the most potential,” the Malaysian entrepreneur said in a June 14 interview. “The financial services industry is complicated, just like airlines, and we are reaching a market that they generally missed and we are utilizing AirAsia’s customer base, which is huge.” The 48-year-old is targeting emerging wealth in Southeast Asia where an increasing number of its 598 million inhabitants can afford to travel and buy consumer goods such as mobile phones for the first time. Fernandes will relocate to Jakarta this month to focus on regional growth. He will also step down as CEO of his Kuala Lumpur-listed airline from June 30 to be replaced by Aireen Omar, currently regional head of corporate finance and treasury, according to an exchange filing in Malaysia today. “When you’re based in Malaysia you’ll inevitably get drawn into the Malaysian operations,” he said. “I’ll take on the regional role.” Resilient Demand Demand for budget services has so far withstood the global economic slowdown amid a protracted crisis in Europe. AirAsia’s first-quarter profit rose while full-service carriers Singapore Airlines Ltd. (SIA) and Malaysian Airline System Bhd. (MAS) posted losses in the period, citing fuel costs. AirAsia’s passenger numbers gained 12 percent in the quarter as the region’s slowing economic growth prompted more people to opt for budget travel. Tune Group is the holding company created in 2007 when the initial aviation business was extended to include hotels. It will eventually hold assets from movie production to Formula One racing and online financial services. Southeast Asia is weathering a slump in IPOs better than markets including Hong Kong , as optimism about the region’s economic outlook draws investors to offerings by companies including Felda Global Ventures Holdings Bhd., Malaysia’s biggest plantation owner, and IHH Healthcare Bhd., Asia’s largest Hospital operator. Repeating Model Asia Aviation Pcl (AAV) , the parent of AirAsia’s Thai airline, has fallen 8 percent in Bangkok after becoming the first subsidiary to begin trading last month. “The best use of capital is a repeating model,” said Fernandes, who has spent some of his wealth on buying a Formula One racing team and the English soccer club Queens Park Rangers. Most of Tune’s companies are designed to contribute to one another. Passengers booking flights online are offered travel insurance, budget bedrooms and prepaid mobile phone cards. All are available and interlinked via the Internet. “With AirAsia, he found a section of the population underserved by current flag carriers,” said Narayan Pant, a Singapore-based professor of management practice at Insead. “It’s not clear if there’s such an underserved segment in the new businesses that he’s going into.” Tune Hotels Regional Services Sdn. operates 24 budget hotels in Southeast Asia and the U.K., with deals signed with developer partners to add another 60 properties in countries including Australia , India and the Middle East, Chief Executive Officer Mark Lankester said in an interview. ‘Disastrous Start’ While international hotel operators including France’s Accor SA have set up economy brands such as Ibis and All Seasons to target budget-conscious travelers, they don’t compete in the same bargain-bucket segment as Tune. Tune Money Sdn. , an online distributor of insurance and mutual funds, got off to a “disastrous start,” said Fernandes, a trained accountant. It changed management and strategy, making about 30 million ringgit ($9.5 million) last year. “Many people who fly with us don’t have insurance, don’t have credit cards, don’t have unit trusts.” Tune Talk Sdn. is a so-called mobile virtual network operator that uses other carriers’ infrastructure for its wireless phone services. It has just broken even, he said. Of three Tune units targeted for listing, fund manager Choo Swee Kee said he’s most skeptical about Tune Talk. “Its fate could be very similar to XOX Bhd. (XOX) , another MVNO player that wasn’t very profitable at the time of listing and then the share price tanked,” said Choo, who manages about 700 million ringgit as chief investment officer of TA Investment Management Bhd. in Kuala Lumpur. Music Roots XOX has reported three straight quarterly losses and slid 80 percent in Kuala Lumpur since its trading debut a year ago. Some Tune ventures have little connection to the core tourism business. Tune Studios allows aspiring singers to record albums inexpensively. Plans are under way to start Tune Live, which would organize concerts. “All these businesses are run by different people,” said Fernandes, who like his former boss Richard Branson started out in the music industry before branching into aviation and other industries. “We are no different from a private-equity fund.” Fernandes, who previously worked as financial controller for Branson’s Virgin Records in London , has more time to expand these businesses after stepping down from Malaysian Air’s board in April and reversing a share swap following union dissent over management’s turnaround plans. Young Population Southeast Asia offers one of the fastest-growing markets for Tune’s products. Indonesia , the region’s most-populous country, has a median age of 28, compared with 36 in China , according to the Central Intelligence Agency’s World Fact Book. Tune joins furniture retailer Ikea Group and Uniqlo store- operator Fast Retailing Co. in targeting a region where gross domestic product growth exceeds 7 percent and its population is among the youngest in the world. The total GDP of Southeast Asia’s 10 nations is $1.86 trillion, more than India, and 37 percent of its residents are under 19, according to the Association of Southeast Asian Nations. Fernandes and Kamarudin bought AirAsia from DRB-Hicom Bhd., with two aging Boeing Co. 737 jets and 40 million ringgit of debt, for a token 1 ringgit, or 32 cents -- three days before the Sept. 11 terror attacks in the U.S. With a current market capitalization of 10.2 billion ringgit , it has overtaken Malaysian Air as the country’s biggest airline by value. Airline Partnerships The budget carrier may order 100 more Airbus SAS A320 jets, including options, within the next two months to facilitate growth, Fernandes said on June 13. The AirAsia group already has 300 planes booked to add to its 110-strong fleet. AirAsia is Airbus’ biggest customer for single-aisle A320s. AirAsia aims to form five budget airline partnerships in the next two years in countries including South Korea, Vietnam and China, Fernandes said. This may include the Middle East. A budget tie-up with All Nippon Airways Co. (9202) is scheduled to start flights from Tokyo ’s Narita Airport in August. Sales growth has averaged 35 percent over the past five years, according to data compiled by Bloomberg. Of 20 analysts who have updated their coverage of AirAsia’s stock in the past six months, 15 rate it the equivalent of buy and three recommend selling it, according to data compiled by Bloomberg. To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net To contact the editors responsible for this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net ; Lars Klemming in Singapore at lklemming@bloomberg.net |
2024-02-18 | Bloomberg | Treasury Notes Fall a Third Consecutive Week Amid Greek Bailout Optimism | Treasury notes fell for a third consecutive week amid speculation Greece will secure an aid package from European leaders, discouraging demand for the safest assets. Yields increased the past two days as reports showed claims for U.S. jobless benefits unexpectedly dropped last week to a four-year low and an index of U.S. leading indicators rose in January. Demand waned Feb. 16 at a Treasury auction of inflation-protected securities, raising concern yields may rise at next week’s auctions of $99 billion of U.S. notes. “The theme for the week has been generally improving U.S. economic data and middling optimism over the Greek situation, which has weighed on Treasuries,” said Larry Milstein, managing director in New York of government trading at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors. “Whether policy makers can get their act together is another question, which means any selloff will be limited.” Five-year note yields rose four basis points, or 0.04 percentage point, to 0.86 percent, according to Bloomberg Bond Trader prices. The 0.875 percent securities maturing in January 2017 fell 6/32, or $1.88 per $1,000 face amount, to 100 2/32. Yields on benchmark 10-year notes increased two basis points to 2 percent. Thirty-year bond yields were little changed at 3.15 percent. Minutes of the Federal Reserve ’s last policy meeting on Jan. 24-25 that were released Feb. 15 showed a few members of the Open Market Committee said economic conditions may warrant more asset purchases, or quantitative easing, “before long.” Central bankers adopted a plan to hold interest rates near zero at least through late 2014 to spur growth and reduce unemployment. Treasury Premium The euro crisis and the Fed’s accommodative policies have lowered the 10-year note yield by 45 basis points from where it would be otherwise, according to a Goldman Sachs Group Inc. report released yesterday. Germany , the biggest contributor to euro-area rescues, signaled this week that finance ministers may be ready to back Greece’s second bailout in two years when they meet Feb. 20 in Brussels. After a week of wrangling among euro-area officials, Chancellor Angela Merkel ’s government indicated it aims to avoid splitting the timetable of the aid and a writedown of Greek debt to private bondholders and agree to the deal as one package. “The bond market is trading as if there’s a better than 50 percent probability that a deal will get done,” said Michael Franzese , managing director and head of Treasury trading at Wunderlich Securities Inc. in New York. “The bond market is also showing signs of growth in the U.S. as the rest of Europe may go into recession.” Inflation Hedge Investors submitted orders to buy 2.46 times the amount of debt offered at the Feb. 16 sale of 30-year Treasury Inflation Protected Securities, compared with a record 3.06 times at the previous sale. The TIPS were sold at a record-low yield of 0.77 percent, the least since the government began issuing the securities in 1998. “It’s hard to see inflation of any significant magnitude coming in the U.S. for a while,” Rick Rieder, chief investment officer for fundamental fixed-income portfolios at BlackRock Inc., said in an interview yesterday on Bloomberg Television’s “In the Loop” with Betty Liu. “The Fed is going to keep moving and keep being accommodative. I think they’re ultimately going to go down the road of QE3. If inflation continues to be tame, then I think they can go down the road and focus on their statutory obligations to keep moving and get to full employment.” Consumer Prices The consumer-price index increased 0.2 percent after no change the prior month, the Labor Department reported yesterday in Washington. Economists surveyed by Bloomberg had forecast a 0.3 percent gain. Over the past 12 months, prices climbed 2.9 percent, the smallest year-to-year advance since March 2011. A measure of traders’ expectations for inflation that is tracked by the Fed has risen this year to 2.55 percent from a low of 2.42 percent in January. The five-year, five-year forward break-even rate , which projects annualized price increases over a five-year period starting in 2017, is below its 2.76 percent average over the past decade. Applications for unemployment insurance payments decreased 13,000 in the week ended Feb. 11 to 348,000, less than the lowest forecast of economists surveyed by Bloomberg News and the fewest since March 2008, Labor Department figures showed Feb. 16. The median survey estimate projected an increase to 365,000. Labor Gains The 0.4 percent increase in the Conference Board’s gauge of the outlook for the next three to six months followed a 0.5 percent rise in December, the strongest back-to-back gains in almost a year. An improvement in the labor market may help deliver the income gains needed to encourage Americans to boost spending. Assuming nonfinancial corporations are at least as healthy as they have been on average over the last 20 years, spreads should narrow by at least 50 basis points for investment-grade bonds and possibly by 100 basis points for high-yield debt, Rieder wrote in a report on the New York-based company’s website. BlackRock manages $3.51 trillion. The Bank of America index of U.S. corporate and below- investment-grade bonds yields 2.96 percentage points more than Treasuries. The spread narrowed to 2.95 percentage points on Feb. 14, the least since August. Measures of Stress Even so, some measures of stress in global credit markets have stopped easing as the rescue plan for Greece still threatens to unravel. The U.S. two-year interest-rate swap spread touched 32 basis points yesterday, the most since the beginning of the month. The measure rises when investors seek the perceived safety of government securities and falls when they favor assets such as corporate bonds. Investors demanded 2.85 percentage points of extra yield to buy 30-year bonds, which are among the securities that are the most sensitive to inflation, instead of two-year notes. The spread has averaged 2.67 points during the past five years. The U.S. will sell $35 billion in two-year notes, $35 billion in five-year debt and $29 billion in seven-year securities on three consecutive days next week starting Feb. 21. To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net Cordell Eddings in New York at ceddings@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-11-18 | Bloomberg | Obama Health-Care Law Is Unconstitutional, Republican Senators Tell Court | President Barack Obama ’s health-care overhaul is an unconstitutional exercise of congressional power, Republican senators said in a brief supporting Florida’s lawsuit challenging the law. Requiring people to purchase health care “oversteps the bounds” of the U.S. Constitution, 32 senators said today in the filing in federal court in Pensacola, Florida. The U.S.’s arguments in favor of the law are “harming the Constitution’s framework by allowing the federal government to overreach its enumerated powers and invade the legitimate province of the states,” wrote the senators, including Republican leader Mitch McConnell. U.S. District Judge Roger Vinson in Pensacola will hear further arguments next month after ruling in October that the case could go forward. The government’s expansion of powers is “simply without prior precedent,” Vinson said in October. In his ruling last month, Vinson allowed Florida to proceed on its claim that Medicaid would be expanded dramatically and the states cannot realistically opt out. He threw out Florida’s claim that the law interferes with the state’s sovereignty as an employer and the mandate for individuals to get coverage violates the right to due process of law. Florida’s suit was joined by 20 states. A separate action filed by Virginia is before a federal judge in Richmond. Already, a U.S. judge in Michigan has found the law falls within the framework of the Constitution, and U.S. District Judge Henry E. Hudson in Richmond, Virginia, has said the trial courts represent “one brief stop on the way to the Supreme Court.” Virginia and Florida each filed lawsuits within minutes of Obama signing the bill on March 23. The states claim that the federal mandate to buy health insurance goes beyond Congress’s authority. The U.S. said the provision is allowed under its power to regulate commerce because of the $43 billion in unpaid medical bills absorbed by the market each year. The case is State of Florida v. U.S. Department of Health and Human Services, 3:10-cv-00091, U.S. District Court, Northern District of Florida (Pensacola). To contact the reporter on this story: William McQuillen in Washington at bmcquillen@bloomberg.net. To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net . |
2024-12-07 | Bloomberg | Bank of Montreal's Chief Downe Says He's in No Rush to Raise Dividends | Bank of Montreal Chief Executive Officer William Downe said he’s in no rush to raise dividends at Canada’s fourth-biggest bank. “It’s all dependent upon our earnings,” Downe , 58, said today in an interview. “We’re committed to increase dividends over time, but I don’t think we’re in a rush.” Bank of Montreal kept its dividend unchanged at 70 cents for 14 quarters. The Toronto-based bank has a dividend payout target of 45 percent to 55 percent of earnings. Bank of Montreal’s dividend payout was equal to 56 percent of profit in the fourth quarter. National Bank of Canada and Canadian Western Bank announced dividend increases within the past two weeks, the first jump among the country’s lenders since Laurentian Bank of Canada announced a dividend increase in December 2009. Downe also said he expects takeover opportunities to emerge in the next year as U.S. banks consolidate. Downe said he’d consider takeovers but he doesn’t want to divert attention to those unrelated to Bank of Montreal’s areas of expertise. “We just have to focus on the Midwest of the U.S. with respect to personal and commercial banking, and wealth management on a North American basis,” Downe said. Bank of Montreal also increased its medium-term financial performance objective to 12 percent annual growth in earnings per share, up from 10 percent, on an expectation that markets will improve in a business-led economic recovery. “The headwinds have abated,” Downe said. “We’re going to see stronger economic growth in the next two or three years than we’ve seen in the previous two and three years.” To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net ; David Scheer at dscheer@bloomberg.net |
2024-05-06 | Bloomberg | Congressional Elections Will Define Next Presidency | Several presidential candidates have called the 2012 U.S. elections the most important ever. That seems a reach: more important than 1860 or 1932? Yet there is no doubt that the stakes are high this year, not just in the contest for the White House, but also in the most crucial congressional elections in memory. The U.S. faces a potential fiscal train wreck at the end of the year, when the tax cuts passed under President George W. Bush expire. This is compounded by the sunset of the extension of the debt-ceiling agreement, which mandates huge, automatic, and largely indiscriminate, spending cuts with a major focus on defense if a deficit-reduction deal isn’t reached. The outcome of the congressional elections will play a major role in the ability of a President Barack Obama or Mitt Romney to work through this morass. Hope for any deficit deal in a so-called lame duck session after the November contests probably would vanish if either party scores a convincing victory. Congress is divided: Democrats have a 53-to-47 advantage in the Senate, Republicans have a 25-seat margin in the larger House of Representatives. The battle for the House will reveal most about the mood of the electorate; the Senate contests feature higher-profile candidates. Republican Advantage In the Senate, about half of each party’s seats that are up for election are in play. Those numbers give Republicans an advantage, since they have only 10 seats up, while Democrats have 23. (Senators serve six-year terms.) The two leading U.S. election analysts, Charlie Cook and Stu Rothenberg, both suppose, as of today, control of the next Senate is about a 50-50 proposition. With such little margin, all eyes are on the Republican primary in Indiana on May 8. If six-term Republican Senator Richard Lugar wins, he’s almost a shoo-in for the general election. If he’s defeated by a conservative challenger, Richard Mourdock, the Democrats believe their candidate, Congressman Joe Donnelly, has a real chance to win the Senate seat in November. This would confirm movement that has tilted slightly more Democratic in recent months. The unexpected retirement of Republican Senator Olympia Snowe of Maine probably means former Governor Angus King, an independent who likely would caucus with the Democrats, will take that seat. The presidential contest will affect some congressional races. In Virginia , two former governors, Democrat Tim Kaine and Republican George Allen, are competing for an open Senate seat; polls consistently show this tight race closely tracking the presidential one. Yet few doubt that Obama will clobber Romney in the Republican’s home state of Massachusetts. At the same time, Republicans are cautiously optimistic that their incumbent senator there, Scott Brown , will edge the Democratic challenger, the consumer-advocate Elizabeth Warren. Conversely, Democrats in Montana , which has only voted Democratic once in the last 11 presidential elections, don’t expect Obama to carry the state, but say they believe that their incumbent, Senator Jon Tester, will squeak out re-election. In the House, both Cook and Rothenberg see Republicans holding on, as of now. Both note that these races become more fluid as the election nears. Redistricting Math Calculations for the House, as is the case every decade after the census, start with drawing new districts. With the 2010 sweep, Republicans controlled most state houses and initially it was thought they could pick up as many as a dozen House seats through redistricting. Instead, says Mark Gersh, a Democratic analyst who is the foremost expert on House races, redistricting “ended up a dead heat.” This wash, he believes, means that a Democratic takeover of the House remains “uphill but doable.” The Republican assessment of redistricting isn’t much different, though the conclusions are. They argue that, even though they didn’t add seats, the party firmly protected at-risk incumbents in states such as Ohio and Pennsylvania. “We were able to shrink the battlefield,” says Paul Lindsay , a spokesman for the National Republican Congressional Committee. In addition to those incumbents, Republicans figure they need to win a half-dozen or more Democratic seats to provide a cushion. The best opportunity is North Carolina, where Republicans dominated the redistricting and believe that three Democratic seats are very vulnerable in November. Democrats controlled redistricting in California , Illinois and New York. They acknowledge that they need to capture almost half the necessary gains in those three big states to win control of the House. Although, in a good year, strategists argue, they could take over four or five Republican seats in each of the three. Some of the more appetizing takeover targets, the Democrats say, are seats Republicans won two years ago when they had a strong political wind to their back. Some rematches look particularly good. For example in Syracuse, Representative Ann Marie Buerkle defeated Democratic Congressman Dan Maffei by 648 votes in a district Obama easily carried two years earlier. This time, Democrats like Maffei’s odds of victory. There may not be a more intriguing or unlikely race than in the district centered in Salt Lake City , a bastion of conservative Mormonism. The Democrat is the six-term incumbent Jim Matheson, son of a popular Democratic governor and a Harvard graduate. Since first winning a House seat 12 years ago, he has survived Republican landslides in Utah year after year, including the 2010 Democratic debacle. His Republican opponent is even more implausible. Mia Love, a 37-year-old small-town mayor who electrified the state Republican convention with a hard-right speech that secured her a shot at an upset victory against Matheson. She is African- American, raised Catholic and who converted to Mormonism. ( Albert R. Hunt is Washington editor at Bloomberg News. The opinions expressed are his own.) Read more opinion online from Bloomberg View. Today’s highlights: the View editors on bank-capital rules and force-placed insurance ; William D. Cohan on e-mails from the fall of Lehman ; Pankaj Mishra on accusations against the Indian military ; Michael Ross on Vladimir Putin’s oil-money machinations. To contact the writer of this column: Albert Hunt in Washington at ahunt1@bloomberg.net To contact the editor responsible for this column: Max Berley at mberley@bloomberg.net . |
2024-09-16 | Bloomberg | Liberty Mutual Group Settles Suit Accusing Lawyer of Extortion | Liberty Mutual Insurance Co. settled a lawsuit the insurer filed against one of its former outside lawyers claiming he tried to extort new legal work with a threat to expose misconduct by an unidentified company executive. U.S. District Judge Richard J. Sullivan in Manhattan ordered the case dismissed after receiving a letter on Sept. 8 from Boston-based Liberty Mutual informing the court that they had reached an agreement with Michael J. Devereaux and his law firm Devereaux & Associates, according to a court filing. Liberty Mutual sued Devereaux in January, saying the New York lawyer threatened to file a suit claiming the executive had engaged in “personal misconduct” and demanded a 5 percent kickback of all fees the company paid the law firm. “We are pleased that the litigation has been resolved and that we have concluded our relationship with the Devereaux firm,” Liberty Mutual said in a statement. Devereaux didn’t immediately return a message seeking comment on the settlement. The case is Liberty Mutual Insurance Co. vs. Michael J. Devereaux & Associates PC, 11-cv-359, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-11-16 | Bloomberg | Cyprus Gets Revised Draft of Bailout Agreement, CyBC TV Reports | Cyprus has received a revised draft of the bailout agreement from international creditors that calls for 1.2 billion euros ($1.5 billion) in spending cuts, state television CyBC reported. The International Monetary Fund , the European Central Bank and the European Commission expect Cyprus to agree to scrapping the so-called 13th salary for government employees next year, a timetable for privatizations, and eliminating the government allocations to the Social Insurance Fund. The more than 7 billion-euro government debt to the Social Insurance Fund that pays pensions to workers at private companies will be written off, the Nicosia-based channel said today, without disclosing how it got the information. Cyprus, which in June became the fifth euro-area country to request international rescue, will also have to cut public sector salaries, pensions, and the lump sum received by civil servants upon retirement as well as to freeze wage indexation for the duration of the adjustment program, CyBC said. The island’s government believes that the public debt will remain sustainable even after Cypriot banks, which wrote down more than 4 billion euros on Greek government bonds , receive 9.5 billion euros in fresh capital, CyBC television said. The east Mediterranean island will also have to overhaul supervision of its cooperative saving banks, CyBC reported and added that only viable cooperatives will receive fresh capital. To contact the reporter on this story: Stelios Orphanides in Nicosia at sorphanides@bloomberg.net ; To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net |
2024-06-24 | Bloomberg | China Cash Crunch Puts Pressure on Small Banks, Moody’s Says | China ’s worst cash squeeze in at least a decade may weigh on smaller banks’ financial strength as their reliance on interbank funding leads to an erosion of loan margins, according to Moody’s Investors Service. Mid-sized banks got 23 percent of their funding and capital from the interbank market at the end of last year, compared with 9 percent for the largest state-owned banks, Moody’s said in an e-mailed statement today. Those banks will probably compete “more aggressively” for deposits amid the credit crunch, which would increase cost of funds, it said. China’s money-market rates, which climbed to a record high last week before retreating for a second day today, have triggered a drop in shares of China Minsheng Banking Corp. (600016) and China Merchants Bank Co. (600036) on investor concern that funding may tighten and curtail credit growth. Slowing economic growth and efforts to rein in shadow banking have contributed to higher borrowing costs and rising bad loans. “The ultimate goal of the policy makers is to force banks, especially the smaller ones, to deleverage,” said Wilson Li, a Shenzhen-based analyst at Guotai Junan Securities Co. “It’s time to clean up their act.” Shares of Minsheng Bank tumbled 10 percent, or the daily limit, to 8.51 yuan in Shanghai trading. The stock fell 8 percent in Hong Kong, the most since November 2011, extending its loss this month to 24 percent. Merchants Bank, which declined 4.6 percent today in Hong Kong, has lost 20 percent this month. Industrial Bank Co. (601166) fell 10 percent in Shanghai to the lowest since December, and has dropped 26 percent in June. Targeted Injections The one-day repurchase rate touched an unprecedented 13.91 percent on June 20 before tumbling on signs targeted injections of funds are being used to ease a cash crunch that threatens to worsen the economic slowdown. The People’s Bank of China said in a statement yesterday that the nation should “appropriately fine-tune” its policies. Non-performing loans may rise more rapidly in the coming months as weaker borrowers find it hard to refinance credit, Moody’s said today. Bad loans at banks including Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. (939) , the nation’s two largest, have increased for six straight quarters through March 31, the longest deterioration streak in at least nine years. Eliminating Speculation Premier Li Keqiang last week signaled a determination to stamp out speculation funded by cheap money by saying banks must make better use of existing credit and step up efforts to contain financial risks. The government aims to direct money toward economic growth following a credit boom that has fueled property-price gains, local-government debt risks, and a wave of wealth-management products. Regulators are forcing trust funds and wealth management plans to shift assets into publicly traded securities, taking so-called shadow banking funds away from property developers and local-government finance vehicles. The China Banking Regulatory Commission told banks in March to cap investments of client money in debt that isn’t publicly traded at 35 percent of all funds raised from the sale of wealth management products. The outstanding amount of wealth-management products -- or financial instruments used by banks to collect funds for periods from 30 days to a year -- rose by 500 billion yuan ($81 billion) to 13 trillion yuan in the first five months of this year, accounting for 16 percent of the nation’s deposits, according to estimates published by Fitch Ratings on June 10. Default Risks Mid-sized banks get an average of 20 percent to 30 percent of their funds from such products, which pay investors higher yields than the benchmark bank savings rate, Fitch said on June 21, without naming specific lenders. That makes those banks more susceptible to default risks on the products. Minsheng, based in Beijing, and Fuzhou-based Industrial Bank were the most aggressive in also using short-term borrowing from the interbank market to generate off-balance sheet loans that allowed them to dodge loan quotas and capital requirements, Guotai’s Li said. A significant part of such loans went to trusts, local government financing vehicles and real estate developers, he said. “If something goes wrong on the interbank market -- such as a sudden, severe cash crunch, or some black-swan event such as a bank run -- their current business structure may not be able to withstand these shocks,” said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Group. “This will force them to strengthen their internal controls and take a more prudent approach when it comes to their lending and borrowing business.” Tapping Banks From 2009 to 2012, mid-sized banks including China Citic Bank Corp., Huaxia Bank Co. and Ping An Bank Co. increased borrowing from the interbank market by 43 percent annually, more than twice as fast as the larger banks, according to Sanford C. Bernstein & Co. estimates from June 21. They now receive 21 percent of their interest income from interbank loans, compared with an average 5 percent for bigger lenders such as ICBC and CCB, Bernstein said. “It is the smaller banks and the A-share listed banks that may run into either earnings headwinds or funding problems if the tightness in the interbank market persists,” wrote Mike Werner, an analyst at Bernstein. To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net ; Aipeng Soo in Beijing at asoo4@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-09-15 | Bloomberg | Bank Values for Home-Equity Loans Said to Face U.S. Scrutiny | U.S. regulators are examining whether the nation’s home lenders have accurately valued $845 billion of home-equity and other second-lien mortgages, according to seven people with direct knowledge of the matter. The Federal Reserve and the Office of the Comptroller of the Currency have teams checking on default risks at the biggest banks and whether they’ve set aside enough reserves to cover the loans, according to the people. They spoke on condition of anonymity because the review is continuing and examinations aren’t public. A slowing economy has cast doubt on the value of second mortgages, whose collateral can be wiped out when home prices decline. The S&P/Case-Shiller index covering 20 U.S. cities has dropped 32 percent from its July 2006 peak, and the jobless rate, stuck above 9 percent, makes it harder for borrowers to keep up with payments. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) are among the largest holders of second liens. “If home prices continue to decline and the homes get more and more underwater and you have layoffs, it becomes an ever- bigger issue,” said Laurie Goodman , a senior managing director at Amherst Securities Group LP in New York. Second mortgages allow borrowers to get extra cash by using the equity in their home as collateral for a loan. When the borrower stops paying or goes bankrupt, the holder of the primary mortgage has first claim on the assets. If the home’s value has fallen since the loan was made, the holder of the second mortgage may be left with little or no collateral to cover losses. Object of Interest Regulators are focusing on individual loans where borrowers are already overdue on their first mortgages, or where the value of the home has dropped below the size of the loans, according to the people. Examiners are requiring banks to conduct a special impairment analysis to determine the risks of steep losses on the loans, even if borrowers are current on payments, said two people with knowledge of the process. Such an analysis may result in a demand for more reserves, they said. The Fed may use the results of the examination to help evaluate capital planning and future dividends at the largest lenders, one person said. With banks cutting reserves as overall defaults decrease, regulators want to ensure the firms still have enough to cover second liens that go sour, the person said. “For a regulator, any time there’s an asset class that experiences a significant change, there’s a concern that there could be a decline in value that hasn’t been recognized by every single financial institution,” said Moshe Orenbuch , an analyst with Credit Suisse AG. Popular Loans Second mortgages soared in popularity during the housing bubble as homeowners sought to tap growing equity values. The balance of home-equity loans and other second mortgages held by lenders rose from $327.6 billion in 2000 to a peak of $1.14 trillion in 2007, according to Inside Mortgage Finance, a trade publication. The total fell to $845.3 billion in the first quarter of 2011. Home-equity lines of credit made up the largest second-lien category with unpaid balances of $666.5 billion in the first quarter, the data show. Investors are skeptical about the true worth of assets held by U.S. lenders, with the KBW Bank Index (BKX) selling at about 75 percent of stated book value for the 24 companies represented. Bank of America, based in Charlotte , North Carolina , has been pummeled by speculation that it needed a bigger capital cushion to protect against unexpected losses. The stock has lost almost 50 percent this year and sells for about a third of book value. Bank Rankings Bank of America, the biggest U.S. lender by assets, holds the largest second-lien portfolio, with $129.3 billion in unpaid balances, according to first-quarter data from Inside Mortgage Finance. San Francisco-based Wells Fargo is second with $114.4 billion, and New York-based JPMorgan Chase & Co. is third, with $101.6 billion. New York’s Citigroup Inc. (C) had $46 billion and PNC Financial Services Group Inc. (PNC) , based in Pittsburgh, had $30.1 billion. Spokesmen for the lenders declined to comment on the examination. John Walsh , the acting comptroller, said in testimony before the Senate Banking Committee last December that examiners were looking into situations where banks had resisted offering loan modifications to distressed homeowners on first mortgages where the bank also held a second mortgage. Modifying the first loan could include an acknowledgement that that the home’s value had dropped, forcing the lender to take a loss or complete write-off of the second mortgage. First and Second “A conflict of interest could arise if the second-lien holder were trying to overstate the second lien’s carrying value (and under-allocate loan-loss reserves) for a troubled borrower,” Walsh said. The comptroller had required that banks take all such risks into consideration in their valuations, even if the second mortgages are performing, Walsh said. The American Bankers Association reported delinquent closed-end home-equity loans rose to 4.12 percent in the first quarter from 4.05 percent in 2010’s final quarter. For open-end home-equity lines of credit, delinquencies rose to 1.8 percent from 1.73 percent. Closed-end loans are for a fixed amount with a fixed repayment period. Open-end loans come with a fixed amount of available credit, with the actual balance fluctuating based on usage. Why They Pay Regulators and lawmakers have been sounding alarms since at least 2009 about the value of second mortgages. The Federal Deposit Insurance Corp. sent a letter to banks in August 2009 asking them to consider boosting reserves for second liens, citing the impact of overdue first mortgages. Barney Frank , then the chairman of the House Financial Services Committee, sent a letter to banks in March 2010 urging them to recognize more losses because “large numbers of these second liens have no real economic value.” Bankers have responded that American borrowers tend to meet their obligations and pay their bills as long as they are able, regardless of whether the value of their homes has declined. Customers keep paying because they want to keep access to the account and draw on the unused portion of their credit lines, according to a paper last December by staff members of the Federal Reserve Bank of Philadelphia. The study found that 31 percent of borrowers who were 90 days or more in default on first mortgages remained current on their second liens, and 20 percent of borrowers in foreclosure on first mortgages still made payments on their seconds. Higher Risk Even if second-lien payments are current, the delinquency on the first loan means the default risk has grown and banks may need to set aside more reserves, two of the people said. The conflict between first and second mortgages may become more acute as banks resume foreclosures, said Guy Cecala , publisher of Inside Mortgage Finance. Lenders halted or slowed the process after accusations that homes had been seized using legal shortcuts and forged documents. Those delays are ending, Cecala said. Default notices sent to overdue U.S. homeowners surged 33 percent in August from the previous month, and total foreclosure filings increased 7 percent from a four-year low, according to a report today from RealtyTrac Inc., the Irvine, California-based data seller. “When you see those foreclosures pick up, which you will, then the losses on the seconds will really start to come in,” he said. To contact the reporter on this story: James Sterngold in New York at jsterngold2@bloomberg.net. Donal Griffin in New York at Dgriffin10@bloomberg.net. Cheyenne Hopkins at chopkins@bloomberg.net. To contact the editor responsible for this story: Rick Green in New York at rgreen18@bloomberg.net |
