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Ford CEO Mulally gets $39.1 million compensation

Thu Apr 5, 2007 6:42pm EDT

http://www.reuters.com/article/2007/04/05/us-ford-pay-executives-idUSN0545344920070405

DETROIT - Ford Motor Co. ( F.N ) on Thursday said it awarded new Chief Executive Alan Mulally compensation of $39.1 million for four months of work in 2006, a year when the second-largest U.S. automaker posted a $12.7 billion loss.

Mulally, a former Boeing Co. ( BA.N ) executive, replaced Ford family scion Bill Ford Jr. as chief executive last September. According to Ford's proxy filing with the U.S. Securities and Exchange Commission, Mulally's compensation included a prorated $666,667 salary, an $18.5 million bonus, $19.6 million of stock and option awards, and $334,433 of other compensation. The latter sum included $172,974 for the required use of corporate aircraft and $55,469 for relocation costs and temporary housing, among other items. Mulally's bonus included $7.5 million awarded when he was hired, and $11 million to offset compensation he gave up when he left Boeing, where he led the commercial plane division. Compensation is based on salary, bonus, the value of stock options and other awards granted during the year, as well as incentives and perks. Ford, using different calculations it set forth in a summary compensation table, said Mulally's compensation totaled $28.18 million for 2006. It also said Mulally also received 4 million stock options last year, but at least 3 million are now out of the money. Chairman Bill Ford, who was CEO from January to August, did not receive any cash salary or bonus for 2006. He had made a commitment the previous year to forgo remuneration until the company's auto unit showed sustained profits. Bill Ford was in March 2006 granted stock awards valued at $4.95 million for work done in 2005, Ford said. Mulally joined Ford as the company was drawing up a restructuring plan that included job cuts and accelerated factory closures. Ford, which doesn't expect its key North American auto operations to return to profitability until 2009, has been steadily losing U.S. market share to more nimble rivals led by Toyota Motor Corp. ( 7203.T ) EXIT PACKAGE WORTH $27.54 MILLION According to his employment agreement, Mulally would receive $27.54 million if he were terminated for a reason other than cause in his first five years, or if Ford was acquired, merged or went bankrupt, the company said in the filing. Among compensation granted to other executives, as calculated by Reuters, Ford Americas President Mark Fields was awarded $10.86 million for 2006, including a salary of $1.25 million, while Chief Financial Officer Don Leclair was awarded $7.99 million, including a $1 million salary. Separately, shareholders are scheduled to vote on eight shareholder proposals at the company's annual meeting on May 10 in Delaware. One proposal, opposed by management, calls for Ford to have a single class of shares. The company, which has been publicly traded since 1956, has two share classes, with Class B shares giving the Ford family 40 percent of voting power. (Additional reporting by Jonathan Stempel in New York)

Monster U.S. online jobs index rises in March

Thu Apr 5, 2007 12:45am EDT

http://www.reuters.com/article/2007/04/05/us-economy-monster-employment-idUSN0435643820070405

NEW YORK - A gauge of U.S. online labor demand rose in March from February, as hirings grew broadly, but year-over-year growth moderated, global online careers and recruiting firm Monster said on Thursday.

Monster said its Employment Index moved up to 185 points in March from 177 in February and up from 164 in the same month a year earlier. "The real story is what happened on a year-over-year basis," said Steve Pogorzelski, group president, international of Monster Worldwide Inc. ( MNST.O ), parent company of Monster. The year-over-year growth rate to March was 13 percent, compared with an average growth rate of 23 percent last year. "The index reflects a softer U.S. economy compared to 2006," he said. Although the labor market continues to show signs of stability, "we believe that job growth is moderating compared to the healthy growth we saw in 2005 and 2006," Pogorzelski said. Overall, 15 of 20 industries and 20 of the 23 occupational categories tracked by the Monster Index increased their online recruitment activity in March. Online job demand in all nine U.S. regions tracked by Monster moved up last month. The Monster Employment index is a monthly analysis based on a review of more than 1,500 career sites, job boards and other Web sites. The margin of error is plus or minus 1 percent. Monster says there is a strong correlation between trends in its index and those in the government's non-farm payrolls report. But Monster's Employment Index is a leading indicator for the following month's payrolls report, because employers commonly take between four and six weeks to hire, Pogorzelski said.

Germany's Software AG buys webMethods for $546 mln

Thu Apr 5, 2007 10:47am EDT

http://www.reuters.com/article/2007/04/05/us-webmethods-merger-idUSBNG22088720070405

FRANKFURT - Germany's Software AG ( SOWG.DE ) plans to make its biggest acquisition in a decade by buying U.S. software firm webMethods WEBM.O for $546 million in cash, strengthening its position in the U.S. market.

Software AG said on Thursday it would offer $9.15 per share, a 26 percent premium over webMethods' closing price on Wednesday, and that webMethods' board of directors would recommend the transaction to its shareholders. "It's a milestone for Software AG, for which we've been preparing for the last three or four years," Software AG's Chief Executive Karl-Heinz Streibich said, adding that the acquisition would almost double Software AG's U.S. sales. Software AG shares touched their highest level since July 2001 and by 1335 GMT were trading up 4.4 percent at 66.72 euros, one of the top gainers in Germany's TecDAX .TECDAX technology index, which was flat. WebMethods shares traded at $9.10 at 1336 GMT, shortly after the New York open. The CEOs of both companies told a conference call the merger would be a perfect geographic fit, doubling Software AG's customer numbers in North America while giving webMethods access to emerging markets in Eastern Europe and South America. "It really is about a land grab in terms of market share," webMethods CEO David Mitchell said. "We now have a world-class distribution channel." Software AG, which specialises in integration and mainframe software, made sales of 483 million euros ($645 million) last year, while webMethods' revenues were about $200 million. Combined, they will have more than 4,000 customers and 3,600 staff. Streibich said sites would be maintained and expanded at Software AG's headquarters in Darmstadt, Germany and webMethods' base in Fairfax, Virginia, and that no job cuts were planned. The acquisition will depress Software AG's profit margins slightly in the short time as earnings per share should remain stable while sales rise, Software AG Chief Financial Officer Arnd Zinnhardt said. "We expect this transaction to be strongly accretive to Software AG's operating earnings from 2008 onwards," he said. The two companies said that together they aimed to become a market leader in service-oriented architecture, which loosely groups together independent software services that can access a common network. The deal is expected to close during the second quarter. (Additional reporting by Esha Dey in Bangalore)

Rockwell Automation says CFO resigns

Thu Apr 5, 2007 12:13pm EDT

http://www.reuters.com/article/2007/04/05/us-rockwellauto-exec-idUSN0523046620070405

BOSTON - Diversified manufacturer Rockwell Automation Inc. ( ROK.N ) said on Thursday James Gelly resigned as chief financial officer, sending the company's shares down more than 5 percent.

J.P. Morgan analyst Stephen Tusa downgraded Rockwell to "neutral" from "overweight." "A lack of detail is troubling," Tusa wrote in a note to clients. "There is little information about the specific reasons for the change, and raises questions about the strategic direction of the company." The maker of factory-automation systems said Gelly, 47, planned to "pursue new challenges and opportunities." A spokesman declined to provide further details and said Gelly would not be available for interviews. Rockwell shares were down $3.43 at $58.10 on the New York Stock Exchange. They've been as high as $79.40 and as low as $53.49 over the past 12 months. The slide left them down 4.9 percent for the year, compared with a 1.4 percent rise in the Standard & Poor's capital goods index. .GSPIC LESS TEMPTING TAKEOVER? In recent years, Rockwell has sold off a few segments of its operations, as part of an effort to focus on higher-tech, higher-profit-margin products. Most recently, in January, Rockwell sold its Dodge mechanical and Reliance Electric units, which accounted for about one-fifth of its revenue, to Baldor Electric Co. BEZ.N in a $1.8 billion deal. "Investors thought this thing was being primed for a sale to a larger, multi-industrial company," said Chris Kotowicz, a stock analyst at A.G. Edwards, who rates Rockwell a "buy." "There was a perception that he was taking steps to make the company a better company, but also more attractive to an acquirer," Kotowicz said. "Him leaving is an indication that perhaps the rest of the management team and perhaps the board didn't see that as their first choice of where they wanted to take the company." A Rockwell spokesman declined to comment on that idea. Rockwell said Theodore Crandall, 52, currently senior vice president and head of the Control Products & Solutions segment, will take on the CFO duties on an interim basis. Rockwell said it will conduct an internal and external search for a permanent successor to Gelly, who the company said will continue to advise Rockwell for the next few months. Gelly joined Rockwell in 2004, after stints at Honeywell International Inc. ( HON.N ) and General Motors Corp. ( GM.N ) Crandall is a 28-year veteran of Rockwell.

SoCal grocery workers walk out of contract talks

Wed Apr 4, 2007 8:42pm EDT

http://www.reuters.com/article/2007/04/05/us-grocers-california-idUSN0438284820070405

CHICAGO/LOS ANGELES - The local unions representing grocery workers in Southern California walked out of contract talks on Wednesday, a spokesman said, after three grocery store chains authorized a lockout if the unions call a strike.

"We aren't negotiating anymore," said Mike Shimpock, spokesman for seven local United Food and Commercial Workers unions representing some 65,000 workers from Bakersfield to the Mexican border. "We've walked out of the talks." But a spokeswoman for the three chains -- Supervalu Inc.'s ( SVU.N ) Albertsons, Kroger Co.'s ( KR.N ) Ralphs, and Safeway Inc.'s ( SWY.N ) Vons -- said negotiations were ongoing and the two parties were deciding when next to meet. She also cited an agreement between the parties that contract talks were not to be discussed. Shimpock told Reuters the unions walked out of talks after learning through the media on Wednesday that the grocers had entered into an agreement that authorized measures including an employee lockout if grocery unions call a strike. Workers at Albertsons passed a resolution last month giving the local unions authority to call a strike against the supermarket chain if contract negotiations break down. Both sides have been negotiating via a federal mediator since March 5, when the contract was set to expire. It was then extended until April 9. Shimpock characterized the grocers' agreement as a "provocative act that would indicate there is nothing more to talk about." But he added, "We haven't decided what we're going to do yet. We're still debating what our next steps will be." After the contract expires on Monday, it automatically renews each day until one party gives notice they want to cancel. After such notice is given, unless the parties reach an agreement within three days, the contract will expire -- at which point the union can call a strike or the grocers can call a lockout. LABOR DISPUTE REVISITED Both sides have said they want to avoid a strike. The unions and grocers still recall a bitter five-month labor dispute in 2003-2004 -- including a walk-out, lockout and strike -- that affected nearly 900 stores in Southern California and resulted in nearly $1 billion in lost sales. That work stoppage, the U.S. grocery industry's longest, centered on disagreements over pay and health benefits. The grocers claimed they could not meet union demands because they were struggling to compete with non-union rival Wal-Mart Stores Inc. ( WMT.N ), the largest U.S. retailer. While details of the current dispute cannot be disclosed, a sticking point might be the two-tier pay system that gives less pay and benefits to more junior workers. The grocers' agreement includes a provision calling for the lockout of employees from all three companies within 48 hours of a selective strike against any one company. The pact provides for financial assistance to any of the companies targeted by the unions in a strike, the grocers said. "The decision to sign the agreement was made only after, and in response to, the unions' strike threat," the grocers' spokeswoman, Adena Tessler, said in a statement earlier on Wednesday. "While none of us wants a work stoppage, the unions' recent strike authorization and threats of future strike votes must be taken seriously." Tessler said the unions were trying to put pressure on one company to agree to "uncompetitive contract provisions and gain significant bargaining leverage against the other companies."

Saving for stagflation

Thu Apr 5, 2007 8:30am EDT

http://www.reuters.com/article/2007/04/05/us-column-finance-idUSN15253920070405

WASHINGTON - Here's a multiple-choice question for savers and investors: What's a more frightening prospect now, inflation or recession?

The answer, of course, is both. Accelerating prices and a slow- or no-growth economy is a killer combo that's been called "stagflation" since the 1960s, and it's not fun. Folks of a certain age might remember the stagflation which dominated the U.S. economy in the 1970s. It was a gloomy time when energy prices (and gasoline lines) dominated the news; when whole industries slumped at the same time, and when job losses and price hikes seemed to travel in tandem. Now, some Federal Reserve-watchers are suggesting we're facing another bout of the same malaise. Remarks in the Fed's latest policy statement "just scream stagflation" writes investment blogger Tim Iacono. "The Fed's stagflation dilemma is getting tougher," according to another economic story." The word "stagflation" was mentioned some 2,480 times in recent blog postings, according to online monitor Technorati.com. It's easy to see where the concerns come from. On the recession side, there's the housing slump, the worsening mortgage market, the continued loss of jobs to lower-paid workers in developing countries and -- as Circuit City recently proved with 3,400 pay-related layoffs -- right here at home. Pay raises have been blah for several years running. If you're looking for inflation signs, you need look no further than February's 1.3 percent gain in producer prices and 0.4 percent rise in consumer prices. But you can look at the accelerating price of manufacturing supplies reported by companies across many industries in the Institute for Supply Management. Or just check what you're paying for health care, college tuition, gasoline or that monthly mortgage. These economic trends are worrisome, though there are some reasons not to fear a recurrence of the 70s ... Interest rates are starting much lower, and the Fed's fear of inflation borders on paranoia. Slow wage growth and jobs should hold prices down, too. The 1970s forces which really pushed markets over the top -- an oil embargo and a private family's cornering of the silver market -- aren't in evidence now, and even homeowners who have seen home prices slide recently are still sitting on a lot of equity. The easy-money credit markets could keep consumers bolstering demand. And, most importantly, things never happen exactly the same way twice. But, things do fall apart in ever different ways, so it makes sense to position yourself for "all of the above" without going overboard. Here are some pointers: -- Don't go overboard. Overboard behaviors include selling all of your stocks, bonds, and your house and putting the money into gold, palladium, art, or any other commodity that doesn't pay dividends or interest or have earnings. -- Worry about yourself first. Collectively, consumers do need to continue spending to keep the economy on the move. But it's probably better for your own finances to shirk this responsibility for a while. Reign in spending and start paying off credit card balances and other bills in the biggest chunks possible. -- Organize your debts. Stagflation, the last time around, saw interest rates rising to usurious levels. Use the time you have now to lock in decent fixed-rate mortgages, transfer balances to low-rate cards, or use other loan products on the market to keep your debts manageable and stable. -- Stay invested and diversified. Stocks may not be great every year, but as long-term places to keep money, they beat bonds, gold and shoeboxes all to heck. Keep your retirement fund in a mix of stocks, foreign stocks, bonds, and more. Even if bad times come, spreading your money around will moderate the impact on you. -- Keep an inflation kicker. Mining stocks, inflation bonds, real estate investment funds, natural resources mutual funds all have different pros and cons, but you'll be happy with any of them if we do undergo a period of runaway inflation. Keep a corner of your portfolio reserved for this. Typically, that's no more than 10 percent. -- Invest in yourself. You may not be able to count on your salary going up in tandem with the costs of running your life. But the right computer, management, or language course could position you for a better (and better-paying) job down the road. -- Save money. The worst part of stagflation is that it makes it harder and harder to save any money. But do what you can. The more cash you have to call upon in an emergency, the less desperate or destitute you'll have to be if those 2,480 bloggers turn out to be right.

Beckman affirms commitment to acquire Biosite

Thu Apr 5, 2007 10:04am EDT

http://www.reuters.com/article/2007/04/05/us-biosite-beckmancoulter-idUSWEN616720070405

NEW YORK - Medical testing equipment company Beckman Coulter Inc. BEC.N on Thursday affirmed its commitment to complete its acquisition of Biosite Inc. BSTE.O for $1.55 billion.

In response to a competing offer from Inverness Medical Innovations Inc. IMA.A for Biosite, Beckman Coulter President and Chief Executive Officer Scott Garrett said his company could complete the deal in 30 days. He also called Beckman's offer "superior to the unsolicited, highly speculative and conditional letter that Biosite has received from Inverness Medical."

Wall St ends higher on Chrysler bid, lower oil

Thu Apr 5, 2007 4:13pm EDT

http://www.reuters.com/article/2007/04/05/us-markets-stocks-idUSL0221982020070405

NEW YORK - U.S. stocks closed higher on Thursday, as a decline in oil prices and a proposed takeover of automaker Chrysler tempered caution before jobs data.

The Dow Jones industrial average .DJI was up 29.66 points, or 0.24 percent, at 12,559.71. The Standard & Poor's 500 Index .SPX was up 4.37 points, or 0.30 percent, at 1,443.74. The Nasdaq Composite Index .IXIC was up 12.65 points, or 0.51 percent, at 2,471.34. For the week, the Dow was up 1.66 percent, the S&P rose 1.61 percent and the Nasdaq gained 2.05 percent.

Banks prone to sell minorities pricy loans

Wed Apr 4, 2007 8:46pm EDT

http://www.reuters.com/article/2007/04/05/us-usa-subprime-minorities-idUSN0422429620070405

WASHINGTON - The largest U.S. banks sold expensive subprime loans more frequently to minorities than whites, according to a study released Wednesday by a community activist group.