2024-07-05 | Bloomberg | Aetna Suit by Doctors Escalates Out-of-Network Dispute | A group of California doctors and medical groups accused Aetna Inc. (AET) of reneging on medical benefits, escalating a dispute over payments for care in facilities that don’t have discounted contracts with the insurance provider. More than six-dozen physicians, medical associations and surgery centers sued Aetna in state court July 3. They alleged that the Hartford, Connecticut-based company retaliated against doctors and patients for using outpatient units that aren’t in the company’s network of preferred providers. The plaintiffs asked a court in Los Angeles to stop Aetna from terminating doctors for referring patients to out-of-network facilities. The complaint is part of a controversy over the out-of- network medical centers, which charge more for procedures than Aetna pays its contracted providers. Earlier this year, Aetna sued six California surgery centers not in its network, alleging they paid illegal kickbacks to doctors and charged too much for health care. In the new lawsuit against Aetna, the doctors and medical groups allege that Aetna violates state fair-business and false- advertising laws by selling insurance policies that allow for out-of-network care, and then intimidating doctors and patients to keep them from gaining access to the benefits. “Aetna’s practice of forcing doctors to preclude Aetna patients with out-of-network benefits from actually using those benefits constitutes a clinical gag clause,” the plaintiffs allege. The group suing Aetna includes 60 named doctors, nine surgery centers, the California Medical Association and the medical associations of Los Angeles, Santa Clara and Ventura counties. Self-Referral Anjanette Coplin, an Aetna spokeswoman, said the provider of medical benefits is aiming to reduce costs driven by so- called physician self-referral -- the practice of sending patients to facilities owned by the referring doctors. Aetna filed its earlier complaint in state court and with the Medical Board of California against six surgery centers in the Silicon Valley, Coplin said. Aetna accused those centers, managed by Bay Area Surgical Management LLC of Saratoga, California, of gouging on rates and paying illegal kickbacks to owner-doctors for self-referrals. Bay Area Surgical and the six surgery centers it manages are named as plaintiffs in the suit against Aetna. The company says it paid those out-of-network centers $52,880 for a bunion repair that usually costs $4,000 at in- network facilities, and $120,000 for lower-back disk surgeries that cost $6,000 at contracted centers. Profits, Patients “Doctors who entice patients to have procedures performed at out-of-network facilities that they own without the patient’s knowledge are putting profits over their patients,” Coplin said in a statement. The California doctors and medical groups allege in their suit that Aetna discouraged patients from using their out-of- network benefits by phoning and sending letters warning that a planned procedure was out-of-network, urging patients to use in- network facilities and withholding payments to non-contracted units. The suit alleges Aetna threatened physicians with network termination for referring patients to non-contracted facilities, and terminated at least 10 doctors for making such referrals. One of the physicians dropped from Aetna’s network was Michael Dillingham of Redwood City , California, the orthopedist for the San Francisco Giants professional baseball team and the San Francisco 49ers professional football team. Transparency Demand Doctors in Los Angeles County abide by their ethical and legal obligation to inform patients when referring them to facilities the doctors own, said Rockard Delgadillo, chief executive officer of the Los Angeles County Medical Association and the former city attorney of Los Angeles. The suit, which Delgadillo called “historic” because he said it is the first time the Los Angeles doctors’ group has sued a health insurer, is aimed at forcing greater transparency by Aetna. “Tell the world you’re not going to pay for something if it goes over $10,000 or whatever; don’t say it’s not ’medically necessary’ or out-of-network,” Delgadillo said. “We believe Aetna is impairing the critical relationship of trust between the patient and the physician in its relentless campaign to cut costs and boost profits.” The case is Los Angeles County Medical Association v. Aetna Health of California Inc. BC487670, Los Angeles County Superior Court. To contact the reporters responsible for this story: Peter Waldman in San Francisco at pwaldman@bloomberg.net ; Edvard Pettersson in Los Angeles at epettersson@bloomberg.net. To contact the editors responsible for this story: Gary Putka at gputka@bloomberg.net ; Michael Hytha at mhytha@bloomberg.net . |
2024-03-13 | Bloomberg | Volume of Volcker Rule Comments Was No Surprise, Regulators Say | U.S. regulators said they weren’t surprised by the volume of the critical comments filed by financial companies and foreign governments over the Volcker rule, which bars U.S. banks from trading for their own account. Acting Comptroller of the Currency John Walsh and Acting Federal Deposit Insurance Corp. Chairman Martin J. Gruenberg said in interviews today that concerns raised over the rule were due to its complexity and to its essential purpose -- the elimination of proprietary trading by U.S. banks. The rule “goes to what’s been a significant activity for the major financial companies,” Gruenberg said in an interview in Nashville, Tennessee , where he addressed the national convention for the Independent Community Bankers of America. The FDIC and OCC are among five regulatory agencies required to draft and implement the rule, which was named for former Federal Reserve Chairman Paul Volcker , by July 21. After receiving more than 17,000 comments about the initial proposal, Fed Chairman Ben S. Bernanke and Securities and Exchange Commission Chairman Mary Schapiro said regulators may miss the deadline. Goldman Sachs Group Inc. (GS) , Morgan Stanley (MS) and JPMorgan Chase & Co. (JPM) are among the institutions that filed comments about the scope of the rule’s impact on activities such as market-making and hedging. Many of the commenting institutions complained that those activities weren’t included in the 2010 Dodd-Frank Act, the legislation that requires U.S. regulators to write hundreds of rules governing the financial industry. A New Framework “I understand the concerns, but it’s a new framework and we have to put it into place,” Walsh said in an interview. “There are a lot of people who just don’t like the basic idea of the rule and I think a certain amount of the criticism is from that quarter.” The FDIC has had an open dialog with institutions about its other Dodd-Frank duties, including on a joint rule with the Fed that requires the largest banks to draft and file plans to protect the broader economy in the event of their collapse, Gruenberg said. Regulators may ask firms to make changes or shed businesses if the plans are deemed inadequate. The plans for banks with more than $250 billion in non-bank assets are due to the agency and the Fed by July, and regulators will probably ask for more information after the initial filing, he said, adding that there would be a “considerable process of engagement” after the plans are submitted. Gruenberg, the agency’s former vice chairman and President Barack Obama’s nominee as chairman of the agency, said it is “too early” to make a judgment on whether banks will be required to make changes in their business models. “At some point we will reach an end to the process and the plan will either satisfy the requirements of the law or the company may be asked to make changes,” Gruenberg said. “We’re not near that point yet.” To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net |
2024-06-12 | Bloomberg | Inflation at 53-Year Low Belies U.S. Demand Vigor | Some Federal Reserve policy makers are citing the lowest inflation rate in at least five decades as an alarm bell for the economy. Economists at UBS Securities LLC say the figure isn’t as troubling as it appears. Consumer prices climbed 1.1 percent in the 12 months through April, according to a measure watched by the Fed that excludes food and fuel -- matching the smallest increase since records began in 1960. That’s down from 1.9 percent in the year ended April 2012. Most of the decline is in industries such as apparel and health care, where consumer demand is growing, said Sam Coffin, an economist at UBS Securities. Among the reasons for slowing inflation are improved efficiency and a stronger dollar, which puts downward pressure on prices of imported goods such as cars and clothing. “If anything, the price softening is helping to support demand,” and the dollar is set to rise further, said Coffin, who is based in Stamford , Connecticut. “Households are getting a little bit more purchasing power out of their income growth.” Fed officials meeting June 18-19 in Washington will weigh how much changes in inflation and the labor market will influence the pace of their $85 billion in monthly asset purchases. James Bullard , president of the St. Louis Fed, this week said inflation below the central bank’s 2 percent target may warrant prolonging bond buying. “Slowing inflation has twice spurred Fed fears that deflationary psychology could damage the recovery as consumers postponed purchases,” Coffin wrote in a June 3 research note. QE1, QE2 Policy makers expanded their first round of quantitative easing in March 2009 by announcing they would buy Treasuries in addition to mortgage-backed securities and debt of government-sponsored enterprises as the inflation measure cooled to 1.4 percent on its way to reaching 1.2 percent that July. In November 2010, the Federal Open Market Committee announced a second round of Treasury security purchases, or QE2, totaling $600 billion as price increases again slowed. Yields on Treasury securities and mortgage rates have surged as gains in employment prompt speculation the Fed will soon reduce asset purchases. At the same time, declining inflation gives the Fed room to maintain record economic stimulus as policy makers led by Chairman Ben S. Bernanke seek to lower a jobless rate of 7.6 percent. Elsewhere today, data showed the economy in the U.K. is gathering momentum as jobless claims fell in May and the unemployment rate dropped in the three months through April. Bullard’s Concern Bullard has expressed concern since 2010 that disinflation is indicating a lack of demand that will trigger a cycle of falling prices and spending declines like the one that has afflicted Japan for 15 years. The situation in the U.S. is less dire, according to Coffin, whose research shows that four industries -- financial services, clothing, medical care and automobiles -- accounted for about 75 percent of the deceleration in core inflation. His calculations show goods and services from the health-care industry account for 0.18 percentage point of the slowdown in prices in the year ended April. Changes in response to the 2010 health-care overhaul may be helping lower costs as hospitals improve efficiency and reduce readmissions, while expanded use of cheaper generic drugs may also be holding down prices, Coffin said. Financial services and insurance accounted for another 0.17 percentage point of the deceleration in core prices. Some of these costs can’t be measured directly, for example free checking accounts, so the government estimates their value. Non-Discretionary Both health care and financial services represent non-discretionary expenditures, meaning consumers don’t have the ability to delay purchases. “Price disinflation or even deflation for these services is unlikely to dampen real consumer spending ,” said Coffin. Autos accounted for another 0.08 percentage point of the slowdown and clothing made up the remaining 0.2 percentage point. Here, a rising dollar may be playing a role, according to UBS research. With automakers posting their best sales in more than five years, deceleration in the motor vehicles and parts category of the personal consumption expenditure, or PCE, price index is reflective of dollar strength that’s held down import prices, as well as domestic producers competing for market share as orders pick up, the UBS report showed. Cars and light trucks sold at a 15.2 million annualized rate in May, making it the sixth month out of the last seven to exceed the 15-million mark -- a level that previously hadn’t been breached since February 2008. Rising Dollar Apparel prices have been held back by dollar appreciation and “exaggerated” monthly swings that don’t match other retail sales figures, he said. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, increased 1.7 percent from the start of the year through June 11 to 81.11. The gauge rose to 84.35 at its May 22 close, the highest level since July 2010. New York Fed President William C. Dudley is among officials looking beyond the slowdown in prices. He said in April that while “underlying measures of inflation are subdued,” expectations for future price increases remained “well anchored,” which eases concern the slowing will continue. Jeffrey Lacker , president of the Richmond Fed, told reporters in Baltimore the day before that a slowing in inflation is temporary and prices will probably rise at about a 2 percent annual rate. Inflation Expectations The gap in yields between Treasury Inflation-Protected Securities, or TIPS, and U.S. government debt not indexed for inflation, known as the break-even rate , shows investor expectations for the consumer price index over the next 10 years were at 2.09 percentage points on June 11. They have held above the Fed’s 2 percent goal since the start of 2012. The steady expectations give the Fed room to maneuver even as actual inflation ebbs, said Harm Bandholz , chief U.S. economist at UniCredit Group in New York. “If inflation expectations would have reacted to these very low core PCE numbers, we would see more people talking about increasing” the Fed’s quantitative easing, Bandholz said. With expectations remaining relatively stable, Fed officials are “discounting a little bit the very low core PCE reading.” Slowdown Transitory The Fed officials have said “this slowdown in inflation is probably transitory, which would imply that it really wouldn’t factor into their decision,” even as Bullard may have an alternate view, said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama , who expects the Fed to begin tapering at their September meeting. Inflation data set for release within the next week could intensify the debate on pricing trends. Import prices were little changed in May, economists project ahead of data tomorrow from the Labor Department, while a report released the following day may show wholesale prices rose 0.1 percent last month after two straight declines. Data for the consumer price index -- due next week -- is projected to show a pickup, although the core year-over-year gauge probably held at a two-year low of 1.7 percent, according to early estimates. UBS economists led by Maury Harris continue to forecast Fed policy makers will not begin to reduce bond purchases until early 2014 as concerns over the slowdown in price gains and the weakening in growth caused by the federal across-the-board spending cuts under sequestration hold sway. Nonetheless, they said that investors will anticipate an earlier scaling back of the Fed’s program. To that end, last week UBS raised its forecast of the year-end yield for the benchmark 10-year note to 2.20 percent from a prior estimate of 2 percent. The note’s yield was 2.19 percent late yesterday. To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-10-06 | Bloomberg | Morgan Stanley-Backed Oberoi to Lead $3 Billion in India Realty IPO Sales | Oberoi Realty Ltd. , a Morgan Stanley- backed developer, began selling shares in an initial public offering today, testing demand for property IPOs in India after a five-month lull. Oberoi, which mostly develops residential real estate in Mumbai, aims to raise as much as 10.3 billion rupees ($231 million) from the sale. The company, founded by billionaire Vikas Oberoi , will sell 39.5 million shares for as much as 260 rupees each, according to an e-mailed statement. The success of Oberoi’s IPO may prompt $3 billion of property share sales at a time when real estate stocks have underperformed the Bombay Stock Exchange’s benchmark Sensitive Index. The BSE Realty Index has gained 1.4 percent this year, compared with a 17 percent advance in the Sensex. Oberoi “operates in the Mumbai market, which is very resilient, and the background of the promoters is strong,” said Anubhav Gupta , an analyst with Kim Eng Securities India Pvt. in Mumbai. “Strong demand and high prices in Mumbai will result in a good set of numbers” for Oberoi’s earnings. Demand for luxury apartments in India is rising as the biggest rally in stocks in 18 years boosts the ranks of the affluent in the third-fastest growing major economy. The South Asian nation has 84,000 millionaires, according to the 2009 World Wealth Report by Cap Gemini SA and Merrill Lynch Wealth Management. The number of millionaires in India is expected to triple between 2008 and 2018, according to the report. Billionaire City About 40 percent of India’s 52 billionaires, the most in Asia after China, live in Mumbai, according to Forbes magazine. That has helped Oberoi make it to the Forbes billionaire list of India’s richest, ranking 46th with a net worth of $1.4 billion. Oberoi, 41, has built the 11.2 million square feet Oberoi Garden City complex, which houses the Westin Hotel, in the city’s north. He recently bought himself a single-engine, four-seater Cirrus airplane, according to Forbes. Indian realty companies such as Lodha Developers Ltd. and Emaar MGF Land Ltd. are among at least 11 builders waiting to tap the market, according to data compiled by Bloomberg. IPO Size Cut Emaar MGF, a joint venture with the United Arab Emirates’ biggest developer, reduced the size of its initial share sale to 16 billion rupees, two people with direct knowledge of the matter said Sept. 30. The builder, a unit of Emaar Properties PJSC , abandoned plans to raise as much as 70.8 billion rupees in February 2008 even after cutting the offer price as global equity markets slumped, the company said at the time. The planned $3 billion of share sales by Indian real estate companies would be the most since $4.3 billion was raised by developers in 2007, according to Bloomberg data. Real estate IPOs in India will have to compete with state- owned companies for investor interest. India’s government plans to raise $8.9 billion selling shares in companies it owns in the fiscal year through March 2011 -- more than half the total value of all of last year’s offerings in the nation. Oberoi plans to use the proceeds from the IPO to complete pending projects and buy land in Mumbai, Oberoi, who is managing director, has said. “Mumbai, being the archetypal city of opportunity, generates an unprecedented demand for properties across the residential, commercial and retail sectors,” said Anuj Puri , Mumbai-based chairman of Jones Lang LaSalle Meghraj. Saleable Area The builder is currently working on 13 projects with another 11 being planned, according to its offer document. The total saleable area of these projects is expected to be about 20.25 million square feet. “Oberoi has a strong presence in Mumbai, the cr‘eme of Indian real estate,’’ said Mumbai-based Aashiesh Agarwaal, an analyst at Edelweiss Securities Ltd. The developer has more than 90 percent of its land bank in the suburbs and the city. The company has kept its balance sheet in check and its construction costs are largely funded through internal accruals in the form of pre-sales and rental income from premium properties, Agarwaal said. He has a ‘‘subscribe’’ rating on the stock at 253 rupees, the lowest end of the IPO price range. Oberoi’s profit rose 84 percent to 4.6 billion rupees in the year ended March 31, 2010. Sales climbed 77 percent to 8.05 billion rupees. A Morgan Stanley real estate fund in January 2007 invested 6.75 billion rupees for a 10.76 percent stake in Oberoi, according to the offer document. Kotak Mahindra Capital Co., Enam Securities Pvt., J.P. Morgan India Pvt. and Morgan Stanley India Co. are managing the sale. To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net ; Paresh Jatakia in Mumbai at pareshj@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at Apapuc1@bloomberg.net |
2024-09-13 | Bloomberg | Romney Re-Explains Why He Can’t Be Trusted on Health Care | Over the weekend, Mitt Romney muddied the waters about where he stands on health-care reform with a series of vague statements from himself and his campaign about health insurance for people with pre-existing conditions. His floundering is a subset of a larger problem: He has committed himself to a set of positions that won't allow for a replacement of Obamacare with something that actually fixes the problem of tens of millions of Americans without health insurance, including those with pre-existing conditions. Sarah Kliff of the Washington Post describes Romney's progression on pre-existing conditions: It started with the Republican presidential candidate saying during an appearance on “Meet the Press” that he liked the Affordable Care Act’s provision that requires insurers to cover preexisting conditions, and would support something similar. Hours later, his campaign clarified he did not, however, support a federal ban against denying coverage for preexisting conditions. Around 10 p.m., the Romney camp had circled back to the same position it held back in March: that the governor supports coverage for preexisting conditions for people who have had continuous coverage. The "continuous coverage" distinction is key: In order to retain the right to insurance that covers your pre-existing condition, you need to make sure to pay health insurance premiums every month. But often, the reason people lose health insurance because they have lost their job. Telling the recently unemployed to pay out of pocket for continuous coverage, typically at a cost of several hundred dollars a month for an individual or more than $1,000 for a family, is often not viable. It's worth noting that the purpose of the continuous coverage requirement is similar to the purpose of the individual mandate: It provides an incentive for healthy people to stay in insurance pools, avoiding a "death spiral" in which only sick people buy insurance. Unaffordability is not a fatal problem for Romney's continuous coverage proposal. It could be fixed with a range of subsidies that make it affordable for people to maintain continuous health coverage. Essentially, that's what Obamacare does, and what Romney's health plan in Massachusetts did. For a conservative approach to fix at least part of the affordability problem, see this article from National Affairs by James Capretta and Tom Miller. Capretta and Miller propose to combine a Romney-style proposal on pre-existing conditions with significantly expanded funding for high-risk insurance pools, in hopes of covering up to 4 million uninsured Americans with pre-existing conditions. But Capretta and Miller estimate that their plan would cost somewhere on the order of $200 billion over 10 years. Where is the indication that Romney plans to make such a significant financial commitment, let alone get one out of a Republican Congress ? Romney's platform is full of expensive promises -- restore $700 billion in Medicare cuts, grow defense spending to 4 percent of GDP, cut tax rates. It funds these promises in part by drastically cutting spending on health care for the non-elderly. Implementing something like the Capretta-Miller proposal would be a significant reversal of course. And what about the tens of millions of Americans who are uninsured not because they have pre-existing conditions but simply because they cannot afford insurance coverage? Romney says he wants to replace Obamacare, but his plans do not signal much help for them. Romney has talked about leveling the playing field for individual purchasers of insurance, so they would get the same favorable tax treatment as businesses buying insurance for their employees. This would make it easier for individuals to buy their own health plans, but it's not a substitute for Obamacare-style subsidies. Any way you structure a tax incentive, it's likely to over-subsidize the wealthy and under-subsidize the poor, leaving huge swaths of America still unable to afford insurance. Romney hasn't said exactly how his tax incentive would work. But it would probably be a tax credit (whose value is static across incomes) or a tax deduction (whose value rises with income). In 2008, John McCain proposed a $5,000 per family tax credit for health insurance. Scaled up for health-care inflation, that would likely be closer to $6,000 today. The average health plan premium for a family is now $15,745. Some middle- and upper-middle-income families can be expected to cover a gap of about $9,000. But poorer people need a larger subsidy if we hope to get them covered. (It is also worth noting that if Romney plans to convert the existing tax exclusion for employer-provided health care into some other health-care subsidy, he cannot also use it as an area for tax-base broadening to pay for his cuts in tax rates, and he needs a lot of base-broadening to make his tax-cut math work.) The key to the subsidy structure in both Romney's Massachusetts plan and Obamacare is that the subsidies decline in value as people's incomes rise. Under Obamacare, people with incomes up to 133 percent of the poverty line get Medicaid, which has very little cost to the beneficiary. Above that, they get sliding-scale subsidies for private insurance; the poorest beneficiaries pay just 2 percent of their incomes. Middle-income people get smaller subsidies, and wealthy people have to pay their own way. Republican rejection of the Medicaid expansion is especially problematic, because Medicaid is cheaper than private insurance, and people earning less than 133 percent of the poverty line have almost no money of their own to contribute toward premiums. Telling these people the federal government will pay 40 percent of their health insurance premiums will not get them insured. The options aside from Medicaid are to provide them private insurance at significantly higher taxpayer cost than in Obamacare, or leave them uninsured. It is easy to guess which option Republicans in Congress would prefer. Romney doesn't want to get into these details about who will get what subsidies. But the details are important. They are the difference between expanding health insurance coverage to the vast majority of Americans, and leaving tens of millions of Americans without access to the health care they need. And they are the difference between actually making it possible for people with pre-existing conditions to get the coverage they need, and not making it possible. As on so many issues, Romney's line on health reform is essentially, "Trust me, I'll figure it out." But uninsured Americans stand to gain a lot from the implementation of Obamacare. They have no particular reason to believe that Romney's vague alternative would bring them similar benefits. (Josh Barro is lead writer for the Ticker. E-mail him and follow him on Twitter.) Read more breaking commentary from Bloomberg View at the Ticker . |
2024-03-09 | Bloomberg | MMI Holdings, MTN Group, Sasol May Be Active: South Africa Stocks Preview | The following stocks may rise or fall in South Africa. Symbols are in parentheses and prices are from the last close. South Africa ’s FTSE/JSE Africa All Share Index retreated for a third day, declining 470.79, or 1.5 percent, to 31,827.42 in Johannesburg. Gijima Group Ltd. (GIJ) : The South African computer- services company reported a loss of 271.8 million rand ($39 million) in the six months ended Dec. 31 from a profit of 85.8 million rand a year earlier. The stock was unchanged at 77 cents. MMI Holdings Ltd. (MMI) : The insurance company formed last year from the merger of Metropolitan Group Ltd. and Momentum Group Ltd. said net income rose to 1.08 billion rand in the six months ended Dec. 31 from 813 million rand a year earlier. The shares rose 3 cents, or 0.2 percent, to 16.20 rand. MTN Group Ltd. (MTN) : Africa’s biggest provider of mobile-phone services publishes full-year earnings. The shares declined 75 cents, or 0.6 percent, to 125.75 rand. Sasol Ltd. (SOL SJ): The world’s largest producer of motor fuel from coal said it entered into transactions to hedge 4.56 million barrels of oil production to protect it should the price of Brent crude slide to below $85. The shares dropped 3.39 rand, or 0.9 percent, to 383.60 rand. Shares or American depositary receipts of the following South African companies closed as follows: Anglo American Plc (AAUKY US) fell 0.8 percent to $26.18. AngloGold Ashanti Ltd. (AU US) was unchanged at $47.62. BHP Billiton Ltd. (BBL US) fell almost 1 percent to $78.99. DRDGold Ltd. (DROOY US) lost 1.8 percent to $4.96. Gold Fields Ltd. (GFI US) advanced 1.8 percent to $17.80. Harmony Gold Mining Co. (HMY US) added 0.5 percent to $12.26. Impala Platinum Holdings (IMPUY US) climbed 0.6 percent to $29.12. Sappi Ltd. (SPP US) retreated 1.9 percent to $5.13. Sasol Ltd. (SOL) lost 0.1 percent to $55.70. To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net. To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net . |
2024-02-18 | Bloomberg | Bull Wagers Tumble Most This Year as Gold Bets Drop: Commodities | Investors cut wagers on a rally in commodities by the most since November as signs of improving U.S. growth reduced demand for gold and rains in South America added to signs that crop harvests will be bigger. Hedge funds and other large speculators reduced net-long positions across 18 U.S. futures and options in the week ended Feb. 12 by 15 percent to 757,060 contracts, the largest decline since Nov. 13, U.S. Commodity Futures Trading Commission data show. Bets on higher gold prices fell to the lowest since December 2008, while a measure for 11 farm goods slumped the most since November 2011. Gold prices are down 3.9 percent since Dec. 31, the worst start to a year since 2001, as U.S. retail sales climbed for a third month in January and consumer confidence rose more than forecast in February. Combined soybean production in Argentina and Brazil will increase to a record and rising output of corn will help replenish global inventories after drought last year sent prices of both crops to a record. “As confidence is building in an economic recovery that’s sustainable globally, you could lose a bid to gold,” said James Paulsen , the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $325 billion of assets. “Agricultural commodities to me are going to have a pullback year as weather normalizes.” The Standard & Poor’s GSCI Spot Index of 24 commodities fell 0.3 percent last week, led by declines in silver and cocoa. The MSCI All-Country World Index of equities slid 0.2 percent, while the dollar rose 0.4 percent against a basket of six trading partners. Treasuries fell 0.1 percent, a Bank of America Corp. index shows. Copper, Gold An improving outlook in the U.S. and China has helped boost commodities most tied to economic growth this year, while damping demand for precious metals. The funds lifted wagers on a copper rally to an eight-week high. Bets on gains in gold fell 19 percent to 70,250 contracts, the lowest since December 2008, the CFTC data show. Bullish silver holdings declined 13 percent to 25,674 contracts, the biggest slide this year. Retail purchases rose 0.1 percent last month, after increases of 0.5 percent in December and November, the Commerce Department said Feb. 13. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 76.3 this month from 73.8 in January, figures showed Feb. 15. The gauge was projected to rise to 74.8, according to the median of 65 forecasts in a Bloomberg survey. Soros Holdings Last week, bullion fell below $1,600 an ounce for the first time since August in New York. Billionaire investors George Soros and Louis Moore Bacon cut their stakes in exchange-traded products backed by the metal in the fourth quarter, government filings showed Feb. 14. “People have become more risk-on,” said Dan Denbow , a fund manager at the $1.6 billion USAA Precious Metals & Minerals Fund in San Antonio. “Therefore, the more defensive aspects are seeing more money taken off the table. We’re seeing that in gold.” Signs of a deepening recession in Europe may mean declines in demand for commodities as well, said Walter “Bucky” Hellwig , who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. The GSCI Spot Index of 24 raw materials is down 3.3 percent since reaching a six-month high in September as Europe’s leaders struggled to revive economic growth. The 17-nation euro area shrank the most in four years in the fourth quarter, official figures showed Feb. 14. The continent accounts for about 18 percent of copper demand and 14 percent of global energy consumption, Barclays and BP Plc data show. Japan Growth Japan’s economy, the world’s third largest, is in recession after contracting at an annualized 0.4 percent in the fourth quarter, the Cabinet Office said Feb. 14. Last month, stockpiles of aluminum in the Asian country, among the top five global metals users, reached the highest in almost four years, signaling waning demand, according to Marubeni Corp. “We saw some of the data coming out of Europe as being worse than expected,” Hellwig said. “The overall tenor of the global economy maybe wasn’t quite as strong as we thought, and as a result, that’s a headwind for commodities.” Sugar Bears Money managers pulled a net $13 million from commodity funds in the week ended Feb. 13, said Cameron Brandt , the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. The declines were spurred by outflows from gold and precious-metals funds, which totaled $211 million, the sixth straight week of outflows, the longest stretch since the first quarter of 2011, he said. Bets on a decline for sugar rose to 25,301 contracts, from a net-short position of 6,600 a week earlier. That’s the most- negative outlook since September 2007. Prices last week fell to the lowest since August 2010 on speculation that production will climb in Brazil, the world’s largest grower. Cocoa net-long positions dropped 7.9 percent to 16,855 contracts, the seventh decline in eight weeks. Prices in New York last week fell to the lowest in seven months. Bullish corn positions plunged 31 percent to 126,363 contracts, the biggest drop since June 5. Bets on a soybean rally slid 1.4 percent, the first drop in five weeks. Investors increased their wheat net-short holding, or wagers on a decline, to 32,415 contracts, the most bearish since May. More Rains Warming equatorial waters in the Pacific Ocean are boosting precipitation in South America and the U.S., after dry weather scorched crops in 2012, Martell Crop Projections said in a report last week. Corn export-sales for delivery before Sept. 1 are 53 percent lower than a year earlier, U.S. Department of Agriculture data show. Domestic inventories before the next harvest will be 5 percent larger than forecast a month earlier, the agency said Feb. 8. “Inventory data for corn has improved, and export volumes have slowed,” said Peter Sorrentino , a senior fund manager at Huntington Asset Advisors in Cincinnati who helps oversee $14.7 billion. “Some of the smart money that’s looking at bigger crops has started to come out, and that’s tripped a landslide. Some of these agriculture commodities may have moved too far, too fast, so we may see some bounce back, but it probably won’t be the start of another rally.” To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-01-11 | Bloomberg | Exotix Joins Barclays in Closing Buenos Aires Office After New Regulations | Brokerage Exotix Ltd. will be “winding down” its Buenos Aires office and transferring staff to New York and London because of Argentine regulations, Managing Director Peter Bartlett said. The London-based brokerage that specializes in distressed securities is transferring its staff because of the “regulatory environment in Argentina,” Bartlett said in a telephone interview from London, adding that “we can easily manage our Argentine activities from elsewhere.” President Cristina Fernandez de Kirchner last month approved anti-terrorism legislation that increases oversight of financial markets, imposing prison sentences of as long as eight years for “conduct that affects the economic and financial order,” according to the law. Barclays Plc also closed its wealth management office in Buenos Aires on Jan. 6 “for strategic reasons,” the company said in a statement. It will serve Latin American customers from New York and Miami. To contact the reporter on this story: Camila Russo in Buenos Aires at crusso15@bloomberg.net To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net |
2024-10-12 | Bloomberg | China’s Stocks Rise Most in Year on Increased Government Support Prospects | China ’s stocks rallied, spurring the biggest gain for the benchmark index in a year, on speculation the government is seeking to bolster the share market after valuations dropped to record low levels. Haitong Securities Co. led a rally for brokerages after Xinhua News Agency reported regulators approved cross-border exchange-traded funds. China Minsheng Banking Corp. surged the most in seven weeks as banks extended yesterday’s rally after Central Huijin Investment Ltd. began buying shares of lenders. Trainmakers CSR Corp. and China CNR Corp. rose more than 4 percent after the 21st Century Business Herald reported their parent companies may get cash injections from the government. The Shanghai Composite Index advanced 71 points, or 3 percent, to 2,420 at the close, the most since Oct. 15, 2010. The CSI 300 Index gained 3.6 percent to 2,644.76. “ Central Huijin ’s move was a flash point, boosting investors’ confidence and buying sentiment,” said Wu Kan, a fund manager at Dazhong Insurance Insurance Co. which manages $285 million. “The government’s move fueled speculation that China’s stocks are undervalued.” The Shanghai Composite has tumbled 14 percent this year, driving down estimated price earnings to 11.2 times, compared with the record low of 10.8 times set on Oct. 10, according to data compiled by Bloomberg. Stocks have fallen after the government raised interest rates and reserve-requirement ratios for banks to cool inflation that’s at the highest level in almost three years. Inflation probably eased to 6.1 percent in September from 6.2 percent in August, according to the median forecast of economists in a Bloomberg survey. The data are scheduled to be released Oct. 14. Consumer prices rose 6.5 percent in July. Cross-Border ETFs A gauge of financial companies in the CSI 300 surged 4.5 percent, the most among the 10 industry groups. Haitong Securities surged 0.81 yuan to 8.87 yuan, the biggest percentage gain since December 2008. Citic Securities Co., the nation’s biggest listed brokerage, gained 6.2 percent to 11.92 yuan. The China Securities Regulatory Commission has approved cross-border exchange-traded funds, Xinhua reported, citing an unidentified person. ETFs mimic the performance of an index and trade like stocks. Chinese investors may benefit from the exchanges’ plans to introduce ETFs tracking overseas indexes they currently have limited access to foreign stocks. Banks Extend Rally China Minsheng jumped 4.9 percent to 5.76 yuan. Industrial & Commercial Bank of China (601398) Ltd., the world’s largest bank by market value, extended yesterday’s 1.5 percent gain, adding 1.7 percent to 4.12 yuan. Agricultural Bank of China Ltd. (601288) gained 2.4 percent to 2.58 yuan. Central Huijin bought 14.6 million Shanghai-listed A shares in ICBC, 7.38 million yuan-denominated shares of Construction Bank, 39.1 million shares in Agricultural Bank and 3.5 million shares in Bank of China , the four lenders said in statements to the Hong Kong and Shanghai stock exchanges. The Shanghai Composite jumped 21 percent in a week after the government said it would buy shares of the three largest lenders on Sept. 18, 2008, according to data compiled by Bloomberg. “Central Huijin’s move proved to be useful in the past as a short-term stimulus, so it still might work for the banking industry this time,” said Zhang Han, a strategist at Guotai Junan Securities Co. Train Stocks CSR rose 5.2 percent to 4.67 yuan, the first increase in six days. China CNR gained 5.2 percent to 4.70 yuan. CSR and China CNR’s parent companies may each receive 2 billion yuan cash injections from the government provided their listed units complete share sales to raise money this year, 21st Century Business Herald reported today, citing an unidentified person familiar with the matter. The units applied last month to the State-owned Assets Supervision and Administration Commission for the injection to counter cash shortages caused by tight credit, the newspaper said. Jiangxi Copper Co. the nation’s biggest copper producer, advanced 3.5 percent to 27.47 yuan. Yunnan Copper Industry Co. climbed 3.2 percent to 18.35 yuan. Copper in London gained as much as 1.2 percent to $7,374 a metric ton, reversing an earlier drop by 1.7 percent. To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net To contact the editor responsible for this story: Shiyin Chen at schen37@bloomberg.net |
2024-06-22 | Bloomberg | U.S. Lawmakers Approve Two-Year Extension of FDIC Program | Congressional negotiators on the financial-overhaul bill agreed to a two-year extension of a program that gave companies unlimited insurance coverage for non-interest bearing bank accounts during the credit crisis. House negotiators last week proposed making permanent the Federal Deposit Insurance Corp.’s Term Asset Guarantee program, which was started in 2008 to provide a backstop for the banking industry. Senate conferees countered by offering a two-year extension, which House members accepted today. “It’s still needed due to the lingering impact of the crisis,” FDIC Chairman Sheila Bair said today at a meeting in Washington where the agency’s board voted to extend the program through the end of this year. Industry groups including the American Bankers Association and the Independent Community Bankers of America pushed for an extension of the program, which has been used by smaller firms struggling with loan losses after the collapse of the U.S. real estate market in 2007. The FDIC has attempted to wean banks from the program by increasing fees on participants, a step that prompted lenders such as Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co., to opt out at the end of 2009. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net . |