Fair Finance Watch found that big lenders such as Citigroup, JP Morgan Chase, Wells Fargo and UK-based HSBC extended higher-cost subprime loans to African-Americans and Latinos far more frequently than whites, according to an analysis of 2006 mortgage lending data released this week. At Citigroup, for example, blacks in the New York metropolitan area were sold subprime loans 4.41 times more frequently than whites, according to the study. "The problem is many of these lenders confine people of color to high-cost loans even though they would be entitled to normally priced loans," said Matthew Lee, executive director of Bronx, New York-based Fair Finance Watch. "Alongside the chaos in the subprime industry, predatory lending has grown and not diminished," warned Lee. Officials at Citibank defended their lending practices, which was based on credit scores and other criteria including loan-to-value and debt-to-income ratios. "We consider each application by the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis," Citibank said in a statement, adding that the bank has ongoing dialogue with community groups to explore ways to make fairly priced credit more available. Subprime mortgages, which have been increasingly popular in recent years, carry a higher interest rate and are offered to borrowers who often have a poor credit history and lower incomes. While the loans have helped to increase home ownership, they have been at the center of a recent surge in mortgage defaults. LOAN DENIALS Still, loan denials nationwide were more frequent among minorities. For example, Citigroup denied applications from blacks 2.10 times more frequently than those of whites and it denied mortgage applications for Latinos 1.84 times more frequently. Wells Fargo, with nearly 20 percent of its 2006 mortgages in the subprime category, denied the applications of blacks 1.72 times more frequently than whites, while denying those of Latinos 1.57 times more frequently, according to Lee's group. The bank said race was not a factor in its loan pricing and said regulators have studied the data for signs of biased lending. "The Federal Reserve has repeatedly emphasized that the limited data analyzed in the report cannot support a conclusion that lending practices are discriminatory," a spokesman for Wells Fargo said. Lee and other community activists for years have pushed for stricter fair lending standards, fearing that predatory lenders prey on the poorer minorities. MORATORIUM ON FORECLOSURES On Wednesday, national civil rights groups called for an immediate moratorium on foreclosures in subprime loans, noting that the bulk of them are made to minorities. "As foreclosures continue to rise on subprime mortgages, a disproportionate share of the harm falls on African-American and Latino homeowners and the neighborhoods where they live," said the groups which include the NAACP and the National Fair Housing Alliance. Some 40 percent of Latino families and more than half of African Americans who receive home loans get higher-cost mortgages, predominately subprime loans, those groups said. To date, an estimated 1.5 million homeowners are facing foreclosure, according to research firm RealtyTrac, and Congress is now looking at tighter lending standards to protect unwary Americans from taking on loans that cannot afford. Larger banks, Lee says, tend to set up their subprime lending shops in poorer neighborhoods. While they make credit available to riskier borrowers who have poor credit quality, these lenders tend to sell minorities these pricier loans regardless of credit quality, Lee says. "Where the rubber will meet the road will be in how the Federal Reserve and other agencies act on specific disparities at specific lenders," said Lee. HSBC sold 6,295 super high-cost loans that were at least 8 percentage points over comparable Treasury securities, or more than 12 percent interest on a 30-year mortgage in 2006 and about double the average for a borrower with the best credit. HSBC, with 63 percent of its mortgages in the subprime sector last year, said it reviewed its lending practices and the bank was "confident that we are treating our customers fairly and with integrity," said Kat Hurham, a spokeswoman for HSBC. Even with the housing downturn, predatory lending is a still-growing problem, impacting not only homebuyers but also consumers, said Lee. He warned that black and Hispanic borrowers taken together are much more likely than non-Hispanic white borrowers to obtain credit from institutions that report a higher frequency of higher-priced loans. "It may be more symptomatic of a more serious issue," Lee said. "These patterns may stem, at least in part, from borrowers being steered to lenders or to loans that offer higher prices than the credit characteristics of these borrowers warrant," Lee said.

Menu Foods recalls additional pet food products

Thu Apr 5, 2007 3:20pm EDT

http://www.reuters.com/article/2007/04/05/us-menufoods-recall-idUSWNAS577020070405

- Menu Foods MEW_u.TO said it recalled an additional 20 varieties of its pet food products that used wheat gluten supplied by ChemNutra Inc.

ChemNutra had on Tuesday announced a recall of all wheat gluten it imported from a Chinese firm, Menu Foods said in a statement. (Reporting by Manish Gupta in Bangalore)

Third Nikko investor offers shares above Citi bid

Thu Apr 5, 2007 2:19pm EDT

http://www.reuters.com/article/2007/04/05/us-nikko-shareholder-idUSN0520435220070405

NEW YORK - Southeastern Asset Management on Thursday became the third major shareholder of Japanese brokerage Nikko Cordial Corp. 8603.T to say it placed a sell order for a large block of Nikko stock at 1,900 yen per share, above Citigroup's ( C.N ) 1,700 per share takeover price.

"Southeastern has decided that it will accept 1,900 yen per share for the 6.6 percent of Nikko Cordial owned by its clients, and accordingly has placed a limit order to sell 64,424,500 shares at 1,900 yen per share on the Tokyo Stock Exchange," said Southeastern in a statement. The move puts pressure on Citigroup to raise its roughly $14 billion bid for the Japanese brokerage. Chicago-based Harris Associates and Bermuda-based Orbis Investment Management have already offered their roughly 5 percent stakes in Nikko at 1,900 yen each, 200 yen above Citigroup's tender offer for Japan's third-biggest securities firm.

Ford must do what it takes to cut costs: CEO

Thu Apr 5, 2007 6:54am EDT

http://www.reuters.com/article/2007/04/05/us-ford-idUSN0437549520070405

NEW YORK - Ford Motor Co ( F.N ) Chief Executive Alan Mulally said on Wednesday the automaker must do "whatever it takes" to make its cost structure competitive and called discussions with the United Auto Workers this summer an important part of the equation.

The former Boeing Co.( BA.N ) executive, who joined the automaker last September, also said that problems in the subprime lending market are "a concern" and Ford was keeping a close watch on the U.S. economy. "We have to do whatever it takes to get a cost structure that is competitive and that includes all the elements of it -- 17 to 18 percent of it is wages and benefits," Mulally told a Morgan Stanley conference in New York in the afternoon. "We have to look at that. It is going to be a very important conversation we have with the UAW this year." Ford, which posted a $12.7 billion loss last year, is in the midst of a restructuring that calls for the closing over a dozen facilities and cutting about 45,000 jobs in North America. In a breakfast speech earlier, kicking off the New York International Auto Show, Mulally said the restructuring of the automaker's North American operations is "generally going pretty well," but the significant job cuts have caused "tremendous upheaval." Mulally told reporters at the auto show that the slowing housing market was a concern for the automaker. The automaker's restructuring plan hinges on the economy holding up. "The biggest thing we've got to keep watching is the economy, because the housing starts, the construction industry, all these things influence purchasing decisions," Mulally said. "It's a little bit softer now, and we see that in our sales a little bit; but the economy kind of looks pretty good through the rest of this year," he added. Ford's North American president, Mark Fields, said Ford could take the biggest hit among automakers from weakness in the housing and credit markets because of its dominance in pickup trucks, the staple vehicle of the construction industry. On Tuesday, Ford reported a 15 percent drop in monthly sales of its market-leading F-Series pickup trucks, in a generally poor month for U.S. automakers. Problems in the subprime lending segment have not directly affected Ford so far, Fields said, but could if they spread to the broader market. UAW TALKS Ford has seen its U.S. market share steadily decline over the years but costs remain high. Since Mulally took over from Ford family scion Bill Ford Jr., he has moved to streamline management, appointed a global product chief and raised $23.5 billion in cash through liens, bond offerings and credit lines. The upcoming UAW talks are another opportunity for Ford to cut fixed costs. Ford's current labor agreement with the UAW expires in September. "We're cautiously optimistic." Mulally said, referring to the contract talks. Fields said the automaker will address the controversial "Jobs Bank" program -- which ensures nearly full pay and benefits to laid off workers -- with the UAW during the upcoming negotiation with the union for a new labor contract. Fields' comments follow UAW President Ron Gettelfinger's assertion last week that he does not consider Jobs Bank a major issue during the negotiations. (Reporting by Jui Chakravorty , Bill Rigby , Nick Zieminski, David Bailey and Poornima Gupta )

Accenture gets $155 mln contract

Thu Apr 5, 2007 8:18am EDT

http://www.reuters.com/article/2007/04/05/us-accenture-contract-idUSWNAS571920070405

- Consulting firm Accenture Ltd. ( ACN.N ) said it received a five-year contract worth $155 million from the Defense Logistics Agency to provide business systems integration, systems engineering and application management services.

The contract has an option to extend it by another five years for $97 million, the company said in a statement. (Reporting by Rakesh Sharma in Bangalore)

SEC to resolve competing stock symbol plans

Thu Apr 5, 2007 3:05pm EDT

http://www.reuters.com/article/2007/04/05/us-sec-symbols-idUSN0520368320070405

WASHINGTON - Competing proposals on allocating stock symbols have been received by the U.S. Securities and Exchange Commission, with the New York Stock Exchange wanting to guard shorter stock identifiers from being used by Nasdaq-listed companies.

The SEC said on Thursday it will work to resolve conflicts between the proposals over the issue of symbols with three or fewer characters. The NYSE and other exchanges are pushing to limit the use of one-, two- and three-character symbols to those listing markets that have traditionally used those symbols. Nasdaq and other self-regulatory organizations are trying to permit any listing market to use one-, two-, three-, four- or five-character symbols, allowing companies to move their securities onto the Nasdaq while retaining their ticker symbols. The SEC said it plans to publish the proposals for comment and "will resolve the conflicts over the allocation of stock symbols as fairly and expeditiously as possible." An SEC spokesman did not have an estimate of how quickly the issue would be decided. The investor protection agency asked the exchanges in February 2005 to work together to develop a national market system plan for reserving, selecting and allocating securities symbols. "Securities symbols are an important part of a listed company's identity and developing a formal process to reserve, select and allocate symbols among listing markets and their companies will help promote a fair and orderly national market system and prevent investor confusion," SEC Market Regulation Director Eric Sirri said in a statement. A new plan would replace the informal understanding among the listing markets under which the NYSE and the other exchanges, including the American Stock Exchange and regional exchanges, use symbols with three or less characters, and Nasdaq uses four- and five-character symbols. A few months after the SEC made the request to formalize the symbol allocation system in 2005, Nasdaq announced its intention to begin listing companies with three or less symbols. Late last month Delta Financial Corp. (DFC) DFC.O became the first company with a three-character symbol to trade on the Nasdaq, which was allowed after a proposal to list that specific company was approved. On March 29 Nasdaq moved a step further with a proposal to the SEC that would explicitly permit the display of three-character symbols on its exchange. The SEC will consider the proposal after the public comment period ends on April 25.

Boeing first-quarter deliveries rise 8 percent

Thu Apr 5, 2007 10:43am EDT

http://www.reuters.com/article/2007/04/05/us-boeing-deliveries-idUSWNAS575320070405

NEW YORK - Boeing Co. ( BA.N ) said on Thursday it delivered 106 commercial planes in the first three months of the year, up about 8 percent from the 98 planes it delivered in the same period last year.

Boeing, which last year reclaimed its crown as the biggest selling planemaker from European rival Airbus, a unit of EADS( EAD.PA ), delivered 83 of its single-aisle 737s in the quarter, three mid-sized 767s, three 747 jumbos and 17 of its 777 minijumbos to customers.

Wal-Mart expands personal well-being programs

Thu Apr 5, 2007 1:29pm EDT

http://www.reuters.com/article/2007/04/05/us-walmart-projects-idUSN0518533220070405

NEW YORK - Wal-Mart Stores Inc. ( WMT.N ), which is pushing its suppliers to embrace environmental practices, is now expanding a program that it said will get its employees to improve their health and wellness, and the health of the environment.

The world's largest retailer said on Thursday that it is expanding "Personal Sustainability Projects," or PSPs, to its 1.3 million U.S. workers after piloting the program last year. It said the projects are used by employees to develop individual goals like making healthier food choices, volunteering or using environmentally friendly products at home. Wal-Mart, which is under attack by critics for its pay and health care policies, has been touting its environmental initiatives. It has vowed to cut energy usage and reduce waste at its stores, and it has challenged employees, suppliers and customers to remove nonrenewable energy from their lives. The retailer has asked its electronics suppliers to start evaluating the environmental impact of their products, and it said it will use the assessment to determine which merchandise to sell in Wal-Mart stores. While the initiatives may help the environment, they also allow Wal-Mart to cut its costs. For instance, it has asked its suppliers to cut the amount of packaging used in products sold through Wal-Mart by 5 percent by 2013. The move is expected to save the retailer $3.4 billion over five years. Wal-Mart shares rose 26 cents to $48.31 in afternoon trading.

Unusual trading surrounds biggest deals

Thu Apr 5, 2007 1:16pm EDT

http://www.reuters.com/article/2007/04/05/us-column-mergers-idUSN0518402620070405

NEW YORK - Despite U.S. regulators' efforts to prevent trading on information obtained illegally, suspicions of such activity have marred some of the year's biggest takeovers, including the First Data Corp. FDC.N deal announced this week.

The unusual activity reached across options, credit swaps and stocks in the days leading up to the credit and debit card payment processor's announcement of its planned sale to private equity firm Kohlberg Kravis Roberts & Co. for $26 billion. The trades came even as the Securities and Exchange Commission pursues insider trading cases stemming from the planned buyout of Texas power company TXU Corp. TXU.N. But lawyers say stepped-up SEC efforts cannot eradicate the problem, even in high-profile deals. In the case of First Data, its credit default swaps widened 23 basis points in the week leading up to the announcement of the KKR deal and 43 basis points in the month before. Analysts said that move in a short time period might indicate that there was more than just market speculation underway. In addition, First Data calls were far outpacing the puts. Last week 80,146 calls and 19,835 puts changed hands, far above First Data's total option volume of 53,572 contracts for all February, according to the Options Clearing Corp. It looks like there was options buying in the calls that give the right to buy First Data shares at $30 when the stock was at around $26 last week, said Michael Schwartz, chief options strategist at Oppenheimer & Co. Inc. in New York. The KKR deal values First Data at about $34 a share. The stock traded at about $32.30 on Thursday. "If a regulator were to look at the pre-announcement trading patterns in the First Data April 30 call options, this would stand out as a sore thumb," Schwartz said. "Often investors will buy out-of-the-money calls if they want to speculate on a takeover rumor." Schwartz said he did not know if the trading was due to insider information or market rumors. First Data shares gained 9 percent in the 10 days ahead of the news, from $24.67 at the close on March 16 to $26.90 at the close on Friday before the deal was announced. The SEC declined to comment on whether it was investigating insider trading around First Data, which did not return a call requesting comment. SEC VS. GREED Pinning unusual trading activity to insider trading rather than speculation is difficult, market participants and lawyers said. And then there is human nature. "Although there are laws regulating and designed to prevent the use of material nonpublic information, although we would anticipate that there would be fewer cases, it is impossible to eradicate the primal nature of mankind, which is greed," said Ron Geffner, a partner at Sadis & Goldberg LLP and a former SEC enforcement attorney. "There are people who, knowing there is a probability to get caught, will still act in a manner to try to make a quick buck," Geffner said. "Hopefully what we would see is that there are fewer professionals engaging in this type of behavior and that the violations are primarily arriving from bystanders on the sidelines." Indeed, the SEC has stepped up its fight against insider trading by professionals. Earlier this year, sources told Reuters that the commission expanded its efforts to include insider trading among some of the largest investment firms. SEC Chairman Christopher Cox said in October that investigations on insider trading rose in fiscal 2006. Of SEC investigations opened during the year, 20 percent dealt with insider trading, up from 18 percent in fiscal 2005. SEC spokesman John Nester said the efforts were working. "Working closely with the self-regulatory organizations under our oversight, the SEC has caught and punished more insider trading than any other regulator," Nester wrote in a statement. In the case of TXU, the SEC found illegal trading in options in three separate trades in the days before the February announcement of the leveraged buyout, the largest on record. The SEC charged a British couple last week with trading on insider information on one of the trades but has not identified suspects on the other transactions. Besides options, shares in TXU also traded outside of their usual patterns, according to Measuredmarkets Inc., a Canadian company that tracks unusual trading activity. Share price, trading volume and number of trades rose more than was typical on both February 22 and February 23, while news of the deal did not surface until after the market closed on February 23. Other companies that had unusual trading in options and credit swaps ahead of news of a takeover include Harrah's Entertainment Inc. HET.N and Sabre Holdings Corp. TSG.N. They have also sparked concerns of insider trading. Neither company was immediately available for comment. The SEC declined to comment on whether it is investigating insider trading around those deals. "(Insider trading) is plainly something that is high on the SEC's radar," said former SEC lawyer Stephen Crimmins, now a partner at Mayer, Brown, Rowe & Maw. "I think the SEC realizes that it's not going to stamp out insider trading but that it has to be always vigilant." (Additional reporting by John Poirier in Washington and Doris Frankel in Chicago)

Wall Street rises with bid for Chrysler

Thu Apr 5, 2007 4:44pm EDT

http://www.reuters.com/article/2007/04/05/us-markets-stocks-idUSN0522512620070405

NEW YORK - U.S. stocks ended higher in light trading on Thursday, as a decline in oil prices and a proposed takeover of automaker Chrysler overcame caution before jobs data that held back share prices earlier.

News in the afternoon of a proposed offer for DaimlerChrysler's Chrysler Group by billionaire Kirk Kerkorian helped to lift indexes. Shares of General Motors also rose after the news, boosting the Dow. The blue-chip average posted its sixth day of gains, matching an advance in November. The Dow is now just about 70 points from its level just before the February 27 global market sell-off, but volume was light ahead of the three-day holiday weekend. "The Kerkorian bid for Chrysler certainly looks like big news and given the fact the bid appears to be all for cash," said Michael Sheldon, chief market strategist at New York brokerage Spencer Clarke. "I think this creates a serious buyer for the car company." U.S. crude oil futures fell for a third day, with Iran tensions easing as the fourth largest oil exporter freed British military personnel after a two-week stand-off. Stocks had been largely flat for most of the morning, with investors cautious ahead of the release of U.S. jobs data on Friday, which could shed light on the economy and the outlook for profits. The data follows this week's report on a gauge of the U.S. service sector, which showed anemic growth and a rise in price pressures. The Dow Jones industrial average was up 30.15 points, or 0.24 percent, at 12,560.20. The Standard & Poor's 500 Index was up 4.39 points, or 0.30 percent, at 1,443.76. The Nasdaq Composite Index was up 12.65 points, or 0.51 percent, at 2,471.34. The S&P rose for a fourth day, while the Nasdaq was up for six days, both matching winning streaks of a little more than two months ago. For the week, the Dow rose 1.7 percent, the S&P gained 1.6 percent and the Nasdaq jumped 2.1 percent. The stock market will be closed on Friday for Good Friday, but the U.S. government will release non-farm payrolls data. The median forecast among economists polled by Reuters was for a gain of 120,000 jobs, after a 97,000 increase in February. Economists forecast the unemployment rate to edge up to 4.6 percent from 4.5 percent in February. U.S. crude oil fell as 15 British military personnel freed by Tehran arrived back in England. Crude slipped 10 cents to settle at $64.28 a barrel. High oil prices raise concern about inflation and the depressing effect on economic growth, analysts said. Investors, though, bought shares of companies that better withstand a slowing economy. Kraft Foods Inc. was up 2.8 percent at $31.58, while drug company Johnson & Johnson, up 0.4 percent at $61.55. DaimlerChrysler's U.S. shares rose to their highest point since July 1999. They closed up 5.3 percent at $84.80. Shares of General Motors rose 2.8 percent to $31.90. Trading was well below average on the New York Stock Exchange, with about 1.25 billion shares changing hands, below last year's estimated daily average of 1.84 billion. On Nasdaq, about 1.6 billion shares traded, below last year's daily average of 2.02 billion. Advancing stocks outnumbered declining ones by a ratio of about 5 to 3 on the NYSE and by 16 to 13 on Nasdaq.

Defense in Black trial slams witness on payments

Thu Apr 5, 2007 5:27pm EDT

http://www.reuters.com/article/2007/04/05/us-black-trial-idUSN0430539220070405

CHICAGO - Some of the payments at the center of Conrad Black's criminal fraud trial were reported to U.S. government regulators in a timely fashion and not hidden as prosecutors have suggested, jurors were told on Thursday.