2024-10-07 | Bloomberg | ABC-Mart, Aeon, Daiwa House, Higo Bank, Mitsubishi Motors: Japanese Stocks | Japan’s Nikkei 225 Stock Average rose 11.33, or 0.1 percent, to 9702.76 at the 11 a.m. trading break in Tokyo. The following are among the most active shares in the Japanese market today. Stock symbols are in parentheses after company names. ABC-Mart Inc. (2670 JT) advanced 3.8 percent to 2,629 yen. The shoe retailer increased its full-year net income forecast by 16 percent to 17.5 billion yen ($210 million) from its previous projection, citing a gain from a sale of shares in United Arrows Ltd. (7606 JT). United Arrows dropped 2.3 percent to 1,130 yen. Aeon Co. (8267 JT), Japan’s second-largest retailer, jumped 5.4 percent to 971 yen, set for biggest gain since January. Net income may climb to between 49 billion yen and 55 billion yen in the year ending February, the company said in a statement. In April, the company forecast profit would be between 32 billion yen and 38 billion yen. Aeon also raised its planned year-end dividend to 21 yen from 17 yen. Aeon Delight Co. (9787 JT), a building-maintenance company, climbed 4.9 percent to 1,547 yen. The company reported a 6.9 percent increase in first-half net income to 2.77 billion. Daiwa House Industry Co. (1925 JT) rose 2.1 percent to 923 yen and Daiwasystem Co. (8939 JT) sank 20 percent to 4 yen. Daiwa House, a homebuilder, sold its entire 12.37 percent stake in Daiwasystem, which develops and builds commercial and industrial buildings, on Oct. 5, according to a statement to the Tokyo Stock Exchange. East Japan Railway Co. (9020 JT) advanced 1.4 percent to 5,200 yen. The company was raised to “neutral” from “underweight” at JPMorgan Chase & Co. Higo Bank Ltd. (8394 JT) plunged 17 percent to 358 yen, headed for its lowest close since March 1984, after the regional lender said it will sell 1.35 million existing shares to Nomura Securities Co. Four shareholders of Higo Bank, including Sompo Japan Insurance Inc. (8755 JP) and Tokio Marine & Nichido Fire Insurance Co. (8751 JP), will sell a total of 9 million shares in the lender. Kyowa Hakko Kirin Co. (4151 JT), a drugmaker, increased 1.4 percent to 872 yen. The company plans to sell its chemical unit, Kyowa Hakko Chemical Co., in a transaction worth as much as 60 billion yen, Reuters reported, citing six unidentified people. Ministop Co. (9946 JT) gained 3.1 percent to 1,283 yen. The convenience-store operator said net income for the six months to Aug. 31 jumped 61 percent to 2.14 billion yen as sales increased. Mitsubishi Motors Corp. (7211 JT) rose 2.9 percent to 107 yen. The automaker will begin selling its i-MiEV electric car in the U.S. from November 2011, President Osamu Masuko said in Okayama, Japan. Sankyo-Tateyama Holdings Inc. (3432 JT), an aluminum-mesh maker, jumped 3.9 percent to 108 yen. The company said net income in the first quarter more than doubled to 67 million yen from 30 million yen a year earlier on higher sales. To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net ; Akiko Ikeda in Tokyo at iakiko@bloomberg.net. To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net . |
2024-05-11 | Bloomberg | Dog-Bite Claim Costs Rise Most Since 2007 | U.S. home insurers paid 5.3 percent more for the average dog-bite claim last year, the biggest jump since 2007, as medical expenses and jury awards increased, a trade group said. The average cost per claim climbed to $26,166 last year from $24,840 in 2009, the Insurance Information Institute said today in a statement. The injuries cost $412.6 million in 2010, little changed from the previous year, as total claims declined 4.9 percent, the New York-based group said. Dog bites accounted for more than a third of homeowners’ insurance-liability claims in 2010, the institute said. The average cost per dog-bite claim has surged 37 percent since 2003, when the cost was $19,162, and the total value of claims has risen 27 percent in that span, the group said. The number of claims declined last year to 15,770. The jump in expense per claim “can be attributed to increased medical costs, as well as the size of settlements, judgments and jury awards,” Jeanne Salvatore, a spokeswoman for the institute, said in the statement. State Farm Mutual Automobile Insurance Co. and Allstate Corp. (ALL) are the largest U.S. home insurers. “A lot of the dogs that have a problem are not neutered or not trained well,” Sandra DeFeo, executive director at the Humane Society of New York , said in a telephone interview. “The thing that worries us is that someone is going to be afraid of dogs for the rest of their life.” Each year , 800,000 Americans, half of them children, seek medical attention for dog bites, according to the Centers for Disease Control and Prevention in Atlanta. Of those injured, about 16 die, according to the CDC. Most residential insurance policies provide $100,000 to $300,000 in liability coverage for dog bites, the institute said. A homeowner responsible for an injury may be required to reimburse the victim for medical costs and lost wages, the group said. To contact the reporter on this story: Laura Marcinek at Lmarcinek3@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net . |
2024-12-22 | Bloomberg | Meredith Whitney Overreaches With Muni Meltdown Call: Joe Mysak | There will be between 50 and 100 “significant” municipal bond defaults in 2011, totaling “hundreds of billions” of dollars. So said banking analyst and new municipal bond expert Meredith Whitney on the “60 Minutes” show on Sunday, in perhaps the boldest, most overreaching call of her career. Hundreds of billions of dollars? The one-year record, set in 2008, is $8.2 billion. You can see how an estimate of “hundreds of billions” would get people’s attention. There are a lot of reasons to be doubtful about the health of the municipal market right now, as elucidated by “60 Minutes” correspondent Steve Kroft. Tax revenue is down, public pension and health-care liabilities are up, the federal government’s bailout money to the states is running out and the chances that those funds will be replenished are remote. And yet -- hundreds of billions of dollars in default? The number is in the realm of the fabulous. If pressed, I would say that we might see between 100 and 200 municipal defaults next year, maybe totaling in the $5 billion or $10 billion range. Whitney doesn’t believe the states will default. That leaves us with local governments and authorities as the ones failing to pay debt service on their bonds, which makes this an even bolder call. Most defaults in the modern era aren’t governmental or what we might call municipal at all. The majority are corporate or nonprofit borrowings in the guise of some municipal conduit -- nursing homes, housing developments, biofuel refineries -- so they could qualify for tax-free financing. Whitney’s Vision And those are the ones I think will still comprise the majority of defaults in 2011. This isn’t the Whitney scenario. No, she envisions between 50 and 100 -- or more -- counties, cities and towns making the choice to renege on their bonded debt. My question is: Why? Why would a governmental entity go out of its way to provoke or alienate its best source of finance? In the old days you might say that bondholders were a distant class of banks and plutocrats mainly centered in the Northeast. That’s no longer true, and hasn’t been since at least the passage of the Tax Reform Act of 1986, which made bonds less attractive for banks and insurance companies, among other things. Today, a city’s bondholders might live in the municipality itself, and almost certainly reside within the state. Debt Service Why would a governmental entity choose to default on its bonds, especially if they make up a relatively small proportion of its costs? “Debt levels for U.S. local and state governments are relatively low, with annual debt service representing a relatively small part of budgets,” Fitch Ratings said in a special report in November. Entitled “U.S. State and Local Government Bond Credit Quality: More Sparks Than Fire,” the report said, “The tax- supported debt of an average state is equal to just 3 percent - 4 percent of personal income, and local debt roughly 3 percent - 5 percent of property value. Debt service is generally less than 10 percent of a state or local government’s budget, and in many cases much less.” The lead analyst on the report was Richard Raphael , who has been covering municipal finance for 31 years. He is not one of the analysts “who got everything wrong in the housing collapse,” in the words of correspondent Kroft. In his report, Raphael said, “debt service is a relatively small part of most budgets, so not paying it does not do much to solve fiscal problems (particularly as compared to the costs of such an action).” Headline Grabber What irks me about this Whitney call is that it generalizes about a market that resists generalization, a market that is particular and specific to a remarkable degree. And it doesn’t answer the question “Why?” It is instead an assertion aimed at getting attention. Whitney made headlines in 2007 when she predicted Citigroup would lower its dividend and that it was time to sell bank stocks. She made headlines in September when she said she produced a report on 15 states’ financial condition, and said the federal government might be called upon to bail them out. Whitney only let clients see the report, so I don’t know if her conclusions are supported. She said it was 600 pages long and had taken two years to produce. Perhaps Whitney should stick with bank stocks. ( Joe Mysak is a Bloomberg News columnist. The opinions expressed are his own.) To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net |
2024-10-26 | Bloomberg | Allstate Among Insurers Pressured by ‘Frankenstorm’ | Allstate Corp. (ALL) , Travelers Cos. and Chubb Corp. (CB) fell as a weather system that’s expected to form from Hurricane Sandy threatens to lash the U.S. East Coast, knock out power and cause travel delays. Allstate, the second-largest U.S. home and auto insurer, fell 0.9 percent to $40.15 at 4 p.m. in New York. Travelers slipped 0.8 percent and Chubb, an insurer of high-end homes, sank 1.8 percent. The system, dubbed “Frankenstorm” by the National Weather Service , may increase claims costs for property insurers, which have benefited this year from lower catastrophe costs than in 2011. Insured losses may be $5 billion in the U.S., with the biggest portion in Pennsylvania, according to estimates from Kinetic Analysis Corp. and compiled by Bloomberg. “Most of the affected areas are pretty population-dense,” Mark Dwelle , an analyst at RBC Capital Markets , said in a phone interview today. “There aren’t a lot of safe landing spots.” The National Hurricane Center track for the system has it going ashore just south of the Delaware Bay on Oct. 30 and moving northwest between Baltimore and Wilmington, Delaware. The path may change before landfall, the center said. As much as 10 inches of rain may fall on parts of the Northeast, with the heaviest rain to the north of the storm’s track. Sandy is likely to cause damage similar to Hurricane Irene , which lashed the East Coast last year, FBR Capital Markets’ Randy Binner wrote in a research note today. The losses are unlikely to reach reinsurance limits, so firms including Allstate, Hartford Financial Services Group Inc. (HIG) and Travelers will bear the costs, he said. Capital Capacity “This level of event is notable for earnings impacts to exposed insurers, but it is not a large event in terms of industry capital capacity,” Binner wrote. Irene cost insurers $4.3 billion, according to data compiled by the Insurance Information Institute. Standard homeowners’ policies protect against wind damage, while losses from flooding aren’t covered, the trade group said. Mark Schussel, a spokesman for Warren, New Jersey-based Chubb, Travelers’ Jennifer Wislocki and Hartford’s Thomas Hambrick declined to comment on storm losses. April Eaton, a spokeswoman for Allstate, said it’s too early to estimate claims costs. As of 2 p.m. New York time, Sandy’s top winds fell to 75 miles (121 kilometers) per hour, down from 100 mph earlier, according to the hurricane center in Miami. It was 30 miles north-northeast of Great Abaco Island in the Bahamas and 430 miles south-southeast of Charleston, South Carolina , moving northwest at 7 mph. State Farm Policyholder-owned State Farm Mutual Automobile Insurance Co., the largest U.S. auto and home insurer, sold the most coverage exposed to storm damage in the states that may be affected by the weather system, according to a report today from JPMorgan Chase & Co. Northbrook, Illinois-based Allstate was the second-largest, followed by Travelers. Chubb was ninth, according to the report. Property-casualty companies have record levels of capital and will probably be able to continue to generate more “even if the industry experiences substantial catastrophic losses” in the fourth quarter, JPMorgan said in the report. “It’s not a crippling storm,” Ed Noonan, chief executive officer of Bermuda-based reinsurer Validus Holdings Ltd. (VR) , said in an interview today. “It’s just it’s unusual to have a storm of this size this late in the year.” To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net ; Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-16 | Bloomberg | Wal-Mart Battle Highlights Gap Between Washington and D.C. | Last month, some of us in Washington were captivated by an epic battle on the District of Columbia Council. At the urging of labor and community groups (with backing from local businesses that compete with Wal-Mart Stores Inc. ), the council passed a living-wage law requiring businesses to pay their workers $12.50 an hour … but only if the business had more than $1 billion in corporate revenue and operated stores with more than 75,000 square feet. The council did everything but specify that the law only applied to companies whose name started with W, and rhymed with “All-Mart.” (Though the few other companies who might feasibly get caught up in this net -- Target Corp. , Home Depot Inc., AutoZone Inc. , Macy’s Inc. -- also protested .) Wal-Mart responded by threatening to halt development plans for the stores it had not yet begun constructing -- three out of the original six, including one south of the Anacostia River , a pet project of Mayor Vincent Gray in an area that desperately needs both the retail and the jobs. The measure passed the council, but ultimately, the mayor vetoed it. Well, Wal-Mart just opened its first two hiring centers, and 11,000 people applied for 1,800 jobs. As City Paper points out , even if no people applied after the first week, that would give Wal-Mart an acceptance rate similar to the University of Chicago. One way to look at this is to say that this just goes to show how wrong the council was: People want to work at Wal-Mart, and pricing them out of the local market would have made all these workers worse off. This is true. But another way to look at it is to say that this just shows the gap identified by Adam Serwer between “Washington” and “D.C.”: Washington, D.C., has always been two cities. Washington spills out of downtown Metro stations at 8 a.m.; D.C. huddles on crowded buses at 6 a.m. On Sundays, when Washington goes to brunch, D.C. is in church. Washington clinks glasses in bars like Local 16 in its leisure time, while D.C. sweats out its perm at dance clubs like Love or DC Star. Washington has health-insurance benefits, but D.C. is paying out of pocket. Washington just closed on a condo; D.C. is in foreclosure. Washington is making money. D.C. never recovered from the 2001 recession. Washington, of course, is mostly white and educated; D.C. is much blacker, poorer and less likely to have an Ivy League degree in its pocket. Looking at it this way is also true. It is lovely that the free market is providing the people who applied with better opportunities to work. But that flood of applications is a measure of the desperation of many longtime D.C. residents. The long boom in D.C.’s economy doesn’t have much place for unskilled or semi-skilled workers. The places that are hiring don’t need them (lobbyists, defense contractors and professional services more than the government bureaucracy -- contra the Tea Party, George W. Bush’s wars did at least as much to create an employment boom here as did Barack Obama’s stimulus). And thanks to various obstacles -- from persnickety regulatory hurdles and landlords who want to rent properties in gentrifying neighborhoods at what they’ll eventually be worth instead of what they actually are, to young professionals who do more and more of their shopping on Amazon.com -- the biggest sectors capable of absorbing these workers, which are retail and food services, are not growing as fast as they should be. One typically closes a piece like this by calling for more education to upskill those stranded workers. And of course, D.C.’s school system does need a whole lot of fixing. But improving the high schools is not going to help a 35-year-old who needs a job. Easing up on the regulatory burdens to opening a business would be a much faster and more effective way to help those workers. As we’ve just seen, however, the District of Columbia Council prefers to move in the other direction. |
2024-09-07 | Bloomberg | New York Life, Insurers Fault Madoff Trustee’s Treatment in Tremont Deal | New York Life Insurance Co. and six other insurance companies assailed the $1 billion settlement the trustee liquidating Bernard Madoff ’s firm forged with Tremont Group Holdings Inc., saying it didn’t treat all of Tremont’s funds equally. As limited partners of the hedge fund’s Opportunity III fund, they said they stand to lose if a court rules that trustee Irving Picard erred in denying compensation to the Ponzi scheme’s so-called net winners. While Picard’s deal with Tremont protects the hedge fund’s other funds by letting them recalculate claims in event of such a ruling, it doesn’t protect the insurance companies, they said in a bankruptcy court filing yesterday in New York. “The agreement contains an ambiguity that may be used by the trustee to refuse to recalculate,” they said. A group of Madoff’s investors last week asked a U.S. appeals court to review its Aug. 16 ruling that bars them from calculating losses based on their account statements. The court’s “general approval” of Picard’s method of calculating who gets compensated may be “modified,” the insurers said. As part of the Tremont deal, its funds will be allowed to make claims on the Madoff estate of about $3 billion. The insurers said the trustee needs to clarify their status in the arrangement. Amanda Remus, a Picard spokeswoman, declined to comment on the insurers’ complaint. The Tremont case is Picard v. Tremont Group Holdings Inc., 10-5310, U.S. Bankruptcy Court , Southern District of New York ( Manhattan .) To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net. To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net . |
2024-06-30 | Bloomberg | UBS Agrees to Buy ING Australia Investment Management Unit | UBS AG (UBSN) agreed to buy ING Groep NV (INGA) ’s Australian investment management unit, adding 24.8 billion euros ($36 billion) of assets, as the Dutch bank shrinks its balance sheet after a government bailout. ING and UBS expect to complete the deal in the fourth quarter, the banks said in separate statements today. Neither company disclosed the terms of the transaction. The purchase will make UBS one of Australia ’s top 10 investment managers by asset size, the Zurich-based company said. ING, the biggest Dutch financial-services company, is selling assets as a condition of a government bailout. “The acquisition significantly increases the scale and distribution of our business,” Ben Heap, head of UBS Global Asset Management for Australia and New Zealand , said in the statement. Most of the ING unit’s assets are managed on behalf of OnePath, the wealth-management business of Australia & New Zealand Banking Group Ltd. (ANZ) ANZ Bank agreed in September 2009 to buy ING’s stake in their life insurance and wealth-management venture for A$1.76 billion ($1.9 billion). Under today’s accord, UBS said it will provide investment advisory services to ANZ Bank. ING was advised on the UBS agreement by Pottinger, an Australian financial adviser. UBS used its own investment bankers. ING this month agreed to sell its U.S. online bank to Capital One Financial Corp. for $9 billion and said last week it’s in talks with potential buyers of its car leasing and fleet-management business. To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net |
2024-05-01 | Bloomberg | MetLife Posts $986 Million Profit, Beats Estimates | MetLife Inc. (MET) , the largest U.S. life insurer, reported a first-quarter profit as Chief Executive Officer Steven Kandarian expands outside the U.S. Net income was $986 million compared with a loss of $144 million a year earlier that was tied to MetLife’s narrowing credit spreads, the New York-based insurer said today in a statement. Operating profit was $1.48 a share, beating the $1.30 average estimate of 20 analysts surveyed by Bloomberg. Kandarian, 61, is searching for customers in faster-growing economies and reducing expenses as slow expansion in the company’s main markets weighs on results. The Standard & Poor’s 500 Index rose 10 percent in the quarter, helping units that sell retirement products and cushioning the damage from low interest rates on investment income. “When equity markets are strong, they get a boost,” Sean Dargan, an analyst at Macquarie Group Ltd., said in an interview before results were announced. “On the interest-rate front, they haven’t gotten any real help.” MetLife has advanced 17 percent this year on the New York Stock Exchange. The shares added 60 cents to $39 in late trading at 4:16 p.m., after results were announced. The firm lifted its dividend for the first time since 2007 last week after selling operations including residential mortgage origination to end its status as a bank overseen by the Federal Reserve. Currency Fluctuations Prudential Financial Inc. (PRU) , No. 2 U.S. life insurer, also posted results that exceeded analysts’ estimates. Operating profit of $2.28 a share beat by about 42 cents the average estimate of analysts. The Newark , New Jersey-based insurer posted a net loss of $706 million in the first quarter, fueled by fluctuations in the yen. In Asia, MetLife’s operating profit rose 11 percent to $333 million as business expanded in South Korea, Australia and India. MetLife purchased American Life Insurance Co., with about 12,500 employees and operations in 50 countries, from insurer American International Group Inc. (AIG) in 2010 to build operations beyond the U.S. Kandarian agreed in February to buy Chilean pension provider AFP Provida SA in a $2 billion deal to add fee income in Latin America. MetLife has been seeking to add sources of income that don’t depend on returns from stocks and bonds. Book value , a measure of assets minus liabilities, fell to $57.03 a share as of March 31 from $57.17 three months earlier. Net investment income, rose to $5.13 billion from $5.08 billion a year earlier. Variable investments, which include private equity and hedge funds, added $337 million before taxes, up from $239 million a year earlier. Expense Cuts In the Americas unit, led by William Wheeler, operating earnings rose to $1.3 billion from $1.16 billion a year earlier, driven by higher investment income and fees in the retail business, as well as expense cuts. The insurer has set a goal of $600 million in expense savings, mostly in the U.S. MetLife is shifting jobs to North Carolina from sites in the U.S. Northeast and California , the company and state officials said in March. MetLife has scaled back from some capital-intensive products such as variable annuities to limit risks from falling stocks, and is working to sell more protection products such as accident-and-health coverage. The firm is targeting return on equity of at least 12 percent by 2016, compared with an operating ROE of about 11 percent last year. Operating profit in the Europe , Middle East and Africa region increased 21 percent to $87 million, amid growth in some emerging markets , the insurer said. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-08-10 | Bloomberg | SEC Sues Stifel Over Wisconsin School Losses Tied to $200 Million of CDOs | The U.S. Securities and Exchange Commission sued broker Stifel, Nicolaus & Co. for fraud, claiming it misled five Wisconsin school districts about the risks of complex investments that wiped out $200 million. Stifel and David Noack, a former executive, masked the risks in persuading the schools to buy notes tied to synthetic collateralized debt obligations, or CDOs, a type of derivative linked to corporate bonds, the SEC said today in a complaint brought against the two in U.S. District Court in Milwaukee. While the schools lost their entire investment, Stifel and Noack, 48, received “significant fees,” the agency said in a statement. The districts used $37.3 million of their own cash and borrowed $162.7 million to invest in the securities in 2006, trying to produce earnings to help pay retiree health costs. The SEC said the firm and Noack misled officials about the risks of products typically sold to hedge funds, banks and insurers. “Stifel and Noack abused their longstanding relationships of trust with the school districts by fraudulently peddling these inappropriate products to them,” Elaine Greenberg, head of the SEC’s unit that handles municipal bond cases, said in the statement. “They were clearly aware that the school districts could ill afford to bear the risk of catastrophic loss.” Shares Drop Stifel Financial Corp. (SF) , the broker’s St. Louis-based parent, fell $2.72 a share, or 9.5 percent, to $25.88 at 4:15 p.m. in New York Stock Exchange composite trading after dropping as much as 19 percent, the most in more than 19 years. Stifel said the notes were rated AA- when they were sold to the districts and faulted RBC Capital Markets , a New York unit of Toronto-based Royal Bank of Canada, for the loss. The bank and its affiliates created the investments, according to the SEC, which didn’t accuse the bank in its complaint. “Based on what we knew in 2006, the investments were suitable,” Stifel said in a statement. “To allege in 2011 that Stifel should have foreseen the 2008 economic collapse, the structural flaws in derivatives which caused billions of dollars in losses, as well as the misrepresentations and conflicts Stifel believes RBC hid from it and the school districts, is 20/20 hindsight.” The districts acknowledged in writing that they were “sophisticated” investors who understood the risks of the products and who could withstand losses, Stifel said. AA- is Standard & Poor’s fourth-highest credit rating. Deflecting Blame “We take exception to Stifel’s attempt to deflect blame without acknowledging their own, central role in the school districts’ losses,” Kevin Foster , an RBC Capital spokesman, said by e-mail. He said Stifel created the investment program, asked Wall Street banks to participate and sold it to the districts, while representing to RBC that it was suitable. Ron Kane, a lawyer for Noack, didn’t return telephone calls seeking comment. A call to a telephone number listed in Noack’s name in Hartland, Wisconsin, went unanswered. The SEC action follows lawsuits by the school districts and a government initiative to crack down on municipal securities fraud. The agency has also brought other cases tied to CDOs, including suing Goldman Sachs Group Inc. last year. Stifel and Noack persuaded the school districts to invest in the derivatives, providing a kind of insurance on the underlying assets. Publicly Funded Insurance “In effect, Stifel and Noack persuaded the school districts essentially to insure the performance of a select group of corporate bonds, and do so with public funds,” the SEC said in its complaint. The districts -- serving Kenosha, the Kimberly area, Waukesha, West Allis-West Milwaukee , and Whitefish Bay -- were sold the investments as a means to help cover retiree health costs that they hadn’t set aside money to fund, the SEC said. The investments, in three transactions from June to December 2006, were unsuitable for the districts, which had no experience with CDOs and related instruments, the SEC said. The agency said that Noack also misled district officials about the chances of failure for the investments. Stifel and Noack knew the districts lacked the sophistication and expertise to evaluate the risks they were taking, relying instead on recommendations from the company and Noack, the SEC said. Noack also gave “sweeping assurances” as to the safety of the investments, the SEC said. In one instance, Noack and the company said that 100 of the top 800 companies in the world would have to go under before the school districts would lose their principal, according to the complaint. They also told the districts it would take the collapse of “15 Enrons” for the investments to fail, a reference to Enron Corp., the Houston energy trader that went bankrupt in December 2001. ‘Teaching Moment’ “Let this be a teaching moment for sellers of complex financial products,” Robert Khuzami , director of the SEC’s Enforcement Division, said in the statement. Those who push such investments must meet standards of disclosure and ensure the suitability of the products for the buyer, he said. “Stifel and Noack violated these standards and jeopardized the ability of the school districts to fund operations and provide a quality education to students,” he said. The case is Securities and Exchange Commission v. Stifel Nicolaus & Co Inc., 11-cv-00755 U.S. District Court, Eastern District of Wisconsin (Milwaukee). To contact the reporters on this story: William Selway in Washington at wselway@bloomberg.net ; Joshua Gallu in Washington at jgallu@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-06-24 | Bloomberg | Behavioral Economists Establish a Beachhead Within Obama Administration | Peter R. Orszag , the White House budget director, plans to resign this summer, the first of President Barack Obama ’s Cabinet to do so. He leaves behind an indelible mark on two of the President’s signature issues: the $862 billion economic stimulus plan and the $940 billion health- care reform law, both of which he had a major hand in drafting. In another, less visible arena, Orszag’s imprint could be just as big. He was one of the Administration’s most prominent devotees of behavioral economics -- the study of what drives consumers to part with their money as they pick one product, retailer, or provider over another. If you give consumers better information and subtly push them in the right direction, the thinking goes, they can be coaxed, not commanded, into buying healthier foods, consuming less energy, and taking out more affordable mortgages , Bloomberg Businessweek reports in its June 28 issue. At the Office of Management & Budget, Orszag, 41, created a team of like-minded adherents, including Cass R. Sunstein , Obama’s regulatory czar and the co-author of Nudge, a behavioralist manifesto. They have quietly established a beachhead, influencing major sections of the health-care reform law and the financial-regulation overhaul Congress is about to complete. Their handiwork can be seen in proposed rules ranging from mine safety to retirement savings, tire durability, and food labels. Ideas Seeded Despite criticism from conservatives like Glenn Beck of Fox News, and even some apprehension from the political and communications teams at the White House, the behavioralists could be influencing regulations long after Orszag leaves. Their ideas have been seeded in numerous initiatives, just as the regulatory state is poised for a dramatic comeback following decades of retrenchment. Other promoters include Michael S. Barr , the Assistant Treasury Secretary for Financial Institutions, who helped draft Obama’s Wall Street reforms. National Economic Council Director Lawrence Summers and economic adviser Austan Goolsbee are sympathetic, though they don’t consider themselves behavioral economists. Even before Obama was sworn in, his advisers spoke excitedly about plans to reregulate business, in part by adapting the emerging theories of behavioral economics. Then came the ridicule. Republican lawmakers said Obama was creating a nanny state by manipulating American lifestyles with voodoo economics. Fox’s Beck launched a crusade against Sunstein, calling him “the most dangerous man in America.” Real-World Experience The behavioral adherents lowered their profile. White House advisers made sure of it by rarely allowing them to speak on the record. They’ve managed to be influential nonetheless. To avoid a partisan fight, Obama’s advisers are urging that regulatory proposals not be based on abstract academic theory. Instead, they say, new rules should stress real-world experience and scientific data. The biggest bet will be in health care. The reform law’s premise is that young, uninsured workers can be persuaded to enroll in insurance plans even though it would be cheaper to flout the law and pay a fine as low as $95 in the first year. The behavioralists believe they can use salesmanship and social pressure to make the law’s grand bargain work, in which insurers cover everyone and, in return, millions of new, low-cost customers pay premiums to subsidize the sick. In Massachusetts, a similar insurance mandate gained 97 percent compliance with an aggressive enrollment campaign that included promotions by the Boston Red Sox. Already, Obama has adopted behavioralist ideas to encourage more businesses to enroll employees automatically in 401(k) plans and to simplify college financial-aid forms. A little- noticed March ruling from Sunstein on a proposed set of tire durability standards is also instructive. The standards were fine, Sunstein concluded, but he demanded more work on labels “to promote easy comparison shopping.” Neoclassical View Behavioral economics research stresses the importance of the clarity and salience of disclosures in shaping consumer behavior; the old-fashioned, neoclassical view is that consumers will make use of disclosed information if it’s important to them. White House advisers have clashed with the food industry in pressing for clear, front-of-package nutrition labeling such as rankings on a scale of one to three stars to show whether a product is healthy or not. A provision in the health reform law to require nutrition information on chain restaurant menus was a brainchild of behavioral economists. Health-care adviser Ezekiel J. Emanuel , housed within OMB, is scouring academic and marketing research to figure out how to assure that consumers focus on nutrition information as readily as they do prices. Mine Disaster “Where’s it likely to impact people, and what’s most likely to do it?” Emanuel asks. The thinking has even entered the White House’s response to the Massey Energy mine disaster: Among the ideas under consideration is a name-and-shame website that would clearly compare individual mine safety records. The consumer financial protection agency in the Wall Street reforms is another vehicle. “Behavioral economics is an impetus for creating the agency,” says Harvard economics professor David Laibson. The Treasury Department document laying out the Administration’s vision for the agency says it’s supposed to assure communications with customers are not just truthful but “balanced,” and that costs, penalties, and risks are “clear and conspicuous.” Generations of college economics students have been taught that consumers are rational creatures who make financial decisions by weighing price against usefulness. The alternative view, seeping into the Obama Administration, argues it’s not just about money. Social pressure and the way choices are presented can be just as important. It’s a new role for government: Pennsylvania Avenue as counterweight to Madison Avenue. To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net. Enlarge image Peter Orszag Alex Wong/Getty Images White House Budget Director Peter Orszag plans to resign this summer. White House Budget Director Peter Orszag plans to resign this summer. Photographer: Alex Wong/Getty Images //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-10-14 | Bloomberg | Annan, Gates Seek Leniency for Gupta for Rajaratnam Tips | Former United Nations Secretary- General Kofi Annan and Microsoft Corp. (MSFT) Chairman Bill Gates were among the supporters seeking leniency for ex- Goldman Sachs Group Inc. (GS) director Rajat Gupta when he is sentenced in 10 days for insider trading. The letters, among more than 200 made public by U.S. District Judge Jed Rakoff in Manhattan, ask the judge to show mercy to Gupta, citing his lifetime of good deeds. Gupta is scheduled to be sentenced Oct. 24 for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam. “I urge you to recognize Rajat for the good that he has done in this world, to give him the credit that he deserves for helping others, and to take into account his effort to improve the lives of millions of people,” Annan said of Gupta’s work to reform management of the UN. “I wanted to add my voice to those of other friends and colleagues of Rajat Gupta who are writing to you in order to round out Rajat’s profile,” Gates said of Gupta’s service as chairman of an organization fighting AIDS, tuberculosis and malaria. Gupta is the most prominent of the 69 people convicted since a nationwide crackdown on insider trading began in August 2009. Besides his tenure at Goldman Sachs, he served as managing partner of McKinsey & Co. from 1994 to 2003 and on the boards of Procter & Gamble Co. (PG) , the Rockefeller Foundation and the Bill & Melinda Gates Foundation. June Conviction Gupta, 63, was convicted in June of three counts of securities fraud and one count of conspiracy. While securities fraud carries a maximum prison term of 20 years, Gupta is likely to be sentenced to fewer years under federal guidelines. After a four-week trial, a federal jury in Manhattan found Gupta guilty of leaking tips to Rajaratnam, 55, about New York- based Goldman Sachs, including information about a $5 billion investment by Warren Buffett ’s Berkshire Hathaway Inc. (BRK/B) on Sept. 23, 2008, and a tip on a quarterly loss. Rajaratnam is serving 11 years in prison for trading on tips from Gupta and others. Writers of the letters made public Oct. 12 included Gupta’s family and former associates in the worlds of academia, business and charity. They included Kushal Pal Singh, the billionaire chairman of DLF Ltd., India’s largest developer; Leonard Lauder, the chairman emeritus of Estee Lauder Cos. (EL) ; and Mukesh Ambani , India’s richest man and the chairman of Mumbai-based Reliance Industries Ltd., the world’s largest refining complex. ‘The Prison Fence’ Singh credited of the Kolkata-born Gupta with bringing Microsoft’s Gates to India and with helping DLF create an urban development initiative there. Because of the case, Gupta’s charitable works in India have been at a “standstill,” he said. “We as a society need more visionaries like Rajat Gupta,” Singh wrote. “Rajat Gupta is no threat to anyone inside or outside the prison fence.” Other writers included Ajit Jain , Berkshire Hathaway Inc.’s reinsurance chief; Judith Rodin, president of the Rockefeller Foundation; Amartya Sen, a Harvard University professor; and author Deepak Chopra. Chopra called Gupta “compassionate, caring, selfless and dedicated” and cited his work helping found the Indian School of Business in Hyderabad. “I think Rajat has tremendously contributed to humanity,” Chopra said. ‘Leverage Information’ Jain, who testified at the trial as a defense witness, talked about his long friendship with Gupta and family. Jain said Gupta has already “been disgraced personally and professionally.” Jain said Gupta “customarily chided me during our social meetings to become more active in philanthropic causes” and said he never saw Gupta abuse “his many positions of trust for personal gain.” “On no occasion of our meetings did Rajat ever seek to inappropriately obtain or leverage information or opportunity by speaking with me, and I would have considered even a mild effort in that regard to be completely foreign to his character,” Jain wrote. Gupta’s wife, Anita, wrote a heartfelt account of meeting her husband in 1968 at the Indian Institute of Technology, where she was the only girl in a class of 250 and he was “a big man on campus.” ‘Devastating’ “I have never forgotten his kindness to the very shy, quiet, small-town girl who felt so out of place,” she said. She told the judge the case has been “devastating” for her family. “Never in my wildest dreams” did she imagine she would be “separated from my husband in this way,” she said in an apparent reference to prison. She recounted how Goldman Sachs Chief Executive Lloyd Blankfein “loudly gave Rajat an ultimatum that he had to choose between Goldman and KKR,” citing a 2008 offer he received to join KKR & Co. (KKR) as an adviser. Gupta, who joined Goldman Sachs’s board in 2006, opted for KKR, then agreed to a request by Goldman Sachs that he return when the financial crisis hit, she said. “I tried very hard to counsel Rajat against it because I felt he had been treated unfairly by Goldman Sachs,” she wrote. “He felt he owed Goldman Sachs his loyalty.” Michael DuVally , a spokesman for Goldman Sachs, declined to comment on Anita Gupta’s letter. Gupta left Goldman Sachs’s board in 2010. Jurors acquitted Gupta of charges that he leaked information that Cincinnati-based P&G’s organic sales growth would fall below estimates and that he tipped Rajaratnam about Goldman Sachs’s earnings in the first quarter of 2007. The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York ( Manhattan ). To contact the reporters on this story: Patricia Hurtado in Manhattan federal court at pathurtado@bloomberg.net ; David Glovin in Manhattan federal court at dglovin@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-06-21 | Bloomberg | Stocks Jump as Miners Rally on China Yuan Move; Kazakhmys, Vedanta Surge | U.K. stocks rallied to the highest level in more than a month after China signaled an end to the yuan’s fixed rate to the dollar, sparking a surge in commodity producers as metal and oil prices climbed. Kazakhmys Plc, Kazakhstan’s largest copper producer, and Tullow Oil Plc jumped more than 2 percent as copper advanced the most in a month in London and crude oil rose to a six-week high. BP Plc limited gains as costs from the Gulf of Mexico oil spill accelerated to $2 billion. The benchmark FTSE 100 Index climbed 48.27, or 0.9 percent, to 5,299.11 in London after the People’s Bank of China said on June 19 it will end a two-year currency peg adopted during the global financial crisis to protect exporters. The FTSE All-Share Index gained 0.8 percent, while Ireland’s ISEQ Index advanced 0.1 percent. “Markets have taken this as a sign of confidence that the global economic recovery is on safe ground,” said London-based Will Hedden, a sales trader at IG Index. “The move has helped to allay concerns about further intervention in China to try and control the rate of economic growth.” Kazakhmys gained 3.4 percent to 1,235 pence, helping to send a gauge of mining shares to a near three-month high. Vedanta, India’s largest copper producer, increased 6 percent to 2,471 pence and Rio Tinto Group, the world’s third-largest mining company, increased 5 percent to 3,490 pence. Largest Consumer Copper jumped, leading a rally in base metals, amid speculation that Chinese imports may grow. A weaker U.S. currency makes dollar-priced metals cheaper for buyers using other currencies. China is the world’s largest consumer of copper. Tullow Oil, a British explorer with the most licenses in Africa, gained 2.3 percent to 1,176 pence as crude oil climbed above $78 a barrel, extending last week’s 4.6 percent gain. Royal Dutch Shell Plc, Europe’s largest oil company, increased 1.4 percent to 1,859.5 pence. BP retreated 2.2 percent to 349.5 pence as the company said the cost of its response to the worst oil spill in U.S. history accelerated to reach $2 billion. BP is seeking to raise $50 billion to cover the cost of the oil spill, the Sunday Times said, without saying where it got the information. The first $10 billion may come from a bond sale this week and the company is talking to banks to get a $20 billion loan, the newspaper said. The remaining $20 billion would come from asset sales over two years, it said. “We need to have an unusually strong cash position,” Andrew Gowers , head of communications of London-based BP, said when contacted by phone. He declined to provide more details. The following companies also rose or fell in the U.K and Irish markets. Stock symbols are in parentheses. Brit Insurance Holdings NV (BRE LN) gained 19.5 pence, or 2.1 percent, to 944.5 pence. Apollo Global Management LLC will raise its 770 million-pound ($1.15 billion) offer for the Lloyd’s of London insurer this week, the Sunday Times reported, without saying where it got the information. Man Group Plc (EMG LN) increased 6 pence, or 2.4 percent, to 254.4 after Credit Suisse AG raised its share-price estimate for the largest publicly traded hedge-fund firm. Credit Suisse raised its 2011 earnings forecast for the company by 11 percent and increased its price estimate for the shares by 5.7 percent to 280 pence. BofA-Merrill Lynch Global Research cut its price objective for Man Group’s shares by 1.4 percent to 355 pence. That’s still 43 percent above last week’s closing price. Shed Media Plc (SHDP LN) jumped 4.5 pence, or 5.8 percent, to 82.5. The U.K. TV producer behind Footballers’ Wives and Supernanny said it is in talks with Time Warner Inc. about a takeover offer. To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net . |