Under cross examination, Fred Creasey, a former comptroller at Black's Canadian holding company Hollinger Inc., was shown a document bearing his name by defense lawyer Patrick Tuite. Creasey had testified on Wednesday that some of the money paid to Black and his associates from newspaper property sales in 2000 did not show up in regulatory filings that Hollinger's U.S. subsidiary, Chicago-based Hollinger International, had made until May 2001. But the document Creasey was given on Thursday had been filed with the U.S. Securities and Exchange Commission in December 2000, two weeks after a major deal involving the sale of some of Black's newspapers. Creasey said he could not remember the document. Tuite suggested that Creasey was trying to "mislead the jury", but he was cut off after objections from prosecutors. U.S. Attorney Patrick Fitzgerald's office is running the prosecution. The courtroom exchange on Thursday, in the early stages of a trial that may go on for months, was an attempt to discredit the prosecution's claims that money flowed to Black and his three co-defendants in a shadowy fashion that skirted routine and legitimate business practices. While focusing on business practices and who knew about what, prosecutors have yet to start trying to prove their allegations that the payments Black and the others received were illegal. The defendants claim they were not. Prosecutors contend that Black and the three co-defendants diverted about $60 million from Hollinger International by sending payments from non-compete agreements to entities more closely controlled by Black such as Hollinger Inc. Black could then siphon those funds for a lavish lifestyle, prosecutors said. These so-called non-compete payments were part of the proceeds from the sale of dozens of newspapers Black and his associates sold as they disassembled what had been one of the world's largest media empires. The payments were made by those purchasing the papers to guarantee that Hollinger International would not reenter a market where it had sold an asset. The company, now called Sun-Times Media Group Inc., once owned hundreds of Canadian and U.S. newspapers, as well as the Daily Telegraph of London and the Jerusalem Post. The case grew out of institutional shareholders' objections to the way the non-compete payments were handled. Black, Jack Boultbee, who was chief financial officer at Hollinger Inc., Peter Atkinson, once an attorney at Hollinger Inc., and Mark Kipnis, once an attorney at Hollinger International, are charged with defrauding shareholders of Hollinger International. The 62-year-old Canadian-born Black is charged with fraud, racketeering, money laundering and obstruction of justice that could result in a maximum prison sentence of 101 years, plus millions in fines and $92 million in possible forfeitures. A member of Britain's House of Lords since 2001, Black is also accused of misusing his company's money to finance a lavish lifestyle that included extravagant parties attended by celebrities at his homes in London, New York and Florida.

J&J wins ruling in Boston Scientific patent case

Thu Apr 5, 2007 3:54pm EDT

http://www.reuters.com/article/2007/04/05/us-bostonscientific-jj-patent-idUSN0519455520070405

NEW YORK - A U.S. federal court has ruled that a drug-coated stent sold by Johnson and Johnson( JNJ.N ) does not infringe a patent held by Boston Scientific Corp. ( BSX.N ).

In a ruling handed down on Wednesday, U.S. District Court Judge Sue Robinson granted a motion by J&J unit Cordis for summary judgment, saying, "based on the evidence of record, no reasonable juror could find for Boston Scientific on the issue of infringement." The patent relates to a method for treating or preventing heart disease through a particular kind of medicinal therapy -- in this case the drugs used on the stents. J&J's Cypher and Boston Scientific's Taxus are currently the only drug coated heart stents available on the U.S. market. Stents are tiny mesh tubes used to prop open arteries that have been cleared of plaque that had been clogging the vessel. The drug coating helps prevent the formation of scar tissue that can reclog the arteries. Boston Scientific had previously prevailed in lower courts in patent disputes that involved the stent itself and the polymer used to bind the medicine to the stent. "We are considering our options," Boston Scientific spokesman Paul Donovan said of the ruling by the Delaware court. "We remain focused on the two cases we won in the lower courts and we expect those rulings to stand," Donovan said. He added that this ruling has no bearing on either of the other two cases. Johnson & Johnson said it was pleased with Judge Robinson's decision. "It affirms our view that we are not utilizing a competitor's intellectual property, but our own," said Cordis spokesman Christopher Allman. Boston Scientific shares were up 12 cents to $14.97 on the New York Stock Exchange, down slightly from a high of $15.00 earlier in the day. J&J shares were up 29 cents to $61.58, also on the NYSE.

Kerkorian wants another spin around Detroit

Thu Apr 5, 2007 6:51pm EDT

http://www.reuters.com/article/2007/04/05/us-daimlerchrysler-kerkorian-idUSN0521053220070405

CHICAGO - Nine years ago, when Daimler-Benz AG bought Chrysler Corp. for nearly $40 billion, billionaire investor Kirk Kerkorian cleaned up, on paper tripling his investment in the U.S. carmaker.

As the German automaker now tries to undo that ill-starred purchase by selling the money-losing U.S. unit, the reclusive billionaire looks like he'll do quite nicely again. That's no surprise to long-time Kerkorian watchers. Deal-making has been a recurring theme in the 89-year-old's life. On Thursday, Kerkorian's Tracinda Corp. investment arm said it offered to buy all of DaimlerChrysler AG for $4.5 billion, just $500 million less than he netted in 1998, when the Daimler-Chysler deal was inked. "It adds more intrigue to the whole process," Dave Cole, chairman of the Center for Automotive Research, said of Kerkorian's offer. "The numbers are very difficult to evaluate because you have to look at the asset values, the liabilities. So the actual amount of cash paid is going to depend on a lot of things." Kerkorian's 1998 windfall in Chrysler proved short-lived as the combined company stumbled in integrating two vastly different corporate cultures. The shares plummeted as did the value of Kerkorian's remaining stake in the company. In 2000, he filed a $1 billion lawsuit against Daimler contesting the acquisition. Two years ago, a federal judge in Delaware ruled against Kerkorian, saying Daimler-Benz had not fraudulently misrepresented the takeover as a merger of equals. To no one's surprise, Kerkorian appealed the ruling. "He's a guy who just won't let go," said Peter DeLorenzo, the publisher of Autoextremist.com, an industry blog. UP FROM FRESNO The son of an Armenian immigrant, Kerkorian grew up the youngest of four children in Fresno, California. After dropping out of school in the eighth grade, he boxed for a while under the moniker "Rifle Right," before joining the Royal Air Force to fly supply planes from Canada to Britain during World War II. After the war, his love of flying and risks took him to Las Vegas, where the gambling industry was in its infancy. Kerkorian bought surplus war planes to fly gamblers from Los Angeles to Las Vegas. He pocketed his first fortune when the business, called Trans International Airlines, went public in 1965. In 1968, he sold it to Transamerica Corp. for more than $100 million in cash and stock. The first investments to earn him broad recognition came in 1970, when he built the 2,000-room International Hotel in Las Vegas, the largest in the city, and also became the largest investor in Hollywood movie studio Metro-Goldwyn-Mayer. Kerkorian expanded his entertainment empire in 1981, when he bought another faded Hollywood studio, United Artists, and merged it with MGM. He sold MGM to Ted Turner in 1986, but months later bought it back, except for 3,300 titles from its classic film library. He sold MGM again in 1990, but bought it for a third time in 1996, when French bank Credit Lyonnais put the studio on the auction block. Kerkorian's latest offer for Chrysler isn't his first. In the 1990s, shortly after the company was bailed out by the U.S. government, Kerkorian began amassing shares in the struggling automaker, ultimately controlling 100 million shares. In 1996, he launched a hostile $22.8 billion bid for control. In the end, Kerkorian failed to win control but got a seat on the board and forced the company to increase share buybacks and sell off nonauto assets. In 2005, Kerkorian appeared to make a similar run at General Motors Corp., with Tracinda amassing nearly 10 percent of GM shares. In the end, Kerkorian sold the stake after failing to get the company to agree to partner with either Renault or Nissan Motor Co. Ltd. "The guy is relentless," said DeLorenzo. "His age is just a number. He just loves being in the game and when he isn't in it, he gets itchy."

Jobless claims mount but labor market still fit

Thu Apr 5, 2007 1:18pm EDT

http://www.reuters.com/article/2007/04/05/us-usa-economy-idUSN0518899520070405

WASHINGTON - New jobless claims rose a larger-than-forecast 11,000 last week, government data on Thursday showed, but analysts said the labor market remained on solid ground despite other signs of slower growth.

Initial filings for state unemployment insurance aid for the week ended March 31 increased to a seasonally adjusted 321,000 from an upwardly revised 310,000 the prior week, the Labor Department said. Reaction from the foreign exchange, stock and bond markets was muted and analysts said the release did not challenge views that the labor market was still in good shape, notwithstanding weakness among U.S. manufacturers and in housing. "Jobless claims are still running at a relatively low level, and are not what we'd expect to see in a recession, rather in a healthy economy, said Gary Thayer, chief economist with A.G. Edwards & Sons Inc in St. Louis. "Yes, we're up a bit (on claims). But if we were in a recession we'd be up 400,000 not 300,000. So it suggests to me that the economy is experiencing problems in some spots, but not across the board," he said. Investors are scrutinizing the jobless data for clues about the general tone of the labor market ahead of the monthly March payrolls report, due on Friday, and after disappointing readings from recent national business surveys. Analysts polled by Reuters forecast 120,000 new jobs were created last month compared with 97,000 in February, with the unemployment rate edging to 4.6 percent from 4.5 percent. In the week ending March 24, jobless claims had posted a surprisingly steep decline to an initially reported 308,000, and analysts on Wall Street had expected claims to rebound to 315,000 in the latest week. On the other hand, a four-week moving average of claims, which irons out weekly volatility to provide a better sense of underlying job-market trends, edged lower to 315,750 in the March 31 week from 317,250 in the prior week. This was the fourth consecutive weekly decline and the lowest reading since early February. Bank of America Economist Gary Bigg said the jobless claims figures have been volatile. "As we've noted in past postings, continuing claims continue to behave in an erratic manner. Over the past 12 weeks, continuing claims have alternately fallen then risen," he wrote in a client note. The total number of unemployed still on the benefit rolls after drawing an initial week of aid fell by 25,000 to 2.492 million in the week ended March 24, the latest period for which these figures are available. It had been expected to come in at 2.51 million. Economists worry a downturn in the U.S. housing market and soft durable goods orders as businesses curb investment plans could hit hiring, spelling bad news for consumer spending if employment prospects dim. But a separate report on Thursday from the Federal Reserve Bank of Chicago showed a modest pickup in its Midwest manufacturing index in February as auto production bounced, although it remained only modestly up on a year ago. The index rose 0.9 percent in February to a seasonally adjusted 103.7 compared with the month before, and was up 0.6 percent versus February 2006.

New York finds college officials held lender shares

Thu Apr 5, 2007 3:26am EDT

http://www.reuters.com/article/2007/04/05/us-studentlenders-subpoenas-idUSN0440799720070405

NEW YORK - New York Attorney General Andrew Cuomo's office, which is probing the $85 billion student loan industry, said on Wednesday it is investigating grants of stock from a student lender to financial aid officers at three major U.S. universities.

A Cuomo spokesman said the office sent a subpoena to New York's Columbia University and sent document-retention letters to the University of Southern California and the University of Texas. The office wants information on school officials who own stock in companies included on colleges' preferred lender lists. Officials from the three universities each owned at least 1,500 shares of Education Lending Group, as disclosed in a stock offering prospectus filed with the Securities and Exchange Commission in September 2003. Student Loan Xpress, a unit of the company, is a "preferred lender" at these schools. David Charlow, the associate dean of student affairs at Columbia, owned 7,500 shares of Education Lending stock and 2,500 stock warrants ahead of the offering, according to the filing. He sold his shares for a gain of more than $100,000. Charlow also was quoted endorsing Student Loan Xpress on its Web site. Columbia, which is cooperating with the probe, was not immediately available for comment. Education Lending's prospectus also identified student aid officials Catherine Thomas, of USC, and Lawrence Burt, of the University of Texas, as each owning 1,500 shares. The Associated Press first reported the stock ownership news earlier on Wednesday. Officials at CIT Group Inc., a commercial finance company that acquired Education Loan Group in 2005, were not immediately available. USC and University of Texas officials also could not be reached for comment. The three school officials also could not be reached for comment. Cuomo for the past two months has drawn attention to potential for abuses in student lending, where loan providers offer payments and perks to college officials and then appear on the school's preferred lender list. Getting on the list is crucial, since nine out of 10 students choose their provider from the list, Cuomo said. The Education Lending prospectus provides fuel for Cuomo's investigation by naming college officials as shareholders. The company even tells investors that Student Loan Xpress markets itself "to the financial aid offices of schools in order to be included on that school's preferred lender list." Previously, Cuomo's investigators found many colleges entered into kickback arrangements with lenders, while some colleges have "exclusive" agreements with loan companies.

AT&T open to Italian partners in torn T.Italia

Thu Apr 5, 2007 12:16pm EDT

http://www.reuters.com/article/2007/04/05/us-telecomitalia-att-idUSL0555232520070405

MILAN - AT&T says it is open to Italian partners in Telecom Italia as it and America Movil aim to buy a controlling interest in Italy's biggest telecoms operator, where investors are at loggerheads over the sacking of its chairman.

The head of corporate development for AT&T ( T.N ) -- which is in talks along with Mexico's America Movil ( AMXL.MX ) about buying Telecom Italia's ( TLIT.MI ) holding company -- told a newspaper he could only comment further when proposals arrived. "We are absolutely ready to take into consideration the interests of Italian industrial and financial partners," Rick Moore said in an interview published in Thursday's edition of leading newspaper Corriere della Sera. The U.S. and Mexican companies are in exclusive talks with Pirelli ( PECI.MI ) about buying 66 percent of Olimpia -- a holding company that owns 18 percent of Telecom Italia. Shares in Telecom Italia were up 0.5 percent at 2.42 euros by 1448 GMT, while Pirelli gained 1 percent in a flat market. The discussions, which could give control of the 45 billion euro group for about 4.5 billion euros ($6.01 billion), have turned up the volume in a debate over protectionism and fired speculation that European or domestic alternatives could emerge. ALTERNATIVES? Italian bank Mediobanca ( MDBI.MI ), insurer Generali ( GASI.MI ) and bank giant Intesa Sanpaolo ( ISP.MI ) are working on alternatives for Olimpia, sources have told Reuters, pressured by the centre-left government of Prime Minister Romano Prodi. "We think it's possible to work with other financial institutions to seek solutions that respect all the interests involved," Intesa Sanpaolo Chief Executive Officer Corrado Passera said in a statement on Thursday. His bank, the second-largest in Italy, and Mediobanca had offered to buy Telecom Italia shares held by Olimpia for 2.7 euros a share but their offer was refused by Pirelli, Italian daily La Repubblica reported earlier this week. The offer from AT&T and America Movil values Olimpia's stake in the telecoms group at about 2.96 euros a share when accounting for the dividend Telecom Italia will pay this month. Prodi's row with Telecom Italia over asset sales last year led to the resignation of Marco Tronchetti Provera as chairman, a post that carries more weight than chief executive. Tronchetti, who still heads Pirelli and is ultimate owner of Telecom, has held talks with a number of possible investors as he seeks to sell the Telecom holding, which he counts at a loss. This week, newspapers reported Spain's Telefonica ( TEF.MC ) and France Telecom FTE.PA were preparing bids, but both declined to comment. SocGen analysts said in a note that if Telefonica were approached by Italian banks, government or Telecom Italia management and got necessary guarantees, "we believe the company would probably reconsider its position". For the Americans and Mexicans, there is no wish to pursue a deal if the government is hostile, a source close to the operation said. Opposition to the U.S.-Mexican talks has come from coalition politicians and other investors in Telecom Italia -- including Mediobanca and Generali -- who slammed on Wednesday the sacking of Chairman Guido Rossi and called for an emergency meeting of Pirelli's key investors. (Additional reporting by Elisabeth O'Leary and Jesus Aguado in Madrid, Mathias Wildt in Milan)

Apollo explores private sale of stake: source

Thu Apr 5, 2007 4:39am EDT

http://www.reuters.com/article/2007/04/05/us-apollo-privatesale-idUSN0441154220070405

NEW YORK - Private equity firm Apollo Management LP is exploring raising money by selling a stake in the company through a private placement or by making a public offering, a source familiar with the matter said on Wednesday.

A private placement would allow the firm to avoid the public scrutiny of an initial public offering and still generate a cash infusion. New York-based Apollo was working with investment banks Goldman Sachs Group ( GS.N ) and JP Morgan ( JPM.N ) and was very early in the process, the source said. Apollo could also decide to do nothing. An Apollo spokesman did not return a message seeking comment. Private equity firms recently have sought to access public capital through public offerings. The cash infusion generated by a public offering allows buyout firms to attract and retain talent, use equity for acquisitions, raise money more quickly, and ensure the firm remains viable after its founders leave. Blackstone Group last month filed for a $4 billion IPO of around 10 percent of the firm. Kohlberg Kravis Roberts & Co. and Apollo both launched public funds in Europe last year. Apollo's private placement plans would entail selling a 10 percent stake for $1.5 billion, the Wall Street Journal reported on Wednesday, citing people close to the situation. Apollo was founded by former Drexel Burnham Lambert banker Leon Black. Its most recent fund raised $10 billion to invest. Apollo deals include the purchase of retailer Linens N' Things and real estate firm Realogy Corp. ( H.N ) (Additional reporting by Ed Leefeldt)

New Century granted $150 mln bankruptcy financing

Thu Apr 5, 2007 2:48pm EDT

http://www.reuters.com/article/2007/04/05/us-usa-subprime-newcentury-idUSN0520645820070405

NEW YORK - New Century Financial Corp. ( NEWC.PK ), the largest U.S. subprime lender now under bankruptcy protection, was authorized on Thursday to obtain up to $150 million of financing to keep operating under Chapter 11.

The order by U.S. Bankruptcy Judge Kevin Carey allows New Century to draw on funds it lined up from CIT Group Inc. ( CIT.N ) and Royal Bank of Scotland Group Plc's ( RBS.L ) Greenwich Capital Financial Products Inc. unit prior to its April 2 bankruptcy filing. "Terms of the (financing) are fair, just, and reasonable under the circumstances (and) reflect the debtors' exercise of their prudent business judgment consistent with their fiduciary duties," the Wilmington, Delaware-based judge wrote. Carey set an April 19 deadline for parties to object to the so-called debtor-in-possession financing. A final hearing to authorize the financing is set for April 24. New Century had been the largest independent U.S. provider of home loans to people with poor credit histories before seeking court protection from its own creditors. The Irvine, California-based company collapsed amid rising delinquencies and defaults, a federal criminal investigation into its accounting and trading in its securities, and orders by or agreements with at least 17 U.S. states to stop lending. New Century has said it agreed to sell its loan servicing unit to hedge fund Carrington Capital Management LLC for $139 million, and some loans to Greenwich Capital for $50 million. Other bidders are eligible to offer higher amounts. Both sales require court approval. New Century stopped making loans last month, and also wants to sell its loan origination platform. It has said a quick sale is necessary so the business's value isn't wiped out. Earlier this week, Carey authorized New Century to pay its employees and some amounts it owes creditors. The company on Monday fired 3,200 employees, or 54 percent of its work force. New Century shares rose 17 cents to $1.17 in afternoon trading on the Pink Sheets.