2024-04-23 | Bloomberg | New York City Rent Limits Left Intact by Supreme Court | The U.S. Supreme Court rejected a challenge to New York City’s decades-old rent-stabilization system, leaving intact rules capping prices on almost a million units in one of the country’s most expensive cities. The justices today turned away an appeal by James and Jeanne Harmon, who said the city was violating their constitutional rights by limiting rents on three one-bedroom apartments in their Upper West Side brownstone. The units rent for about $1,000 a month, less than half the price of three similar, unregulated units in the building, the Harmons say. The couple targeted a 43-year-old state statute that has become part of the city’s fabric, shaping its neighborhoods along with the wallets and lifestyles of millions of city residents. “To the extent that the court is saying rent regulation must stand, I think that’s good news for the state of New York ,” Governor Andrew Cuomo , a Democrat, said at a Manhattan news conference today. “Rent regulations are very important to the tenants of New York.” James Harmon, 68, said in an e-mailed statement after the court action that the U.S. Constitution “does not allow the government to force us to take strangers into our home at our expense for life.” ‘Dickensian Conditions’ Rent-stabilized apartments have become the stuff of lore and scandal in New York. Former Mayor Ed Koch lived in one for years. So have celebrities including Cyndi Lauper and Carly Simon, according to the New York Times. U.S. Representative Charles Rangel, a Democrat and the former chairman of the tax- writing House Ways and Means Committee, was fined $23,000 last month for using a rent-stabilized apartment in Harlem as a campaign office. Supporters say the rent-stabilization law protects tenants from prices that otherwise would be out of reach for many New Yorkers. The median household income for those in the 970,000 rent- stabilized households last year was $37,000, according to the city’s most recent housing and vacancy survey, released in February. Four percent of households in rent-stabilized units had incomes of $150,000 or more in 2010, according to the U.S. Census Bureau. “We would have Dickensian conditions,” said Allison Tupper, 72, a retired school teacher. She pays $2,233 a month for a four-room, first-floor apartment with access to a small garden on West 46th Street in Manhattan, in the once rough-and- tumble neighborhood known as Hell’s Kitchen that’s now rapidly gentrifying. “People would be living in the streets.” Median Rent Tupper takes in a combined $3,700 a month from Social Security and her teacher’s pension. She said one-room studios in her seven-unit building can go for as much as $3,000 a month. The median monthly rent for unregulated apartments citywide was $1,369 in 2011; for rent-stabilized units it was $1,050, the city survey showed. Yet in Manhattan , average rents hit a record $3,418 in March, Citi Habitats, a real estate brokerage, said in an April 16 report. New York’s history of rent regulation goes back to 1920, when a post-World War I housing shortage prompted the state to enact temporary rules, upheld two years later by the U.S. Supreme Court. The federal government imposed emergency controls during World War II as part of a nationwide push to prevent rents from soaring in cities central to the war effort. Rent Guidelines Board The current system dates to 1969 when the state responded to rising rents and falling vacancy rates by enacting the Rent Stabilization Law, which now governs almost all the city’s rent- limited apartments, including those of the Harmons. Under the law, cities may limit rents if their vacancy rate is less than 5 percent -- a test New York easily meets. Its vacancy rate in 2011 was 3.12 percent, the city survey showed. The system limits annual rent increases to a percentage set by the Rent Guidelines Board -- 3.75 percent for a one-year lease in the most recent adjustment. About 40,000 units are still covered under the older rent-control regime, which ties increases to a landlord’s operating costs. The law gives tenants broad rights to remain in an apartment or pass it on to a family member. The Harmon family has owned the West 76th Street brownstone since 1949, when James’s grandparents bought it with a $22,000 mortgage, according to court documents. James and his brother inherited the building in 1994, and James bought out his sibling’s interest in 2005 for $1.5 million. ‘Taking’ of Property The Harmons live on the first floor. The three upper floors each have two units -- one rent-stabilized, one market-rate. The tenants in the low-rent apartments have all lived there since at least 1982. One owns a home in the Hamptons on Long Island , purchased for $320,000 in 2001, according to the Harmons’ 2008 complaint. The Harmons contend the rent-stabilization law is an unconstitutional “taking” of private property without compensation. They say previous Supreme Court decisions allow rent-control laws only for emergency situations and that New York’s decades-old system has effectively become permanent. “This simple case challenges the power of the city and state of New York to impose on the Harmons the unconstitutional burden of involuntarily and permanently renting a part of their residence to tenant-strangers,” the couple argued in their appeal. A New York-based federal appeals court threw out the Harmon suit on a 3-0 vote, rejecting their contention that the law was akin to a physical occupation of their property. New York City and state both asked the Supreme Court to reject Harmon’s appeal without a hearing. Previous Supreme Court decisions say that judges “should not sit as super-legislatures reviewing matters of economic policy, but should ask only whether a legislature’s policy judgments are rational,” New York Attorney General Eric Schneiderman argued in court papers. The case is Harmon v. Kimmel, 11-496. To contact the reporters on this story: Greg Stohr in Washington at gstohr@bloomberg.net ; Henry Goldman in New York at hgoldman@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-12-13 | Bloomberg | EU Ministers Move Toward Accord on ECB Bank Oversight | European Union finance ministers moved closer to an agreement on a single euro-area bank supervisor that could give the European Central Bank more time to take on its expanded oversight role. After 12 hours of talks, the ministers early today were considering a March 2014 target date for the new supervisor to be fully functional, or 12 months after the EU publishes regulations to set it up, whichever comes first, according to a draft proposal prepared by Cyprus, which holds the EU’s rotating presidency. Yet the proposal also allows the ECB unlimited discretion to delay if it wants more time to prepare for its oversight mission. German Finance Minister Wolfgang Schaeuble and his French counterpart Pierre Moscovici led a chorus of voices yesterday calling for a deal, before a year-end deadline set by leaders aiming to break the link between banking woes and sovereign-debt struggles. Ministers are striving to agree on which banks the ECB will oversee, how to balance the needs of large and small countries and how the new system would affect non-euro lenders. “I’m confident that we will find a solution today or next week that everyone can agree to,” Schaeuble told reporters on his way into the meeting yesterday. He reiterated Germany ’s concern that ECB supervisory duties not interfere with monetary policy and called for a “clear separation” of tasks. Key Obstacle The balance of ECB power has been a key obstacle for finance ministers trying to reach a deal on the single supervisor this month. Joint oversight is a required first step before banks can tap the euro zone’s 500 billion-euro ($652 billion) firewall fund instead of passing through national authorities, as was required in Spain ’s financial-sector rescue. “The outlines of an agreement exist,” Moscovici said yesterday. “It’s very important to wrap up on banking supervision. It’s one of the causes of the crisis, it’s about getting at its roots.” The most recent proposal would allow participating nations to seek mediation if they disagree with an ECB supervisory decision and simplify procedures for objections from non-euro nations that opt to join the oversight regime. Nations were still wrestling with voting procedures on the ECB’s supervisory board and on the membership of a steering committee within that board. Finance ministers aim to reach agreement before EU leaders meet later today to begin two days of meetings in Brussels. Draft summit conclusions call for the EU to begin work on a euro-area bank resolution plan once it finishes the single supervisor and other current proposals on how countries handle failing banks and manage national deposit-insurance schemes. Public Debate France would be willing to accept bank-size thresholds in order to get the new supervisor up and running, Moscovici said. Nations are closing in on proposals to require direct ECB oversight for lenders with more than 30 billion euros in assets or units in multiple countries, as well as for banks whose total assets are larger than 20 percent of their home country’s gross domestic product. The ECB would prefer to avoid specific targets and eliminate the multiple-countries threshold, ECB Vice President Vitor Constancio said. The latest compromise altered the proposal for when cross- border operations would trigger direct ECB oversight. The changes mean fewer banks would be caught by that requirement. ECB supervision would be required for nations that use the euro and optional for countries outside the currency bloc. Non- euro nations were pressing for concessions on how to handle voting rules at the London-based European Banking Authority, which sets standards and handles disputes among EU regulators. Double Majority Early today, finance ministers were on track to agree on a U.K.-backed proposal for divvying up EBA voting rights, according to draft documents. The U.K., home to Europe ’s biggest financial center and which won’t join the banking union, has sought a requirement that EBA decisions be taken by so-called double majority voting, so that nations outside the supervisory mechanism can’t be automatically overruled by those who take part. Limits on the powers of the ECB Governing Council could be set up to reassure non-euro nations that accept common banking oversight, according to a Dec. 9 opinion from the ECB and the European Commission obtained by Bloomberg News. The report also says nations could signal “that a specific point to be addressed by treaty change would be to strengthen democratic accountability over the ECB insofar as it acts as a banking supervisor” as they establish the new oversight regime. ‘Interim Solution’ Germany backs current efforts to set up a common supervisor as an “interim solution” until nations can agree on a permanent framework, Schaeuble said. “A limited treaty change would be the better regulation, but that can’t be done overnight,” he said. When the new supervisor is up and running, the ECB will want to make sure its officials can access all the information they need, said Daniel Gros of the Center for European Policy Studies and Thorsten Beck of the European Banking Center at Tillburg University. In difficult times, they said in a report today, financial stability can be the biggest threat to price stability. “A strict separation of supervision and monetary policy is not desirable during a financial crisis,” wrote Gros and Beck in a report to the European Parliament’s economic affairs committee. “The key problem hampering the ECB today is a lack of detailed information, which is often highly confidential, on the state of the health of the banking system.” ‘More Divided’ Swedish Finance Minister Anders Borg said the ECB’s common supervision would leave Europe “more divided” than it has been, by creating a rift between countries inside and out of an emerging banking union. At the same time, he said his nation would not block the single supervisor as long as its concerns as a non-participating nation were addressed. As the new supervisor takes shape, smaller countries are vying to ensure their vote counts as much as their larger counterparts when the ECB takes supervisory decisions. Tonio Fenech, the finance minister of Malta, said his country was worried about the consequences of its banks being among the smallest institutions referred for ECB oversight. “When you have to review big companies or big banks, you put in your best people, when you have smaller banks or smaller companies, you put your junior staff,” Fenech said during public debate. “In our case, we are presently having our best people supervising our more important banks in the economy. These will be transfered to the ECB to be supervised by juniors. Sorry, no thank you, I will not risk my economy.” To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net ; Rebecca Christie in Brussels at rchristie4@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-02-21 | Bloomberg | Union Bank of Nigeria `Resolved' Dispute With Unions, Operations Resume | Union Bank of Nigeria Plc ended a dispute with the Nigerian Labor Congress over participation of employees in trade unionism, bank spokesman Francis Barde said. “The disagreement between the labor unions and the bank has been resolved, so things are now back to normal,” Barde said in a phone interview today from Lagos, the commercial capital. The Nigerian Labor Congress started a protest against Union Bank on Feb. 14 after the bank stopped its workers from belonging to an affiliated union. The lender prevented employees from joining the Association of Senior Staff of Banks, Insurance and Financial Institutions, NLC’s President Abdulwaheed Omar said in a statement posted on the congress’s website on Feb. 10. “Union Bank has agreed to recognize the workers union; it will also reinstate all workers sacked on account of their union membership,” Ismail Bello, a member of the national executive council of the Nigerian Labor Congress, said by phone today. “The bank has also agreed to rescind its decision to transfer some workers on account of their union membership.” To contact the reporter on this story: Sam Olukoya in Lagos at solukoya2@bloomberg.net To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net |
2024-04-12 | Bloomberg | BlackRock Plans Bond-Trading System, Bypassing Banks: WSJ | BlackRock Inc. (BLK) , the world’s largest money manager, is planning to set up a bond-trading system that will allow it to make transactions directly with other investors and bypass dealers, the Wall Street Journal reported. The electronic trading platform slated to start this year may cut revenue at securities companies that have acted as middlemen in the credit markets, according to the article. The system is being developed to reduce costs and make up for Wall Street’s diminished ability to provide liquidity, not to compete with investment banks, the newspaper reported, citing Richard Prager, a BlackRock managing director. “It’s not going to cannibalize Wall Street,” Prager, also head of global trading, said in an interview with the Journal. “If there’s a savings available to clients, we want to give it to them.” Fiona Tyndall, a Hong Kong-based spokeswoman for BlackRock, didn’t immediately reply to an e-mail seeking comments. Katherine Cheung, a Hong Kong-based managing director for BlackRock, didn’t answer two calls to her office phone. The trading platform would be run by New York-based BlackRock Solutions and offer clients the ability to deal in corporate bonds, mortgage securities and other assets, the Journal said. Customers would include sovereign-wealth funds, insurance companies and other money managers, according to the article. Bloomberg LP, the owner of Bloomberg News, competes with Reuters in providing news, information and trading systems to the financial community. Bloomberg Tradebook competes with Instinet Group Inc. in matching stock trade orders. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net ; Bei Hu in Hong Kong at bhu5@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net |
2024-04-29 | Bloomberg | Regulators Don’t Understand Structured Products, Eusipa Says | Regulators of the $1 trillion structured products market don’t understand the difference between risk and complexity, according to the European Structured Investment Products Association. Individual investors who buy the notes, which package debt with derivatives, don’t need to understand every detail of the structures, said Thomas Wulf, secretary general of Eusipa, as the organization is known. The association is comprised of issuer groups in Europe that represent banks including Deutsche Bank AG (DBK) and Goldman Sachs Group Inc. Wulf was responding to criticism of structured notes from European and U.K. regulators who are scrutinizing the market. Martin Wheatley, chief executive of the U.K.’s Financial Conduct Authority, said this month the products have “often been mind- bogglingly complicated financial gambles.” “Complexity is not always a disadvantage to a client,” said Wulf. “Adding features to a product to make it more secure, such as by giving it protection against capital loss or issuer default, is necessarily making it more complex.” The Madrid-based International Organization of Securities Commissions proposed new rules on April 18 governing sales of the securities. The organization, which represents more than 100 national regulators, said it was responding to concerns of its members that structured notes are difficult for investors to understand, leaving them vulnerable to mis-selling. Key Information At least 16 regulators are considering changing their existing rules for the products, said the Madrid-based group. Policy makers are preparing to require lenders in the European Union to publish so-called key information documents, or KIDs, that provide concise information about the characteristics and risks of their products, which could be in place by the end of next year. French socialist Pervenche Beres is leading a committee responsible for the European Parliament’s position on the so- called Packaged Retail Investment Products rules. Beres is focusing on consumer protection rather than the level of risk of individual product types, said a spokesman for the politician, who asked not to be named citing policy. She wants to extend KIDs to other securities besides structured products, including stocks and bonds, to create a level playing field, he said. Financial gambles The securities should be considered in relation to who is buying them rather than in abstract terms, said Jamie Smith , chairman of the U.K. Structured Products Association. Citigroup Inc. (C) , Morgan Stanley and Royal Bank of Scotland Group Plc (RBS) belong to the association. “Complexity is a relative term that depends on the investors at the end of the chain,” said Smith. “It can’t be defined adequately by reference to the number of derivatives or calculations involved.” Banks in Belgium signed a voluntary moratorium on sales of certain complex structured products in 2011 at the request of the country’s Financial Services and Markets Authority. Regulators should pay more attention to how the securities are distributed rather than how many moving parts they have, said Chris Muyldermans, head of policy advice, public policy and regulatory affairs at the asset management arm of KBC Groep NV (KBC) in Brussels. The Brussels-based bank raised $318.2 million from selling 18 structured notes last year, according to data compiled by Bloomberg. “Do investors really have to understand every detail of the derivatives that create the structure and determine its outcomes?” she said. “What they need is distributors or salespeople to explain the life cycle of the products and what can happen in between, not every detail of its underlying structure.” Distributors typically include retail banks, wealth management companies, financial advisers and brokers. To contact the reporter on this story: Alastair Marsh in London at amarsh25@bloomberg.net To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net |
2024-07-12 | Bloomberg | Treasuries Gain as Growth Concern Spurs Demand for Safety | Treasuries advanced along with the bonds of other highly rated nations on concern central banks need to take more action to sustain faltering global growth, spurring demand for the safest assets. U.S. 10-year yields dropped to within five basis points of a record low, while bonds also rallied in Germany , the U.K., Japan and Australia. Longer-maturity bonds led gains in Treasuries after the Federal Reserve disappointed investors yesterday by failing to signal further monetary easing. The $13 billion in 30-year debt the U.S. is scheduled to sell yielded a record low in pre-auction trading. “There’s the expectation of the Federal Reserve doing more,” said Thomas Simons, a government-debt economist in New York at Jefferies Group Inc., one of 21 primary dealers that trades with the Fed. “The easing bias is still intact. It’s a desire for safe, dollar-denominated assets, driven partly by the Fed and by what’s going on in Europe .” The 10-year Treasury yield fell three basis points, or 0.03 percentage point, to 1.48 percent at 12:25 p.m. in New York, according to Bloomberg Bond Trader prices. The 1.75 percent security due in May 2022 rose 10/32, or $3.13 per $1,000 face amount, to 102 14/32. The yield dropped to a record 1.4387 percent on June 1. Thirty-year yields fell three basis points to 2.58 percent, approaching the all-time low 2.5089 percent also set on June 1. Applications for jobless benefits decreased last week 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, Labor Department figures showed today. Economists forecast 372,000 claims, according to the median estimate in a Bloomberg News survey. ‘Reluctant’ Setup “The bid in the market is due to a little bit of concern about a global slowdown,” said Sean Murphy , a trader at primary dealer Societe Generale in New York. “It seems to be gripping the market. There’s some concern that maybe the same demand for the 10-year may show up for the 30-year, so guys are a bit reluctant to set up for the market today.” The 30-year Treasuries being sold today yielded 2.59 percent in pre-auction trading, versus 2.72 percent at the prior sale June 14. Investors bid for 2.4 times the amount of debt offered, the least since November at the monthly auctions. The U.S. sold $21 billion of 10-year notes at an all-time low rate of 1.459 percent yesterday as the auction attracted record-high demand from a group of investors that include pension funds and insurance companies. Thirty-year bonds have returned 7.8 percent this year, compared with 5 percent for 10-year notes and 0.1 percent for two-year debt, according to indexes compiled by Bank of America Merrill Lynch. Volume, Volatility A few Fed policy makers said the central bank will probably need to take more action “to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee’s goal,” according to minutes released yesterday after the Federal Open Market Committee ’s June 19-20 meeting. The central bank’s next policy decision is due on Aug. 1. Treasury trading volume reported yesterday by ICAP Plc, the largest inter-dealer broker of U.S. government debt climbed to $263.16 billion, the most since June 29. Trading averaged $242 billion this year. Volatility closed yesterday at 63.8 basis points, according to Bank of America Merrill Lynch’s MOVE index. It dropped to a five-year low of 56.7 basis points on May 7, and has averaged 76 basis points this year, touching a 2012 high of 95.4 basis points on June 15. It reached a record high of 264.6 basis points in October 2008 as the financial crisis intensified. The index measures price swings based on options. Korea, Brazil The Bank of Korea cut borrowing costs for the first time in more than three years today, lowering its seven-day repurchase rate to 3 percent from 3.25 percent. Brazil reduced its benchmark for an eighth meeting to 8 percent yesterday. The Bank of Japan (8301) bolstered its asset-purchase fund while cutting a credit-loan facility by the same amount. The ECB cut interest rates by 25 basis points to 0.75 percent on July 5 and the Bank of England expanded its bond- buying program the same day. Global economic growth will slow to 2.26 percent this year from 2.9 percent in 2011, a Bloomberg News survey showed. Japan’s 10-year bond yield dropped two basis points to 0.765 percent, the lowest since 2003. German two-year yields declined to a record low and were below zero for the fifth straight day. Australia’s 10-year yield dropped as much as 11 basis points to 2.87 percent, while similar-maturity French rates declined eight basis points to 2.24 percent. U.K. 10-year yields fell five basis points to 1.51 percent. The U.K. sold 3.5 billion pounds ($5.41 billion) of 10-year gilts today at a record low yield of 1.719 percent. Term Premium The term premium , a model created by the Fed that includes expectations for interest rates , growth and inflation, showed Treasuries are the most expensive ever. The gauge fell to a record negative 0.9617 percent on July 10. It was negative 0.9496 percent today. The Fed bought $2.3 trillion of securities in two rounds of so-called quantitative easing from 2008 to 2011 to support the economy. In September it embarked on a plan to replace $400 billion of short-maturity Treasuries in its portfolio with longer-term debt to cap borrowing costs. It expanded the effort on June 20 by $267 billion and extended it until year-end. The Fed sold $7.93 billion of Treasuries today due from July 2013 to January 2014 as part of its Operation Twist program. The central bank announced on June 20 it would extended the program is replacing $667 billion of shorter-term securities in its holdings with longer-term bonds through this month to keep borrowing costs down. To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net ; Susanne Walker in New York at swalker33@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-07-30 | Bloomberg | Refinancing Anxiety Pushes Protection Costs to Record: Mortgages | A retiring couple in Hebron, Connecticut , that recently considered refinancing their roughly $70,000 home loan has never been more attractive to the $5.3 trillion market for government-backed mortgage bonds. The homeowners, who were leaving jobs in insurance and as a municipal worker, contacted Norcom Mortgage after seeing new loan rates had fallen a percentage point below what they’re paying, according to Greg Radding, a manager of retail production at the firm. After Radding ran through the math of how little they would save each month and closing costs of about $3,000, they opted to keep their current loan. Borrowers with small loans frequently make that decision, said Radding. “They often just don’t feel like they’re getting much bang for their buck; What’s 50 bucks? It’s just not worth it to them.” Mortgage investors, anxious over the record prices of government-backed securities, are paying unprecedented extra amounts for the types of bonds considered the least likely to prepay quickly, such as those backed by loans of less than $85,000. Bondholders paying more than face value risk losses if enough homeowners take out new mortgages to repay their existing debt. The securities have risen even as refinancing soars, driven by expanded government programs and loan rates that have set all-time lows for six straight weeks. Protection Costs Average values for agency mortgage bonds reached almost 109 cents on the dollar this month, bolstered by a jump in so-called pay-ups. That’s the extra amount investors pay for specific bonds above prices in trading where they don’t know exactly which securities they’re buying. FTN Financial says the cost of the refinancing protection, which in some cases now exceeds 5 cents on the dollar, has “skyrocketed.” “With just how high MBS prices are, it’s very, very difficult to buy generic pools because you’re so at risk,” said John Anzalone, head of structured securities portfolio management at Atlanta-based Invesco Ltd., which oversees about $650 billion. “The higher the premium at risk is, the more you should be willing to pay for protection.” Bonds guaranteed by taxpayer-supported Fannie Mae and Freddie Mac or U.S.-owned Ginnie Mae averaged 108.65 cents on the dollar on July 20, the peak since at least 1986, Bank of America Merrill Lynch index data show. The debt, which has fallen to 108.48, is up from 107.59 at the start of this year. Gains amid Europe ’s debt crisis and speculation the Federal Reserve may expand its bond purchases to bolster the economy drove down the average rate on a typical 30- year mortgage to 3.49 percent last week, from 3.95 percent at the end of 2011, according to Freddie Mac data. Refinancing Boom The rally partly reflects bond buyers’ belief that the refinancing boom will be limited by obstacles ranging from lenders’ constrained capacity and tight standards to consumers’ frustrations with banks and weakened finances, with even generic securities reaching records. Two-thirds of investors surveyed last week by JPMorgan Chase & Co. are “overweight” mortgage securities, or holding more than found in benchmark bond indexes. Almost 80 percent expect the Fed to buy more of the debt, with 57 percent forecasting an announcement at or before its September meeting, according to a July 27 report by the bank’s analysts. Refinancing applications climbed to a three-year high last week that was more than 57 percent greater than this year’s low in March, according to a Mortgage Bankers Association index. Still, the pace remained 46 percent below a 2003 peak. More Options Karen Mayfield, the mortgage banking national sales manager at BNP Paribas SA’s San Francisco-based Bank of the West unit, says part of the reason more homeowners aren’t replacing their loans is they mistakenly think they can’t qualify amid depressed home prices and stories of lenders demanding more paperwork. “There are more options available than people realize,” she said. “This may be an inconvenient experience compared to what it used to be in the past, but it’s going to be even more worth it, based on where rates are.” Mortgage-bond investors are willing to pay the price for protection against homeowners joining the wave. Securities carrying premiums include those only filled with the smallest loans, as well as debt taken out more than seven years ago or less than three months. Also in demand are ones tied to rental properties and loans made under a program for Fannie Mae and Freddie Mac borrowers with little or no home equity known as the Home Affordable Refinance Program, or HARP. Boost Margins Originators set aside these types of mortgages for specific bonds to boost their margins on sales. That’s something they’ve done much more in recent years as a result of the higher pay-ups being offered, sometimes selling 30 different flavors of bonds at the same time, said Walt Schmidt, a mortgage strategist in Chicago at FTN Financial, the brokerage unit of First Horizon National Corp. Loans with low balances are considered less likely to be refinanced because the potential monthly savings are smaller and closing costs relatively higher, limiting the homeowner’s incentive. While lenders can help make some borrowers interested in refinancing by rolling such costs as for appraisals, attorney fees, title work and credit reports into loan rates or balances, or find homeowners interested in shorter terms rather than lower payments, they’re exceptions to the rule, Radding of Avon, Connecticut-based Norcom said. ‘Policy Risk’ That kind of prepayment protection is especially valued in a world where investors face “policy risk,” or the threat of rule changes, said Qumber Hassan, a Credit Suisse Group AG analyst. After HARP adjustments this year urged by the Obama administration, lawmakers including Democratic Senators Robert Menendez of New Jersey and California ’s Barbara Boxer are seeking legislation to further expand it. The government, which failed to address refinancing challenges created by Federal Housing Administration insurance-rate hikes when tweaking HARP, then targeted them with changes that took effect last month. Pay-ups on Fannie Mae’s 4.5 percent bonds with 30-year mortgages of less than $85,000 have soared to a record 4.8 cents on the dollar from about 3.5 cents in early June and about 0.7 cent a year ago, according to Credit Suisse data. That’s come as prices in the so-called To Be Announced, or TBA, market for similar generic mortgage securities rose to roughly 108 cents from about 107 cents early last month and less than 104 cents a year ago, according to data compiled by Bloomberg. TBA sales contracts can be filled with debt matching a range of characteristics. Rates on loans backing Fannie Mae 4.5 securities average about 5 percent. Prepayment Speeds Recent prepayments show why investors are paying more. Loans underlying a 4.5 percent Fannie Mae bond from 2009 with low balances prepaid at a rate that would erase 4 percent of the debt in a year over the past three months, Bloomberg data show. Aggregate speeds for 4.5 percent debt were 25.5 percent, and a TBA trade means risking something worse than the average. “The difference between the best pools and worst pools are just massive,” with some borrowers locked out of the boom by a variety of issues and others quick to jump in, Invesco’s Anzalone said. At some point pay-ups for different types of bonds can become “too rich, and they’re richer than they’ve been, but certainly a lot of it makes sense.” Bryan Whalen, co-head of mortgage bonds at TCW Group Inc., which manages about $130 billion, agreed, saying that “as a general theme it’s still too early to take the trade off.” The rise in pay-ups has been the most notable among debt with the lowest rates, said Brad Scott, Bank of America Corp.’s head trader of pass-through agency mortgage securities. Pay-Up Costs Investors had been assuming that while those borrowers are among the most sophisticated and most likely to qualify easily, they’d only recently taken out their mortgages and didn’t have enough incentive to pick up the phone to refinance again soon, he said. “All of a sudden” that’s changing with rates moving even lower and poised to potentially fall further, he said. Pay-ups on the types of highest-rate bonds that offer protection against borrowers tapping HARP aren’t gaining as much because many investors estimate the program’s use may be peaking, he added. Fannie Mae’s 3.5 percent securities filled with loans exceeding borrowers’ property values by 25 percent or more carry pay-ups of about 1.4 cents, up from about 0.3 cent at the start of this month, according to Credit Suisse data. While borrowers with those loans qualified under HARP, it’s available only on loans from before May 2009, meaning they need a jump in property prices or rule changes to refinance again. ‘Momentum Trade’ While a “wide variance between the fast and slow payers” in the current environment means specified pools should be more in demand, the size of pay-ups has gotten too large for investors to get higher returns with them, FTN’s Schmidt said. “It’s a momentum trade at this point,” he said, adding that bond buyers would be better off switching to securities backed by 20-year loans from 30-year debt. Investors paying for prepayment protection risk underperforming if bond prices decline and rates increase, leaving even the most dangerous homeowners in certain cohorts with no reason to refinance, according to Credit Suisse’s Hassan. “If we sell-off from here, the fall could be very steep,” he said. Still, the greater demand for slow paying bonds may feed upon itself by increasing the odds of receiving bad securities as those become a greater share of what’s being traded, according to Schmidt and Anzalone. “Your worst-to-deliver right now is pretty horrendous,” said Anzalone, referring to the bonds investors must assume they’ll get via generic, TBA trades. To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net To contact the editors responsible for this story: Rob Urban in New York at robprag@bloomberg.net ; Alan Goldstein at agoldstein5@bloomberg.net |