Vodafone says full Essar buy against India law: FT

Thu Apr 5, 2007 2:05am EDT

http://www.reuters.com/article/2007/04/05/us-vodafone-india-idUSSP20466320070405

SINGAPORE - Vodafone ( VOD.L ) says Indian law bars it from owning all of the 67 percent of Hutchison Essar it plans to buy in a controversial $11.1 bln deal, the Financial Times reported on Thursday.

In a letter to the Indian finance ministry obtained by the newspaper, Vodafone acknowledged that it would be breaching a 74 per cent ceiling on foreign direct investment if it attempted to take direct ownership of all of the stake in the mobile operator. Vodafone has agreed to buy a two-thirds interest in Hutchison Essar from Hutchison Telecommunications International 2332.HK, a unit of Hong Kong tycoon Li Ka-shing's Hutchison Whampoa ( 0013.HK ), but an Indian foreign investment regulator has delayed approval of the deal. Hutchison Telecom owns 52 per cent of Hutchison Essar directly, with a further 15 per cent stake held on its behalf by companies owned by two Indian nationals, over which it has call options, the FT reported. Vodafone is planning to replicate these shareholder and accounting arrangements. The 15 per cent stake held by Asim Ghosh, Hutchison Essar's managing director, and Analjit Singh, chairman of healthcare group Max India, does not count towards the foreign ownership ceiling while it is in their hands, according to the newspaper. The rest of the 74 per cent quota is filled by Essar, an Indian conglomerate that owns 33 per cent of Hutchison Essar and has structured its stake so that 22 per cent is held offshore. This leaves Vodafone unable to own directly more than 52 per cent, the FT reported. The FT said Vodafone had pointed out that its statement had put its interest in Hutchison Essar would be 52 per cent. The proposed shareholder structure was legal, the company added.

Halliburton, KBR split up

Thu Apr 5, 2007 7:18pm EDT

http://www.reuters.com/article/2007/04/05/us-halliburton-kbr-idUSN0523848520070405

NEW YORK - Halliburton Co. ( HAL.N ), the No. 2 U.S. oilfield services company, has split off KBR Inc. ( KBR.N ), an engineering and construction company that had been a unit for 44 years, the companies said on Thursday.

Halliburton first announced plans in January 2005 to separate KBR, whose results had dragged on overall profitability. KBR is the Pentagon's largest contractor in Iraq, and its shares began trading in November. Under an exchange offer that expired on April 2, Halliburton swapped 135.6 million KBR shares, equal to roughly an 81 percent stake, for 85.3 million of its own shares. Both companies are based in Houston. Halliburton sparked criticism from some U.S. politicians when it announced plans on March 11 to open a headquarters in Dubai and move Chief Executive David Lesar there, to become better positioned to win contracts in the oil-rich Middle East. Auditors, Congressional Democrats and the Justice Department have scrutinized Halliburton over the quality and pricing of KBR's work for the U.S. army in Iraq. In Thursday trading, Halliburton shares closed up 10 cents at $32.94, while KBR fell 2 cents to $20.54.

Biosite says Inverness plans competing bid

Thu Apr 5, 2007 12:42pm EDT

http://www.reuters.com/article/2007/04/05/us-biosite-inverness-idUSN0540901920070405

PHILADELPHIA - Biosite Inc. BSTE.O, which has agreed to be acquired by Beckman Coulter Inc. BEC.N, said on Thursday that Inverness Medical Innovations Inc. IMA.A was planning an unsolicited offer to buy Biosite for $90 per share.

Inverness already owns 4.9 percent of Biosite, which makes tests that help in the diagnosis of heart conditions and other diseases. At $90 per share, Inverness's potential offer to buy the remaining shares of Biosite it does not already own would be valued at about $1.56 billion. Beckman said last month it would acquire Biosite for $85 per share, or about $1.55 billion, to expand its presence in the market for the diagnosis and assessment of heart failure. Biosite stock surged 9 percent, or $7.61, to $91.91 in noon trading on Nasdaq. Beckman's shares lost $1.44, or 2.2 percent, on the New York Stock Exchange. Shares of Inverness hit a low of $38, but recovered to trade at $41.70, down $3.11, or 6.9 percent, on the American Stock Exchange. Inverness said it must review Biosite's proprietary financial records before a formal offer could be submitted. Biosite said its board is evaluating Inverness' letter, but declined to comment further. "This is a surprising and extremely aggressive move by (Inverness), especially give the size of the deal," Stifel Nicolaus analyst Gregory Simpson said in a research report. Inverness has a market capitalization of about $2 billion, or about half the size of Beckman's $4.2 billion market capitalization. "We find the move interesting but are uncertain of the strategy, to say the least," said Simpson. Stifel Nicolaus cut its investment rating on Inverness to "hold" from "buy." Beckman reiterated its commitment to acquire Biosite and said it could complete the deal in 30 days. Beckman said its proposal was "superior to the unsolicited, highly speculative and conditional letter that Biosite has received from Inverness Medical." The unsolicited offer by Inverness "raises questions as to the success of (Inverness's) ongoing cardiology R&D (research and development)," Simpson said. "Does the proposed Biosite acquisition strengthen this strategy significantly or does it suggest that Inverness's internal efforts have been disappointing and unsuccessful?" The Beckman-Biosite deal grew out of a relationship the two companies had over the past four years in the area of B-type Natriuretic Peptide (BNP), a test that aids in the diagnosis and severity-assessment of heart problems. The threat of a competing bid may force Beckman to sweeten its deal, but it may be restrained it how much it could offer, said one arbitrageur who declined to be named. Beckman's stock has dropped about 5 percent since March 23, the last trading day before it announced its deal with Biosite. Shares of Biosite have surged 66 percent over that same time period. (Additional reporting by Jessica Hall)

Kerkorian offers $4.5 billion to buy Chrysler

Thu Apr 5, 2007 4:15pm EDT

http://www.reuters.com/article/2007/04/05/us-daimlerchrysler-kerkorian-idUSN0521013720070405

DETROIT - Kirk Kerkorian, the 89-year-old billionaire who was once Chrysler Corp.'s largest single shareholder, offered to pay $4.5 billion to buy the struggling automaker from DaimlerChrysler DCXGn.DEDCX.N, which paid almost $40 billion for it less than a decade ago.

Kerkorian -- who made the offer on Thursday through investment vehicle Tracinda Corp. -- said in a letter to DaimlerChrysler's supervisory board that he was willing to put down a $100 million deposit as a sign of good faith. It was the first publicly disclosed bid for Chrysler and it sent DaimlerChrysler's U.S.-listed shares up almost 5 percent. The offer is contingent on Chrysler working out a favorable labor contract with the United Auto Workers union, the letter said. Tracinda said it would offer the UAW and Chrysler management the opportunity to participate as equity partners in the deal. DaimlerChrysler spokesman Thomas Froehlich said "all options are open," but declined to comment specifically on Tracinda's offer. Erich Merkle, an analyst with IRN, said the $4.5 billion offer sounded on the low side. "I think Chrysler can probably fetch some place higher than, say, $5 billion," Merkle said, but added that it was "really damaged merchandise" right now. "I know Blackstone had offered $4.6 or $4.7 (billion) a few weeks ago," Merkle said. Kevin Tynan, analyst with Argus Research, agreed with Merkle's cost assessment and said this would likely be Tracinda's opening salvo. "I would imagine if it winds up being Tracinda ... it winds up higher than $4.5 billion," he said. DaimlerChrysler's U.S. shares rose $3.93 to $84.49, their highest point since July 1999. In the past year, the shares have traded as low as $45.98, which it hit last July. Tracinda also said it seeks exclusive rights to conduct due diligence on Chrysler, which it believes could be completed within 60 days. Sources close to the situation have told Reuters that private equity groups Cerberus Capital Management CBS.UL and Blackstone Group BG.UL, plus Canadian car parts group Magna International Inc. MGa.TO are all possible candidates to take over Chrysler. FIVE TO SEVEN YEARS After the 1998 buyout of Chrysler, Kerkorian sued DaimlerChrysler, charging that Daimler management deceived shareholders by characterizing the deal as a "merger of equals." The suit was later dismissed. He also shook up Chrysler more than a decade ago with a failed hostile takeover bid. Kerkorian previously owned as much as 9.9 percent of General Motors Corp. ( GM.N ), but sold out of GM stock last year following the automaker's rejection of his proposed three-way tie-up with Nissan Motor Co. ( 7201.T ) and Renault SA. In a separate letter to DaimlerChrysler Chief Executive Dieter Zetsche, former Chrysler executive and current Kerkorian adviser Jerome York said a long-term approach was needed to solve Chrysler's problems. York said it would likely take five to seven years to build Chrysler into a "robust and lasting, stand-alone entity." He also noted that a private ownership approach was in the "best interest of all Chrysler constituencies." York said a substantial portion of Chrysler equity should be offered to UAW as part of finding a solution to rising health care costs. UAW spokesman Roger Kerson declined to comment on Tracinda's bid. UAW President Ron Gettelfinger said last week in Detroit that the union wanted DaimlerChrysler to retain the U.S. unit. "This latest offer reinforces our view that the most likely outcome for Chrysler is a sale to a private equity buyer which promises a conciliatory approach to labor," Lehman Brothers analyst Brian Johnson said. (Additional reporting by Nick Zieminski in New York and Michael Shields in Frankfurt)

Adidas to consolidate US operations

Thu Apr 5, 2007 5:02pm EDT

http://www.reuters.com/article/2007/04/05/us-adidas-reorganization-idUSWNAS577620070405

- Adidas AG ADSG.DE said it will consolidate its Adidas and Reebok U.S. apparel and footwear distribution centers into new facilities in Spartanburg, South Carolina by fall 2009, affecting about 375 employees.

The facilities in Memphis, Tennessee and Hebron, Kentucky are expected to remain in operation until fall 2008 and those at Stoughton and Norwood, Massachusetts and an existing Spartanburg facility are expected to remain in operation until fall 2009. The affected employees belong to the company's apparel distribution facilities in Memphis and Hebron, and at footwear distribution facilities in Stoughton and Norwood, the company said in a statement. Adidas employees currently in Spartanburg will move to the new site a few miles away, it said. (Reporting by Anup Roy in Bangalore)

Kerkorian bid may put Chrysler in tight spot

Thu Apr 5, 2007 7:10pm EDT

http://www.reuters.com/article/2007/04/05/us-daimlerchrysler-exclusivity-idUSN0545133520070405

NEW YORK - Billionaire Kirk Kerkorian's Tracinda Corp. has written an exclusivity clause into its $4.5 billion offer to buy Chrysler that industry experts call a shrewd move but a potentially troublesome one for the auto maker's board.

DaimlerChrysler, which confirmed on Wednesday that it was talking with prospective buyers of the money-losing Chrysler unit, could run into problems with irate rival bidders and disgruntled shareholders if it accepts an exclusive arrangement with just one buyer, academics said. Kerkorian, who was once Chrysler's largest single shareholder, is seeking 60 days' exclusive rights to conduct due diligence on Chrysler. "It's classic Kerkorian -- it's shrewd, smart, excellent business," said Anthony Sabino, attorney for Sabino & Sabino and a professor of law and business at St. John's University. "He knows Chrysler very well. He's trying to move in and snag it, or a significant interest in it ...," Sabino said. "But Chrysler's board has to be very careful here because, as is well established under American corporate law, once you're on the block, you have to keep yourself open to all bidders." Tracinda, Kerkorian's investment vehicle, said in a letter addressed to DaimlerChrysler's Supervisory Board, dated and made public on Thursday, that in order to secure exclusivity it was willing to put down a $100 million deposit. It offered to forfeit $25 million of that if it fails to pursue a deal. Sabino argues that while DaimlerChrysler could give a certain amount of exclusivity to one bidder, it will have to eventually allow everyone to do due diligence and make bids. The offer comes as private equity firms Blackstone Group, Cerberus Capital Management, and Canadian auto parts maker Magna International are pursuing their own bids for Chrysler, a source previously told Reuters. A spokesman for DaimlerChrysler declined to comment when asked if the automaker could in theory participate in such an exclusivity agreement. Kerkorian's offer is unique in that with most auctions, potential buyers get in line with the rest of the suitors, hoping their bid wins approval from the company and its advisers. Investment banking advisors typically try to keep an auction as open as possible. Allen Michel, professor of finance and economics at Boston University's School of Management, said an exclusivity deal could potentially result in litigation against DaimlerChrysler's board from rival bidders and shareholders, although he declined to speculate on how likely such litigation would succeed. "Anytime you are putting restraints on an auction process, some of the parties are going to feel as though they were deprived of an opportunity," Michel added. SMART MOVE? Dealing exclusively with just one party is a delicate balancing act for a seller, whose executive board is typically compelled to consider all options on the table and to choose which one will offer the best return for shareholders. "You have to look at all the circumstances -- how many other bidders are there, where do you think those bidders are likely to come in relative to the bidder that is seeking exclusivity and where does $4.5 billion stand relative to what you'd like to get for the asset?" said Morton Pierce, partner and chairman of the firm's Mergers and Acquisitions group at law firm Dewey Ballantine. Pierce added that it is a matter of business judgment as to whether to go exclusive with one party or engage with many. "A seller has no obligation to be fair (to bidders) -- their obligation is to get the best price they can for their shareholders," he said. (Additional reporting by Michael Flaherty )

Exclusive: Peugeot and Opel halt talks on further tie-up

Tue Nov 13, 2012 1:54pm EST

http://www.reuters.com/article/2012/11/13/us-peugeot-gm-talks-stalled-idUSBRE8AC0RK20121113

LONDON/FRANKFURT/PARIS - General Motors and alliance partner PSA Peugeot Citroen have halted talks on a deeper tie-up amid misgivings about the French carmaker's worsening finances and government-backed bailout, people familiar with the matter said.

The companies, already pursuing an operational partnership announced in February, had also been exploring a full combination of Peugeot with GM's European unit Opel, which is based in Germany. Two sources with direct knowledge of those discussions said they were broken off after Peugeot accepted a state guarantee for its lending arm last month and announced a further deterioration of its cash position. The automakers have agreed to a "pause" in early-stage talks on a Peugeot-Opel deal, said one of the sources. The government bailout is "sabotaging the plan", he added. "They now consider that any deeper tie-up is unlikely before 2014, when the market picks up," another source said. "The government bailout conditions rule out French job cuts, which means a deal can't happen any faster," he said. "It would be politically impossible to have all the cuts falling on the German side." A Peugeot spokesman said there were no Opel tie-up talks currently in progress, breaking a month of silence since such talks were first reported. "There are no such discussions underway," the spokesman said, declining to comment on past conversations. GM is "fully focused on earning the benefits from the alliance that we have identified", a Detroit-based spokesman for the U.S. company said, citing previously announced plans. He refused to elaborate on any other discussions. With their costly French and German plants and exposure to austerity-strapped southern European markets, Peugeot and Opel are major casualties of Europe's protracted slump in auto sales, which has left the industry struggling with surplus capacity. Peugeot, which is burning though 160 million euros ($200 million) of cash a month, is scrapping 10,000 jobs and a domestic plant. GM, which predicts European losses of $1.5-1.8 billion this year, is in union talks to close an Opel factory in Bochum, Germany. An imminent tie-up would have required deeper plant and workforce cuts on both sides, the same sources said. One option discussed would have seen GM transfer Opel to the new combined entity along with a $5 billion cheque to offset future losses and restructuring, according to one of the people. That could have allowed the U.S. automaker to expunge the underperforming division from its own accounts. Unlike 15 percent state-owned Renault, Peugeot has no government shareholder. But political influence has grown as its finances weakened, leading to the 18.5 billion euro refinancing deal that put a ministerial representative on the board. Unveiling the bailout, including a 7 billion euro state guarantee, ministers said they would expect to be consulted on strategy and sounded a cautious note on the GM alliance. "Peugeot needs to build alliances," Industry Minister Arnaud Montebourg said in an October 23 interview with daily Liberation. "But we need to ... measure their consequences for our country and obtain Peugeot's commitment to preserve all its French sites," he told the newspaper. Montebourg's office did not immediately return calls and messages seeking comment for this story. The French bailout stirred doubts in Detroit, which further deepened with Peugeot's warning that net debt would rise in 2012 as the group consumes cash faster than it can sell assets. Peugeot shares have plunged 57 percent this year, compared with a 25 percent gain by GM, which last month posted $1.48 billion in third-quarter profit on strong U.S. sales. "GM is looking at this and saying, 'What the heck are we doing here?'" said a person familiar with the company's thinking. "Peugeot's incentives to cooperate may have changed because the French government is at the table," he said. "They're not going to want to have Opel building Peugeot product." GM and Peugeot announced plans in February and March to pool European purchasing, logistics and vehicle program, including a project dropped last month for a future small car for Brazil. The deal also saw GM pay $400 million for a 7 percent stake in its troubled French partner. The decision to shelve a deeper tie-up may renew critical scrutiny of the existing alliance plan, already questioned by some investors. The dropped car program in Brazil, where Peugeot needs a partner to cut costs, hurts the company "in the area where they needed help the most", Credit Suisse analyst Erich Hauser said. Peugeot has sacrificed other relationships and markets to pursue the broader GM alliance, which is now falling short of early expectations. Ford, a longstanding engine partner, said in April it would stop making larger diesels with Peugeot, and BMW dissolved their hybrid parts venture to team up with Toyota instead. The French automaker blamed financing problems for its February decision to halt sales to Iran - the Peugeot brand's second-biggest market - but GM told investors its new partner had promised to exit the country. Peugeot had also flagged plans to build cars with GM in India and seek a partner to develop rechargeable hybrids, but GM said it was interested in neither project. Setbacks aside, the depth of Europe's slump is making the alliance and its promise of eventual gains seem irrelevant, according to Credit Suisse's Hauser. "It's become obvious that the plan announced in February is just inadequate," he said. "For it to make sense there would have to be a plan B." ($1 = 0.7867 euros) (Additional reporting by Soyoung Kim and Ben Klayman ; Editing by Will Waterman and Peter Graff )

Japan lawmakers agree to avert 'fiscal cliff', election looms

Tue Nov 13, 2012 2:14am EST

http://www.reuters.com/article/2012/11/13/us-japan-politics-fiscal-idUSBRE8AC07520121113

TOKYO - Japan's ruling and opposition parties agreed on Tuesday to quickly pass a deficit funding bill in parliament, in a move that will keep the country from falling off its version of a 'fiscal cliff' as the prime minister eyes elections as early as next month.