2024-11-24 | Bloomberg | Orders for U.S. Durable Goods Unexpectedly Decline | Orders for U.S. goods meant to last several years unexpectedly decreased in October, raising the risk that companies will scale back on investments in new equipment. Demand for so-called durable goods dropped 3.3 percent, the biggest plunge since January 2009, after a revised 5 percent jump in September that was larger than previously estimated, figures from the Commerce Department showed today in Washington. A slowdown in capital spending would deprive the world’s largest economy of a source of strength just as household purchases are starting to accelerate. While overseas demand is helping companies like Rockwell Automation Inc. , there may be less of a contribution to growth from inventory rebuilding in coming months. “Business investment is slowing, but the numbers we got today might overstate the magnitude,” said Brian Jones , an economist at Societe Generale in New York, who said the first month of the quarter typically shows weakness. Other government reports today showed consumer spending rose in October for a fifth month and applications for unemployment benefits fell last week to the lowest level since July 2008. Household purchases advanced 0.4 percent after a 0.3 percent gain in September that was larger than previously estimated, Commerce Department figures showed. Incomes climbed 0.5 percent and the Federal Reserve’s preferred measure of inflation was little changed, capping the smallest 12-month gain since records began five decades ago. Jobless Claims Jobless claims declined by 34,000 to 407,000 in the week ended Nov. 20, according to Labor Department figures. The median projection of economists surveyed by Bloomberg News called for a drop to 435,000. The total number of people receiving unemployment insurance decreased to the lowest in two years, and those on extended payments also fell. Stock-index futures extended earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in December rose 0.7 percent to 1,186.70 at 9:20 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.83 percent from 2.78 percent late yesterday. Economists forecast total durable goods orders would increase 0.1 percent, according to the median of 74 projections in a Bloomberg News survey. Estimates ranged from a drop of 2.7 percent to an increase of 4.5 percent. Excluding Transportation Excluding transportation, bookings decreased 2.7 percent. They were forecast to increase 0.6 percent, according to the Bloomberg survey. Orders for non-defense capital goods excluding aircraft, considered a proxy for future business investment, fell 4.5 percent after a 1.9 percent gain in September. The government had previously estimated such orders dropped 0.2 percent in September. The swings in orders for capital goods may reflect calendar effects that the government isn’t able to capture with its seasonal adjustments. “I would expect the trend to be slowing a little bit in the core numbers but I wouldn’t get too concerned if you see a little bit of weakness in them,” Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York, said before the report. “You have gotten very strong growth in the first of this year and it may be hard to sustain that pace.” Non-Defense Capital Goods Shipments of non-defense capital goods excluding aircraft, used in calculating gross domestic product, decreased 1.5 percent after a 1 percent gain in September. The so-called core capital goods figures typically are weaker at the start of the quarter, particularly for October, said Aaron Smith , a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. The world’s largest economy grew at a 2.5 percent annual pace from July through September, the Commerce Department said yesterday. Corporate profits increased 2.8 percent during the third quarter and were up 28 percent from the same three months last year. Today’s report counters others suggesting factories are supporting growth in the fourth quarter. Federal Reserve The Federal Reserve last week said factory output increased in October by the most in three months. The 0.5 percent increase in the manufacturing component of the industrial production report was led by makers of autos, computers and communications gear. Foreign sales are a bright spot for factories and exports in September rose to the highest level in two years, according to Commerce Department data released Nov. 10. Some businesses are responding to greater demand from the U.S. and abroad by replacing aging equipment and bringing more parts of their plants online. Rockwell Automation, the maker of factory software, said it sees interest rising in large-scale plant projects for full- production lines in developed markets, a sign that those economies may be picking up steam. “These are projects that are significant expansion in production capacity or new lines,” Chief Executive Officer Keith Nosbusch said in an interview Nov. 9. “These would be larger capital spending investments,” which means those markets have a more positive outlook on their future. To contact the reporters on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net ; Bob Willis in Washington at bwillis@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-04-21 | Bloomberg | Toyota Extends N. American, China Output Cuts to June | (Corrects the date of production in fourth paragraph of story originally published on April 20.) Toyota Motor Corp. (7203) , the world’s largest automaker, extended production cuts at its North American and Chinese plants because of a shortage of parts after Japan’s record earthquake and tsunami last month. The company’s North American unit said today that plants in the region will continue to be closed on Mondays and Fridays and run at 50 percent on Tuesdays, Wednesdays and Thursdays through June 3. Toyota will also shut U.S. plants for one week starting May 30 and in Canada from May 23. In China , the utilization rate at factories will generally be 50 percent of normal levels and may fall as low as 30 percent from April 21 to June 3, it said in a statement. “This is not going to be over soon,” said Jesse Toprak , an analyst for Truecar.com, an automotive pricing and data website based in Santa Monica , California. “The impact of reduced production could mean that Toyota’s sales in the U.S. are impacted as much as 10 percent this year.” Toyota lost production of 150,000 units in North America and 80,000 units in China from March 11 to June 3, said Paul Nolasco , a spokesman for the carmaker. In 2010, Toyota made 1,458,000 units at its plants in North America and 770,000 in China. Toyota, Honda Motor Co. and Nissan Motor Co. are working to restore full plant operations in Japan and at factories abroad that are running short of parts. Toyota estimates it lost production of 260,000 units in Japan from March 14 to April 8 and 35,000 units of North American auto production this month due to quake-related shutdowns. Shares in Toyota rose 1.4 percent to 3,170 yen in Tokyo. The stock has dropped 12 percent since the March 11 temblor. ‘Plant Improvement’ Employees at Toyota’s North American plants won’t be laid off because of the production cutbacks, the company said. Workers will use the “non-production time for training and plant-improvement activities,” Toyota said. “We are trying to continue production as much as possible and keep our workforce intact in order to facilitate a smooth transition back to full production when all parts are available,” Steve St. Angelo, executive vice president for North American production, said in a statement today. Toyota, which canceled five days of North American output, from April 15 through April 25, said its production plans after June 3 will be decided later. The company’s U.S. sales unit is based in Torrance, California. “No one knows how long production will remain at about 30 to 40 percent of the usual level,” said Koji Endo , an analyst at Advanced Research Japan in Tokyo. “Customers who are not willing to wait for Japanese vehicles may switch to buying American, Korean and European cars instead.” To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net ; Bill Koenig in Detroit at wkoenig@bloomberg.net To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net |
2024-04-28 | Bloomberg | Buffett Disciples Want ‘Oracle’ to Come Clean: Alice Schroeder | Last month, the news broke that David Sokol , who was Warren Buffett’s presumed heir apparent at Berkshire Hathaway Inc. (BRK/A) , made $3 million from Lubrizol Corp. (LZ) stock purchases while he was pushing Buffett to buy the company. In the statement announcing Sokol’s resignation, Buffett downplayed the importance of front-running Lubrizol stock, excusing Sokol on the grounds that he did nothing “unlawful.” That, wrote Buffett, was all he planned to say on the subject -- until yesterday. That’s when Berkshire issued an audit-committee report condemning Sokol for having misled Buffett and the company. It also said Berkshire might sue Sokol. The report responds to weeks of criticism about Berkshire’s seeming indifference to ethical standards, and comes just before some 40,000 people descend on Omaha, Nebraska , for the annual shareholder meeting. For Buffett, sometimes dubbed the Oracle for his investing acumen, the meeting is a double-edged sword. The event at which he and his vice chairman, Charles T. Munger, spend almost six hours answering questions puts considerable pressure on him to be more forthcoming. On the other hand, Buffett will be speaking with a home-field advantage to a receptive audience that wants to think well of him. Buffett’s Enemies He will need their good will. The audit-committee report answers some questions about what happened with Sokol, but not the most important ones: Why did Berkshire fail to condemn his behavior initially, and instead praised his “extraordinary” contributions to Berkshire? And what will Berkshire do to improve its corporate governance? The company lays out a story in which Sokol misled Buffett and Berkshire’s chief financial officer, Marc Hamburg. These revelations are damning, and the audit committee has concluded in harsh terms that Sokol violated Berkshire’s code of conduct, its insider-trading policy and failed his duties as a manager. But according to the report, the essential elements were known by the Berkshire board before March 30. This is when Buffett praised Sokol in a press statement and declared Sokol’s actions kosher because they were “not unlawful.” According to a statement by Sokol’s attorney, Barry Levine, Buffett “was told twice, not once,” about Sokol’s ownership of Lubrizol shares before Buffett began takeover talks with the company. It’s understandable that a continuing investigation might justify taking a harsher view of the facts, but Berkshire’s opinion hasn’t just evolved. It has taken a 180-degree turn. Behavior that was explained away just a month ago is now being condemned. Obviously, Buffett did need to change his mind and be clear about the reasons. Missing Explanation The problem isn’t the about-face. It is the missing explanation for why Berkshire went so easy on Sokol in the first place. Whatever the detailed reasons, ultimately it boils down to Berkshire’s reliance on Buffett’s personal judgment about his managers and his ability to delegate to them to the point of abdication. When this one-man infrastructure makes a mistake, it’s hard to admit that Buffett is at fault. Changes in the way the company is managed are personal, not corporate. Under the circumstances, the temptation is high to blame everything on a single rogue employee. That doesn’t excuse Sokol’s behavior, but the failure of oversight needs to be acknowledged and corrected. Instead, Berkshire is struggling with how to handle this situation. For years, Buffett’s quirky management style was hailed as a strength, and he escaped this kind of scrutiny. His former Teflon status is making the backlash all the harder. Fat Cats Buffett has plenty of enemies, though they have stayed underground until recently. They include fat cats who don’t want to pay the higher taxes Buffett advocates, chief executive officers weary of being called greedy parasites by one of the world’s richest men, and Wall Streeters of all stripes who think Buffett’s hellfire-and-damnation tirades about their business are hypocritical. Now, caught in the painful fall stage of the great American narrative known as rise, fall and redemption, it’s hard to see how Buffett can change the narrative’s overall course through public relations. But he can avoid making it worse for himself by taking responsibility. The more explicitly Buffett shoulders some of the blame for having waffled on ethics, the more future redemption points he will get. If he dumps on Sokol while trying to avoid all entanglement in the situation, or reaches for credit for having turned tough, it won’t be convincing. Based on the audit- committee report, it looks as though this is where things are headed, but it’s not too late for Buffett to change direction. $200 Billion Governance, rightfully, will be high on the audience’s mind during the meeting, because Sokol is only a symptom of an underlying cause. The world acknowledges that a $200 billion company that employs about 260,000 people can’t be run by a single man. Buffett should step up on these issues now, before a public outcry puts him in conflict with his own board. The No. 1 thing everyone wants to know is who would run Berkshire if Buffett vanished today. Why not just tell them? If it is Ajit Jain, who runs Berkshire’s reinsurance operation, Buffett should say so. He can always hedge and say his choice doesn’t bind the board and later events might change things. The Sokol incident has boomeranged to become a referendum on Buffett’s judgment of people and management style, Berkshire’s corporate governance, institutional infrastructure, risk-management and internal controls, and the succession process for a new CEO. It has also raised questions about the board’s committee structure, compensation and responsibilities. These issues weren’t addressed in the audit-committee report, and it is a tall order to do so. All this is probably too much to expect from Buffett in a single weekend. But the more straightforward Buffett is at this meeting, the better off Berkshire’s shareholders will be -- and so will he. ( Alice Schroeder , author of “The Snowball: Warren Buffett and the Business of Life” and a former managing director at Morgan Stanley, is a Bloomberg News columnist. The opinions expressed are her own.) To contact the writer of this column: Alice Schroeder at aliceschroeder@ymail.com To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net |
2024-09-04 | Bloomberg | Weitz Buffett-Malone Bets Best in Value: Riskless Return | Wally Weitz likes to invest with billionaires he’s known a long time. He’s been a shareholder for more than 35 years in Berkshire Hathaway Inc. (BRK/A) , run by his Omaha, Nebraska, neighbor Warren Buffett , and has held stakes in companies run by media mogul John Malone for more than 20. The investments helped Weitz’s Partners III Opportunity Fund (WPOPX) produce the best risk-adjusted performance among U.S. value funds in the past five years, according to the BLOOMBERG RISKLESS RETURN RANKING. The $901 million fund had below-average volatility and the second-highest absolute return among 283 vehicles with at least $500 million in assets. Weitz has always looked for companies whose stocks are cheap compared with the cash flow he expects them to generate, a common metric for value investors. Over time, he has come to believe that finding management teams that know how to redeploy any excess cash intelligently is critical to investment success. “Warren Buffett and John Malone could not be more different, but both of them know how to create more than a dollar of value for every dollar they reinvest,” Weitz, 64, said in a telephone interview. The Opportunity fund has the most flexibility of his firm’s five equity funds because it regularly shorts, or bets against, stocks. Unlike many short sellers, Weitz typically doesn’t bet against individual stocks. He wagers against baskets of equities using index options and exchange-traded funds, a technique that allows him to put more money into his favorite stocks while hedging market risk, tempering volatility. Three Decades Weitz’s fund operated as a private partnership from June 1983 to December 2005, when it became a mutual fund. Over its three decades, the fund has returned 14 percent a year, compared with 11 percent for the Standard & Poor’s 500 Index, according to Weitz’s website. Bloomberg’s risk-adjusted return is calculated by dividing total return by volatility, or the degree of daily price-swing variation, giving a measure of income per unit of risk. The returns aren’t annualized. Partners III Opportunity Fund returned an adjusted 5.1 percent in the five years ended Aug. 30. It had lower volatility than 95 percent of similar funds. Like many value investors, who pick assets that they deem cheap relative to peers, Weitz isn’t too concerned with producing steady results. An investor must ride out the inevitable periods when his style is not in favor, he said. Accepting ‘Lumpy’ “We agree with Warren on this one,” Weitz said, referring to Buffett. “We would rather have a lumpy 14 percent annual return than a smooth 10 percent.” Two funds run by Donald Yacktman , founder of Austin, Texas-based Yacktman Asset Management Co., ranked second and third in risk-adjusted performance in the past five years. The $12.3 billion Yacktman Fund (YACKX) and the $10.6 billion Yacktman Focused Fund returned 4.4 percent. Both were near the top in total return with below-average volatility. Weitz, who manages about $5.3 billion in funds and separate accounts, has run his Omaha-based firm, Weitz Investment Management, since 1983. He has invested in Buffett’s Berkshire Hathaway for clients since 1976. His office and Buffett’s are about five miles apart. Weitz, who has a bachelor’s degree in economics from Carleton College in Northfield, Minnesota, recalls going to a Berkshire annual meeting in the 1970s in the lunch room of a local insurance company, where he was among the handful of investors present. Today the meetings draw tens of thousands. No Secrets “We see each other periodically, we’re friendly, but he doesn’t call and give me secrets,” Weitz said about his relationship with Buffett. From the end of 1976 to June 30, Berkshire returned 23 percent annually, according to data compiled by Max Olson, an investor who edited a book of Buffett’s letters to shareholders. The S&P 500 Index returned 11 percent a year. In the past five years, Berkshire rose about as much as the S&P 500. The stock accounted for 4.1 percent of the Opportunity fund as of June 28, according to data compiled by Bloomberg. Weitz’s value style of investing is similar to Buffett’s, said Bradley Alford, founder of Alpha Capital Management LLC in Atlanta, who owns shares in the Opportunity fund. “He’s Buffett with a lot less zeros,” Alford said in a telephone interview. Golden Touch Weitz first met Malone at a media conference in the late 1980s, when the executive was running Denver-based Tele-Communications Inc., and was struck by his grasp of the cable industry. Today, Malone’s assorted publicly traded companies hold stakes in businesses from satellite radio company Sirius XM Radio Inc. (SIRI) to home-shopping network QVC Inc. Malone is worth $6.4 billion, according to the Bloomberg Billionaires Index. “Everything John Malone has touched over the past five years has turned to gold,” Christopher Marangi, a portfolio manager at Rye, New York-based money manager Gamco Investors Inc. (GBL) , said in a telephone interview. Since Malone’s Liberty Media Corp. (LMCA) was spun off from AT&T in 2001, his companies have generated annual returns of 17 percent to 18 percent a year, Marangi estimated. The aggregate returns have probably been higher since the 2008 bear market , said Marangi, who owns stakes in all of Malone’s companies. DirecTV Stakeholders Weitz called Malone a master at “dreaming up ways to separate out valuable businesses from less valuable ones.” Two of his firms, Englewood, Colorado-based Liberty Interactive Corp. (LINTA) and London-based Liberty Global Plc, were among the biggest contributors to the fund’s performance in the past five years, according to data compiled by Bloomberg. Liberty Interactive gained 88 percent in that span; Liberty Global more than doubled. One of Weitz’s largest positions, El Segundo, California-based DirecTV (DTV) , counts both Malone and Berkshire Hathaway among its five biggest shareholders. Weitz’s fund isn’t immune to slumps. It fell 13 percent in 2007, worse than 99 percent of peers, dragged down by financial stocks such as New York-based insurer American International Group Inc. (AIG) , which had to be rescued by the U.S. government in 2008 amid losses. The 2007-2009 economic crisis convinced Weitz that financial firms were taking risks he never appreciated. “I would characterize our mostly happy, 30-year experience investing in financials as a bad idea we got away with,” Weitz said. Safety Margin The manager now demands a greater margin of safety before he will invest in financials, said Kevin McDevitt, an analyst with Chicago-based Morningstar Inc. (MORN) Wells Fargo & Co. (WFC) , the largest home lender, was the Opportunity fund’s third-biggest equity holding as of the end of June. The San Francisco-based bank has “fewer headaches” than its competitors, Weitz said. Should interest rates keep rising from their May lows, Wells Fargo’s pool of cheap deposits will buoy earnings, Weitz said. In a 2012 presentation, Wells Fargo said it had a lower average cost of deposits than any large bank. “The fact that Warren is a big owner gives me extra comfort,” said Weitz. Berkshire is Wells Fargo’s largest shareholder, according to data compiled by Bloomberg. Weitz tries to buy stocks at a steep discount and sell them as they approach his estimate of fair value. The process can lead him to sell too soon. In the first quarter of 2011, Weitz sold Cabela’s Inc. (CAB) , a Sidney, Nebraska-based retailer of hunting and fishing equipment, taking a substantial gain, according to a shareholder letter in a regulatory filing. Selling Early “We would gladly own the stock again at the right price,” Weitz wrote. The shares have more than doubled since March 31, 2011. “Given our value orientation we often get out early,” Weitz said in the interview. “You have to be philosophical about that.” Weitz, who is in the process of selling his firm to his employees, said he has no intention of leaving any time soon. He said he’s confident that his approach still works. “Human nature has not changed,” he told shareholders in a 2009 letter. “People acting out of fear and greed cause assets to be mispriced from time to time. Our business is to take advantage of this mispricing.” To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net |
2024-08-27 | Bloomberg | California Assembly Passes Bill on Biosimilar Drug Use | Pharmaceutical makers won approval from the California Assembly to restrict generic versions of drugs isolated from natural sources, such as vaccines, known as biosimilars, once they become available in the U.S. The bill passed yesterday would require pharmacies to notify doctors and sometimes patients when a cheaper biosimilar drug is substituted for a brand-name medicine. It also would forbid a pharmacist from substituting the biosimilar drug if the physician says no. Biosimilars are generic versions of drugs derived from living cells, known as biologics, for chronic diseases and conditions including cancer, heart disease and diabetes. Drugmakers such as Thousand Oaks, California-based Amgen Inc. (AMGN) , which holds patents on biologics, want to limit the use of biosimilars. Global sales of biologics jumped 69 percent in five years to $157 billion in 2011, according to IMS Health, a health-care data provider based in Danbury, Connecticut. “California should not jump the gun when the federal government has a process under way to sort out the benefits and risks of some of the costliest pharmaceuticals coming on the market,” Patrick Johnston, president of the California Association of Health Plans, said in an interview, referring to the U.S. Food and Drug Administration. “The FDA should finish its process and determine which drugs are suitable for substitution before California enacts any new laws.” The bill, which passed 58-4, returns to the state Senate, where it was approved May 2, to reconcile changes made in the Assembly. Governor Jerry Brown, a Democrat, hasn’t said whether he’ll sign the bill. No Notice Under current state law, a pharmacist can substitute generic drugs without notifying the prescriber. While no biosimilars have been approved by the FDA, they are allowed in Europe. Geoffrey Eich, executive director for research and development policy at Amgen, said the company is investing in six biosimilars in addition to the biologics it manufactures. “We’ll benefit from the confidence patients will have in biosimilars,” he said in an interview. More complex than small-molecule chemical drugs, biologicals include blood and blood components, gene therapies, tissues and proteins. Some are nearing the end of their patented status, paving the way for the advent of their biosimilar twins. The California Public Employees’ Retirement System, the biggest public pension and the nation’s second-largest purchaser of health insurance, voted Aug. 21 to oppose the bill in its current form. Calpers’s objections to limiting the generics centered on costs. Biosimilars are projected to save tens of billions of dollars in health care over the next decade. ‘Unnecessary’ Limits “The bill imposes unnecessary physician notification requirements on pharmacists that could potentially reduce the number of prescriptions substituted with biosimilars,” a Calpers lobbyist, Danny Brown, wrote in an Aug. 21 letter to state Senator Jerry Hill, a Democrat from San Mateo who is the measure’s sponsor. In testimony to the Calpers board the same day, Mandy Lee, a lobbyist for the California Retailers Association, said the biosimilars bill “is designed to derail the market entry of less-costly, more-affordable lifesaving products.” Ten states have rejected legislation this year that would have regulated biosimilars. Four others approved such measures, though three put sunset clauses on the notification requirement, meaning the restriction will die after a certain number of years. To contact the reporter on this story: Mark Melnicoe in Sacramento at mmelnicoe@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-12-15 | Bloomberg | Serbian Central Bank Keeps 2012 Inflation Target Unchanged | Serbia ’s central bank will keep its inflation target intact for 2012, aiming to steer consumer prices toward 4 percent by the end of next year, it said in a monetary policy program today. The Belgrade-based Narodna Banka Srbije will aim to reduce the inflation rate toward 4 percent plus or minus 1.5 percentage points by the end of 2012, from 4.5 percent plus or minus 1.5 percentage points at the start of the year. Inflation stood at 8.1 percent in November, down from a 14.7 percent peak in April. As part of inflation targeting policy framework, the central bank will continue to use its benchmark interest rate as the key policy instrument and will “change it in a consistent and transparent way,” the bank said on its website. The dinar will remain subject to a managed-float system, with any market interventions organized only if there’s the need to slow “excessive daily oscillations” or maintain stability of the financial system, it said. -- Editor: James M. Gomez To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net |
2024-04-03 | Bloomberg | Lloyd Wright's Samuel-Novarro House on the Market Again | Embezzlement, Hollywood stardom and architectural fame are wrapped up in the Samuel-Novarro House . Designed in 1928 by Frank Lloyd Wright Jr. (known as Lloyd Wright), the Los Angeles home was listed for $4.195 million in November 2011. But after sitting on the market for six months without securing a buyer, the listing was removed. Now, less than a year later, the historic property is for sale again with an even bigger price tag of $4.49 million. While perhaps overshadowed by his father's groundbreaking architectural design, Wright made his mark on Los Angeles real estate, designing homes for silent-movie stars and contemporary A-listers. This property, located at 2255 Verde Oak Dr, Los Angeles, CA 90068 , was named after its first two residents. Ramon Novarro was the first Latin American actor to achieve stardom as one of Hollywood's top silent-movie stars. Wright was asked to design the home for Novarro's personal secretary and companion, Louis Samuel. However, when Novarro discovered Samuel was embezzling funds from him a year later, he said he wouldn't press charges if Samuel "made it right." The secretary proceeded to turn over his prized home to Novarro to make up for financial losses. Novarro accepted the offer and rehired Wright to make the house his own, adding a pergola, music room and bedroom suite. "It's a very unique property," said Hilton & Hyland listing agent Aaron Kirman. "There is a lot of nice open space; gardens and terraces throughout." The home also boasts a pool, sleek concrete floors and dramatic windows — not to mention its highly sought-after location in one of L.A.'s most exclusive neighborhoods, The Oaks. In the listing description, Kirman says the home has been "meticulously restored, keeping the architect's original vision intact." While it's unclear exactly what Wright's architectural vision was, Oscar winner Diane Keaton , who owned the home in the '90s, thinks it was perhaps more about making a design statement than housing a growing family. "If you have a family, it's not as easy to live in a Lloyd Wright house," she told The New York Times in a past interview. "They are beautiful. But they have very, very small bedrooms." Keaton moved on to purchase a Spanish-style home — perhaps she would have been more suited for Wright's Mayan-inspired home in Los Feliz . Other celebrity owners, Christina Ricci and Adam Goldberg, also didn't last long in the Samuel-Novarro property, selling it a year after they bought it in 2005. While the Hollywood Hills housing market is on the rise, the median home value is $1.22 million — significantly less than the asking price on Wright's design. An estimated monthly payment is $16,146, assuming 20 percent down on a 30-year fixed mortgage. More from Zillow.com : Lloyd Wright's Samuel-Novarro House for Sale House of the Week: Lloyd Wright's Sowden House Frank Lloyd Wright House Hits the Market for First Time Ever |
2024-02-14 | Bloomberg | Container Rates Rising 28% as Cargo to U.S. Rebounds From Decline: Freight | Container rates on the world’s biggest international trade route are rallying after U.S. imports of manufactured goods rebounded from the first decline in two years. U.S. container imports gained 1.6 percent in the fourth quarter from a year earlier, compared with a drop of the same amount in the previous three months, data from Newark, New Jersey-based PIERS show. Volumes from northern Europe and the Mediterranean rose 12 percent. Rates to carry 40-foot boxes to the West Coast from China rose 29 percent since Dec. 16, according to Clarkson Plc (CKN) , the world’s largest shipbroker. Shipping lines will make money again this year after “deep losses” at the end of 2011, said Jon Windham , an analyst at Barclays Capital in Hong Kong. Investors should buy shares of A.P. Moeller-Maersk A/S and Neptune Orient Lines Ltd., according to Morgan Stanley, which expects charter rates to more than double this year. U.S. cargo volumes will rise as much as 3.5 percent to a five-year high in 2012, UBM Global Trade predicts. “The data show U.S. households and businesses are still looking to take in imports,” said Paul Dales , a senior economist at Capital Economics Ltd. in London, whose 1,200 clients include hedge funds , banks and insurance companies. “The U.S. economy is not doing brilliantly, but at least it’s growing and probably will continue to grow this year.” Steel Box The cost of moving a loaded forty-foot steel box to the West Coast from China was last at $1,824, from $1,418 on Dec. 16, Clarkson data show. That’s still 5.6 percent lower than a year ago after a capacity glut drove rates down as much as 30 percent in 2011. Average costs to charter ships carrying 4,400 twenty-foot boxes for six to 12 months will rise to $18,000 a day this year, from $8,700 in 2011, according to Morgan Stanley. The gain in volume to the U.S. from Europe accounted for 95 percent of fourth-quarter growth, and contrasts with a 0.9 percent decline in imports from Asia , according to PIERS, a unit of UBM Global Trade. Cargoes totaled 4.27 million units last quarter, the data show. The 17-nation euro weakened to its lowest quarterly average since September 2010 against the dollar , making the region’s goods more competitive, as its debt crisis deepened. China’s yuan strengthened for an eighth consecutive quarter against the dollar. The Asian nation’s global exports rose 13.4 percent in December, compared with 17.9 percent a year earlier, data from the customs bureau show. Delaying Purchases The fourth-quarter gains in the U.S. may have been caused by last-minute imports for retailers who had delayed purchases in the third quarter, said Louis J. Le Gendre of International Shipping & Logistics in Chatham, New Jersey. Some shipping lines cut services or idled vessels. The management consultant expects U.S. volumes to continue to “gently pick up.” Global container volumes will rise 7.7 percent this year, Clarkson said last month, reducing a previous estimate of 8.2 percent. That’s still more than its prediction for a 7.3 percent expansion in the global container fleet. About 90 percent of trade moves by sea, according to the Round Table of International Shipping Associations. While China-West Coast box rates are rebounding, they are still 36 percent below the $2,833 reached in July 2010. Maersk, owner of the world’s largest container line , will report a 7.7 percent drop in net income to 13.8 billion kroner ($2.45 billion) for 2012, the mean of 15 analyst estimates compiled by Bloomberg show. Shares of the Copenhagen-based company rose 20 percent this year, compared with an 8.9 percent gain by the MSCI All-Country World Index of equities. World Trade World trade in goods and services will expand 3.8 percent this year, from 6.9 percent in 2011, the International Monetary Fund said last month. The Washington-based group cut its forecast by 2 percentage points from September. The U.S. economy will grow 2.2 percent in 2012, compared with 1.7 percent last year, according to the mean of 89 economist estimates compiled by Bloomberg. The U.S. expanded at the fastest pace since mid-2010 in the fourth quarter as factory orders advanced for two consecutive months, and unemployment reached the lowest level in almost three years in January. That growth may be curbed as the euro-zone crisis weakens global trade. The region’s $12 trillion economy will drop 0.45 percent in the first three months of this year and continuing contracting through the end of 2012, according to the median of as many as 12 economist estimates compiled by Bloomberg. Federal Reserve Chairman Ben S. Bernanke told the House Budget Committee in Washington on Feb. 2 that the pace of the U.S. recovery had been “frustratingly slow” and that left the economy “vulnerable to shocks.” Baltic Index Other types of vessels have yet to rebound. The Baltic Dry Index, a measure of commodity shipping costs, slumped 55 percent from the start of this year, according to the Baltic Exchange , which publishes freight rates along more than 50 maritime routes. Very large crude carriers, each hauling about 2 million barrels of oil, dropped 14 percent to $27,089 a day, Clarkson data show. Expectations for earnings may improve after a group of shipping companies said they would seek to raise annual contract prices. The Transpacific Stabilization Agreement, whose 15 members include Maersk, said Feb. 9 it would ask customers for an increase of at least $500 per forty-foot box for shipments from China. The shippers’ position is being strengthened by economic indicators. U.S. consumer confidence reached a one-year high in the week ended Feb. 5, the Bloomberg Consumer Comfort Index showed. The unemployment rate fell to 8.3 percent in January, the lowest since February 2009, according to the Bureau of Labor Statistics. Companies added 243,000 workers in January, the most in nine months, the Labor Department said Feb. 3. Vehicle Sales That’s boosting demand for consumer goods. Cars and light trucks sold at an annual rate of 14.1 million units last month, the most since August 2009, data compiled by Bloomberg show. Homebuilders’ confidence rose in January to the highest level in more than four years, according to the National Association of Home Builders/Wells Fargo. More home buying increases demand for furniture, the largest item brought to the U.S. in containers, said Mario Moreno, an economist at UBM Global Trade. Factory output rose 0.9 percent in December, the largest increase in a year, according to Federal Reserve data. Factory orders advanced 1.1 percent that month, the second month of gains, Commerce Department data show. The order backlog climbed 1.4 percent, the most since March 2008. “We’re seeing a consistent pickup in U.S. indicators across the board, and we’re seeing it in import growth as well,” said Dean Maki , chief U.S. economist at Barclays in New York. “The U.S. is back on a more solid growth trend.” To contact the reporters on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net ; Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net |
2024-01-07 | Bloomberg | Class-Action Limits Weighed as Court Hears Claim of Abuse | The U.S. Supreme Court weighed new constraints on class-action lawsuits, reviewing a case from an Arkansas county that companies say is rife with abusive litigation tactics and plaintiff-friendly local judges. Hearing arguments today in Washington, the justices generally voiced support for a Travelers Cos. (TRV) unit battling a suit over homeowners-insurance claims. The case turns on a tactic used by plaintiffs’ attorneys to ensure that cases are handled by state judges, rather than in the federal courts that tend to give businesses a more favorable reception. Under the disputed approach, lawyers agree not to seek more than $5 million -- the threshold that sends class- action suits to federal court under a 2005 U.S. law. Businesses say those promises mean little because plaintiffs’ lawyers can still extract much larger settlements from companies threatened with millions of dollars in litigation costs. Several justices today also said lawyers might file a series of related class actions, each worth just under $5 million on behalf of a subset of the potential plaintiffs. “If so, this is just a loophole that swallows up all of Congress’s statute,” Justice Stephen Breyer said. “All that is required is a few extra pieces of paper that will soon become standardized and a lot of postage stamps.” The Supreme Court has proven receptive to past accusations of abuse of the litigation system. In 2011 the court rejected an effort to sue Wal-Mart Stores Inc. (WMT) for discrimination on behalf of potentially 1 million female workers. Miller County The high court case comes from Miller County, in Arkansas’s southwestern corner. The county is a “magnet jurisdiction,” where trial lawyers have “dragooned scores of out-of-state corporations into settling cases for vast sums bearing no meaningful relationship to their merits,” according to a court filing by five insurance companies and the Manufactured Housing Institute, an industry trade group based in Arlington, Virginia. A group representing Arkansas plaintiffs’ lawyers called that characterization a “myth.” Since 2000, only 28 class- action cases have been filed in Miller County, the Arkansas Trial Lawyers Association says. “When the thin surface of their accusations is scratched, a different story is revealed,” the group said. Travelers’s Standard Fire Insurance unit is accused of failing to fully reimburse losses by refusing to pay for the cost of hiring general contractors. The lawyers suing the company said they would cap the damages they seek, including attorneys’ fees, at the $5 million threshold. 2005 Law Standard Fire says that so-called stipulation is barred under the 2005 law, known as the Class Action Fairness Act. The law put curbs on group litigation, largely by funneling more cases into federal court. Standard Fire’s lawyer, Theodore Boutrous , said plaintiffs’ lawyers were “slicing and dicing the classes up into pieces in order to thwart jurisdiction.” Lawyers pressing the suit say Congress didn’t preclude plaintiffs’ attorneys from limiting the scope of their cases in order to stay in state court. The lead plaintiff in the case is Greg Knowles, whose home was damaged in a 2010 hailstorm. Congress intended to leave “legal judgments and strategies” in the hands of the plaintiffs, said David Frederick, Knowles’s Supreme Court lawyer. ‘Jerry-Rigged’ Frederick drew his strongest support today from Justice Elena Kagan, who repeatedly said Congress didn’t seek to bar stipulations that limit damages. She said business advocates were seeking a “jerry-rigged solution to get at a problem Congress in fact did not address.” Chief Justice John Roberts asked Frederick whether lawyers could file two $4 million suits, one on behalf of people whose names start with letters from A through K, and a second one for those from L to Z. He said Frederick’s position would give plaintiffs “extraordinary leverage.” At the same time, Roberts said Boutrous’s stance put defense lawyers in an unusual spot. “You’re at the position of arguing that, you know, they are seeking less than $5 million, but we’re responsible for a lot more damage than that,” Roberts said. The case, which the court will decide by June, is Standard Fire v. Knowles, 11-1450. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net |
2024-04-17 | Bloomberg | Greenhill Profit Slumps 16%, Misses Estimates, as Revenue Falls | Greenhill & Co. (GHL) , the advisory firm planning to add five to 10 managing directors this year, reported first-quarter profit that missed analysts’ estimates as revenue slumped. Net income fell 16 percent to $13.6 million, or 45 cents a share, from $16.1 million, or 53 cents, a year earlier, the New York-based firm said today in a statement. The average estimate of seven analysts surveyed by Bloomberg was for 67 cents. Greenhill, run by Chief Executive Officer Scott Bok, 53, has been adding managing directors in anticipation of a pickup in global merger and acquisition activity, which declined last year for the first time since 2009. The firm hired Citigroup Inc.’s Anne Eastep this year to focus on the insurance industry and Carl-Georg Bauer-Schlichtegroll to work with European financial companies in London. “The data for M&A transactions globally shows a relatively weak level of activity for the first quarter, which has surprised many after a very strong quarter ending last year,” Bok said in the statement. Total revenue fell 3.7 percent to $79.6 million from a year earlier. The average estimate of seven analysts surveyed by Bloomberg was for $98.3 million. Greenhill fell 1.6 percent to close at $51.09 in New York. The shares have slid 1.7 percent this year, trailing the 11 percent advance of the 86-company Standard & Poor’s Midcap Financials Index. To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net. To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . |
2024-03-29 | Bloomberg | China Stocks Decline for First Time in Three Days Amid Tightening Concerns | China stocks fell, dragging the benchmark index down for the first time in three days, as investors speculated the government will raise borrowing costs to cool inflation. Beiqi Foton Motor Co. sank 4.3 percent and Gree Electric Appliances Inc. (000651) dropped from a record high, pacing declines among consumer-related companies, after the China Securities Journal said the central bank may boost interest rates as early as next month. China XD Electric Co. plunged the most on record after earnings trailed estimates and a brokerage cut its rating. Industrial Bank Co. rose to an 11-month high after net income beat analyst forecasts. “The central bank has made it clear about the need for further measures to control inflation,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “That adds to the uncertainty in the market. Banks are rallying because of better-than-expected profit growth.” The Shanghai Composite Index lost 25.93, or 0.9 percent, to 2,958.08 at the 3 p.m. close. The measure has added 5.3 percent this year after sinking 14 percent in 2010. The CSI 300 Index (SHSZ300) slid 1 percent to 3,257.98 today. Policy makers have boosted borrowing costs three times since the start of 2010 while raising banks’ reserve requirements nine times, including an increase on March 18. Annual inflation reached 4.9 percent in February, slowing from a two-year high of 5.1 percent in November. Inflation Concern The central bank may increase interest rates in April or the middle of this year as inflation continues to exceed the government’s target, the China Securities Journal said in a front page editorial today. Consumer prices may increase by 6 percent in June and July, the editorial said. The People’s Bank of China said yesterday that controlling inflation in the world’s fastest-growing major economy remains its main task. A gauge tracking companies reliant on consumer- discretionary spending sank 2 percent. Beiqi Foton, China’s biggest commercial-vehicle maker, tumbled 4.3 percent to 23.52 yuan. Gree Electric, the largest maker of home air-conditioners, dropped 3.6 percent to 23.20 yuan, paring its annual advance to 28 percent. China XD Electric, the nation’s biggest maker of power transmission and distribution equipment, slumped 9.6 percent to 7.59 yuan, its biggest decline since it began trading in January last year. The company’s 2010 per-share earnings missed consensus estimates, Li Xiaoguang and Qi Qi, analysts at Shenyin & Wanguo Securities Co., wrote in a report. They cut the stock’s rating to “outperform” from “buy.” China Radiation China detected trace amounts of radioactive iodine-131 in the atmosphere above coastal areas yesterday, as the country monitors for contamination from the nuclear accident in Japan. The isotope was first found above Heilongjiang province in the northeast, and later over Jiangsu, Shanghai, Zhejiang, Anhui, Guangdong and Guangxi in the southeast, the Ministry of Environment said in statements on its website yesterday. The effects of Japan’s earthquake, coupled with higher oil prices , may worsen inflation in China, according to Bank of America-Merrill Lynch. China’s inflation rate may rise to as high as 5.5 percent in March, Ting Lu, economist at Bank of America, said in a report. Shanghai Electric Group Co. fell 2 percent to 7.85 yuan after the South China Morning Post said its nuclear power projects may be delayed. Miao Deming, a deputy director of Shanghai Electric’s nuclear power management department, said yesterday a government review of nuclear power plants prompted by Japan’s nuclear crisis might delay some of its projects, the paper said. Fu Rong, a spokeswoman at Shanghai Electric, couldn’t be immediately reached for comment. Banks Advance A gauge of financial stocks rallied 0.6 percent, the only increase among 10 industry groups. Industrial Bank, which is part-owned by a unit of HSBC Holdings Plc, gained 2.7 percent to 29.39 yuan. Net income rose to 18.5 billion yuan last year, higher than the average 17.3 billion yuan of 19 analyst estimates compiled by Bloomberg. China Minsheng Banking Corp. jumped 2.2 percent to 5.63 yuan. China’s banks will have another record year for earnings, Mike Werner, an analyst at Sanford C. Bernstein & Co., said in an interview on Bloomberg Television today. --Irene Shen. With assistance from Zhang Shidong. Editor: Allen Wan To contact Bloomberg News staff for this story: Irene Shen in Shanghai at +86-21-6104-3049 or ishen4@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-10-04 | Bloomberg | South Stream Seen Seeking $14 Billion of Loans for Gas Pipeline | South Stream Transport BV is seeking about 10 billion euros ($14 billion) of loans to help fund the joint-venture’s gas pipeline under the Black Sea , according to two people with knowledge of the financing. Advisers to the construction group, led by Russia’s gas export monopoly OAO Gazprom, met lenders last month to gauge appetite for the debt, said the people, who asked not to be identified because the talks are private. South Stream hired Credit Agricole SA, ING Bank NV and RPFB Project Finance Ltd. as advisers to the 16 billion-euro project in April 2012, according to the venture’s website. The 900-kilometer pipeline under the Black Sea links Russian gas fields to Europe through the Bulgarian city of Varna, according to the company’s website. Gazprom supplies a quarter of Europe’s gas and says South Stream will cut costs and improve energy security by bypassing nations such as Ukraine, according to Alexey Miller, Gazprom’s chief executive officer. A Gazprom spokeswoman, who asked not to be identified citing company policy, said the joint-venture hasn’t started raising the project financing yet. She declined to comment on any details of the proposed debt. Commercial banks and export credit agencies are being asked to provide the financing, the people said. The agencies may provide insurance against political and commercial risk for a portion of commercial bank debt and are also considering making direct loans themselves, the people said. Pipeline Plan Construction of the offshore pipeline is divided into two phases, the first part will be backed by the majority of the debt at about 8.6 billion euros. The final composition and pricing of the 10 billion-euros of debt haven’t been decided, the people said. The South Stream undersea link, which has a planned capacity of 63 billion cubic meters a year, will run through Anapa in Russia along the Black Sea bed to Bulgaria , then continue to Serbia, Hungary, Slovenia and Italy, according to the project’s website. Gazprom says it should start delivering fuel in December 2015. Gazprom joined with Eni SpA (ENI) , EDF SA and BASF SE (BAS) ’s energy unit Wintershall Holding to build the pipeline, the company said in the Oct. 2 statement on its website. Gazprom holds a 50 percent stake in the project, Italy’s Eni has a 20 percent stake, and Germany’s Wintershall and France’s EDF own 15 percent each. To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net |
2024-08-08 | Bloomberg | Yamada Says Gold May Slump After July Rally: Technical Analysis | Gold may resume a slump following the July rally of 7.3 percent, the most in 18 months, said Louise Yamada , the managing director of Technical Research Advisors LLC, citing momentum and moving-average signals. The parabolic stop-and-reverse system and a death-cross formation, with the 10-month moving average below the 20-month measure, remain intact after the rally, said Yamada, the former head of technical research at Citigroup Inc. Gold may approach the 34-month low of $1,179.40 an ounce reached on June 28, the New York-based analyst said. The metal entered a bear market on April 12, falling more than 20 percent from the record settlement of $1,891.90 in August 2011. “It will need a lot of repair to come out of this bear market,” Yamada said in a telephone interview. “The recovery that we have seen is fragile, and monthly momentum is in steep decline.” In 2013, gold has dropped 23 percent on the Comex in New York following 12 straight annual gains. Some investors lost faith in the metal as a store of value amid a U.S. equity rally and low inflation. The parabolic stop-and-reverse system measures price momentum and gauges a higher-than-normal probability of a change in direction. The 20-month moving average was $1,583, and the 10-month measure was $1,491. In technical analysis , investors and analysts use charts trading patterns and prices to predict changes. To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net |
2024-04-02 | Bloomberg | Stockton Ruling Makes Public Employees a Protected Class | By allowing the bankruptcy of Stockton, California, to proceed over its creditors' objections, a judge on Monday skirted the issue that must soon be addressed in the state: whether the overly generous pension benefits promised to public employees in good economic times can be reduced when cities go belly up. "I don't know whether spiked pensions can be reeled back in," said U.S. Bankruptcy Judge Christopher Klein, according to the Associated Press. It would be nice to get a more definitive read from the judge charged with reviewing these complex questions. Instead Klein gave the California Public Employees’ Retirement System and the state’s powerful public-employee unions a huge victory. A California law makes the pension payments that cities make to the retirement systems funding those pensions sacrosanct. Pension reformers thought that federal bankruptcy law would trump state law, and that bankruptcy would therefore be a good way for cities to get out from under their crushing pension debts. But those who advocated the municipal-bankruptcy option underestimated the determination of city officials to protect pensions above virtually everything else. When Stockton couldn’t make its pension payments, it borrowed money via pension-obligation bonds. Now when the city’s overspending and misshapen priorities -- providing the most-generous pension formulas in the state, granting employees what one councilmember referred to as a lifetime “Lamborghini” health plan, paying many cops more than $200,000 a year in compensation -- have caught up with it again, it has chosen to protect most of the big spending and stiff the creditors who provided the pension bonds. Maybe it’s hard to feel sorry for creditors who would provide the poorly run industrial city with pension-obligation bonds, but this decision is bad news. The cost of municipal borrowing is sure to rise statewide, even if the bond community has mostly shrugged at the developments in Stockton’s bankruptcy efforts. Perhaps creditors will insist on future covenants with cities to protect themselves. The real losers, however, are taxpayers and residents of hard-pressed cities. Stockton’s creditors claimed that the city wasn't really bankrupt because it didn't try to take on Calpers, its biggest creditor and the largest U.S. public pension. City officials argued that they couldn't staff the city if they didn't offer an “industry-standard pension plan” -- a dubious claim, especially given the high regional unemployment rate. The city claims that it slashed benefits, when in fact it only reined in some compensation, leaving generous pensions intact. Calpers has praised Stockton's bankruptcy plan even as it has protested the bankruptcy in San Bernardino. That decrepit city in Southern California hasn't been making its full payment to Calpers given its lack of funds. Some observers say that as the Stockton bankruptcy unfolds, the question of city obligations to Calpers will be addressed. That seems unlikely. Reformers will turn their attention to San Bernardino, and to litigation over the city of San Jose’s successful pension-reform initiative passed last year. Those cases have a better chance of determining whether current employees have to share in the pain when municipal overspending takes its toll, or whether Calpers and public employees remain a protected class. (Steven Greenhut, a contributor to Bloomberg View based in Sacramento, California, is vice president of journalism of the Franklin Center for Government and Public Integrity. The opinions expressed are his own.) |
2024-04-08 | Bloomberg | U.S. Home Price Rise May Cut FHA Shortfall in Obama Budget | Surging U.S. home prices could help shrink the Federal Housing Administration ’s projected shortfall in President Barack Obama ’s budget due on Wednesday. Democratic and Republican lawmakers have been pushing for changes at the FHA since a November actuarial report said its reserve fund for bad loans may require a taxpayer subsidy of as much as $16.3 billion in fiscal-year 2013, the first time in its 79-year history that it wouldn’t be self-supporting. The new assessment by White House budget staff may show some improvement because the turnaround in the housing market will shrink the losses FHA suffers on defaulted loans. The agency also has raised fees and tightened standards for new loans. Still, those factors probably won’t fully offset the damage caused by mortgages the agency backed during the years of the real-estate crash. “My expectation is that there will be mixed perspectives coming out of the president’s budget,” Mortgage Bankers Association President and Chief Executive Officer David Stevens , who was FHA commissioner during Obama’s first term, said in a telephone interview. “It will likely show extremely healthy returns in terms of mortgages in the 2013 book. Nevertheless, I would not be surprised if it leaned in the same kinds of direction as the independent actuarial report.” The FHA’s shortfall stems from loans it backed from 2007 to 2009 as it expanded its book of business to shore up the mortgage market as private capital evaporated. Those loans alone are projected to cost the agency $70 billion. Four-Fold Increase The agency insures $1.1 trillion worth of mortgages and backs about 15 percent of the U.S. loan originations for home purchases, almost quadruple the 4 percent share it covered in 2007. About 9.5 percent of loans insured by the FHA are at least 90 days delinquent. The president’s budget estimate will probably reflect an improved outlook if only because the earlier independent actuarial report assumed that home prices would only rise by 1 percent in 2012. The S&P/Case-Shiller index of property values in 20 cities increased 6.8 percent for the year. The Federal Housing Finance Agency said home prices jumped 6.5 percent in the year through January. “That’s the direction things have been headed for a while now, so I think it’s a question of magnitude,” Julia Gordon, director of housing finance and policy at the Center for American Progress, a group aligned with Democrats, said in a telephone interview. “Certainly the picture can’t have improved dramatically in three months.” Future Losses The FHA is required to keep enough cash to cover all expected future losses and must take a taxpayer subsidy if its projected revenue falls short. The chances of avoiding a subsidy depend on whether it can earn enough from insuring high-quality new loans to offset the bad ones. To accomplish that, agency officials have taken steps including raising fees. The FHA’s finances are complicated by declining interest rates, which give newer borrowers an incentive to refinance out of the FHA portfolio. The rate at which the agency loses those borrowers will affect its bottom line. “These trade-offs could show a net effect of not a whole lot of difference between the current forecast and the actuarial view, but the drivers behind that could be very different,” Stevens said. Reverse Mortgages The budget will show that losses persist in particular in the FHA’s reverse-mortgage program, according to two people familiar with discussions at the agency who asked not to be named because the budget hasn’t been released. The FHA backs 90 percent of such mortgages, which enable homeowners age 62 or older to withdraw equity and repay it only when their homes are sold. The FHA already has set some new limits on the program to rein in costs and could institute further caps on the amount of equity borrowers are able to withdraw, the people said. George Gonzalez, a spokesman for FHA, didn’t reply to requests for comment on losses in the reverse-mortgage program. The budget prediction will be closely watched in Congress, where both Democrats and Republicans are working on legislation that would further tighten FHA’s lending. Leaders of the Senate Banking Committee have pledged to work on a bipartisan bill to restructure the agency. Republicans in the House of Representatives are working on their own measure. Under consideration are policies that would reduce the share of the government guarantee on an FHA loan, which now stands at 100 percent, possibly through a risk-sharing arrangement with private guarantors. Lawmakers are also considering policies that would limit the agency’s role to providing insurance to low- or moderate-income borrowers. Currently, borrowers at any income level can qualify for FHA coverage. FHA’s Decision FHA Commissioner Carol Galante has said the agency could avoid taking Treasury aid even if the president’s budget shows a shortfall. The agency has until the current fiscal year ends on Sept. 30 to determine whether it must take aid from Treasury to balance its books. Critics of the agency say it needs to change even if it manages to avoid drawing a subsidy this year. “FHA is not out of the woods, and the reason it’s not out of the woods is it is one moderate middling to moderate recession away from catastrophe,” Edward Pinto , a resident fellow at the American Enterprise Institute , which supports free markets, said in an interview. “FHA doesn’t price for risk. It doesn’t underwrite for risk.” Meanwhile, supporters of the FHA say they’re worried the agency will go so far in its efforts to shore up its finances that it won’t be serving the low- and moderate-income home buyers it was created to help. “Is every single step they’ve taken a good idea from the point of view of access to credit?” Gordon said. “I’m not sure. It’s getting pretty expensive to get an FHA loan.” To contact the reporter on this story: Clea Benson in Washington at cbenson20@bloomberg.net ; To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net |
2024-12-03 | Bloomberg | FirstRand of South Africa Says First-Half Profit Will Rise at Least 20% | FirstRand Ltd ., South Africa’s second-biggest financial-services company, said first-half profit will increase by at least 20 percent. “This is due to the significant gain arising from the unbundling of Momentum,” the Johannesburg-based lender said in a statement today. FirstRand merged its insurance unit, Momentum Group Ltd., with Metropolitan Holdings Ltd. earlier this year to create the third-biggest listed insurer in South Africa, after Sanlam Ltd. and Old Mutual Plc. Metropolitan subsequently changed its name to MMI Holdings Ltd. and the merged entity has a market value of 25.2 billion rand ($3.7 billion). FirstRand gained 36 cents, or 1.8 percent, to 20.80 rand in Johannesburg trading, its biggest one-day gain since Nov. 12. To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net |
2024-10-12 | Bloomberg | Oil Heads for First Weekly Gain in Month on Economy, Middle East | Oil headed for its first weekly gain in a month in New York after claims for U.S. jobless benefits dropped to the lowest level in four years and increasing Middle East tensions prompted concern crude supplies may be disrupted. Futures were little changed after rising 0.9 percent yesterday. First-time unemployment claims fell to 339,000 last week, the lowest since February 2008, according to Labor Department data. Brent oil traded near the highest premium in a year to West Texas Intermediate grade after Turkey said a Syrian plane that it grounded contained munitions, while Italian Foreign Minister Giulio Terzi said Europe is prepared to tighten sanctions on Iran. “The potential for a blow-up in the Middle East is being reflected in that persistently wide spread between Brent and WTI,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “Jobless claims were better-than-expected.” Crude for November delivery was at $92.19 a barrel in electronic trading on the New York Mercantile Exchange, up 12 cents, at 3:20 p.m. Singapore time. The contract yesterday climbed 82 cents to $92.07. Prices are up 2.6 percent this week and down 6.7 percent this year. Brent oil for November settlement on the London-based ICE Futures Europe exchange declined 42 cents to $115.29 a barrel. The European benchmark crude was at a $23.10 premium to WTI, down from $23.64 yesterday, the biggest gap since October 2011. Middle East Oil may extend gains in New York after its moving average convergence-divergence indicator rose above the signal line yesterday for the first time in four weeks, according to data compiled by Bloomberg. Investors typically buy contracts on a so-called bullish MACD crossover. Crude has technical resistance along its middle Bollinger Band, around $93.50 a barrel today. The Syrian Arab Airlines plane that was forced by Turkish F-16 jet to land on Oct. 10 contained equipment and munitions sent for the Syrian Defense Ministry from a Russian institution equivalent to a state arms manufacturer, Recep Tayyip Erdogan, Turkey’s prime minister, said yesterday. The confiscation of the cargo follows the shelling of a Turkish border town by Syrian President Bashar al-Assad’s forces and Turkish artillery barrages in response over the past week. Europe is prepared to tighten sanctions on Iran if talks stall over the country’s nuclear program, Terzi said in a Bloomberg Television interview yesterday. A European Union ban on the purchase, transport, financing and insurance of Iranian oil went into effect on July 1. Military action against the Persian Gulf nation, which has been threatened by Israeli leaders, wouldn’t be effective, Terzi said. Crude Stockpiles U.S. crude inventories rose 1.7 million barrels last week as output climbed to a 17-year high, an Energy Department report showed yesterday. Supplies were forecast to increase 1.5 million barrels, according to the median estimate of 11 analysts in a Bloomberg News survey. Production rose 78,000 barrels a day to 6.6 million in the week ended Oct. 5, the fastest rate since May 1995, the report showed. Imports were up 115,000 barrels a day at 8.22 million. Royal Dutch Shell Plc (RDSA) , BP Plc (BP/) and Vitol Group are among companies that have applied to the U.S. government for licenses to export “substantial” amounts of crude for the first time in decades, the Financial Times reported, without saying where it got the information. Gasoline stockpiles fell 534,000 barrels to 195.4 million last week, dropping for the 10th time in 11 weeks to the lowest since October 2008, the Energy Department said. Imports of the motor fuel declined and refinery output slid to 8.6 million barrels a day, the lowest since March. Distillate-fuel supplies, including heating oil and diesel, decreased 3.2 million barrels to 120.9 million. The Organization of Petroleum Exporting Countries will reduce shipments by 0.3 percent this month, according to Oil Movements. The group will export 23.83 million barrels a day in the four weeks to Oct. 27, down from 23.89 million a month earlier, the tanker tracker said yesterday in a weekly report. The data exclude Angola and Ecuador. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net |
2024-07-01 | Bloomberg | Sumo Gambling Scandal Prompts Fuji Xerox to Quit Sponsoring Ancient Sport | Fuji Xerox became at least the fifth company to pull its sponsorship of Japan’s sumo wrestlers as the sport’s governing authority battles to stem the fallout of a betting scandal. Japan’s biggest maker of color copiers yesterday canceled prizes for winning wrestlers worth 540,000 yen ($6,100) for a tournament scheduled to begin July 11 in Nagoya, central Japan. It follows decisions by Nagatanien Co. , Asahi Mutual Life Insurance Co., IHI Corp. and Natori Co. not to sponsor the event. Japan’s sumo association this week suspended Chairman Musashigawa and 13 wrestlers after some members admitted to illegal gambling on baseball matches. Organizers are protecting $96 million in tournament sales and guarding against damage to a sport already hurt by allegations of assault, trainee abuse and drug use. “The association is paying for its failure to take adequate measures to address various incidents in the past,” Sports Minister Tatsuo Kawabata told reporters in Tokyo June 29. “The fate of sumo, with a long history, hinges on efforts by the association from now on.” Kawabata said he was concerned about links between the sport and organized crime, including allegations that stablemasters gave front-row tournament tickets to gangsters. An investigative panel commissioned by the association has recommended that at least two members be expelled for their involvement in gambling. The association should replace Chairman Musashigawa with someone able to remove the influence of “socially threatening groups,” panel member Shigeru Ito told reporters on June 27. Wrestler Prizes Fuji Xerox , a unit of Fujifilm Holdings Corp. , has provided 9 prizes at each tournament held this year. Each prize is worth 60,000 yen, with the majority of the funds going to the winning wrestlers. Sponsors can provide multiple prizes per bout, and their names are displayed on banners carried around the ring and read out before matches. Fujifilm , which owns a 75 percent stake in Fuji Xerox, declined 1.7 percent to 2,545 yen at the 3 p.m. close on the Tokyo Stock Exchange. IHI dropped 2.1 percent to 140 yen. The benchmark Topix index fell 1.6 percent. “We judged there is a social impact” from the involvement of wrestlers and stablemasters in gambling, Fuji Xerox spokesman Masaaki Bando said today. IHI ’s boilermaker unit also decided to cancel its 12 prizes at the Nagoya tournament, spokesman Keiichi Sakamoto said by phone today. The sumo association has no comment to make on the withdrawal of sponsors, a spokeswoman, who declined to provide her name, said yesterday. One-Day Tournament Asahi Broadcasting Aomori Co. this week canceled a plan to hold a one-day sumo tournament in August because of the controversy. Public broadcaster NHK, which has aired every major tournament since 1953, has said it may cancel coverage of the Nagoya event unless the association takes “sufficient” measures to address the gambling issue. The sumo association forecasts annual sales of about 8.53 billion yen this year from six tournaments, according to a report on its website. Morinaga & Co. may also cancel its award, which is given in a tournament in September, spokeswoman Kaoru Nakamura said today. McDonald’s Holdings Co. Japan isn’t considering canceling its sponsorship, said spokesman Kazuyuki Hagiwara today. The burger chain installed a custom-made seat to support the weight of wrestlers at its restaurant near Tokyo’s sumo stadium after it started sponsoring the sport last year. To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net |
2024-06-15 | Bloomberg | Poland Shouldn't Cut Budget Too Much Until Growth Assured, World Bank Says | Poland should avoid cutting its budget deficit too quickly so it doesn’t choke off the economic recovery, the World Bank says. “You don’t want to tighten the fiscal policy too much and too quickly now,” said Thomas Laursen , the bank’s manager for Poland and the Baltic states, in a June 8 interview in Warsaw. The country’s “debt is not at a critical level and there is quite a lot of confidence in Polish economic management.” While Poland’s debt rose to 51 percent of gross domestic product last year, that is less than half the 115 percent figure in Greece, where the European Union required immediate cost cuts in return for a bailout. EU governments last week vowed to step up review of national budgets and introduce new sanctions to prevent a repeat of the Greek crisis that undermined the euro. Michal Boni , chief adviser to Polish Prime Minister Donald Tusk , said June 4 that spending cuts aren’t the government’s top priority until economic growth is sustainable. Economic growth slowed to 1.8 percent last year, from 5 percent in 2009 as the global recession curbed demand for the country’s exports. The government has proposed limiting increases in discretionary spending to no more than 1 percent above inflation, a measure it says will save 9 billion zloty ($2.7 billion) a year by 2013. That will help narrow the deficit to less than the European Union limit of 3 percent of GDP within three years, Finance Minister Jacek Rostowski said June 11. Piotr Kalisz , chief economist at Citibank Handlowy in Warsaw, said the proposals aren’t enough to prevent debt from rising because they cover only about 26 percent of government spending. The new rules won’t affect so-called inflexible expenditures, such as subsidies for local government, social insurance and debt service, which can’t be altered without additional legislation. ‘Far From Sufficient’ “These proposals are far from sufficient and should be followed by additional measures to reduce the share of inflexible spending from an unsustainably high level of 75 percent,” Kalisz said in an interview. “Although we see the proposed measures as a first step in the right direction, it is still definitely a very small step.” Public debt may increase to 56.3 percent of GDP in 2011, according to Poland’s plan for meeting the criteria for adopting the euro. If debt rises above 55 percent of GDP it would trigger mandatory austerity measures under Polish law. Throughout the EU, debt rose to almost 74 percent of GDP last year. Poland’s limited austerity measures aren’t a concern for euro adoption because the economic slowdown and rising deficit mean it will probably be three years before the country can meet conditions for joining the single currency, Laursen said. Finance Minister Jacek Rostowski said last week that 2015 is a realistic target for Poland to adopt the euro. Growth ‘Below Potential’ It may make sense for Poland to join the European exchange- rate mechanism, a prerequisite for joining the euro, as quickly as possible because of the single currency’s decline against the zloty, Laursen said. Entering the mechanism would peg the value of the zloty to the euro. “We don’t know what it’s going to look like in three years,” Laursen said of the zloty’s exchange rate. The zloty has gained 9.7 percent against the euro in the past 12 months. The Polish currency rose to 4.0974 per euro yesterday in Warsaw, after touching a three-week low of 4.1465 on June 11. Marc Chandler , global head of currency strategy at Brown Brothers Harriman & Co. in New York, said yesterday in a note the Polish currency may reach 4.035 in the “near term.” Poland’s economy will probably expand 3 percent this year, which is still “below potential,” Laursen said. The central bank’s Monetary Policy Council kept its benchmark seven-day rate at a record low of 3.5 percent for an 11th month in May as it sought to balance concern about inflation with the need to bolster economic growth. The inflation rate fell below the bank’s 2.5 percent target in April for the first time since September 2007. “There are no immediate signs of inflationary pressure so the current level of interest rates seems right where it stands, rather than moving in any direction,” Laursen said. To contact the reporter on this story: Monika Rozlal in Warsaw at mrozlal@bloomberg.net. Donald Tusk, Poland's prime minister, attends a news conference with Angela Merkel, Germany's chancellor, in Berlin on Dec. 11, 2007. Photographer: Adam Berry/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-02-02 | Bloomberg | Societe Generale to Close Private Banking Office in Bahrain | Societe Generale SA (GLE) will move its private banking office in Bahrain to the United Arab Emirates as the French lender seeks to cut costs, an official at the bank said. Societe Generale decided to centralize its private banking business in the U.A.E., said the official, who declined to be identified because the matter is private. Zawya Dow Jones reported the news earlier today. Societe Generale opened the wealth management office in Bahrain in November 2009 as part of its expansion in the region. To contact the reporter on this story: Stefania Bianchi in Dubai at sbianchi10@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-12-11 | Bloomberg | Women Lacking Top Jobs Makes Yahoo CEO Exception to Rule | Women made few inroads this year in joining U.S. corporate boards or executive teams, even as high- profile appointments at companies such as Yahoo! Inc. (YHOO) spotlight the potential for greater parity. Women held 14.3 percent of executive positions at Fortune 500 companies as of June 30 and 16.6 percent of board seats, figures that show “glacial progress” in boosting female representation, according to a report published today by Catalyst , a non-profit researcher studying women and business. Catalyst’s research indicates growth in female corporate leadership has stalled, signaling Marissa Mayer ’s rise to the top job at Yahoo and Sheryl Sandberg’s board-seat victory at Facebook Inc. (FB) are the exceptions. Less than a fifth of the Fortune 500 had 25 percent or more board seats filled by women, while more than a quarter had zero women in executive roles, Catalyst data show. “The lack of progress toward closing this gender leadership gap is, to put it frankly, troubling,” Rachel Soares, a senior research associate at New York-based Catalyst and lead author of the report, said in a telephone interview. “The companies that are taking deliberate and sustained actions to advance women in leadership are in the vast minority, and all the work that they’re doing is only providing enough momentum to maintain the status quo of women lagging men.” Wasted Talent Women’s share of executive officer positions, defined as president or any vice president in charge of a principal business unit of the company, rose 1.4 percent this year from 2011, Catalyst data show. Among Fortune 500 companies, 27.8 percent had no women serving in top jobs at the end of the second quarter. “I’m very frustrated,” Toni Wolfman, executive adviser at the Center for Women and Business at Waltham, Massachusetts- based Bentley University , said in a phone interview. “There’s a lot of talent there that’s going to waste if companies don’t figure out how to support and advance women in their companies.” On corporate boards, 51 companies in the Fortune 500 had all-male directors as of June 30, Catalyst data show. Growth in female board representation has stagnated even as data from the Credit Suisse Research Institute show that companies perform better when they have women directors. Shares of companies valued at more than $10 billion that had female board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years, according to the report. Executive Positions “Companies with women at the top, in executive positions and on the board, are being shown to be more profitable,” said Betty Spence, president of New York-based National Association for Female Executives, which provides resources for female professionals and business owners. Progress in increasing representation “is paltry in comparison to the talent that is out there and is not being tapped,” Spence said in a phone interview. Companies that already have at least one female director are more likely to appoint more women than those with all-male boards, according to a separate report from Ernst & Young LLP released yesterday. While women are joining U.S. company boards at an increasing rate, with 40 percent of current female directors attaining their positions within the last five years, change has been incremental, Ernst & Young said. To achieve greater gender parity, Catalyst will build a directory of CEO-backed female board candidates and encourage member companies to both sponsor women for addition and draw from the list when making their own director nominations. “It’s not fun to write the same headline year after year,” said Brande Stellings , vice president of corporate board services at Catalyst. “We wanted to come up with a solution.” Catalyst derives its data from the U.S. Securities and Exchange Commission and National Association of Insurance Commissioners filings. To contact the reporter on this story: Brooke Sutherland in New York at bsutherland7@bloomberg.net To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net |