The bill is needed to borrow some $480 billion and fund roughly 40 percent of this fiscal year's budget. Without it, the government could run out of money by the end of this month and would have to stop debt auctions next month, just as the economy teeters on the brink of a recession. Until recently the opposition has used its control of the upper house to stall the bill in a bid to press Prime Minister Yoshihiko Noda to call an election. Noda had promised in Agusut to go to the polls "soon" in order to win support for an unpopular plan to hike the sales tax. Hoping to force Noda's hand, however, the main opposition Liberal Democratic Party (LDP) and its former coalition ally New Komeito have changed tack and looked poised to pass the deficit bond bill Noda has set as a condition for calling elections. "I'm glad that we have demonstrated the wisdom of parliament by overcoming differences between ruling and opposition parties," Goshi Hosono, policy affairs chief of the ruling Democratic Party of Japan (DPJ), told reporters. "We managed to show the people even at the last minute that parliament is functioning," he said, after striking a deal with his counterparts from the two opposition parties. The bill is expected to pass in the lower house as early as Thursday and looks set to be enacted in the upper house with the backing of the two opposition parties during the current parliament session that ends on November 30. In reaching the deal, the Democrats made concessions to the opposition parties by promising to review spending earmarked for the current fiscal year and curb deficit bond issuance. The three parties agreed to allow issuance of deficit bonds through the fiscal year that starts in April 2015, meaning that passage of deficit bond bills would be secured without the bills being taken as a political hostage in the coming few years. Countering a concern that guaranteeing issuance of deficit bonds may jeopardize fiscal discipline, the three parties said in a statement that the deal was aimed at stabilizing fiscal management on condition that the government keeps such bond issuance under control and maintains sustainable finances. The three parties also said they would seek a swift end to deferrals on government spending such as on tax grants to rural governments, which have been put in place since September to avoid a cash crunch due to the deadlock over the funding bill. Finance Minister Koriki Jojima told reporters on Tuesday that swift passage of the bill is badly needed as the government is considering crafting an extra budget at some point to stimulate the economy after a contraction in the third quarter. Noda, under opposition pressure to call an early poll, looks to be leaning towards holding one as early as next month, after pledging support for a controversial U.S.-led free trade pact. But some in his party would prefer to delay the day of reckoning with support for his government at its lowest since Noda took office last year. The risk that Japan could lurch over its "fiscal cliff" -- a term coined to describe massive tax hikes and spending cuts that could hit the United States early next year -- has prompted fresh warnings from rating agencies that a prolonged political gridlock could prompt credit downgrades. (Editing by Kim Coghill)

Exclusive: Wells names firm veteran to lead private client group

Tue Nov 13, 2012 3:43pm EST

http://www.reuters.com/article/2012/11/13/us-wells-promotion-idUSBRE8AC14P20121113

- Wells Fargo Advisors, one of the biggest U.S. brokerage firms, said it has tapped company veteran David Kowach to take charge of its private client group, the company said Tuesday.

The group, which is the largest division of Wells Fargo & Co's ( WFC.N ) brokerage channel, includes nearly 11,000 advisers in standalone brokerage offices. Kowach is replacing Jim Hays, who recently left the private client group to oversee a smaller group of brokers based at the bank's branches. Hays had run the private client group since 2005. Kowach, who will report to Danny Ludeman, chief executive of Wells Fargo Advisors, began his career as a financial adviser two decades ago. Most recently he led the firm's business development group, where he was in charge of increasing financial adviser productivity, recruitment, retention, as well as national sales. Wells Fargo advisers reached by Reuters Tuesday described Kowach as a well-liked insider who knows the ins and outs of the firm. An adviser based in the Southeast, who asked not to be identified because he wasn't authorized to speak to the press, said Kowach's biggest challenge will be to preserve Wells' regional feel while continuing to compete with the other large brokerage firms, including Morgan Stanley Wealth Management ( MS.N ) and Bank of America Corp's ( BAC.N ) Merrill Lynch Wealth Management. Both have larger adviser forces and more assets under management. Many Wells advisers promote the firm as being focused on "Main Street," contrasting St. Louis-based brokerage with Wall Street-based financial companies. (Reporting By Jennifer Hoyt Cummings; Editing by Steve Orlofsky)

Germany eyes "bundled" loan payment to Greece: source

Tue Nov 13, 2012 8:15am EST

http://www.reuters.com/article/2012/11/13/us-eurozone-greece-report-idUSBRE8AC0HL20121113

BERLIN - European countries deliberating on the payment of delayed loans to Greece could decide to bundle several tranches together in a single transfer of roughly 44 billion euros, a German government source said.

Under the terms of its second bailout programme, Greece was due to receive 31.2 billion euros by the end of June, plus an additional 5 billion by the end of September and 7.2 billion euros by the end of December. The sources said these three payments could be combined to avoid stoking uncertainty with further deliberations on tranches in the coming weeks and months. A German finance ministry spokeswoman said no final decision had yet been made on further loan payments to Greece under its second international bailout programme. Earlier, the euro rose to a session high and German Bund futures fell on a report in the Bild newspaper that the tranches could be bundled. Loans have been held up since Athens went off track with promised reforms and budget cuts, partly as a result of holding two elections in the space of three months earlier this year. Earlier on Tuesday, Greece's international lenders clashed over how to help the stricken country bring its debts down to a sustainable level. German Chancellor Angela Merkel, anxious to avoid losses for her taxpayers ahead of Germany's federal elections next September, is resisting IMF calls for euro zone governments to write off some of the Greek debt they hold. However, French Finance Minister Pierre Moscovici said bailout money should flow to Athens by the end of November. (Reporting by Gernot Heller ; Writing by Gareth Jones. Editing by Jeremy Gaunt.)

UK regulator to probe HSBC

Tue Nov 13, 2012 1:44pm EST

http://www.reuters.com/article/2012/11/13/us-hsbc-jersey-idUSBRE8AC0UT20121113

JERSEY - Jersey's financial watchdog is to probe anti-money laundering systems and controls at HSBC, following a report that Europe's biggest bank was harboring money for convicted criminals.

Britain's Daily Telegraph newspaper said on Friday it had been handed leaked data that identified 4,388 British-based people holding 699 million pounds ($1.1 billion) in current accounts, including celebrities and bankers. Jersey's Financial Services Commission said on Tuesday it was to investigate "the matters raised by the press, including how the misappropriation of data occurred". While HSBC has refused to confirm the authenticity of the leaked client data for confidentiality reasons, the report has left Jersey's financial services sector - a critical component of the island's economy - facing a severe image crisis. London-listed HSBC, conducting its own investigation into the circumstances surrounding the alleged leak, has agreed to co-operate, the Commission said. Antonio Simoes, appointed deputy chief executive of HSBC Bank Plc and head of its British bank in November, was in Jersey on Sunday and Monday to meet the regulator and kickstart the banks' own probe. "We are pleased that the JFSC will look into how the misappropriation of data occurred, and apologize again to our customers for this," Simoes said in a statement on Tuesday. Last week, HSBC said probes by the United States into anti-money laundering failures in its international operations could result in a fine of more than $1.5 billion. "BASHED" The regulator and Jersey residents told Reuters they were frustrated about insinuations in the press before the facts of the case were clear. "We get bashed all the time. It is aggravating because a lot of time and effort goes into regulating," Barry Faudemer, director of enforcement at the Jersey Financial Services Commission, told Reuters. Geoff Cook, chief executive of lobby group Jersey Financial, said he was more concerned about the implications for loss of privacy enjoyed by account holders rather than the allegations of money-laundering failures. "The breach of data was unhelpful for Jersey, but not damaging because this is not a systemic issue," he said. The commission has set up an anonymous whistleblowing telephone line to help collect information that will identify regulatory misconduct. Jersey politician Geoff Southern said: "It is absolutely vital for the reputation of the island that they do a thorough investigation and that the results are made public in the widest sense. It is no good saying that you have got the best regulation in the world if you cannot show it". (Writing by Sinead Cruise and Chris Vellacott; Editing by Dan Lalor)

State Street battles weak FX revenue, high compensation costs

Tue Nov 13, 2012 11:57am EST

http://www.reuters.com/article/2012/11/13/us-banks-statestreet-idUSBRE8AC0TX20121113

- Weak foreign exchange revenue persists at State Street Corp ( STT.N ), hurting the custody bank's chances of lowering its high ratio of compensation expenses, top executives said on Tuesday.

Some shareholders, including activist investor Nelson Peltz, have criticized State Street's compensation-to-revenue ratio, saying it is too high. State Street's goal is to keep the ratio at about 39 percent, compared with 40 percent in 2011. But that goal could be hard to meet as foreign currency trading revenue withers from slack volume and volatility while key customers shift away from transactions with higher profit margins. State Street Chief Financial Officer Ed Resch said on Tuesday he expects the compensation-to-revenue ratio to be pressured, primarily because of weak trading revenue. He made his remarks during a presentation with State Street Chairman and Chief Executive Jay Hooley at the Bank of America Merrill Lynch Banking and Financial Services Conference in New York. Meanwhile, State Street is battling a number of lawsuits that allege the bank overcharged clients on forex trades that were not negotiated. These so-called standing instruction trades had been a lucrative franchise for State Street. The bank denies any wrongdoing, but pension funds, for example, are now telling their investment managers to negotiate more forex trades and to do fewer standing instruction transactions. State Street's third-quarter foreign exchange revenue dropped 44 percent to $115 million from the year-ago level of $204 million, partly because of the change in client behavior. In a closely watched forex case, the Arkansas Teacher Retirement System and State Street entered into private mediation talks during two days in late October. But the $12 billion pension fund and the bank were unable to settle the case, lawyers said in a November 2 joint status report filed in U.S. District Court in Boston. State Street shares were up 0.7 percent at $44.68 at midday on Tuesday. (Reporting by Tim McLaughlin in Boston; editing by Matthew Lewis )

Exxon in talks with buyers for Iraq West Qurna 1 field: Shahristani

Tue Nov 13, 2012 12:05pm EST

http://www.reuters.com/article/2012/11/13/us-iraq-oil-exxon-idUSBRE8AC0UB20121113

LONDON - Exxon Mobil ( XOM.N ) is in advanced stages of discussions with potential buyers to take on the West Qurna 1 oilfield, Deputy Prime Minister for Energy Hussain Shahristani said on Tuesday.

He told reporters on the sidelines of the Oil and Money conference in London that Exxon would soon hand over the field to a company that had the capabilities to exploit it, but he declined to say how many companies there were or to identify their country of origin. ExxonMobil has informed the Iraqi government it wants to pull out of the $50 billion oil project in southern Iraq. Russia's second largest crude producer LUKOIL ( LKOH.MM ) said on Friday it would study an offer from Exxon to take over the West Qurna-1 oilfield, Interfax news agency said. LUKOIL, which is already developing West Qurna-2, has previously said West Qurna-1 is "too big for it to swallow", but on Friday said it would at least look into the proposal. (Reporting by Simon Falush ; Editing by Anthony Barker)

Cisco to meet quarterly target, disappointment expected on outlook

Mon Nov 12, 2012 9:47pm EST

http://www.reuters.com/article/2012/11/13/us-cisco-earnings-idUSBRE8AB0X020121113

- Tech investors hoping for good news may have to look further than Cisco Systems Inc's ( CSCO.O ) quarterly report as analysts expect Chief Executive John Chambers to be pessimistic in his forecast for the coming year.

Cisco, which is expected to meet estimates when it reports its first-quarter results on Tuesday, is seen as harbinger in terms of spending on information technology because of its global reach and customers across all sectors. Chambers has been warning since April that businesses are reluctant to spend and that conditions will get worse before they get better. Most analysts expect him to stay conservative given continued financial weakness in Europe and a drop in U.S. federal spending as concerns mount over the so-called fiscal cliff, which refers to a combination of tax hikes and spending cuts that loom at the end of the year and may tip the economy into recession. JP Morgan analyst Rod Hall said he has changed his investment recommendation on Cisco to neutral from overweight in light of weak corporate and government spending as well as the continued economic pressure in Europe, but also in regard to longer term risks. "To be clear, we're not making a call on (fiscal quarter)FQ1'13, but do believe FQ2'13 guidance is likely to disappoint and expect 2013 to be a tough year as macro pressures persist," he said. Hall also said he anticipated that Cisco could face some risks by 2014 from technological developments such as software defined networking (SDN). SDN lets customers create virtual networks that can operate independently of underlying physical networks, which may pose a threat to Cisco's network dominance. BMO Capital Markets analyst Tim Long said that in light of a cautious outlook BMO has reduced its 2013 earnings per share outlook to $1.94 from $1.96 and lowered its sales outlook for Cisco to revenue of $48.9 billion from $49.2 billion. "October results should at least meet expectations, though guidance is likely more at risk," Long said in a note. Analysts, on average, expect Cisco to post EPS of 46 cents and revenue of $11.79 billion in the quarter that runs until end-October, according to Thomson Reuters I/B/E/S. Wedbush analyst Rohit Chopra said Cisco has proven it can ride out tough times. "Despite the macroeconomic environment, we believe Cisco is well positioned given its track record in navigating challenging environments, its broad portfolio of products, and continued actions to control its cost structure ahead of its rivals," Chopra said. "We advise long-term investors looking for a well-capitalized company that can weather an uncertain spending environment to own the stock." Cisco shares were up slightly at $16.90 on Monday. The stock has lost around 10 percent in the past month and is down 7 percent year-to-date. (Reporting By Nicola Leske; Editing by Peter Galloway)

Sears moldy washer suit can proceed as a class action

Tue Nov 13, 2012 6:09pm EST

http://www.reuters.com/article/2012/11/13/us-sears-mold-idUSBRE8AC19620121113

- Customers suing Sears, Roebuck and Co ( SHLD.O ) over alleged mold defects in their Kenmore-brand washing machines can bring their claims as a class action, a federal appeals court ruled on Tuesday.

The 7th U.S. Circuit Court of Appeals, in Chicago, found that customers who sued over alleged mold buildup in the machines had enough in common to band together and pursue their claims collectively. "It is more efficient for the question whether the washing machines were defective - the question common to all class members - to be resolved in a single proceeding than for it to be litigated separately in hundreds of different trials," Judge Richard Posner wrote for a unanimous three-judge panel. Customers in six states who purchased Sears' Kenmore-brand washing machines after 2001 sued the company in federal court in 2006. One group of consumers claimed that the front-loading machines, with low water level and low water temperature, did not clean themselves adequately. The result was a buildup of mold in the drum that emitted a bad odor, the owners claimed. A second group of consumers said a defect in the control unit caused the machines to stop mid-cycle. Sears argued that the customers claiming mold problems could not sue together because the machines' manufacturer, Whirlpool Corp ( WHR.N ), had made a number of design modifications that undermined the similarity of individual owners' experiences. The trial judge agreed, refusing to certify the class on the mold claims. But the 7th Circuit reversed that ruling on Tuesday. "Sears does not contend that any of Whirlpool's design changes eliminated the odor problem but only that they reduced its incidence or gravity," Posner wrote. If the design changes greatly reduced the amount of mold buildup, the lower-court could then break the class into smaller groups, he added. Posner noted a decision by the 6th Circuit granting class status to a group of Ohio consumers who sued Whirlpool over similar mold claims. In the same opinion on Tuesday, the 7th Circuit panel also upheld the lower-court judge's decision to allow the customers alleging control-panel defects to proceed as a class. Sears, in a statement, said the ruling conflicts with Supreme Court precedent, and that the company would likely request a rehearing before a larger panel of the court. "An overwhelming majority of our customers have never experienced any mold or odor in these machines, even after many years of use," the company said, citing service data. Four of the six plaintiffs named in the lawsuit admitted they have had no mold problems, Sears said. Whirlpool did not immediately respond to a request for comment. Jonathan Selbin, a lawyer for the consumers, welcomed the decision. "It's a reaffirmation from a very influential court that when a company sells a defective product to thousands of consumers, the doors to the courthouse remain open because they can band together in a class and level the playing field," Selbin said. The case is Butler et al v. Sears, Roebuck and Co, 7th U.S. Circuit Court of Appeal, Nos. 11-8029, 12-8030. (Reporting By Terry Baynes in New York; Editing by Steve Orlofsky and Dan Grebler)

BofA launches card reader for small businesses

Tue Nov 13, 2012 12:28pm EST

http://www.reuters.com/article/2012/11/13/us-bankofamerica-cards-idUSBRE8AC0VJ20121113

- Bank of America Corp ( BAC.N ) on Tuesday said it is offering small business customers a credit card reader that can be used through their smartphones, adding competition for providers such as Square Inc.

Bank of America Merchant Services, a joint venture between the No. 2 U.S. bank by assets and First Data Corp, said "Mobile Pay on Demand" will be available starting December 3. It works with smartphones and Apple Inc ( AAPL.O ) iPads. The service comes with a free app and reader, the bank said. Merchants pay swipe fees with each transaction. The device is the latest entry in a changing payments industry that includes "mobile wallets" in which customers use their smartphones to make purchases and new types of point of sale terminals for merchants. (Reporting By Rick Rothacker in Charlotte, N.C.; Editing by Bob Burgdorfer )

Peace deal frees BP to cooperate with Rosneft

Tue Nov 13, 2012 11:31am EST

http://www.reuters.com/article/2012/11/13/us-tnk-bp-idUSBRE8AC0J920121113

LONDON/MOSCOW - BP ( BP.L ) moved towards closer ties with Russia's Rosneft ( ROSN.MM ) as its existing partners in the oil-rich country dropped opposition to an alliance with the state oil major in exchange for what sources said was a $325 million payoff.

BP and AAR, the holding company of a group of Soviet-born businessmen and co-owner of the TNK-BP TNBP.MM venture being sold to Rosneft, said they had agreed to end the legal battles that had blighted their decade-old partnership. Both sides last month decided that divorce was the best option, agreeing separately to sell their TNK-BP stakes to Rosneft in a $55 billion takeover. The deals, which point to increasing state control of Russia's energy assets under President Vladimir Putin, will make Rosneft the dominant producer in the world's No.2 oil exporter and give BP a 19.75 percent Rosneft stake. The British company will now be free to revive efforts to forge an offshore partnership with the Russian national oil champion after a failed attempt last year landed in the courts. "Today's agreement allows both AAR and BP to move forward and focus on the future," said David Peattie, head of BP Russia. $325 MILLION PAYMENT "BP will be able to concentrate on the sale of our interest in TNK-BP to Rosneft and on working more closely with them as we develop the next stage of BP's long involvement in Russia." AAR, which represents tycoons Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, had won an injunction blocking the deal, which was abandoned after an arbitration panel found it violated TNK-BP's shareholder agreement. The tycoons then launched a second round of arbitration to determine whether BP had made itself liable to damages through its agreement in January last year to exchange equity stakes and explore for oil with Rosneft under Russia's Arctic waters. Sources familiar with the matter said that the two sides agreed to settle all their disputes, including arbitration, before a final ruling by a London-based tribunal. The settlement included a $325 million payment by BP to AAR, the sources said. That is significantly less than the $5 billion to $10 billion that TNK-BP might have sought in damages had arbitration found in favor of AAR, according to comments in May by sources close to the shareholder group. AAR Chief Executive Stan Polovets nonetheless declared himself satisfied with the settlement, describing it in a statement as a "win-win" for both sides. ARCTIC PARTNERSHIP? "The settlement enables BP and AAR to focus on issues that are most important at this stage - closing our respective transactions with Rosneft and ensuring that TNK-BP continues to operate at world-class levels during the transition period that lies ahead," Polovets said. Both sides declined on-the-record comment on the terms of the settlement. Until the settlement, BP had been unable to discuss any other kinds of co-operation because of the legal wrangle in London. Now it will be able to discuss the secondment of BP engineers, exploration projects and other co-operation deals with its new partner, including the potential revival of plans for joint exploration in the Russian Arctic. "BP is not taking an equity position in Rosneft as a portfolio investor - they are looking at a future relationship through which they can grow production and reserves in Russia," said Chris Weafer, chief strategist at Sberbank CIB. "From Rosneft's perspective, they see the opportunity down the road of expanding globally together with BP." Since the collapse of last year's deal, Rosneft has signed an offshore exploration deal with U.S. oil company ExxonMobil ( XOM.N ), covering the three blocks in the Arctic's Kara Sea that had been earmarked for BP. Rosneft, headed by powerful Putin ally Igor Sechin, has also partnered Italy's Eni ( ENI.MI ) and Norway's Statoil ( STL.OL ) to search for oil on Russia's continental shelf. (Editing by David Holmes and David Goodman)

Airshow: China sells jetliners, may spur Eastern revival

Mon Nov 12, 2012 9:37pm EST

http://www.reuters.com/article/2012/11/13/us-china-airshow-idUSBRE8AC03B20121113

ZHUHAI, China - China announced 50 new orders for its new Comac C919 passenger jet at the opening of the country's main air show on Tuesday and looked set to assist in the rebirth of one of the most famous names in aviation -- defunct U.S. carrier Eastern Air Lines.