2024-06-23 | Bloomberg | European Stocks Tumble to Three-Month Low as Fed Cuts Forecast | European stocks sank, falling to their lowest level since March, as banks led a selloff after Federal Reserve Chairman Ben S. Bernanke cut his growth forecast for the world’s largest economy. Banco Bilbao Vizcaya Argentaria SA (BBVA) led a gauge of banks to its biggest drop in four months. Bayer AG (BAYN) slumped the most in more than two years after a rival to its Xarelto blood thinner outperformed the traditional treatment in a study. Mediaset SpA (MS) , the broadcaster controlled by Italian Prime Minister Silvio Berlusconi , sank 6.7 percent after forecasting that advertising will decline. The Stoxx Europe 600 Index dropped 1.4 percent to 264.31 at the 4:30 p.m. close in London, the gauge’s lowest level since March 16. The gauge has tumbled 9.2 percent from this year’s peak on Feb. 17 as U.S. economic data trailed forecasts and concern mounted that Greece will fail to repay all its debt. The measure is on course for an eighth consecutive week of losses, the longest stretch of declines since 1998. Bernanke’s “providing a strong message; we are seeing a very slow second half of the year recovery,” Patrick Legland, the global head of research at Societe Generale SA in Paris said in a Bloomberg Television interview with Francine Lacqua. “Markets are extremely worried because we lack the political will at this stage” to solve the debt crisis in Europe. Fed Forecasts The Fed yesterday reiterated a pledge to keep interest rates near zero and said it will complete a $600 billion bond- purchase program as scheduled this month, even as Bernanke said the recovery is progressing “more slowly” than expected. Officials at the central bank lowered their predictions for U.S. growth and employment this year and next. U.S. reports today showed that sales of new homes declined in May for the first time in three months and more Americans than forecast filed first-time claims for unemployment insurance last week. European services and manufacturing growth slowed in June more than economists had forecast, adding to signs that the economy is losing momentum. A composite index based on a survey of euro-area purchasing managers in both industries fell to 53.6 from 55.8 in May, London-based Markit Economics said. European Union leaders began a two-day summit in Brussels today to discuss Greece ’s financing needs as the nation attempts to avert a default. European Central Bank President Jean-Claude Trichet yesterday said danger signals for financial stability in the euro area are flashing red as the debt crisis threatens to infect banks. Benchmark Indexes National benchmark indexes retreated in every western European market open today. The U.K.’s FTSE 100 Index slumped 1.7 percent, Germany’s DAX declined 1.8 percent and France’s CAC 40 Index fell 2.2 percent. Austria and Luxembourg were closed for a public holiday. Stocks in the U.S. and Europe may drop as much as 11 percent over the next 12 months as growth slows and earnings weaken, according to equity strategists at Exane BNP Paribas. “Earnings and interest rates, two key drivers for equities, are as good as they are likely to get,” Bert Jansen, a stocks strategist at Exane BNP Paribas in Paris, wrote in the report. “With bond yields, interest rates and inflation near record lows and profit margins close to record highs, it is difficult to see what will drive equity markets higher beyond 2011, amid slowing growth.” Banks Tumble Banks were the worst performing of the 19 industry groups in the Stoxx 600, sliding 2.6 percent. BBVA, Spain’s second- largest lender, declined 5.5 percent to 7.57 euros. Italy’s Banca Monte dei Paschi di Siena SpA (BMPS) dropped 5.1 percent to 54.7 euro cents and Dexia SA (DEXB) lost 5.4 percent to 2.06 euros. Bayer slumped 6.3 percent to 54.40 euros, its largest drop since March 2009. The results position Pfizer Inc.’s and Bristol-Myers Squibb Co.’s apixaban ahead of Bayer’s Xarelto in a race to win approval to provide new stroke-preventing drugs to patients with the condition known as atrial fibrillation, Mark Schoenebaum , an analyst with ISI Group Inc., wrote. Mediaset tumbled 6.7 percent to 3.10 euros, the lowest close since its initial public offering in 1996. The company said advertising sales in Italy will decline as much as 5 percent in the first six months. Energy shares slumped, with every company in the Stoxx 600 Oil & Gas Index falling. Total SA (FP) sank 1.6 percent to 37.97 euros and BP Plc (BP/) dropped 2.2 percent to 435.5 pence. Crude plunged to a four-month low of $90.65 a barrel in New York. The International Energy Agency said it will release 60 million barrels of oil from emergency stockpiles, the third time the agency has coordinated the use of emergency reserves since its founding in 1974. STMicroelectronics NV (STM) tumbled 5.6 percent to 6.44 euros as its chipmaking joint venture with Ericsson AB, ST-Ericsson, pushed back the date at which it expects to become profitable. Temenos Group AG (TEMN) slid 4.3 percent to 24.35 Swiss francs after CA Cheuvreux cut its recommendation on the shares to “underperform” from “outperform.” To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-10-11 | Bloomberg | Toyota Found Not at Fault in Acceleration-Related Death | Toyota Motor Corp. (7203) wasn’t responsible for an accident that killed a 66-year-old woman who crashed her 2006 Camry into a tree after it sped out of control on a road in the wrong direction, a California jury said. A Los Angeles jury yesterday found that there wasn’t a defect in the Camry that contributed to the 2009 crash, rejecting the allegation that the absence of a brake-override system in the vehicle was to blame for the car speeding into oncoming traffic and crashing while driver Noriko Uno was trying to brake. The jury instead pinned full liability on the driver of another vehicle that had crashed into Uno’s car before the Camry sped out of control. Jurors said the other driver should pay $10 million in damages to Uno’s husband and son. The Uno trial was a bellwether case for about 85 personal-injury and wrongful-death lawsuits in California state court that were brought against the Toyota City, Japan-based carmaker in the wake of a series of recalls in 2009 and 2010 for possible sudden, unintended acceleration-related issues, including floor mats that could get stuck under the gas pedal and sticky pedals. The 2006 Camry wasn’t included in the Toyota recalls for unintended acceleration issues. ‘Unfortunate Accident’ “We are gratified that the jury concluded the design of the 2006 Camry did not contribute to this unfortunate accident, affirming the same conclusion we reached after more than three years of careful investigation –- that there was nothing wrong with the vehicle at issue in this case,” Carly Schaffner, a Toyota spokeswoman, said in a statement. “We believe this verdict sets a significant benchmark by helping further confirm that Toyota vehicles are safe with or without brake override.” Outside California, Toyota has won both injury cases that reached jury verdicts since the recalls, including one in New York in 2011 and another in Philadelphia in June. A trial is under way in Oklahoma City over a crash that left one woman dead and another injured. Toyota is facing a fifth trial next month in federal court in Santa Ana , California, where about 200 death and injury cases are pending. Another case is set for trial in February in state court in Michigan. In the Los Angeles case, Toyota lawyers argued that the lack of a brake-override system in the Camry wasn’t to blame for the accident because Uno didn’t try to brake. Uno’s medical condition, including diabetes, caused her to experience cognitive impairment after her car was struck by the other vehicle running a stop sign, Toyota said. Happy, Disappointed Jeffrey Uno, Noriko Uno’s son, said in an interview he was “very happy with the verdict but disappointed about the outcome with respect to Toyota.” “I wish the best for the other cases and hope that they’ll have better luck and an outcome that will shed more light on the problems in Toyota vehicles ,” Uno said. Garo Mardirossian, a lawyer for the plaintiffs, who sought damages of $20 million, he was happy that the Uno family won damages from the other driver. Toyota “got away by the skin of its teeth,” he said. “We had so many missing pieces in this case -- the woman’s dead, she couldn’t talk,” Mardirossian said. The attorney said he has another case against Toyota involving allegations of sudden acceleration by a plaintiff who will be able to testify about it. That case “is much more straight-forward,” he said. John Duffy, who represented the driver found liable in the accident on behalf of her insurance company, said he was ``stunned'' by the amount the jury awarded to the Unos. When asked if they would appeal, Duffy said, ``It sure looks like we will have to.'' The cases are In re Toyota Motor Cases, JCCP4621, California Superior Court, Los Angeles County (Los Angeles). To contact the reporters on this story: Edvard Pettersson in Federal court in Los Angeles at epettersson@bloomberg.net ; Valerie Reitman in state court in Los Angeles at valeriereitman@yahoo.com |
2024-11-14 | Bloomberg | N.J. Housing-Bias Accord Scuttles U.S. Supreme Court Case | A New Jersey town settled a housing-bias lawsuit that was set for a U.S. Supreme Court hearing next month, scuttling a case that might have shielded lenders from discrimination suits pressed by the Obama administration. The Mount Holly town council today unanimously approved an accord with residents who sued over the redevelopment of a predominantly minority neighborhood. The agreement makes Supreme Court dismissal of the case a formality. The settlement averts the prospect of a watershed change in the scope of the 1968 Fair Housing Act and a separate law the administration has used against lenders. The court was considering requiring proof of intentional discrimination and barring “disparate impact” claims, which focus on the effect of a disputed policy without requiring evidence of intent. President Barack Obama ’s administration is relying on disparate-impact arguments in suits over housing and auto loans. Bank of America Corp. , Wells Fargo & Co. (WFC) and SunTrust Banks Inc. (STI) have agreed to pay at least $480 million to settle claims since December 2011. The U.S. Consumer Financial Protection Bureau has embraced the disparate-impact approach under the Equal Credit Opportunity Act. The settlement is a missed opportunity for lenders, said Camden Fine, president of the Independent Community Bankers of America , which represents smaller lenders. He said legal uncertainty over disparate impact is “creating havoc among lenders.” ‘Solid Lenders’ “The government is using these issues as clubs to force otherwise solid lenders to do the government’s bidding on whatever social outcome they want,” Fine said in an e-mail. “This has got to stop or the very people they are purportedly trying to help will find it more and more difficult to get credit.” Civil-rights advocates said they feared the court would invalidate the disparate-impact approach, changing the law across the country. The Supreme Court under Chief Justice John Roberts has cut back legal protections for racial minorities in other contexts. In June, a divided court struck down a core part of the 1965 Voting Rights Act, which opened the polls to millions of Southern blacks. Given those rulings, “I wouldn’t be too eager to have this bench decide a disparate-impact housing claim,” said Elizabeth Wydra, a lawyer with the Washington-based Constitutional Accountability Center, which filed a brief backing disparate-impact claims. Appeals Courts Eleven courts of appeals have ruled on the issue, and all have said the Fair Housing Act allows disparate-impact claims. The high court will have another opportunity to take up the issue. The insurance industry in June sued to challenge a Department of Housing and Urban Development rule that interprets the Fair Housing Act as allowing such claims. The settlement marks the second time the high court has agreed to rule on the issue, only to see a case disappear. A dispute involving St. Paul , Minnesota , was scuttled in 2012 when the city dropped its appeal at the Obama administration’s urging. The housing case stems from an effort by Mount Holly to redevelop what it said was a blighted, high-crime area. Known as the Gardens, the neighborhood was originally built to provide homes for returning World War II veterans and their growing families. In more recent years, the Gardens was the only predominantly black and Hispanic area in town, with 75 percent minority residents in 329 residential units. Vacant Lots The town began buying homes in the Gardens, in most cases paying $30,000 to $50,000, until only 70 remained in private hands. The redevelopment effort has since stalled, even as the town has destroyed scores of homes and accumulated $18 million in debt. No new houses have been built, and the remaining structures now form a patchwork amid vacant lots. A group of current and former residents sued, claiming the effort had a disparate impact on minorities. A federal appeals court said the case could go forward. Under the settlement announced tonight, the township can proceed with development of the area in exchange for the construction of 44 “emerging market” homes in the neighborhood. Twenty of them will be offered to current residents at no extra expense. “The clients wanted to be able to stay in the community once it was revitalized,” Olga Pomar, the lead lawyer for the plaintiffs, said during a conference call today. “The township has agreed that no one will have to move until a new unit is available for them.” The case is Township of Mount Holly v. Mount Holly Gardens Citizens in Action, 11-1507. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net |
2024-10-10 | Bloomberg | Sandusky Gets 30-Year Minimum Prison Term for Sex Abuse | Jerry Sandusky, the ex-Pennsylvania State University assistant football coach convicted of sexually abusing children, was sentenced to 30 to 60 years in prison, concluding a prosecution that tarnished the school’s image and led to the firing of head coach Joe Paterno. Sandusky, 68, appeared yesterday before Common Pleas Court Judge John Cleland wearing an orange jumpsuit and white sneakers. The hearing in state court in Bellefonte, Pennsylvania, came almost four months after he was found guilty of abusing 10 boys over a 15 year-period. He was convicted on 45 counts. Sandusky met the boys he abused through the Second Mile , a charity he founded for needy children. During a two-week trial in June, prosecutors portrayed him as a serial child molester who used the charity to recruit his victims, befriending them and “grooming” them with gifts, trips to Penn State football games and money. “You abused the trust of those who trusted you,” Cleland said. “The crime is not only what you did to their bodies but the crime is your assault to their psyche and their souls.” The judge said Sandusky will be kept in the Centre County Correctional Facility for 10 days before being transferred to Camp Hill , Pennsylvania, for processing and placement. Sandusky got credit for the 112 days he has been incarcerated since the case began. ‘Natural Life’ Sandusky will serve at least three decades before he’s considered for parole, in essence “the remainder of his natural life,” lead prosecutor Joseph McGettigan said after the sentence was imposed. The sentence is no more than anyone could reasonably expect, said Daniel Filler , a criminal law professor at Drexel University in Philadelphia. The sentence could even be considered lenient considering Sandusky was convicted of indecent deviant sexual intercourse, Pennsylvania’s “old- fashioned term” for rape, Filler said. “If Sandusky lives to age 98, he won’t necessarily get parole even after 30 years,” Filler said. “It’s hard to imagine a court sentencing any serial rapist to a lesser term.” Before a packed court, including his wife and four of his six adopted children, Sandusky denied the charges against him. ‘My Heart’ “Others can take my life, they can make me out as a monster, but they can’t take away my heart,” he said. “And in my heart I know that I did not do these disgusting things.” Three of Sandusky’s victims addressed the court before sentence was passed. Statements from a fourth victim and the mother of one of the victims were read. In a recorded statement posted on the Penn State ComRadio News website Oct. 8, Sandusky blamed his conviction on a “well- orchestrated effort” by the media, investigators, “the system,” Penn State , his accusers, civil attorneys and psychologists. The “attention, financial gain and prestige” they won will “all be temporary,” Sandusky said. He said his lawyers didn’t have time to prepare for the trial. Sandusky’s statement was “a masterpiece of denial and self-delusion,” McGettigan said after the hearing. “It was untethered from reality.” Sandusky read his statement yesterday as victims seated three rows behind him lowered their heads and shook them from side to side. The former coach was at times defiant, pledging to “continue to fight,” and at other times anguished at the separation from his wife of 46 years and his grandchildren. He said the victims are people he cared about and still does. Abuse, Manipulate Sandusky sought to abuse and manipulate his victims until the very end, a teenager identified as Victim 1 said in a statement read at the hearing by McGettigan. “There is no remorse, no regret, only evil,” the victim said in the statement. Another victim who spoke during the hearing said his abuse left him suffering from anxiety, post-traumatic stress, embarrassment and guilt. “I can never erase the filthy images of his naked body against mine, his hands on me and him forcing my hands on him,” the teenager said. Another victim said he would never forgive the former coach. “You were the person in my life who was supposed to be a role model. Instead you did terrible things,” the victim, who now has a child of his own, said. “Rather than take accountability for your actions you decided to attack us as if we did something wrong. You should be ashamed of yourself.” Victims Applauded Pennsylvania Governor Tom Corbett, who oversaw the beginning of the Sandusky probe when he was attorney general, applauded the victims for stepping forward. “Today’s sentence will hopefully give comfort to those young men, whose trust in the justice system is rewarded by seeing this man go to prison for the rest of his life,” Corbett said yesterday in a statement. Defense attorney Joseph Amendola said he believes Sandusky would have been acquitted had his lawyers had enough time to get ready for trial. The lawyers had 4 1/2 months to prepare a case based on 52 criminal counts and 10 separate victims, much less than a related case against two Penn State officials charged with lesser crimes, Amendola said. “Had we had the time, we would have had the opportunity to prove Jerry’s innocence,” Amendola said after the hearing. Appeal Plan The issue will be the basis for an appeal that will be filed within 10 days, Karl Rominger , another defense attorney, said. Cleland’s denial of a request to delay the trial “fundamentally taints the fairness of the process,” Rominger said. The Sandusky scandal cast a shadow over the university, located in an area called “Happy Valley,” for almost a year. The fallout led to the firings of university President Graham Spanier andPaterno, who headed Penn State’s football program for 46 years. It also resulted in the university being sanctioned and two other school officials facing related criminal charges. Paterno died Jan. 22. The scandal was a “train wreck” that captivated the nation, Duquesne University law professor Wesley Oliver said. “I couldn’t imagine the appetite for this case lasted as long as it did,” Oliver said. “It was uncontroverted that Sandusky raped these kids. We didn’t tune into this trial to see what would happen or to see whether he did it. We tuned in because we were drawn to the gruesomeness of it.” Inappropriate Conduct Sandusky, a former defensive coordinator for Penn State’s Nittany Lions , played and coached under Paterno for more than 30 years before retiring in 1999, the year after allegations first surfaced of inappropriate contact with minors. State prosecutors began investigating in early 2009 after a teenager reported that Sandusky had inappropriately touched him several times over a four-year period. Sandusky was arrested and charged in November. Additional charges were added the following month. Sandusky’s lawyers argued that the case was the product of overzealous investigators. Sandusky didn’t testify. Some of Sandusky’s victims took the witness stand at his trial, recounting their experiences with him at his home and on campus. “This case was very simple from a legal perspective,” Oliver said in an interview. “You had overwhelming evidence from credible accusers and you had the defendant’s own words,” he said, citing TV and newspaper interviews by Sandusky. “There was nothing particularly in doubt,” Oliver said. Second Mile Second Mile served children with physical, emotional and academic needs, according to its website. The charity had supporters with high-profile ties to Penn State including Dorothy Huck, the wife of Penn State emeritus board trustee Lloyd Huck, who sat on the charity’s state board of directors. Sandusky’s success as the group’s primary fundraiser was evident as the charity’s assets more than tripled from 2002 through 2009, according to Internal Revenue Service filings. Second Mile had revenue of $2.7 million and net assets of $9 million, according to its 2010 annual report. Second Mile said in May it planned to close and transfer its assets to a Houston-based nonprofit. Those plans are on hold pending the resolution of investigations tied to the Sandusky case. Violent Predator Sandusky was designated a sexually violent predator before his sentencing yesterday, a move that was uncontested by the defense. Under Pennsylvania law, that status is applied to a person convicted of sexually violent crimes who, because of mental abnormality or personality disorder, presents a high risk of recidivism. The designation requires a lifetime registration, community notification and lifetime counseling, according to the state’s Sexual Offenders Assessment Board. Last month, Penn State President Rodney Erickson said the school plans to compensate Sandusky’s victims with money from insurance policies and funds set aside from interest on internal loans. The 157-year-old school is trying to move forward even as it can never forget what happened, Erickson said in a Sept. 18 interview. “Our thoughts today, as they have been for the last year, go out to the victims of Jerry Sandusky’s abuse,” Erickson said yesterday in an e-mailed statement. “While today’s sentence cannot erase what has happened, hopefully it will provide comfort to those affected by these horrible events and help them continue down the road to recovery.” University Changes The school, which has spent $19.2 million responding to the Sandusky scandal, has changed its governance structure, implemented management changes and created more transparency as it embarks on a search for a new president. In July the university was fined $60 million by the National Collegiate Athletic Association , while it faces at least three victims’ lawsuits and a complaint filed by a former football coach who testified against Sandusky. The NCAA also stripped the football team of its wins from 1998 through 2011. The former coach who sued, Mike McQueary , is a prosecution witness in the case against Timothy Curley, Penn State’s athletic director at the time, and Gary Schultz , a former vice president in charge of university police. The men are slated for trial in January on charges they lied to a grand jury about a 2001 sex-abuse allegation against Sandusky and failed to report the incident to authorities. Both denied the charges. Freeh Report A university-commissioned report released in July by Louis Freeh , the ex-director of the Federal Bureau of Investigation, said Curley, Schultz, Spanier and Paterno failed to take responsible action after the February 2001 incident although they knew of an early allegation and investigation in 1998. Lawyers for Curley and Schultz said the report was unfair, inaccurate and not based on a full record of the facts. An attorney for Spanier said in August that the report was an undeserved, biased attack on the former president. McQueary said he was fired from his $140,400-a-year job because of his cooperation with state prosecutors. He’s seeking $4 million in lost earnings, according to a complaint filed Oct. 1 in state court. The cases are Commonwealth of Pennsylvania v. Sandusky, CP-14-2422-CR-2011, Court of Common Pleas, Centre County, Pennsylvania (Bellefonte); and Commonwealth of Pennsylvania v. Schultz, CP-22-CR-5164-2011, Court of Common Pleas of Dauphin County, Pennsylvania (Harrisburg). To contact the reporter on this story: Sophia Pearson in Pennsylvania state court in Bellefonte at spearson3@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-02-02 | Bloomberg | Ace Fourth-Quarter Profit Increases 5% on Rise in Investment Income, Sales | Ace Ltd ., the insurer added to the Standard & Poor’s 500 Index last year, said fourth-quarter profit rose 5 percent on improved returns from investments and a rise in policy sales. Net income advanced to $1 billion, or $2.92 a share, from $953 million, or $2.81, a year earlier, the Zurich-based company said today in a statement. Operating income, which excludes some investment results, was $2.05 a share, beating the $1.84 average estimate of 19 analysts surveyed by Bloomberg. Ace, which has offices in more than 50 countries, remained profitable during a global economic decline that has crimped demand for coverage. Chief Executive Officer Evan Greenberg, 56, expanded beyond commercial property-casualty insurance through acquisitions, adding life and general insurance companies in Asia and purchasing a majority stake in a U.S. crop insurer. “They’re building a very good, high-quality portfolio of non-correlated products, as well as businesses that are geographically diverse,” said Michael Paisan, an analyst at Stifel Nicolaus & Co., before the earnings were announced. “It’s kind of the like the conglomerate theory, where you’re not at the whims of any single market.” Paisan has a “buy” rating on the stock. Ace shares advanced 34 cents to $62.50 at 4 p.m. in New York Stock Exchange composite trading. They have gained 26 percent in the past year compared with a 18 percent gain in the S&P 500 Index. In 2010, ACE agreed to pay about $1.1 billion for a majority stake in Rain & Hail Insurance Service Inc., $425 million for New York Life Insurance Co.’s Hong Kong and South Korean life units and $210 million for Malaysia-based Jerneh Insurance Bhd. To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-05-02 | Bloomberg | Indonesia Stocks: Astra Agro, Bank Mandiri, Sinar Mas Multiartha | Shares of the following companies had unusual moves in Indonesian trading. Stock symbols are in parentheses, and prices are as of the 4 p.m. Jakarta-time close. The Jakarta Composite index (JCI) advanced 29.68 points, or 0.8 percent, to 3,849.30, closing at a record for a fourth day. PT Astra Agro Lestari (AALI IJ), the nation’s biggest listed plantation company by market value, gained 3.7 percent to 24,000 rupiah, the sharpest increase since Jan. 25. The company allocated as much as 516 billion rupiah ($60 million) to build four palm oil processing plants, Bisnis Indonesia reported. Tonny Hermawan Koerhidayat, vice president director at Astra Agro, didn’t return a call and a mobile-phone text message. PT Bank Mandiri (BMRI IJ), Indonesia’s biggest bank by assets, climbed 2.8 percent to 7,350 rupiah, the highest close since its July 2003 trading debut. Mandiri said first-quarter net income jumped 89 percent from a year earlier to 3.78 trillion rupiah as lending expanded and after it sold a stake in state airline PT Garuda Indonesia. PT Elang Mahkota Teknologi (EMTK IJ), a television company, rose 3.8 percent to 1,660 rupiah, the highest close since its January 2010 trading debut. Elang said it plans to buy as many as 1.47 billion shares of PT Indosiar Karya Media (IDKM IJ) at 900 rupiah to 1,040 rupiah each, according to a statement published in Bisnis Indonesia. Indosiar gained 1.1 percent to 920 rupiah. PT Sinar Mas Multiartha (SMMA IJ), an insurance company, increased 18 percent to 3,300 rupiah, the highest close since January 1999. Mitsui Sumitomo Insurance Co. said today it will spend 7 trillion rupiah to buy 50 percent of PT Asuransi Jiwa Sinarmas, a unit of Sinar Mas. To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-04-15 | Bloomberg | VIX Slumps to Three-Year Low on Smaller Price Swings, Manufacturing Growth | The benchmark index for U.S. stock options tumbled to a three-year low, driven down by smaller equity price swings and a report showing manufacturing in the New York region expanded in April at the fastest rate in a year. The VIX, as the Chicago Board Options Exchange Volatility Index is known, slumped 5.8 percent to 15.32 at 4:15 p.m. in New York, after falling as low as 14.92 intraday. That’s the lowest closing level since July 2007, a month before BNP Paribas SA, France ’s biggest bank, barred withdrawals from funds that owned subprime loans, intensifying the financial crisis. Price swings have narrowed for stocks, a situation that tends to reduce the value of equity derivatives. The VIX measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which moved within a 0.7 percent range between today’s high and low. The 10-day average intraday swing stands at 0.9 percent. S&P 500 price swings hit a six-month high of 2.5 percent on March 16. The March 11 earthquake in Japan spurred a three-day slump of 3.6 percent in the S&P 500. “The market just hasn’t been moving much since the Japan situation,” said Jeremy Wien, head of VIX options trading at Peak6 Capital Management LLC in Chicago. “We tested 1,300 yesterday and popped right back up” on the S&P 500. The S&P 500 closed at 1,319.68 today, up 0.4 percent. It fell 0.6 percent this week. The VIX has averaged about 20.4 in its two-decade lifetime. The Federal Reserve Bank of New York’s general economic index rose to 21.7 from 17.5 in March. Economists projected a reading of 17, based on the median forecast in a Bloomberg News survey. Figures greater than zero signal factory expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Joanna Ossinger in New York at jossinger@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-08-31 | Bloomberg | NJ Floods Keeps 10,000 Residents From Homes | New Jersey ’s northern suburbs remained in Hurricane Irene’s grip, with swollen rivers keeping more than 10,000 people from their homes and utility crews working to restore power to 190,000 customers. The state, the most densely populated in the U.S., was awaiting word on Governor Chris Christie ’s request for a federal disaster declaration. Janet Napolitano, U.S. secretary of Homeland Security , today was scheduled to tour the hardest-hit areas, within 50 miles (80 kilometers) of New York City. President Barack Obama will visit Paterson on Sept. 4, the White House announced today. “We expect the flooding to start to end today,” Mary J. Goepfert, a spokeswoman for the New Jersey Office of Emergency Management, said in a telephone interview. “Today is going to be challenging, and part of tomorrow. I would not say that everything is going to be all and well by Friday.” From the beaches of North Carolina to New York ’s Catskill Mountains and the ski resorts of Vermont, Irene blew through the Eastern Seaboard last weekend, killing 45 people, causing losses of about $12.4 billion and leaving 6.69 million homes and businesses without power. The U.S. National Weather Service posted flood warnings for the New Jersey counties of Morris, Essex, Passaic and Morris through this evening. No rain was forecast for the area. New Jersey Shelters Obama today approved disaster applications from North Carolina, where the hurricane made landfall Aug. 27, and New York, where it hit the following morning as a weakened tropical storm. Vermont, which sustained its worst flooding in 75 years, was declared a disaster area yesterday. The designation triggers cleanup and restoration funding from the U.S. Federal Emergency Management Agency. In New Jersey today, 852 people were in shelters in seven counties, Goepfert said. The evacuees were among 10,107 residents still barred from their homes after 11 inland rivers and their tributaries crested, some at record levels. Teams were preparing to survey damage near the coast and head north as floodwater recedes, Goepfert said. Municipal workers in beachside towns were repairing boardwalks and restoring dunes in preparation for the long Labor Day holiday weekend, which marks the end of the tourism season. Fairfield Submerged In Fairfield, a township of 9,000 about 25 miles northwest of New York City , some areas were 8 feet to 10 feet (3 meters) beneath water that had flowed from the Passaic River, Deputy Police Chief Anthony Manna said. He spoke during a tour with a reporter aboard a 2 1/2-ton military truck, which was submerged to the bumpers. National Guard troops and police officers in boats took some residents from their homes. Bill Fitzgerald, president of the Fairfield Volunteer Fire Department, said the water measured a mile wide in some places, and carried raw sewage, gasoline and chemicals. Responders dodged barbecue tanks, lawn furniture and lumber, he said. “The biggest danger we have going on?” Fitzgerald said during an interview at the firehouse. “Pick one: natural gas leaks, electrical lines down, people staying in their homes and water.” In New York, 19 of 62 counties will be eligible for aid, according to a release from Governor Andrew Cuomo ’s office today, one day after the governor asked Obama for help. New York Damage The damage in New York state will be almost $1 billion, with 600 homes wiped out, six towns inundated, 150 major highways damaged and 22 state bridges closed, Cuomo said. He estimated $45 million in agricultural losses on 140,000 acres, a figure that is rising, he said at a press conference in Prattsville, a Catskills town ravaged by torrential rains. Of the 328,907 customers without power statewide, more than half were on Long Island , Cuomo’s office said. The Long Island Power Authority estimates that 95 percent of its 190,000 customers will have their power restored by Sept. 2 at midnight. In the Catskills, about 17,000 customers don’t have power. “These are not communities of deep pockets, and these are communities that will need economic help to restore themselves,” Cuomo said at the news conference. In Vermont , Route 4, a gateway to ski resorts, was severed in a dozen places, state officials said. In and around Killington, 10,000 residents and vacationers were stranded, Town Manager Kathleen Ramsey said yesterday. In North Carolina, seven counties will be eligible for federal disaster funding. The hurricane destroyed more than 1,100 homes and caused damage of at least $71 million, Governor Bev Perdue said yesterday. Damage South “We are estimating right this minute that we’re up to about $70 million worth of damage, simply in things that we’ve eyeballed,” Perdue said yesterday at a news conference. “We know there will be significant add-ons to that number with the debris and the business interests, and obviously you will layer on that agricultural and other kinds of issues. This has become an expensive hurricane for North Carolina .” Irene caused losses of about $12.4 billion in the U.S., according to an estimate by Kinetic Analysis Corp., a firm that predicts the effects of disasters. Insurers and reinsurers will probably cover about $4.9 billion of that cost, according to Kinetic. “This was not a very strong wind event, but it was a very strong water event,” Jan Vermeiren, chief executive officer of Kinetic, said in a telephone interview. Private insurers “rarely offer flood insurance, they only cover damage from wind.” To contact the reporters on this story: Elise Young in Trenton, New Jersey, at Eyoung30@bloomberg.net ; Terrence Dopp in Trenton, New Jersey, at Tdopp@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net . |
2024-04-26 | Bloomberg | Prudential Hires Standard Life’s Hunt as Head of U.K. | Prudential Plc (PRU) , the U.K.’s biggest insurer, hired Standard Life Plc (SL/) Chief Financial Officer Jackie Hunt to run its U.K. and Europe division. Hunt, 44, replaces Rob Devey, who will leave the company in October, Prudential said today in a statement. She could earn more than 3 million pounds ($4.6 million) in salary, bonus and long-term incentives, Prudential said. Standard Life, Scotland’s biggest insurer, is yet to appoint a replacement for Hunt, the Edinburgh-based company said in a separate statement. “Jackie joins Prudential with a proven track record of delivery in the highly competitive U.K. insurance market,” Prudential Chief Executive Officer Tidjane Thiam said in the statement. “I am delighted that a person of her talent and experience is joining the group.” London-based Prudential earned about 24 percent of its operating profit from the U.K. last year , while the bulk of its income comes from Asia. Thiam was reprimanded by the Financial Services Authority last month for failing to notify the regulator of his planned bid for Asian insurer AIA Group Ltd. (1299) in 2010. To contact the reporter on this story: Liam Vaughan in London at lvaughan6@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-03-05 | Bloomberg | Lehman’s Caicos Calamity Saved by Luxury Comeback | More than 1,300 miles (2,092 kilometers) from New York , on the uninhabited island of West Caicos, a group of European investors are helping to pick up the pieces from Lehman Brothers Holdings Inc.’s (LEHMQ) collapse. Building is expected to resume this year at the Molasses Reef resort, according to the Turks and Caicos Islands governor’s office. The new developers, advised by London-based Kew Capital LLP, bought Lehman’s stake in the unfinished luxury project in December, more than four years after the bank’s record failure stranded at least 400 Chinese construction workers at the site surrounded by semi-built condos and weed- clogged swimming pools. The island development, a mix of condos, land parcels and hotel suites, is being rescued as global stock markets rise to the highest levels in five years, helping drive demand for luxury properties from London to Honolulu. Some investors are seeking to capitalize on the rebound by buying commercial mortgages or construction debt tied to projects paralyzed when the credit crisis sent values plunging and helped bring on the worst economic slump since the Great Depression. “For projects that went belly-up lenders were taking losses in the 70 to 80 percent range on loans,” said Matthew Anderson , managing director at loan research company Trepp LLC. “Investors could be all in, in some cases, at half the cost of the original envisioned project. That gives you a lot of room to make some money.” Private Island Development on the unpopulated Atlantic Ocean landmass began in 2001 just as the U.S. economy was slowing because of the bursting dotcom bubble. The Ritz-Carlton Reserve agreed to manage the hotel on the 9-square mile (23 square-kilometer) private island reachable only by boat, plane or helicopter, according to marketing materials. Lehman, once the world’s fourth-largest investment bank, funded the majority of Molasses Reef as part of a massive expansion into real estate before filing the biggest bankruptcy in U.S. history in September 2008. Even after exiting court protection last year, it continues to liquidate properties to pay creditors, from Detroit office towers to hotels in Hawaii. Jeffrey Fitts, Lehman’s New York-based head of real estate and a managing director at Alvarez & Marsal, the advisory firm managing the liquidation, said in August that the firm would only sell assets to repay creditors once the timing is right. The bank is planning to put its Ritz-Carlton Kapalua luxury resort in Maui on the market in the next few months as tourism across the islands reaches record levels. Kimberly Macleod , a spokeswoman for the firm, declined to comment on the Molasses Reef sale. Hostage Situation Construction on West Caicos came to a standstill with the project about 70 percent complete, and some of the Chinese employees of Israeli construction firm Ashtrom Properties Ltd. (ASPR) held their contractors hostage when an anticipated Lehman loan didn’t materialize and wages weren’t paid. The standoff ended after a week. More than four years later, the cement shell of a hotel with views across turquoise water is mostly intact, as are the remnants of less luxurious workers’ quarters, resembling a mini trailer park. Birds have built nests on the rooftops of some of the 30 unfinished condos, originally marketed from $2.5 million to $5.5 million, that line a stretch of beach on the island northeast of Cuba. Unique Project “It’s always been a unique project and the asset is still very sound,” said Matt McDonald, director of Logwood Development Co., the prior developer which agreed to sell most of its interest to the European investors, who weren’t identified in the release. “It was a very complex transaction and Kew had the foresight and recognized the discount they were getting on the debt.” About $300 million has been put into the island so far and the remaining infrastructure, hotel and condo project may cost about another $130 million to complete, McDonald said. “The investment reflects our conviction that Turks and Caicos Islands has a great tourism base and has enormous further tourism potential,” Kew Capital said in a Dec. 14 statement. The firm was started by former Credit Suisse Group AG executives Jeremy Fletcher and Nathan Burkey in 2008 to advise Russian steel magnates Alexander Abramov and Alexander Frolov on how to manage “several billion dollars” of their wealth, Dow Jones reported at the time. Jeremy Mercer, a spokesman for Kew, didn’t disclose the price paid for the assets or name the investors. Boosting Demand A recovering global economy, including the world’s largest in the U.S., is helping boost demand for projects that stalled during the crisis. Construction will start on a $400 million downtown Seattle tower that’s planned to be the city’s tallest new building, five years after the hotel and office development was put on hold. SBE Entertainment Group LLC, which owns the luxury SLS brand, will run a 184-room hotel in the tower. Demand for luxury properties is also on the rise after the MSCI All-Country World Index (MXWD) of stocks more than doubled, including reinvested dividends, since the lows in March 2009. Developer Howard Hughes Corp. (HHC) , whose chairman is hedge fund manager Bill Ackman , said last month it sold 206 luxury condominiums in 29 hours at a Honolulu development. Central London luxury-home prices unexpectedly rose at the fastest pace in 10 months in February, Knight Frank LLP said. The broker last year forecast prices would be little changed in 2013 after an 8.7 percent increase in 2012. Turkish Style Near Miami, Regions Financial Corp. (RF) led banks providing a $160 million loan for the Mansions at Acqualina, a hotel and condominium project with amenities including a Turkish-style spa and a private movie theater. International demand for property has strengthened markets such as South Florida , said Rusty Campbell, executive vice president of real estate banking at Regions. “We see a lot of buyers from Europe , South America , attracting all this international capital which gives that market a boost in its economy,” Campbell said in a telephone interview. Lenders are proceeding with caution. They required $320 million in presales with 50 percent of the non-refundable down payments from buyers, according to Michael Goldstein, president of Trump Group, the company building the Mansions at Acqualina. They raised $100 million of the funds in two weeks with no advertising, Goldstein said. Units range from $7.8 million to $55 million. CMBS Sales Still, loans are flowing more freely to landlords as property values rise and investor demand for commercial backed securities surge. JPMorgan Chase & Co. raised its forecast for CMBS sales in 2013 to $70 billion from $45 billion last month as issuance in January and February exceeded expectations. The extra yield investors demand to own top-ranked CMBS rather than Treasuries has fallen to 1.24 percentage points from 2.61 percentage points at the end 2011, according to Barclays Plc. Goldman Sachs Group Inc. (GS) sold a $1.1 billion commercial mortgage bond in February tied to six hotels owned by Cerberus Capital Management LP including the Sheraton Waikiki in Hawaii. Debt linked to the properties had been sent to special servicing in April 2011 after the hotels’ value dropped. Even with banks starting to lend again “there are still plenty of those old busted projects around that will sap some of the demand for totally new projects getting going,” Anderson said. Broken Projects Molasses Reef is a “classic example” of the sort of opportunities that are out there, according to Andy Wimsatt, senior vice president of investment properties at CBRE Inc. and a former manager of the West Caicos project. “Those are projects that were broken in some way or another during the contraction and are in need of creative capital.” Investors are looking at returns in the high 20 percent range if they are buying impaired debt or projects that need capital for completion that have a residential component, according to Wimsatt. “Investors now view Caribbean resorts as having hit bottom and improving,” he said. “When the residential market there begins to warm up, and we’re in the early stages of that now, you’ll see a lot more activity.” To contact the reporter on this story: Heather Perlberg in New York at hperlberg@bloomberg.net To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net |