The dozens of new orders for China's first large commercial passenger jet were seen dominating the first day of the China Airshow, held every two years in the southern city of Zhuhai, along with fresh evidence of China's military ambitions. The latest orders for the 150-seat plane will boost the official total to 380, reaching the state-owned manufacturer's declared breakeven point of 300-400 orders. Western analysts however say it will be some time before the aircraft, due to make its maiden flight in 2014, proves its viability. The C919 is designed to challenge Airbus ( EAD.PA ) and Boeing ( BA.N ) in the largest segment of the $100 billion annual jetliner market. Commercial Aircraft Corporation of China (COMAC) said on Tuesday it would sign orders for 20 aircraft each with Joy Air and Hebei Aviation Group, confirming a Reuters report of buying interest from the two Chinese regional carriers. Its only foreign customer GECAS, a unit of General Electric ( GE.N ) which co-produces the engines, will buy 10 more, taking its total order for the plane to 20, COMAC said in a statement. Other potential C919 customers that have already signed tentative agreements also include Irish low-cost carrier Ryanair ( RYA.I ) and British Airways IVAG.L, according to COMAC. COMAC also confirmed it would sign a provisional agreement with investors representing Eastern Air Lines, which went bankrupt in 1991. There have been sporadic reports of efforts to relaunch the airline, whose forked logo was seen on display as a backdrop to the signing ceremony due later on Tuesday. Once led by former World War I ace Eddie Rickenbacker and later by former Apollo astronaut Frank Borman, Miami-based Eastern Air Lines rose to become one of the largest airlines in the world before losing a battle against low-cost competition. The air show -- attended by a record 650 exhibitors -- also featured prototypes of a new Chinese business aircraft and a model of a new stealth fighter China hopes to build for export. Industry publication Aviation Week noted the model bore a "striking resemblance" to an aircraft recently photographed flying from the Shenyang Aircraft factory, which captured worldwide interest from military analysts and publications. (Reporting by Alison Leung, Editing by Tim Hepher and Jeremy Laurence )

"Fiscal cliff" already affecting U.S. economy: BofA CEO

Tue Nov 13, 2012 12:28pm EST

http://www.reuters.com/article/2012/11/13/us-bankofamerica-moynihan-idUSBRE8AC0NP20121113

- Fiscal brinkmanship in Washington is already affecting the U.S. economy as worried businesses invest less in equipment, Bank of America Corp ( BAC.N ) Chief Executive Brian Moynihan said.

U.S. lawmakers return to the capital Tuesday with a seven-week deadline to agree on averting the so-called fiscal cliff - scheduled tax hikes and budget cuts, set to take effect in January, which threaten to tip the nation into another recession. <ID: nL1E8MD0B9> "That uncertainty continues to hold back the recovery," Moynihan said Tuesday at an investor conference in New York. The bank's clients need more clarity before they make investments, he said. Moynihan and chief executives of other major financial services companies sent a letter last month to President Barack Obama and members of Congress urging them to find a bipartisan solution. The parties involved know a resolution is needed in the first quarter of next year, Moynihan said, adding he remained optimistic about the outcome. Moynihan, the opening speaker at a conference hosted by his bank, spent most of his presentation highlighting his efforts to streamline Bank of America, which required two bailouts during the financial crisis. In his nearly three years as CEO, the bank has shed more than $60 billion in non-core assets and businesses, generating more $12 billion in Tier 1 common capital. In its continued downsizing, the bank plans to reduce its mortgage servicing portfolio to about 6 million loans, down from about 8 million now and 12 million at its peak, Moynihan said. Bank of America has been scaling back its role in the mortgage business after incurring massive losses on its disastrous 2008 Countrywide Financial acquisition. Servicing mortgage loans - collecting payments and assisting delinquent homeowners - has grown more expensive during the housing bust and requires more capital under new international rules. "We continue to look at transactions," Moynihan said. "We have been selling servicing in relatively sizable chunks to the market." The bank's shares were up 0.4 percent at $9.43 in morning trading. (Editing by Bernadette Baum )

Home Depot view up as housing heals; Sandy lift looms

Tue Nov 13, 2012 2:42pm EST

http://www.reuters.com/article/2012/11/13/us-homedepot-results-idUSBRE8AC0FF20121113

- Home Depot Inc ( HD.N ) raised its full-year outlook on Tuesday, even before considering any future sales lift from superstorm Sandy, as the retailer benefited from a recent uptick in the U.S. housing market.

The nascent recovery in housing has encouraged professional contractors to buy more in recent months. Home Depot, the world's largest home improvement chain, has also gained from its own efforts to improve distribution, cut costs and localize marketing and merchandising. Janney Capital Markets analyst David Strasser said Sandy "will certainly help the home improvement sector in the next few quarters". The fact that Home Depot's new forecast does not include those benefits was helping to push up the stock, he said, along with "further evidence of a company running on all cylinders." Shares of Home Depot, which also beat analysts' quarterly earnings and sales estimates, were up 4.2 percent at $63.72 in midday trading. "Sales were considerably higher than we had anticipated," said Chief Financial Officer Carol Tome in an interview. "The whole store performed better than expected." "We believe we're on a path to recovery. We're not there, but we're on a path," she said. The U.S. housing market, which is being buoyed by low interest rates and falling inventories, is becoming "an assist to growth, rather than an anchor," added. Rising sales are pushing down the stock of unsold properties on the market, lifting prices and giving builders more confidence to take on new projects. The company said it had rung up $70 million in third-quarter sales to consumers who stocked up on flashlights, batteries, generators and extension cords before Sandy slammed into New Jersey on October 29, the day after the quarter ended. Home Depot expects a bigger sales boost ahead because of rebuilding efforts, but could not pinpoint its magnitude or timing. Home Depot raised its full-year sales growth forecast to 5.2 percent from 4.6 percent. The company said it expected earnings of $3.03 a share, excluding an 11-cent charge for closing stores in China. Its prior full-year forecast, given before news of the China closures, called for a profit of $2.95 per share. The new forecast implies fourth-quarter earnings of 62 cents per share, according to Janney Capital Markets analyst David Strasser. That is one cent higher than analysts' average estimate, according to Thomson Reuters I/B/E/S. Home Depot derived about $360 million in incremental sales from Hurricane Irene last year, whose strong winds tore off roofs and caused trees to fall on homes. So far, estimates are pegging property damage from Sandy at around $20 billion, Tome said, versus about $16 billion from Irene. "With Sandy sadly, this is structural. Homes are destroyed," said Tome. "It's more like Katrina, and if you think about Katrina, the rebuilding continues in New Orleans." So far in November, sales have been "quite good," Tome said, with strength in the southern and western parts of the country, which the storm did not affect. The company's outlook reflects plans to buy back $700 million in additional shares this quarter, which would bring the total value of repurchases for the year to $4 billion. Net earnings rose to $947 million, or 63 cents per share, in the third quarter from $934 million, or 60 cents per share, a year earlier. Excluding a charge for closing seven stores in China, Home Depot said earnings were 74 cents per share. On that basis, analysts were expecting 70 cents. Sales rose nearly 5 percent to $18.13 billion, topping analysts' estimates of $17.93 billion. Sales at stores open at least a year increased 4.2 percent globally, including a 4.3 percent rise in the United States. Edward Jones analyst Robin Diedrich was expecting same-store sales growth of just above 3 percent. "Things are going pretty well for them, with sales remaining strong," said Diedrich, who has a "hold" rating on the shares due to their valuation. "The stock has done extremely well and trades at quite a premium to the rest of retail." Home Depot has been taking market share from rival Lowe's Cos Inc ( LOW.N ) with the help of better pricing and customer service, analysts have said. Lowe's, which has lagged Home Depot in same-store sales for 13 straight quarters, plans to report its results next week. (Reporting by Martinne Geller and Dhanya Skariachan in New York; Editing by Lisa Von Ahn, Bernard Orr )

CBOE sues ISE for $525 million over options trading system

Tue Nov 13, 2012 5:00pm EST

http://www.reuters.com/article/2012/11/13/us-ise-cboe-patent-lawsuit-idUSBRE8AC17H20121113

- The Chicago Board Options Exchange has sued International Securities Exchange LLC for at least $525 million, accusing its rival of infringing three patents related to an automated options trading system.

In a complaint filed on Monday in the U.S. District Court in Chicago, CBOE said the patents were issued in 2008, 2011 and 2012, and cover systems to monitor quote risk and automatically adjust quotes when risk exposure gets too high. The Chicago-based unit of CBOE Holdings Inc ( CBOE.O ) said these methods are "crucial to market maker participation" and that ISE, a unit of Deutsche Boerse AG ( DB1Gn.DE ), has deprived it of profit and royalties by infringing its patents. CBOE is seeking a minimum of $525 million to cover what it described as lost profit and reasonable royalties. It is also seeking triple damages if any infringement is deemed willful. Molly McGregor, a spokeswoman for ISE, declined to comment. Both exchanges have fought each other for years over a range of intellectual property issues. CBOE filed its complaint six months after a U.S. appeals court in Washington, D.C. revived ISE's own patent infringement lawsuit challenging CBOE's hybrid trading system, which combines floor-based "open outcry" trading and electronic trading. ISE is an all-electronic platform. Less than three weeks after the May 7 federal appeals court ruling, an Illinois state appeals court upheld a ban on ISE from listing Standard & Poor's 500 .SPX index options, one of CBOE's most profitable products, and Dow Jones Industrial Average .DJI options. The case is Chicago Board Options Exchange Inc v. International Securities Exchange LLC, U.S. District Court, Northern District of Illinois, No. 12-09085. (Reporting by Jonathan Stempel in New York; Editing by Leslie Gevirtz )

Verizon Wireless to pay $8.5 billion dividend to its owners

Mon Nov 12, 2012 8:09pm EST

http://www.reuters.com/article/2012/11/13/us-verizon-vodafone-dividend-idUSBRE8AB17S20121113

NEW YORK - Verizon Wireless said on Monday that its board agreed to pay a total dividend of $8.5 billion to its two parent companies, Verizon Communications ( VZ.N ) and Vodafone Group Plc ( VOD.L ).

The announcement follows months of investor speculation as to whether Verizon Wireless would pay a dividend this year. Verizon Communications, which owns 55 percent of Verizon Wireless and is dependent on wireless operations for growth, could put the cash toward its capital spending, debt interest or its own shareholder dividends, Barclays analyst James Ratcliffe said. "It's driven primarily by the cash needs of Verizon Communications," said Ratcliffe, who had expected a distribution in the range of $10 billion to $12 billion. Verizon declined to comment on the size of the pay-out or how it plans to use the cash. The pay-out is down from the $10 billion dividend that Verizon Wireless announced in July 2011 and paid in January 2012. In the past, the dividend had been a bone of contention for Vodafone shareholders, anxious to get a return on their ownership in the top U.S. wireless service. The dividend had been suspended from 2005 through 2010 while Verizon Wireless focused on paying down debt. Verizon Wireless said the distributions would be paid in one or more tranches, with each tranche paid in proportion to the two owners' partnership interests. The announcement came the day before Vodafone was due to report its half-year results. The dividends are due to be paid on or before December 31, Verizon Wireless said. Vodafone's U.S. shares ( VOD.O ) edged higher in late trade after closing at $26.39 on Nasdaq. Verizon shares rose to $42.62 after closing at $42.56 on the New York Stock Exchange. (Reporting By Sinead Carew; Editing by Phil Berlowitz, Andrew Hay and Leslie Adler)

Assured Guaranty, Flagstar make final pleas in key loans case

Mon Nov 12, 2012 10:56pm EST

http://www.reuters.com/article/2012/11/13/us-assured-flagstar-idUSBRE8AC04H20121113

NEW YORK - Lawyers delivered closing arguments in a closely watched U.S. case brought by Assured Guaranty Ltd ( AGO.N ) against Flagstar Bancorp Inc ( FBC.N ) over claims the quality of loans underlying $900 million in mortgage-backed securities were misrepresented.

More than three-fourths of 800 loans the bond insurer examined failed to comply with Flagstar's underwriting guidelines, Assured counsel Jacob Buchdahl told the judge during closing arguments in a federal court in Manhattan on Monday. Assured is seeking $116 million in damages. Similar lawsuits by insurers including Assured, MBIA Inc.( MBI.N ) and Ambac Financial Group IncABKFQ.PK are pending against banks such as JPMorgan Chase & Co( JPM.N ), Credit Suisse Group AG( CSGN.VX ) and Bank of America Corp's( BAC.N ) Countrywide Financial unit. The case against Flagstar was the first of those lawsuits to reach trial. Veronica Rendon, a lawyer for Flagstar, called Assured's approach to establishing liability "cavalier," and attacked a core expert witness for Assured as being "nothing more than a talking head." U.S. Judge Jed Rakoff in Manhattan, who is presiding over the non-jury trial, said he expects to issue a final decision by the end of January. Filed in April 2011, the lawsuit accused the Troy, Michigan-based lender of misrepresenting the quality and characteristics of loans underlying two mortgage securitizations issued in 2005 and 2006 valued at more than $900 million. Buchdahl described 25 loans that he said contained evidence of fraud by borrowers that should have been spotted by Flagstar, such as inflated incomes or undisclosed debts. Rendon said Assured had failed to establish that Flagstar was aware of various loan breaches that required repurchasing. For example, online search tools such as Salary.com were used to determine expected incomes for the careers of various borrowers in the securitizations. But Rendon said the websites had only contemporaneous data, not salaries for the period when the loans were originated more than six years ago. Stewart Aaron, another lawyer for Flagstar, also criticized Assured's method of estimating damages. Assured relied on a statistical analysis of a handful of the 16,000 loans underlying the two transactions. But Aaron said Assured relied on an "insufficient sample size." Flagstar said in its earning announcement October 23 that it was increasing its litigation reserves by $40 million to address its exposure to "pending and threatened litigation." Paul Borja, Flagstar's chief financial officer, declined on an analyst conference call the next day to say whether the reserve increase was attributable to Assured's lawsuit. Shares in Assured Guaranty closed down 3.13 percent at $13.28 on the New York Stock Exchange. Flagstar shares closed up 2.11 percent at $16.41. The case is Assured Guaranty Municipal Corp v Flagstar Bank, FSB in U.S. District Court for the Southern District of New York, No. 11-2375. (Reporting By Nate Raymond in New York; Editing by Jeremy Laurence )

EU, IMF clash over Greece revives debt crisis fears

Tue Nov 13, 2012 2:18pm EST

http://www.reuters.com/article/2012/11/13/us-eurozone-greece-idUSBRE8AA0IV20121113

BRUSSELS - A public clash between Greece's international lenders over how Athens can bring its debts down to a sustainable level has reignited fears that Europe's troubles could flare up anew.

Euro zone finance ministers suggested Greece, where the euro zone debt crisis began, should be given until 2022 to lower its debt to GDP ratio to 120 percent but International Monetary Fund chief Christine Lagarde insisted the existing target of 2020 should remain, in an unusually public airing of disagreement. Beneath her sharp exchange with Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, lies a rift over whether euro zone governments need to write off some of Greece's debt to them to make it manageable. IMF officials have pressed for such a "haircut" while Germany, the biggest contributor to euro zone bailout funds, has vehemently rejected it as illegal. German Finance Minister Wolfgang Schaeuble told reporters on Tuesday that the 2020 deadline was "a little too ambitious". "There's a debate about a haircut for official creditors. On that I will say, and most countries have said so in the past few weeks, that that's legally not possible," he added. Chancellor Angela Merkel has signaled she wants to keep Greece in the euro zone but is determined to avoid losses for German taxpayers before a general election in September 2013. With so much stake, diplomats remain confident that a deal will be done to release a 31.5-billion-euro tranche of bailout money, which Athens urgently requires to avert bankruptcy. But it is a way off yet. Financial markets, which have been calmed by the European Central Bank's pledge to buy euro zone government bonds to shore up the currency bloc, took a dim view of the failure to agree. The euro dipped to a two-month low against the dollar and safe-haven German Bund futures rose to two-month highs. "There seems to be quite a big difference of opinion between the IMF and euro zone finance ministers ... but our view is still that Greece won't leave the euro zone," Rabobank rate strategist Lyn Graham-Taylor said. Juncker said a further meeting of the 17-nation Eurogroup would take place on November 20 and officials said more negotiations could be required the week after that to nail down a new deal. French Finance Minister Pierre Moscovici told reporters that bailout money should flow by the end of the month. "Our objective is to reach an agreement in principle on November 20 so that we can ... proceed to the disbursement of funds by the end of this month," he said. The euro later gained some poise after a German government source said the euro zone could decide to bundle several tranches together in a single transfer of roughly 44 billion euros for Greece, to avoid stoking uncertainty with further deliberations in the coming weeks and months. But that cannot happen until the lenders reach a broader agreement. The delay left Athens scrambling to meet a 5-billion-euro bond repayment deadline on Friday. Greece sold 4.062 billion euros ($5.14 billion) of one- and three-month treasury bills on Tuesday and while that sale was insufficient to redeem the 5 billion, the debt agency will accept additional non-competitive bids by Thursday, enabling it to raise the full amount. With Greece's overall debt pile set to hit 190 percent of GDP next year, the IMF has set 120 percent as the target, saying that anything much above that is not sustainable, given Greece's low growth prospects and high external borrowing requirements. "All avenues in order to reduce debt on Greece are being explored and will continue to be explored in the coming days," Lagarde said. NUMBERS GAME If the IMF, which is concerned to avoid damage to its own integrity, were to walk away from the Greek bailout, the euro zone would have to contribute extra funds and its reputation in financial markets could be severely damaged. Equally, if the IMF were to back down, its authority would be diminished. The euro zone ministers did agree on Monday to give Greece two more years to make the spending cuts demanded of it but by doing so they face an extra funding bill of around 33 billion euros, according to a document prepared for the meeting. A target was set in March for Greece to achieve a primary surplus of 4.5 percent of GDP in 2014. That will now be moved to 2016, giving Athens some breathing space to temper a deep recession that is to all intents and purposes a depression. Despite Greece approving a tough 2013 budget on Sunday, which it hoped would meet conditions for the release of the next tranche of emergency loans under its second bailout programme, Lagarde said more work was needed to cement the budget measures. "There will be a few, only a few, additional prior actions to be verified in the coming days," she said. Loans have been held up since Athens, which has received two bailout packages from the euro zone and IMF, went off-track with promised reforms and budget cuts, partly as a result of holding two elections in the space of three months earlier this year. Until the bailout money flows, Greece is issuing short-term paper to keep itself afloat, although the government owes suppliers increasing amounts. Its debt agency expressed confidence that the 5-billion-euro issue maturing on November 16 will be fully funded. Three officials told Reuters that the "troika" of international institutions - the EU, IMF and ECB - had concluded that Greece's debt burden will fall only to 144 percent of gross domestic product in 2020 and roughly 10 percentage points lower two years later if current policies do not change. To get the higher figure down to 120 percent of GDP requires lopping the best part of 50 billion euros of Greece's debt pile. Among the new instruments under consideration to reduce Greek debt are the removal of the 150-basis-point interest above financing costs on 53 billion euros of bilateral government loans to Greece, and lengthening the maturity of the loans. Greece may also borrow from the euro zone bailout fund to buy back its privately held debt, of which there is 50-60 billion euros, taking advantage of the deep discount it trades at to save money on redemptions and interest payments. "It may be that we take some measures to reduce interest rates that will have an immediate effect on the budget," Schaeuble said. "Apart from that, we expect that the problems will be solved within the financial framework of the second programme by allowing more time with additional measures." (Additional reporting Luke Baker, Daniel Flynn, John O'Donnell and Robin Emmott in Brussels; Writing by Mike Peacock; Editing by Paul Taylor and Alastair Macdonald )

White House lists two dozen leaders to meet with Obama on deficit

Mon Nov 12, 2012 9:25pm EST

http://www.reuters.com/article/2012/11/13/us-usa-fiscal-obama-leaders-idUSBRE8AC03720121113

WASHINGTON - Two dozen business, labor and civic leaders, including the chief executives of major U.S. corporations such as Ford, IBM and Wal-Mart, will meet President Barack Obama to discuss how to control the federal deficit, said the White House on Monday.