2024-02-09 | Bloomberg | ING Profit Misses Estimates After Impairments, Hedge Loss | ING Groep NV (INGA) , the biggest Dutch financial-services company, posted fourth-quarter profit that missed analysts’ estimates as measures to protect capital led to hedging losses and impairments. Net income rose to 1.19 billion euros ($1.58 billion) from 130 million euros a year earlier, the Amsterdam-based firm said today in a statement. That missed the average 1.89 billion-euro estimate of 10 analysts surveyed by Bloomberg. ING shares fell the most in almost two months. The company is seeking to sell its insurance unit before a European Union deadline at the end of 2013 and repay state aid amid the region’s debt crisis and tougher capital requirements. Chief Executive Officer Jan Hommen may consider selling bank assets to help raise the 3 billion euros still owed the Dutch state as the firm last month said it may be more difficult to meet its goal of completing repayment this year. Profit was hurt by 214 million euros in impairments on bonds and equity securities at the banking unit, 348 million euros in losses on a hedge against equity losses at the insurance division and a writedown in ING’s U.S. annuity business. Earnings included a gain of 1.29 billion euros from the sale of assets. Hedging Losses Hedging losses were “surprisingly high” and the U.S. insurance unit charge was “at the upper end of the range -- that’s a bit disappointing,” said Andreas Schaefer, a Dusseldorf-based analyst at WestLB AG. He has a “buy” recommendation on the stock. ING fell as much as 5.9 percent and was down 3.1 percent to 7.03 euros as of 2:08 p.m. in Amsterdam trading. That compares with a 1.5 percent gain for banks in the Stoxx Europe 600 Index. The shares have advanced 23 percent this year. ING took a charge of 1.1 billion euros before tax as lower interest rates and stock markets hurt a U.S. annuity business the firm is winding down. The company in December updated its assumptions to reflect market conditions and the behavior of about 500,000 annuity holders who are retaining their contracts for longer than expected. At that time it predicted a writedown in the range of 900 million euros to 1.1 billion euros. Insurance IPO The measures are part of the program to prepare the U.S. insurance business for an initial public offering, Hommen said. The sale could take place as early as this year, he told reporters, while no timetable has been set. “The equity markets have improved significantly, especially insurance companies have done relatively well,” he said. “There is a market again, you could do an IPO.” The firm had a loss of 348 million euros on hedges aimed to protect regulatory capital against a drop in equities, Chief Financial Officer Patrick Flynn said. The hedges, which have to be accounted through the profit-and-loss account, improved shareholders funds by 700 million euros, he said. ING posted a loss, excluding divestments and one-time items, of 516 million euros in the fourth quarter, compared with a profit of 252 million euros a year earlier. Analysts had estimated a fourth-quarter underlying profit of 362 million euros. Underlying pretax profit at ING’s banking division fell 45 percent to 793 million euros. The company set aside 530 million euros for doubtful loans, compared with 410 million euros a year earlier. Additions to loan-loss provisions are expected to remain high in the coming quarters, ING said. Greek Writedown Net interest margin at the banking unit rose to 1.42 percent from 1.37 percent in the third quarter. The insurance division had an underlying pretax loss of 1.35 billion euros, compared with a loss of 873 million euros a year earlier. ING wrote down its holdings of Greek sovereign debt to market value as of Dec. 31, leading to a 199 million-euro pretax impairment. That represented a writedown of about 80 percent. “The fourth quarter was challenging, with very volatile markets and a deepening of the sovereign crisis in Europe ,” Hommen told analysts today. “The environment being uncertain, our priority was to protect capital and further reduce our risk position.” The European Union has ordered ING to exit its insurance business by the end of 2013 as a condition for approving state support. The bank and insurer received 10 billion euros in aid and transferred the risk on 21.6 billion euros of U.S. mortgage assets to the Dutch government after the 2008 financial crisis. ING expects the outcome of an appeal it filed to the EU General Court in Luxembourg on the restructuring demands on March 2, Hommen said today. Repayment Priority ING last month said its priorities in the next two years are repayment of the Dutch state, completing the EU-ordered restructuring and meeting Basel III capital requirements. ING plans to have a core Tier 1 capital ratio, a measure of financial strength, of more than 10 percent by the end of 2013, it said. That compares to a 9.6 percent ratio at the end of 2011. After repaying its government bailout and meeting the capital demands, ING plans to resume dividend payments. ING agreed last year to sell its U.S. online bank to Capital One Financial Corp. (COF) The U.S. Federal Reserve, which has to approve the transaction, yesterday rescheduled a meeting to discuss the matter. The deal is still expected to close in the first quarter, Hommen told reporters on a conference call today. The proceeds may be used to repay part of the state aid by May, he said. ING last month scrapped a plan to create an Asian-European insurer in an initial public offering and said it may sell the Asian business separately given its greater allure for buyers after European markets worsened. To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-08-25 | Bloomberg | Google, Alabama Immigration, JPMorgan, FDIC, Swiss Accounts: Compliance | Google Inc. (GOOG) agreed to pay $500 million to settle U.S. allegations that advertising for online Canadian pharmacies on its website allowed illegal imports of prescription drugs. Google was aware as early as 2003 that the shipment of prescriptions to the U.S. from outside the country is illegal, the Department of Justice said in a statement yesterday. The payment represents revenue that Google generated from the ads and that Canadian pharmacies reaped from online drug sales to American consumers, the DOJ said. “This settlement ensures that Google will reform its improper advertising practices with regard to these pharmacies while paying one of the largest financial forfeiture penalties in history,” Deputy Attorney General James Cole said in the statement. Google, owner of the world’s most popular search engine, is grappling with increasing scrutiny from governments around the world, including an investigation of its business practices by the U.S. Federal Trade Commission. As part of the settlement, there will be “a number of compliance and reporting measures,” the DOJ said, without providing further details. Google had $29.3 billion in revenue last year, almost entirely from advertising. The Mountain View , California-based company said in May that it had set aside $500 million to resolve an investigation of its ad business. “We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago,” Google said in an e-mailed statement yesterday. “However, it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place.” In December 2010, Google joined Microsoft Corp. (MSFT) , Yahoo! Inc. and other companies in helping establish a nonprofit organization to fight illegal Internet pharmacies. Counterfeit drug sales account for about $75 billion in global sales , the National Association of Boards of Pharmacy said at the time. About 1 percent to 2 percent of prescription medicines in North America are counterfeit, according to the pharmacy group. For more, click here. Compliance Policy Alabama Immigrant Status Checks May Spark Suits, Judge Says Alabama’s new immigration law requiring that police officers check immigrants’ legal status might lead to lawsuits for unlawful detention, a judge said in a hearing on challenges to the statute. “There are a lot of problems with this statute,” U.S. District Judge Sharon Blackburn in Birmingham, Alabama , said yesterday in a hearing on three cases filed by the federal government, groups including the American Civil Liberties Union and Christian clergy. “My job is to decide if this is constitutional.” The measure, to go into effect Sept. 1, requires police officers to verify the immigration status of anyone they stop and suspect may be in the U.S. illegally. Businesses must use a federal database called E-Verify to determine whether job applicants are eligible to work. And it’s a crime to rent housing to illegal immigrants. The U.S. Justice Department and the ACLU argue that federal law governs the handling of undocumented immigrants. Roman Catholic, Episcopal and Methodist clergy say the statute makes it illegal for them to fulfill their mission to feed, clothe and give communion to undocumented aliens. Alabama is the fifth U.S. state to enact such legislation. The three lawsuits are consolidated before Blackburn. Governor Robert Bentley signed the bill into law in June. The cases are Hispanic Interest Coalition of Alabama v. Bentley, 5:11-cv-2484, Parsley v. Bentley, 5:11-cv-2736, and U.S. v. Bentley, 5:11-cv-2746, U.S. District Court, Northern District of Alabama (Birmingham). Compliance Action Switzerland , U.K. Agree to Settlement in Tax-Evasion Dispute Switzerland and the U.K. completed an agreement to end a dispute over tax evasion by wealthy Britons holding offshore accounts with Swiss private banks. Swiss banks will pay 500 million Swiss francs ($629 million) to the U.K. government to cover the failure by their clients to disclose undeclared money in the past, Switzerland’s Finance Ministry said yesterday. The banks will later be reimbursed from taxes paid by their customers. The accord “respects the protection of bank clients’ privacy, but also ensures the implementation of legitimate tax claims,” the ministry said in an e-mailed statement from the Swiss capital, Bern. The treaty comes after Switzerland agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development. The settlement may trigger outflows by Britons who question the value of cross-border accounts as Swiss banking secrecy crumbles and follows a similar accord with Germany earlier this month. “The days when it was easy to stash the profits of tax evasion in Switzerland are over,” U.K. Chancellor of the Exchequer George Osborne said in an e-mailed statement. “We will be as tough on the richest who evade tax as on those who cheat on benefits.” Swiss banks will levy a withholding tax of 48 percent on investment income and 27 percent on capital gains earned by Britons with offshore accounts, according to yesterday’s statement. Revenue generated will go to the British Treasury, while client identities remain secret. The initialed tax agreement should be signed by both governments in the next few months and is expected to come into force in 2013, the Treasury said. Switzerland is the world’s biggest center for offshore wealth with about 1.96 trillion francs of assets last year, according to Boston Consulting Group. For more, click here. SEC Wins Civil Judgment Against Fugitive Analyst Deep Shah The U.S. Securities and Exchange Commission won a judgment against Deep Shah, who has been declared a fugitive in the insider trading case of Galleon Group LLC co-founder Raj Rajaratnam, that includes a civil penalty of $24.6 million. Shah, an ex-analyst at Moody’s Investors Service Inc., was charged in November 2009 by Manhattan U.S. Attorney Preet Bharara and sued by the SEC for allegedly passing along inside information about acquisitions involving Hilton Hotels Corp. and Kronos Inc. The commission sought a default judgment in June against Shah claiming that he had not responded to its suit. U.S. District Judge Jed Rakoff signed the order Aug. 22 and it was filed Tuesday in federal court in Manhattan. The judgment says Shah must pay back $8.2 million in profits gained or losses avoided as a result of the conduct alleged in the complaint, along with prejudgment interest of $1.76 million and the civil penalty. The SEC is “pleased with the decision,” spokesman John Nester said. Lawyers for the SEC said in court documents filed in March that the commission had located Shah in Mumbai , where a bailiff found Shah’s residence in the Juhu neighborhood of the city and left an amended complaint on March 22, 2010. Shah is accused of tipping Roomy Khan , a former Intel Corp. product-marketing engineer, in 2007 to material nonpublic information about pending takeover bids for Hilton Hotels Corp. and Kronos Inc. Khan then passed on the tips to Rajaratnam, prosecutors said; she pleaded guilty in 2009. The case is Securities and Exchange Commission v. Galleon Management LP, 09-cr-8811, U.S. District Court, Southern District of New York (Manhattan). Chicago Hedge Fund Principal Pleads Guilty to Wire Fraud Philip J. Baker, principal of the collapsed Chicago hedge fund Lake Shore Asset Management Ltd., yesterday pleaded guilty to one count of wire fraud for his role in an alleged $292 million global scheme. Indicted in absentia in February 2009 for his role in the scheme that ensnared about 900 investors, Baker had faced 27 criminal counts including 17 for wire fraud and two for commodities fraud, as well one count of embezzlement of commodity pool funds. He pleaded not guilty last year after being extradited from Hamburg. Baker is also liable for $154 million in restitution, U.S. District Judge John W. Darrah in Chicago said. Sentencing is set for Nov. 17. “The government will recommend the maximum term of 20 years in prison when Baker is sentenced,” Chicago U.S. Attorney Patrick Fitzgerald said in an e-mailed statement after the plea was entered. A trial had been scheduled for Sept. 19. Baker’s lawyer, Kurt Stitcher of Baker & Daniels LLP, declined to comment after the hearing. The criminal case is U.S. v. Baker, 1:09-cr-00175, and the civil case is U.S. Commodity Futures Trading Commission v. Lake Shore Asset Management Ltd., 1:07-cv-03598, U.S. District Court, Northern District of Illinois (Chicago). For more, click here. Courts CIFG Opposes BofA’s Mortgage-Bond Accord With Investors Bank of America Corp. (BAC) ’s proposed $8.5 billion mortgage-bond settlement, which has drawn criticism from a group of investors and two states, is opposed by bond insurance company CIFG Assurance North America Inc. The accord requires approval from a New York state judge, and CIFG filed a “notice of intention to appear and object” to the agreement yesterday in New York State Supreme Court. The proposed settlement calls for Bank of America to pay $8.5 billion to resolve claims from investors in Countrywide Financial Corp. mortgage bonds. Charlotte, North Carolina-based Bank of America acquired Countrywide in 2008. Lawrence Grayson, a Bank of America spokesman, declined to comment. The case is In the matter of Bank of New York Mellon, 651786/2011, New York State Supreme Court, New York County (Manhattan). New Suits JPMorgan Sues Homebuilder Over Share of $381.7 Million Loan JPMorgan Chase & Co. (JPM) , leader of a group of lenders owed $381.7 million on a bankrupt homebuilding project in Henderson, Nevada , sued Meritage Homes Corp. (MTH) to recover the builder’s share of a guarantee. JPMorgan and other lenders agreed in 2004 to advance as much as $535 million to builders including Meritage and Beazer Homes USA Inc. (BZH) , taking repayment guarantees from each builder, according to a complaint filed Aug. 22 in Las Vegas. The share of Meritage for the loans advanced to date is $13.3 million, JPMorgan said in the filing as it asked a judge to compel payment. “JPMorgan has made due demand under the repayment guaranty, and the defendants have failed and refused to pay their liabilities,” the bank said. South Edge LLC, which is owned by the builders, is in bankruptcy court in Nevada. The bankruptcy triggered the repayment guarantee, JPMorgan said. Meritage sued the bank Aug. 19 in state court in Ohio, where the JPMorgan unit that is the trustee for the lenders is based. Meritage asked a judge to rule the homebuilder doesn’t have any obligations to the lenders and seeks $8 million in damages. Meritage claims that it tried to pay the lenders in April 2008 but JPMorgan refused to accept the payment. Meritage’s claim for damages is based on losses related to the drop in value of the property and legal fees, company Chief Financial Officer Larry W. Seay said yesterday in a telephone interview. The case is JPMorgan v. Meritage Homes, 11-cv-01364, U.S. District Court, District of Nevada (Las Vegas). FDIC Sues Ex-First National Bank of Arizona CEO Over Losses Ex-First National Bank of Arizona Chief Executive Officer Gary A. Dorris and former director Philip A. Lamb “sacrificed safety” and promoted risky nontraditional mortgage loans that ultimately caused the bank’s failure, the Federal Deposit Insurance Corp. said in a lawsuit. Dorris and Lamb were negligent in exercising their duties, given the obvious risks of the bank’s business model, the agency said yesterday in a complaint in federal court in Phoenix. “Although these risky loans returned record profits in the near term, they produced losses once the real estate market softened, and ultimately caused the bank’s failure,” the agency said in the complaint, which seeks to recover more than $193 million in damages. As of Aug. 4, the FDIC has authorized lawsuits against 266 officers and directors in an effort to recoup more than $6.8 billion in losses stemming from the credit crisis, the agency said on its Web site. An additional 172 residential malpractice and mortgage fraud lawsuits are pending, consisting of lawsuits filed and inherited, the agency said. More than 350 lenders have failed since the start of 2008. A woman who answered the phone at Dorris’s home in Scottsdale, Arizona, said he was unavailable. Lamb has no public phone listing and couldn’t immediately be reached for comment. The case is Federal Deposit Insurance Corp. v. Dorris, 2:11-cv-01652, U.S. District Court, District of Arizona (Phoenix). For more, click here. To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-07-05 | Bloomberg | Consumer Comfort in U.S. Declined Last Week From Two-Month High | Consumer confidence dropped last week from a two-month high as fewer Americans considered it a good time to spend and their views of the economy languished. The Bloomberg Consumer Comfort Index decreased to minus 37.5 in the week ended July 1 from minus 36.1 in the previous period. Even with the drop, the measure averaged minus 37.6 in the second quarter, the best showing since the first three months of 2008, helped in part by lower gasoline prices. Slower job growth and an unemployment rate that’s exceeded 8 percent for 40 straight months is restraining sentiment and making it difficult for spending to pick up. Confidence waned among Americans earning $50,000 a year or more as Europe ’s debt crisis took a toll on investments. “The decline in consumer comfort is consistent with the soft spending data observed over the past two months and does pose a risk to the growth path of the economy,” said Joseph Brusuelas , a senior economist at Bloomberg LP in New York. It’s “reversing three months of improvement of sentiment among upper-end households that have been the main drivers of the modest pickup in overall household spending in 2012.” Other data today indicate the U.S. economy is avoiding further deterioration in the labor market. Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week. Applications for jobless benefits decreased 14,000 in the week ended June 30 to 374,000, the fewest since the middle of May, Labor Department figures showed. ADP Data Companies added more workers than forecast in June, according to a report from Roseland, New Jersey-based ADP Employer Services. The 176,000 gain last month followed a 136,000 rise the prior month that was higher than initially estimated. Stocks dropped as concern over the outlook for global growth outweighed the better labor market data. The Standard & Poor’s 500 Index declined 0.3 percent to 1,370.07 at 9:41 a.m. in New York. Other measures of confidence have declined as the labor market weakened. The Conference Board’s sentiment reading fell in June to a five-month low, the New York-based group said last week. The Thomson Reuters/University of Michigan’s measure dropped last month to the lowest level this year. Payrolls climbed by 69,000 in May, less than the most- pessimistic forecast in a Bloomberg survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed June 1. The jobless rate rose to 8.2 percent from 8.1 percent. Payroll Forecast The jobs tally in June probably capped the weakest quarter for employment in more than two years, a Labor Department report tomorrow is projected to show. Employers added 90,000 workers to payrolls, according to the median forecast in a Bloomberg survey. The Bloomberg index of whether consumers consider it a good time to buy declined to minus 42.4 after minus 40.9 the prior week. The gauge of personal finances fell to 1.8 from 4.4. The index of the state of the national economy was little changed at minus 71.7 after minus 71.9. Sentiment for higher-income respondents was negative for the second straight week, while confidence among households earning $50,000 or more was the weakest in a month. “As a general rule, when the index is negative among better-off Americans, consumer sentiment is in trouble overall,” Gary Langer , president of Langer Research Associates in New York, which compiles the index for Bloomberg, said in a statement. Cheaper Gasoline Cheaper gasoline failed to spur confidence last week. The average cost of a gallon of regular unleaded reached $3.33 a gallon on July 1, down 61 cents from a high this year reached in April, according to AAA, the nation’s largest auto group. Target Corp. and Macy’s Inc. posted June same-store sales that trailed analysts’ estimates, a report today showed. Purchases at Target, the second-largest U.S. discount chain, rose 2.1 percent, falling short of the average projection for a 2.8 percent gain from analysts surveyed by researcher Retail Metrics Inc. Macy’s, the second-biggest U.S. department-store chain, posted a 1.2 percent increase in same-store sales, missing the 2.3 percent estimate. “Consumers continue to face difficult economic headwinds,” Howard Levine , chairman and chief executive officer of Matthews, North Carolina-based Family Dollar Stores, Inc., said on a June 28 earnings call. “While consumer expectations for inflation have moderated recently, unemployment rates have given up gains and consumer confidence is deteriorating.” Today’s figures also showed Democrats registering higher sentiment than Republicans for a record 15th consecutive week, while independents were at their second-lowest reading of the year at minus 46.8. Survey Details The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old and older. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks. The latest reading for the first time included mobile phone and Spanish-language interviews as a transition toward expanding the survey’s reach. The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points. To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-07-26 | Bloomberg | China Coal, Foxconn, Manila Electric, Parkway: Asia Ex-Japan Stock Preview | The following companies may have unusual price changes in trading in Asia, excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise. Coal producers: China’s benchmark Qinhuangdao coal price fell 1.3 percent from a week earlier, the biggest drop in four months, the China Coal Transport and Distribution Association said. China Shenhua Energy Co. (601088 CH), the nation’s largest coal producer, declined 0.4 percent to 23.15 yuan. China Coal Energy Co. (601898 CH), the second largest, added 1 percent to 9.38 yuan. Focus Point Holdings Bhd. (FPHB MK): The Malaysian operator of eye-care centers will make its trading debut on the Kuala Lumpur stock exchange. The company sold shares at 39 sen apiece in its initial public offering. Foxconn International Holdings Ltd. (2038 HK): The world’s biggest contract maker of mobile phones said it halted production today at its Chennai, India factory after workers fell ill from chemical exposure. More than 250 workers were treated, with about 20 employees in hospital under observation and no major health problems have been found, said Vincent Tong , the spokesman for Foxconn’s Hong Kong-based unit, in a telephone interview yesterday. The stock rose 6 percent to HK$5.46. Fraser & Neave Ltd. (FNN SP): Kirin Holdings Co., Japan’s largest brewer, said it agreed to buy Temasek Holdings Pte’s 14.7 percent stake in Singapore brewer Fraser & Neave for S$1.34 billion ($978 million) or S$6.50 per share. Fraser & Neave dropped 1.4 percent to S$5.67. Manila Electric Co. (MER PM): The biggest Philippine power retailer said first-half net income rose 51 percent to 4.8 billion pesos ($104 million) in a stock exchange filing. The company said it will pay 2.50 pesos a share in dividends in September and maintained its core profit target at 11 billion pesos this year. Manila Electric fell 1.7 percent to 179 pesos. PLDT Communications and Energy Ventures Inc. (PCEV PM), which owns shares in Manila Electric, was unchanged at 8 pesos. First Philippine Holdings Corp. (FPH PM), which owns 6.6 percent of Manila Electric, fell 0.1 percent to 55.45 pesos. PacificMas Bhd. (PACM MK): The Malaysian insurance and asset management group said in a statement yesterday it has ended negotiations to sell its entire stake in Pacific Insurance Bhd. to Tokio Marine Asia Pte. PacificMas lost 0.2 percent to 4.64 ringgit. Parkway Holdings Ltd. (PWAY SP): Khazanah Nasional Bhd., Malaysia’s sovereign wealth fund, offered S$3.5 billion, or S$3.95 a share, for the 76.1 percent it doesn’t already own in Parkway, Asia’s biggest hospital operator. That is higher than a bid from India’s Fortis Healthcare Ltd. Singapore-based Parkway, which was suspended from trading yesterday, last traded at S$3.88 on July 23. Philippine Long Distance Telephone Co. (TEL PM): First-half profit is “up,” as are the number of mobile phone subscribers, Philippine Telephone Chairman Manuel Pangilinan told reporters yesterday, without elaborating. Separately, company President Napoleon Nazareno said mobile phone net subscribers were “a little better” than 2009. The largest Philippine company by market value was unchanged at 2,430 pesos. Singapore Airlines Ltd. (SIA SP): The world’s second- largest carrier by market value said first-quarter net income was S$252.5 million ($185 million), compared with a loss of S$307.1 million a year earlier. That beat the S$162.4 million average estimate of four analysts compiled by Bloomberg. Singapore Air slipped 0.1 to S$14.76. Xinjiang Goldwind Science & Technology Co. (002202 CH): The Chinese wind-turbine maker will postpone a plan to offer shares in Hong Kong by 18 months, according to a filing to the Shenzhen Stock Exchange on July 26. The shares climbed 2.8 percent to 19.01 yuan. To contact the reporter on this story: Ronnie Koo in Hong Kong at rkoo4@bloomberg.net . |
2024-09-19 | Bloomberg | Visa Puts at Record High as Swipe Rule Threatens Lead: Options | Visa Inc. (V) options traders are more bearish than ever, betting the company will suffer more than MasterCard Inc. (MA) from U.S. rules meant to foster competition among firms that process debit-card transactions. Three-month puts to sell San Francisco-based Visa should the stock fall 10 percent cost 1.29 times more than calls, near the all-time high of 1.30 on Sept. 14, according to data compiled by Bloomberg. The price relationship known as skew is 1.21 for Purchase, New York-based MasterCard, down from an 11- month high of 1.31 on June 20, the data show. Visa has rallied about half as much as MasterCard in 2011 after the Federal Reserve set rules that let retailers choose from at least two networks for debit transactions that involve the use of personal identification numbers. The Fed also capped swipe fees that merchants pay for most debit transactions, including those that require customers’ signatures. Visa processed $1.05 trillion of the payments last year, more than triple the amount at MasterCard. “It clouds the growth trajectory for a company like Visa,” Walter “Bucky” Hellwig, who helps oversee $17 billion at BB&T Wealth Management in Birmingham, Alabama , said in a Sept. 16 telephone interview. “It experienced a high rate of growth for debit-card usage, and now maybe it’s not as high.” Visa Revenue Visa forecast that revenue will increase about 10 percent in 2012, according to a filing on July 6, a week after the Fed’s decision. The projection from Visa, which handled $5.6 trillion in transactions during the year ended June 30, compared with its estimate for 2011 sales to rise 11 percent to 15 percent. MasterCard predicts its sales will grow 12 percent to 14 percent a year through 2013, according to a slide show posted on the company’s website Sept. 15. Will Valentine, a spokesman for Visa, and Jim Issokson, a spokesman for MasterCard, declined to comment. The Chicago Board Options Exchange Volatility Index fell 20 percent last week to 30.98 for its biggest slump since the period ended July 1. The gauge of Standard & Poor’s 500 Index options prices has dropped 32 percent from a two-year high of 48 on Aug. 8, the first session after S&P lowered its rating on U.S. government debt. The gauge hasn’t closed below its 20.91 average for the past year since July 26. It rose 5.7 percent to 32.73 today. Europe ’s VStoxx Index (V2X) , which measures the cost of options to protect against declines by the Euro Stoxx 50 Index, dropped 14 percent last week, the biggest retreat since July 22, to 42.96. It jumped 6.2 percent to 45.61 today. Card Purchases Visa said U.S. credit-card purchases rose 9.8 percent to $224 billion in the quarter ended June, compared with a 5.9 percent growth in the same period last year. U.S. credit-card spending at MasterCard rose 6.1 percent, versus 1.1 percent in the second quarter of 2010, the company said last month. The price-earnings ratio for Visa is 19, or 12 percent less than MasterCard and close to the record 14 percent discount on Aug. 5, according to data compiled by Bloomberg. MasterCard’s valuation first surpassed Visa’s in January. Financial companies in the S&P 500 trade at 11.1 times profit. “Economic conditions in the U.S. have slowed dramatically, and that’s likely to be true elsewhere where Visa does business,” Keith Wirtz , who oversees $16.7 billion as chief investment officer at Fifth Third Asset Management in Cincinnati, said in a Sept. 16 telephone interview. In a recession, “you’re going to see revenues diminish.” Growth Forecasts U.S. gross domestic product may expand by 1.6 percent this year, according to the median of 79 economist estimates in a Bloomberg survey. That’s down from a median forecast of 1.7 percent in August and below last year’s 3 percent rate. Analysts are more optimistic about Visa than MasterCard, assigning average ratings of 4.69 and 4.53, respectively, on a 5-point scale, according to data compiled by Bloomberg. David Koning, an analyst at R.W. Baird & Co. in Milwaukee , downgraded MasterCard to “neutral” from “outperform” in a Sept. 16 note, citing the stock’s year-to-date rally. He rates Visa “outperform.” Visa has climbed 28 percent this year to $90.03, falling 0.9 percent today after it said it agreed to a licensing deal with Google Inc. that allows its cardholders to make purchases and complete other transactions using their mobile phones. MasterCard has risen 55 percent in 2011 to $347.98. Options traders are piling into bearish bets on Visa. The company’s December $87.50 puts had the biggest rise in open interest among all options in the past 30 days, increasing by 3,038 contracts to 3,812, according to data compiled by Bloomberg. January $72.50 puts jumped by the second-largest amount, rising by 2,976, reaching 3,782 contracts. “This is one time when I am probably grateful for not having had the highest market share in debit in the United States ,” MasterCard Chief Executive Officer Ajay Banga said last year in a conference call with analysts, referring to provisions in the Dodd-Frank Act that spurred the Fed’s debit- card rules. To contact the reporters on this story: Cecile Vannucci in Amsterdam at cvannucci1@bloomberg.net ; Jeff Kearns in New York at jkearns3@bloomberg.net To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net ; Andrew Rummer at arummer@bloomberg.net |
2024-04-26 | Bloomberg | Chile's Peso Rises to Strongest in a Week on Copper, Stocks in the U.S. | Chile’s peso rose to the strongest level in more than a week as stocks and copper, Chile’s biggest export, climbed. The peso rose 0.4 percent to 519.03 per dollar, the strongest level since April 14, from 521.05 on April 23. Copper futures for July delivery gained 1.75 cents, or 0.5 percent, to $3.548 a pound on the Comex in New York, after touching $3.5805, the highest price since April 16. The Dow Jones Industrial Average extended a six-day winning streak. The currency has appreciated 1 percent this month on speculation the government and insurers will need to buy pesos to help pay for rebuilding after the fifth-largest earthquake in a century struck the country in February. “U.S. markets are trading a lot better than they were in the morning and that has provided extra support for the peso,” said David Duarte, an economist at 4Cast Inc. in New York. “There’s been a tug of war between dollar demand from pension funds and peso demand from insurance companies. People are starting to see insurance companies bringing in dollars to pay for repairs from the quake.” To contact the reporter responsible on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net |
2024-08-25 | Bloomberg | Swiss Insurers to Boost Profit Through Acquisitions, Fitch Says | Zurich Financial Services AG (ZURN) , Baloise Holding AG (BALN) and other Swiss insurers will compensate for slowing growth in their home market by making acquisitions, according to Fitch Ratings. Low interest rates and slowing economic growth are depressing earnings in a Swiss insurance market that is already “highly saturated,” Fitch said in a study published today. The Swiss insurance industry’s total profit was 8.5 billion Swiss francs ($10.7 billion) in 2010, the ratings company said. We expect “strongly capitalized insurance companies to continue to take advantage of the current challenging market conditions and make acquisitions if attractive opportunities arise,” Fitch said. Zurich Financial, Switzerland ’s biggest insurer, bought 51 percent of Banco Santander SA’s Latin America insurance business for $2.1 billion in February. Third-ranked Baloise completed its 75 million-euro ($109 million) acquisition of Avero Schadeverzekering Benelux NV from Eureko Group in January. To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-11-05 | Bloomberg | Orcel Announces Overhaul of UBS’s Investment Banking Team | Andrea Orcel , chief executive officer of UBS AG (UBSN) ’s investment bank, is creating two client groups in an overhaul of the operation to revive profit. Corporate client solutions will include merger advisory, capital markets and financing solutions for corporate, financial institutions and private-equity firms, Orcel said in a memorandum to employees today obtained by Bloomberg. Investor client services will encompass equities, foreign exchange, precious metals, rates and credit, he said. UBS, Switzerland’s biggest bank based in Zurich, said last week it will exit most of its fixed-income businesses to boost profitability of the investment bank, hurt by stricter capital requirements and Europe’s sovereign debt crisis. Orcel was named the sole head of the shrunken unit, with Carsten Kengeter moving to wind down debt businesses. UBS plans to boost the pretax return on equity of the investment bank to more than 15 percent from next year compared with 12 percent to 17 percent targeted previously. “The many moving parts of the restructuring plan serve to enhance UBS as a very well-capitalized bank with excellent capital return prospects,” Espirito Santo Investment Bank analysts, led by Andrew Lim, said in an e-mailed note today. “The plan de-emphasises the investment bank, where previously the market was attributing a near-zero and indeed sometimes even negative valuation.” Organized Regionally The corporate client solutions units, which will contribute about a third of total revenue for the investment bank, will be organized regionally with David Soanes heading Europe, the Middle East and Africa, Steve Cummings in the Americas and Matthew Grounds in the Asia-Pacific region, Orcel said. Rajeev Misra, who co-headed fixed income, currencies and commodities with Roberto Hoornweg, will become global head of financial solutions, he said. Hoornweg is leaving the bank, Orcel said in a separate memo. Soanes has been leading global capital markets for UBS since 2011, Cummings was the chairman of investment-banking division in the Americas, while Grounds co-headed investment banking with Simon Warshaw. Warshaw will advise clients and report to Orcel, according to the memo. Investor client services, contributing two thirds of investment-bank revenue, will be led by Mike Stewart as global head of equities, Chris Vogelgesang and George Athanasopoulos as global co-heads of foreign exchange and precious metals and Chris Murphy as global head of rates and credit, Orcel said. Stewart, Vogelgesang and Athanasopoulos are staying in their previous roles, while Murphy has been heading the global rates business. All eight men will report to Orcel. Richard Morton , a spokesman for UBS, confirmed the contents of the memorandum. “We will collaborate across the entire franchise and ensure the investment bank is more complementary to wealth management , global asset management and our Swiss universal bank,” Orcel said. To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-09-30 | Bloomberg | Kalbe Farma Creates M&A Team to Target Health-Care Acquisitions in Asia | PT Kalbe Farma, Southeast Asia ’s largest drugmaker, created a three-person team to help it find acquisitions in the region, including producers of consumer health-care products, Chief Financial Officer Vidjongtius said. The strategic investment team was formed last quarter to identify targets costing $10 million to $50 million, Vidjongtius said in a telephone interview from Jakarta yesterday. Kalbe, which makes prescription drugs and nutrition supplements, hired a former Unilever executive to oversee the task, he said. Kalbe has about $150 million in cash and could use treasury stock to boost funding if necessary, Vidjongtius said. It wants to buy businesses that sell over-the-counter products and herbal remedies. That would broaden Kalbe’s product range, mitigating the threat of competition, said Andy Ferdinand, who tracks the drugmaker for PT Batavia Prosperindo Sekuritas in Jakarta. “They are playing on volume,” Ferdinand said in a telephone interview. “It’s difficult for pharma companies to increase prices in Indonesia because of industry competition.” Kalbe decreased 0.8 percent to 3,250 rupiah at the 5 p.m. close of trading on the Indonesian Stock Exchange in Jakarta. The shares are unchanged from their Jan. 1 level, while the benchmark Jakarta Composite Index (JCI) has declined 4.2 percent this year. Southeast Asian companies have made at least $211 million of acquisitions in pharmaceuticals over the past five years, with the biggest being Kalbe’s $48 million purchase of Indonesian drug distributor PT Enseval Putera Megatrading, according to data compiled by Bloomberg. $4 Billion Market Kalbe gets 95 percent of its revenue from Indonesia, where it has 13 percent of the market for prescription and over-the- counter medicines, Vidjontius said. It’s one of about 200 companies -- including 30 multinationals -- competing for $4 billion of sales, he said. A universal insurance program slated to go national in 2014 may bolster pharmaceutical sales in Indonesia and increase health-care spending to 5 percent of the nation’s gross domestic product from about 2.5 percent now, Vidjontius said. Still, Kalbe is seeking a broader geographic base and is selling in eight other Asian markets as well as Nigeria and South Africa. The objective is to “create a bigger Kalbe,” Vidjongtius said, adding that the Philippines and Singapore have been identified as growth areas. To contact the reporter on this story: Natasha Khan at nkhan51@bloomberg.net To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net |
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