Obama was scheduled to meet labor and civic leaders on Tuesday, followed by a meeting with business executives on Wednesday. A White House official said the leaders would discuss "the best ways to move our economy forward and find a balanced approach to reduce the deficit." Unless the president and lawmakers agree, a combination of tax increases and government spending cuts will take effect in early 2013, the so-called fiscal cliff that would reduce the deficit but harm the U.S. economy. Expected at the meeting on Tuesday were four labor leaders - Mary Kay Henry of the Service Employees International Union, Lee Saunders of the public employees union AFSCME, Dennis Van Roekel of the National Education Association and Richard Trumka of the AFL-CIO, the umbrella organization for U.S. labor. Also at the session on Tuesday would be leaders of civic and politically progressive groups. They were John Podesta and Neera Tanden of the Center for American Progress, Robert Greenstein of the think tank Center on Budget and Policy Priorities, Laura Burton Capps of Common Purpose Project, Max Richtman of the National Committee to Preserve Social Security, Justin Ruben of MoveOn and Deepak Bhargava of Center for Community Change. Business executives invited to meet the president on Wednesday were Mark Bertolini of Aetna Inc, Ursula Burns of Xerox Corp, Kenneth Chenault of American Express Co, David Cote of Honeywell International Inc, Michael Duke of Wal-Mart Stores Inc, Jeffrey Immelt of General Electric Co, Andrew Liveris of Dow Chemical Co, Robert McDonald of Procter & Gamble Co, Alan Mulally of Ford Motor Co, Indra Nooyi of PepsiCo Inc, Ginni Rometty of IBM, and John Watson of Chevron Corp. (Reporting by Charles Abbott ; Editing by Lisa Shumaker )

GE, Pickens' Clean Energy in natural-gas supply deal for trucks

Tue Nov 13, 2012 7:02am EST

http://www.reuters.com/article/2012/11/13/us-ge-cleanenergy-naturalgas-idUSBRE8AC0HQ20121113

- General Electric Co ( GE.N ) reached a deal to sell equipment to Clean Energy Fuels Corp ( CLNE.O ), which is building out a series of liquefied natural gas fueling stations for U.S. truckers.

The largest U.S. conglomerate sees liquefied natural gas equipment as becoming a $1 billion market over the next five years, said Mike Hosford, general manager of unconventional resources for GE Oil & Gas. Clean Energy, which counts T. Boone Pickens as its largest investor, agreed to buy two GE-made MicroLNG plants to provide liquefied natural gas for a network of 70 natural gas fueling stations it is opening at truck stops along U.S. interstate highways this year, the company said in a statement released on Tuesday. "We currently have some LNG production facilities, but the country is going to need more," said Andrew Littlefair, Chief Executive of Clean Energy, in a statement released on Tuesday. "These two plants are critical in our next phase (of expansion) and we are going to need more plants over time." By the end of 2012, Clean Energy aims to have in place natural-gas filing stations at existing truck stops on major highways across the United States, at intervals of roughly 250 miles apart. Next year it aims to boost its count to 150 filling stations, Littlefair said. U.S. natural gas production has grown rapidly in recent years as advances in hydraulic fracturing technology have opened up new supplies of the fuel. Surging production has driven down prices, making it a more appealing fuel for everything from power plants to truck engines made by companies including Cummins Inc ( CMI.N ). Trucks using liquefied natural gas can save about 25 percent on their fuel costs, Clean Energy estimated, though the engines add to the cost of the truck. Having its own conversion plants, which can take natural gas from pipelines and chill it into the liquefied form used in trucks will be critical to meeting demand, said GE's Hosford. He noted that today much liquefied natural gas, or LNG, is produced by electric power stations at off-peak times. "As soon as a cold day comes around, the utility is obligated to supply that gas to generate power for its customers," Hosford said. "There is not enough LNG capacity in the United States." Texas oilman Pickens owns 20.8 percent of Clean Energy, according to Reuters data. (Reporting By Scott Malone; editing by Andrew Hay)

Sears moldy washer suit can proceed as a class action

Tue Nov 13, 2012 3:05pm EST

http://www.reuters.com/article/2012/11/13/us-sears-mold-idUSBRE8AC13520121113

- Customers suing Sears, Roebuck and Co ( SHLD.O ) over alleged mold defects in their Kenmore-brand washing machines can bring their claims as a class action, a federal appeals court ruled on Tuesday.

The 7th U.S. Circuit Court of Appeals, in Chicago, found that customers who sued over alleged mold buildup in the machines had enough in common to band together and pursue their claims collectively. "It is more efficient for the question whether the washing machines were defective - the question common to all class members - to be resolved in a single proceeding than for it to be litigated separately in hundreds of different trials," Judge Richard Posner wrote for a unanimous three-judge panel. Customers in six states who purchased Sears' Kenmore-brand washing machines after 2001 sued the company in federal court in 2006. One group of consumers claimed that the front-loading machines, with low water level and low water temperature, did not clean themselves adequately. The result was a buildup of mold in the drum that emitted a bad odor, the owners claimed. A second group of consumers said a defect in the control unit caused the machines to suddenly stop mid-cycle. Sears argued that the customers claiming mold problems could not sue together because the machines' manufacturer, Whirlpool Corp ( WHR.N ), had made a number of design modifications that undermined the similarity of individual owners' experiences. The trial judge agreed, refusing to certify the class on the mold claims. But the 7th Circuit reversed that ruling on Tuesday. "Sears does not contend that any of Whirlpool's design changes eliminated the odor problem but only that they reduced its incidence or gravity," Posner wrote. If the design changes greatly reduced the amount of mold buildup, the lower-court could then break the class into smaller groups, he added. Posner noted a decision by the 6th Circuit granting class status to a group of Ohio consumers who sued Whirlpool over similar mold claims. In the same opinion on Tuesday, the 7th Circuit panel also upheld the lower-court judge's decision to allow the customers alleging control-panel defects to proceed as a class. Sears declined to comment on the litigation, and Whirlpool did not immediately respond to a request for comment. Jonathan Selbin, a lawyer for the consumers, welcomed the decision. "It's a reaffirmation from a very influential court that when a company sells a defective product to thousands of consumers, the doors to the courthouse remain open because they can band together in a class and level the playing field," Selbin said. The case is Butler et al v. Sears, Roebuck and Co, 7th U.S. Circuit Court of Appeal, Nos. 11-8029, 12-8030. (Reporting By Terry Baynes in New York; Editing by Steve Orlofsky)

Raymond James shuts Brazil unit on regulatory hurdles

Tue Nov 13, 2012 12:11pm EST

http://www.reuters.com/article/2012/11/13/us-raymondjames-brazil-idUSBRE8AC0UQ20121113

RIO DE JANEIRO - Brokerage and investment bank Raymond James Financial Inc ( RJF.N ) announced on Tuesday it was closing its equity research operations in Sao Paulo, Brazil, due to tax and regulatory hurdles.

A small number of employees who support Latin American sales and trading will also lose their jobs in New York and London, the St. Petersburg, Florida-based firm said in a statement. Raymond James had eight analysts in Sao Paulo and four employees supporting Latin American trading and sales in New York and London, said a bank source, requesting anonymity. "The firm has concluded that the costs, structural impediments, and complex legal, tax and regulatory environments are impeding sufficient return on invested capital," Raymond James said in a statement. The firm added it will keep its affiliate operations in Argentina and Uruguay, in addition to global operations in the United States, Canada and Europe. A spokeswoman for the bank in New York offered no additional comment. On its website, Raymond James says its international subsidiaries and affiliates employ 47 analysts based outside the United States, who cover more than 400 companies. (Reporting by Walter Brandimarte and Paula Laier; Editing by Maureen Bavdek and Jan Paschal )

Analysis: Tough task for Portugal to match Ireland's bond success

Tue Nov 13, 2012 4:59am EST

http://www.reuters.com/article/2012/11/13/us-ireland-portugal-markets-idUSBRE8AC0D620121113

DUBLIN/LISBON - Portugal is going to have a tough time following fellow euro zone bailout beneficiary Ireland's route back into the bond markets.

Its first post-bailout venture -- a bond swap -- was right out of the Irish playbook. But further down the road subdued attempts to woo investors and deeper fiscal woes stand in Lisbon's way. Portugal last month carried out the bond swap in an identical manner to the one Ireland ran in January. The Irish move later kicked off a flurry of bond activity in Dublin which included another swap, a first amortizing issue and the pinnacle -- the raising of new long-term debt. It was a clear success for Ireland, which like other countries bailed out by European Union peers had been locked out of capital markets because of fears it could not repay its debt. Dublin credits the success to a strict implementation of its bailout program, the return last year to economic growth and a punishing schedule of investor roadshows that started back in May 2011 when bond yields were approaching record highs. Unlike Ireland, Portugal has had to grapple with recession, angry demonstrations, emergency budget cuts and -- according to the head of Dublin's debt agency -- a self-imposed exile from the investor roadshow circuit. "Portugal has sort of disappeared from the international circuit," John Corrigan, chief executive of Ireland's National Treasury Management Agency (NTMA) said in a speech earlier in the year. He contrasted this with Ireland's action after getting a bailout from the EU, European Central Bank and International Monetary Fund, known as the troika of lenders. "With Ireland's entry into the troika program, we took the view that we needed to actually redouble our investor relation efforts... It is a slow, deliberate process but one which I believe is starting to pay dividends," Corrigan said. The NTMA met more than 200 institutional investors from Europe to North America, Asia and the Middle East between May 2011 and the early part of this year, putting forward the case for an Irish recovery at a time when most analysts saw a second bailout as virtually unavoidable. More recently Corrigan's team have held meetings in China, the United States and Europe as it mulls a syndicated issue in dollars, euros or both that would start 2013 off with a bang and make the need for more help seem almost inconceivable. Portugal's journey has been far more downbeat. It only recently kicked off a series of roadshows where it invited international investors to Lisbon to explain its strategy for an Irish-style return. "The NTMA is more active and more transparent in talking to investors, but it could be a bit of an unfair comparison. The Irish really have to do it now," said David Schnautz, strategist at Commerzbank in New York, referring to a steep post-bailout funding cliff that Dublin has almost fully tackled. "But just being open to be contacted is not enough. Ireland for example has flagged the types of clients it plans to target. We would not mind getting more information out of Portugal." HOW WILL PORTUGAL GROW? It is not just a question of timing and style, however. The traditional foreign-heavy holding of Irish debt -- just 17 percent was in domestic hands at end-June -- left Dublin with a relatively untapped buyer base at home when it began to plot a market return. The NTMA detailed plans to diversify its funding in July to attract that group, saying it would issue staged payment, or amortized bonds and inflation-linked paper for the first time. It raised the first 1 billion euros of an expected 3-5 billion euros from the two types of bond a month later. With the domestic, foreign-owned split in Portugal much closer to 50/50, fewer avenues would appear open to them. "Portuguese banks and investors have been more involved in its bond market, so there's less low hanging fruit," said Danske Bank's Owen Callan, a Dublin-based primary dealer of Irish bonds. Ultimately, however, the successful full return to the bond markets will depend on the economy. Again, Ireland is a better sell. Despite relentless austerity, stubbornly high unemployment and growing numbers struggling to pay their mortgages, Ireland's export-orientated economy managed to eke out growth last year and avoid joining most of the euro zone in recession. Portugal, by contrast, is one of those countries feeling the strain most, kicking off a debate that has appeared only on the sidelines in Ireland, whether bailout medicine -- which recently included the sharpest tax rises in living memory -- will only serve to push it into a recessive Greek-like spiral. Popular patience and political consensus has begun to fray in Portugal -- there is a general strike on Wednesday -- whereas Ireland, who voted in a centre-right led coalition with a record majority last year has enjoyed industrial peace disturbed only by the occasional, relatively small protest. That would explain why while both have witnessed big bond market rallies in recent months, the yield on 10-year Portuguese debt is still almost twice that of Ireland's at 8.89 percent. "Ireland is seen as (one) who had been doing terribly well and suffered a setback, but it is an open, growing economy that has largely capped its bank problem," said Luca Jellinek, head of European Rates Strategy at Credit Agricole in London. "But with Portugal the question of a second bailout will not go away. One can't help noticing the quality of their fiscal work is deteriorating as is the political situation. "Basically, investors are asking, how the hell will Portugal grow." (Writing by Padraic Halpin. Editing by Jeremy Gaunt.)

Microsoft and Google financials could surface at trial

Tue Nov 13, 2012 4:41am EST

http://www.reuters.com/article/2012/11/13/us-microsoft-google-trial-idUSBRE8AC08920121113

- Microsoft and Google's Motorola Mobility unit are set to square off on Tuesday at a trial with strategic implications for the smartphone patent wars and which could reveal financial information the two companies usually keep under wraps.

The proceeding in a Seattle federal court will determine how much of a royalty Microsoft Corp should pay Google Inc for a license to some of Motorola's patents. Google bought Motorola for $12.5 billion, partly for its library of communications patents. If U.S. District Judge James Robart decides Google deserves only a small royalty, then its Motorola patents would be a weaker bargaining chip for Google to negotiate licensing deals with rivals. Apple Inc and Microsoft have been litigating in courts around the world against Google and partners like Samsung Electronics Co Ltd, which use the Android operating system on their mobile devices. Apple contends that Android is basically a copy of its iOS smartphone software, and Microsoft holds patents that it contends cover a number of Android features. Motorola had sought up to $4 billion a year for its wireless and video patents, while Microsoft argues its rival deserves just over $1 million a year. A federal judge in Wisconsin last week threw out a similar case brought by Apple against Google just before trial. During the run-up to trial in Seattle, both Microsoft and Google asked Robart to keep secret a range of financial details about the two companies, including licensing deals and sales revenue projections. Google requested that Robart clear the courtroom when witnesses discuss those details. However, in an order on Monday, Robart rejected that request. The public will not be able to view the documents describing patent deals or company sales during trial, Robart ruled, but testimony will be in open court. "If a witness discloses pertinent terms, rates or payments, such information will necessarily be made public," the judge wrote. Additionally, any documents the judge relies on for his final opinion will be disclosed, Robart wrote on Monday. Representatives for Microsoft and Google could not immediately comment on the ruling. The case in U.S. District Court, Western District of Washington is Microsoft Corp. vs. Motorola Inc., 10-cv-1823. (Reporting By Bill Rigby in Seattle and Dan Levine in San Francisco; editing by Jim Marshall )

Schaeuble: paying 3 tranches to Greece together is under discussion

Tue Nov 13, 2012 11:28am EST

http://www.reuters.com/article/2012/11/13/us-eurozone-greece-tranches-idUSBRE8AC0SH20121113

BRUSSELS - EU finance ministers met on Tuesday seeking to break an impasse over a new regime to supervise banks, but with much of the plan contested and time running short to agree.

Their talks followed a meeting of euro zone finance ministers where disagreement between Greece's international lenders over how long to give Athens to get its debts down to a sustainable level reignited fears that the euro zone debt crisis could flare anew. For highlights of comments from ministers and officials after the talks click on: [ID:nL5E8MD30I] (Brussels newsroom)

Goldman Sachs shutting South Korea asset management unit

Tue Nov 13, 2012 3:56am EST

http://www.reuters.com/article/2012/11/13/us-goldmansachs-koreafunds-idUSBRE8AC09U20121113

SEOUL/HONG KONG - Goldman Sachs Group Inc ( GS.N ) is quitting the South Korean asset management business just five years after entering the highly competitive market, the firm's Hong Kong-based spokesman said on Tuesday.

South Korea, Asia's third-biggest asset management market, is dominated by domestic institutions and wafer-thin profit margins have made it difficult for companies with sub-scale operations to make an impact. Goldman's decision to wind down its asset management operations comes at a time when ING Groep NV ( ING.AS ) is struggling to find a buyer for its Asia investment management unit, which includes South Korean operations. Goldman's unit manages about $4 billion in assets and has about 40 staff. While the fate of staff is not clear, the Hong Kong spokesman said Goldman will try to absorb them in other parts of the company. "Our expectations for the local Korean asset management business have not been met," Niklas Ekholm, a London-based spokesman for Goldman Sachs Asset Management, said in a separate statement. Goldman will continue to invest in South Korea through its offshore funds management unit, the Hong Kong spokesman added. Goldman moved into the South Korean market by acquiring a joint venture between Macquarie Group ( MQG.AX ) and local firm IMM Investment Management. (Reporting by Joyce Lee and Nishant Kumar; Writing by Denny Thomas ; Editing by Matt Driskill)

Businesses turn to tax fight, some stung by Romney bets

Tue Nov 13, 2012 11:17am EST

http://www.reuters.com/article/2012/11/13/us-usa-tax-corporate-idUSBRE8AC05Q20121113

WASHINGTON - As major U.S. businesses dive into the Washington tax policy debate now that the presidential election is over, some are finding themselves in an awkward position after betting heavily on Mitt Romney.

The Republican, who lost in last week's vote, was backed overwhelmingly not only by Wall Street, but also by the oil and gas, agribusiness, construction, private equity and transportation sectors, according to data from the Center for Responsive Politics. That puts some businesses on the outs with President Barack Obama and his fellow Democrats, who tightened their grip on the Senate after reelection to a second term, some corporate lobbyists said. "For most businesses, this wasn't necessarily their desired outcome ... There's some patching up that needs to be done," said Pam Olson, a tax lawyer at PricewaterhouseCoopers and a former senior tax official under President George W. Bush. Alone among major segments of Corporate America, the high technology and communications sector wagered heavily on Obama. Tax breaks that are central to businesses, both in and out of favor with Democrats, will be in play as Washington deals with the year-end "fiscal cliff" and as lawmakers edge toward a possible full-scale overhaul of the tax code in 2013-2014. The president is expected to meet with business leaders on Wednesday to talk about fiscal issues. Top of the agenda is avoiding the fiscal cliff, a volatile mix of tax increases and spending cuts that, in the absence of a deal in Congress to avert it, could tip the United States into recession. Among those slated to attend the White House meeting are General Electric Co Chief Executive Jeffrey Immelt, already a top Obama adviser, American Express Co CEO Kenneth Chenault and Aetna Inc CEO Mark Bertolini. "I really don't think it's any secret that the business community has had some reservations about the agenda in Washington over the course of the last four years, but that is now history," Jay Timmons, head of the National Association of Manufacturers, said last week on a conference call with reporters. The tax aspects of the fiscal cliff mostly apply to individuals, but some corporate breaks are involved. One is a provision that lets companies accelerate depreciation of new equipment. That is scheduled to expire at the year end, potentially raising tax costs for capital-intensive businesses. Similarly, the research-and-development tax credit cuts across multiple sectors. The R&D credit - one of many items on the "tax extenders" list - expired at the end of 2011. It is up for renewal and has wide political support. Divisions will emerge as the tax debate unfolds among businesses based on the actual tax rates paid by each sector. Retailers such as Wal-Mart Stores Inc tend to pay higher rates, while drug makers such as Pfizer Inc pay a lot less than the 35 percent corporate tax rate that is on the books. Further, businesses organized as "S-corps" - which pay taxes through the individual tax code and not the corporate tax code as "C-corps" do - will see tax rates rise if Congress agrees with Democrats to lift rates on income above $200,000. Case in point: JPMorgan Chase & Co CEO Jamie Dimon's recent statement that he would be willing to pay higher personal tax rates in exchange for a deficit-cutting deal at year's end. As a C-corp CEO, Dimon's personal tax situation does not affect JPMorgan. That is not the case for an S-corp executive. FENCES TO MEND? Other corporate tax provisions are more specific. Some have been targeted for repeal by the Obama administration, possibly to help pay for lowering the overall corporate income tax rate from 35 percent and potentially paring the deficit. Private equity firms have fought for years to protect the "carried interest" tax benefit that lets senior partners pay the 15 percent capital gains tax rate on a big slice of their gains, rather than the top 35 percent income tax rate. The Obama administration has targeted the carried interest break for repeal, but the industry so far has fought this off. Oil and gas companies have several tax provisions - such as the well depletion allowance and expensing of intangible drilling costs - that they have defended for many years. Obama would like to remove these, too. "We certainly don't want to be used as a pay-for," said Brian Johnson, a senior tax adviser at the American Petroleum Institute, the industry's trade group, using Washington short-hand for a tax provision that would raise revenues if repealed. He said the industry has no fences to mend with Democrats and that raising taxes on energy companies would be "a short-sighted solution." The institute is set to kick off a multi-state advertising campaign within days. Silicon Valley and the communications business are in a better position than energy and finance companies in defending their tax positions, said Dean Garfield, president of the Information Technology Industry Council, which represents technology companies. Regarding the general state of relations between businesses and the White House, Garfield acknowledged: "There are some feelings that have been hurt." Looking to 2013, lawmakers are aiming for a full-scale revamping of the tax code. Carrying out this politically dicey task is far from certain, but the effort will reveal big fault lines. For example, curbing the value of big breaks such as the home mortgage write-off is among the options being floated to minimize the code's special favors. That would hurt homebuilders and banks that finance housing, but it would leave export-heavy industries such as technology and aerospace relatively unscathed. ENERGY LEANED TO ROMNEY An analysis by the Center for Responsive Politics, a campaign finance watchdog, showed that executives and family members of energy and natural resource companies gave $8.6 million to Romney and $2.2 million to Obama. The figures, drawn from Federal Election Commission records, are current up to October 25 so they exclude the campaign's last days before the November 6 election. The energy sector's nearly 4-to-1 bias toward Romney exceeded Wall Street's. The finance, insurance and real estate sector donated $52.1 million to Romney and $18.7 million to Obama, a nearly 3-to-1 ratio, the data showed. Other sectors that backed Romney included agribusiness at 3-to-1; construction, by about 2-to-1 and transportation, 4-to-1. Conversely, Obama was supported by the communications and electronics sector by about 3-to-1. "An election is really a reset button and the American people have spoken. They have chosen their leaders. The business community will respond to that," Timmons said. (Additional reporting by Sarah Lynch and Patrick Temple-West ; Editing by Howard Goller , Andre Grenon and Bernadette Baum )

French finance minister: aim is to disburse funds to Greece by end-Nov

Tue Nov 13, 2012 4:21am EST

http://www.reuters.com/article/2012/11/13/us-eurogroup-greece-moscovici-idUSBRE8AC0AQ20121113

BRUSSELS - EU finance ministers meet on Tuesday seeking to break an impasse over a new regime to supervise banks, but with much of the plan contested and time running short to agree, the European Union risks seeing this centerpiece reform unravel.

Their talks follow a meeting of euro zone finance ministers where disagreement between Greece's international lenders over how long to give Athens to get its debts down to a sustainable level reignited fears that the euro zone debt crisis could flare anew. (Brussels newsroom)

Congress, Obama playing with dynamite, CEOs say of "fiscal cliff"

Tue Nov 13, 2012 6:23pm EST

http://www.reuters.com/article/2012/11/13/us-usa-fiscal-nyse-honeywell-idUSBRE8AC17Y20121113

BOSTON - Corporate America is raising the volume of its plea that the U.S. government avert a year-end "fiscal cliff" that could send the nation back into recession, but chief executives aren't pushing the panic button just yet.

With a heated election season in the rear-view mirror, executives are calling on the White House and congressional leaders to head off a self-imposed deadline that could bring $600 billion in spending cuts and higher taxes early in 2013 if they are unable to reach a deal on cutting the federal budget deficit. The Business Roundtable on Tuesday kicked off a print, radio and online ad campaign on which it plans to spend hundreds of thousands of dollars featuring the chiefs of Honeywell International Inc ( HON.N ), Xerox Corp ( XRX.N ) and United Parcel Service Inc ( UPS.N ) calling on lawmakers to resolve the issue. One of the more dramatic warnings of the consequences of allowing the U.S. economy to go over the fiscal cliff came from Honeywell CEO David Cote. "If the last debt ceiling discussion was playing with fire, this time they're playing with nitroglycerin," Cote said in an interview. "If they go off the cliff, I think it would spark a recession that's a lot bigger than economists think. Some think it would just be a small fire. I think it could turn into a conflagration." The nonpartisan Congressional Budget Office estimates that the U.S. economy would contract 0.5 percent in 2013 if the government fails to stop the budget cuts and tax increases - far below the 2 percent growth economists currently forecast. A failure in Washington to solve the crisis by the year's end could prompt major companies to curtail investment plans, said Duncan Niederauer, CEO of NYSE Euronext NYX.N, operator of the New York Stock Exchange. "We simply won't be investing in the United States. We will be investing elsewhere where we have more certainty of the outcome," Niederauer said in an interview. About a dozen top U.S. CEOs, including General Electric Co's ( GE.N ) Jeff Immelt, Aetna Inc's ( AET.N ) Mark Bertolini, American Express Co's ( AXP.N ) Ken Chenault and Dow Chemical Co's ( DOW.N ) Andrew Liveris are scheduled to meet with President Barack Obama on Wednesday to discuss the issue. The four are members of "Fix the Debt," an ad-hoc lobbying organization that this week launched an advertising campaign that advocates long-term debt reduction. UNCERTAINTY FACTOR Bank of America Corp ( BAC.N ) CEO Brian Moynihan said on Tuesday that worries about the cliff have companies holding off on spending. "That uncertainty continues to hold back the recovery," Moynihan said, speaking at an investor conference in New York. Sandy Cutler, CEO of manufacturer Eaton Corp ( ETN.N ), shared his concern. "Until we solve the fiscal issues (in the United States and Europe), you're not going to get back to normal GDP growth," Cutler told investors on Tuesday. CEOs are not alone in this worry. The CBO report warned that failure to reach a deal could push the U.S. unemployment rate up to 9.1 percent, the highest since July 1991. It is currently 7.9 percent. Obama and the Republican leadership of the House of Representatives have signaled a more conciliatory tone since last week's election, when Obama soundly defeated Republican challenger Mitt Romney, whose party retained a majority in the House. Wilbur Ross, an investor known for taking stakes in distressed companies, is bracing for higher tax rates in 2013. "We, like many people, have been trying to utilize gains this year. It does seem that the probability is that rates will go up," Ross said in an interview with Reuters Insider. "We don't have a "for sale" sign on anything. But we are mindful that there is a benefit to concluding things this year rather than next. NO SIGNS OF PANIC Concerns about the cliff have not prompted customers to cancel orders, though they have added to an overall level of uneasiness that has companies wary of making large capital purchases or hiring significant numbers of new workers. "We haven't seen the panicking, like, 'I'm not going to order something because of the fiscal cliff,'" said Steve Shawley, chief financial officer of heating and cooling systems maker Ingersoll Rand Plc ( IR.N ). "Customers are being very judicious with their orders." Likewise, JPMorgan Chase & Co ( JPM.N ) CEO Jamie Dimon last month told investors he did not expect the negotiations to hurt lending in the fourth quarter. "The fiscal cliff isn't going to change us," Dimon said, referring to JPMorgan's commercial bank, which loans money to businesses. The bank's investment banking side could be more vulnerable if the debate makes investors jittery, he allowed. WEAPONS, MEDICINES IN THE CROSS-HAIRS The defense and healthcare sectors are the most vulnerable to the fiscal cliff, as they face the threat of sequestration -- automatic, across-the-board cuts to their funding. Markers of weapons systems note that they have long been preparing for declining sales as the United States winds down two long warns in Iraq and Afghanistan. The industry has already shed tens of thousands of jobs and closed facilities. Lockheed Martin Corp's ( LMT.N ) new president and chief operating officer, Marillyn Hewson, told analysts on Monday her company had been preparing for tighter defense budgets for years, even before the sequestration deal. "We aren't going to see a major change," said Hewson. "We've been very proactive as a leadership team in taking actions in recent years to address our cost structure, to look at how we can make our product more affordable." Automatic cuts to the federal budget could reduce federal health spending by $21.5 billion in 2013, potentially affecting everything from Medicare to the Food and Drug Administration, according to an analysis by PwC's Health Research Institute. Vincent Forlenza, the CEO of Beckton Dickinson & Co ( BDX.N ), said the labs he supplies have held off on buying new instruments because of the threat of spending cuts. "If we don't get to a deal we will have another year of paralysis and putting off research," Forlenza said. "The impact of uncertainty on the (National Institutes of Health) budget is causing our research customers to put off research." (Additional reporting by John McCrank , Nick Zieminski, Caroline Humer , Jed Horowitz, Sharon Begley and Daniel Wilchins in New York, Rick Rothacker in Charlotte, North Carolina, Nichola Groom in Los Angeles, Andrea Shalal-Esa in Washington, Debra Sherman in Chicago and Anna Driver in Houston; Editing by Patricia Kranz and Steve Orlofsky)

Goldman chief outlines risky asset reduction under new rules

Tue Nov 13, 2012 5:40pm EST

http://www.reuters.com/article/2012/11/13/us-goldman-rwas-idUSBRE8AC18K20121113

- Goldman Sachs Group Inc ( GS.N ) would have $728 billion in risk-weighted assets under yet-to-be-implemented Basel III capital rules, 67 percent more than the investment bank has under current regulations, Chief Executive Lloyd Blankfein said on Tuesday.

Goldman aims to reduce risk-weighted assets to $700 billion by the end of 2013, with $18 billion of that coming from a decrease in credit risk, and another $11 billion coming from a decline in market risk. Much of the reduction will come from an expiration of existing trades, like mortgage securitization, derivative portfolios and some investments that will be repaid, Blankfein said at a conference in New York hosted by Bank of America Corp ( BAC.N ). "For more than a decade, larger size and complexity were viewed entirely as synergistic and virtuous," Blankfein said. "For the first time, it's clear that size and complexity come with a higher cost." Blankfein's disclosure of risk-weighted assets under Basel III rules was the first time Goldman reported those figures. At the end of the third quarter, the bank said it had $435.3 billion in risk-weighted assets under current rules, and expected that number to fall by $88 billion by 2015. (Reporting by Lauren Tara LaCapra ; Editing by Jan Paschal )

Rivals dig in as "fiscal cliff" drama debuts

Tue Nov 13, 2012 4:12pm EST

http://www.reuters.com/article/2012/11/13/us-usa-fiscal-idUSBRE8A80WV20121113

WASHINGTON - Both sides in the "fiscal cliff" debate stood their ground on Tuesday as they gathered in Washington for the first time since the elections, with a fundamental tax dispute preventing a broader compromise on deficit reduction.

The White House made clear it was ready to negotiate with Republicans on taxes and spending, but a spokesman for Democratic President Barack Obama said he will not budge on insisting that the wealthy's tax rates must rise in 2013. The president wants to extend low individual income tax rates beyond year's end for 98 percent of Americans, but he will not agree to extending them for the top 2 percent of earners, said White House spokesman Jay Carney at a news conference. On the Senate floor, Republican Leader Mitch McConnell said his party was open to discussing new government revenues, but not raising tax rates. "We're ... not about to further weaken the economy by raising tax rates and hurting jobs," he said. The defiant remarks came as Congress returned from a post-election break with seven weeks left to deal with the "fiscal cliff," a convergence of urgent tax and spending issues that, if mishandled, could plunge the economy into another recession according to the non-partisan Congressional Budget Office. Generally weak since the elections, U.S. stock markets were flat on Tuesday, with nervous investors eyeing Washington amid skepticism about lawmakers' ability to make fiscal decisions. About half of Americans doubt that Obama and congressional Republicans will be able to reach an agreement to resolve the "fiscal cliff," according to a poll released on Tuesday by the Pew Research Center for the People and the Press. A regular survey of small business sentiment on Tuesday showed hopes of a pick-up in sales, but widespread uncertainty among owners about business conditions in the next six months. The National Federation of Independent Business said its optimism index rose 0.3 point to 93.1 in October. 'PHOTO-OP WEEK' "We're three weeks away from serious negotiations on the fiscal cliff," said Greg Valliere, chief political strategist at Potomac Research Group, a Washington policy analysis firm. "This is a photo-op week, next week is Thanksgiving, then lawmakers will straggle back to Washington to examine what staffers have come up with. The dominant theme in these three weeks will be trial balloons," he said. At the end of 2012, low, "temporary" tax rates enacted a decade ago under former President George W. Bush are set to expire. If Congress does nothing, individual income tax rates will rise sharply. That is a key facet of the "fiscal cliff." Another element is deep, across-the-board cuts in federal programs that will take effect in January if Congress takes no action. Lawmakers fear the cuts, known as the "sequester," could devastate the economy and many are working to prevent them. Obama - fresh from a re-election triumph over Republican challenger Mitt Romney - hosted liberal and labor groups at the White House. Attendees said Obama made his tax cut stance clear, but did not ring-fence big government social programs dear to Democrats, such as Medicare, Medicaid and Social Security. "There was absolute consensus in the room that ... tax cuts for the top 2 percent" must not be extended, said Dennis van Roekel, head of the National Education Association teachers' union. In New York at an investor conference, Bank of America Corp Chief Executive Brian Moynihan said fiscal brinkmanship in Washington is already affecting the U.S. economy as worried businesses invest less in equipment. Corporate chieftains were slated to visit the White House on Wednesday to talk with Obama. The U.S. Chamber of Commerce, the nation's largest business lobbying group, backed mostly Republicans in the elections and has not been invited. Chamber President Thomas Donohue brushed off the exclusion. "The president has a lot of meetings," he said at a roundtable with reporters. (Additional reporting by Kim Dixon , Richard Cowan , Rachelle Younglai , Thomas Ferraro , Lisa Lambert ; with David Gaffen and Rick Rothacker in New York; Editing by Fred Barbash and Cynthia Osterman )

Kodak in financing deal to leave bankruptcy

Mon Nov 12, 2012 7:28pm EST

http://www.reuters.com/article/2012/11/13/us-kodak-bankruptcy-idUSBRE8AB1C320121113

NEW YORK - Eastman Kodak Co EKDKQ.PK said on Monday it has reached a $793 million financing deal with bondholders that could take the one-time photography giant out of bankruptcy.

The deal, which still needs bankruptcy court approval, will come in the form of new loans from Centerbridge Partners, GSO Capital Partners, UBS ( UBSN.VX ) and JPMorgan Chase & Co ( JPM.N ), Kodak said in a statement. The financing is contingent on the company receiving at least $500 million for a patent portfolio it has been trying to sell for more than a year, Kodak said. The package should allow Kodak to emerge from bankruptcy in the first half of 2013, Antonio Perez, Kodak's chief executive, said in the statement. "The significance of this agreement for Kodak is that it establishes a clear path for our emergence as a stronger, more focused company," Perez said. Kodak will likely be a different company exiting bankruptcy than it was going in. In addition to selling its patent portfolio, Kodak must sell all or part of its document imaging and personalized imaging businesses in order to convert the loan into post-bankruptcy financing. That would mean a restructured Kodak would largely be out of the consumer business, focused instead on its commercial imaging businesses. Kodak filed for Chapter 11 protection in January in hopes of selling its intellectual property portfolio, but bids have been lower than hoped. It remains in talks for a patent sale with potential buyers, including Apple Inc ( AAPL.O ) and Google Inc ( GOOG.O ). Kodak said in Monday's statement it is "confident" the patents will fetch the $500 million required under terms of the loan. The financing package is comprised of $467 million in new loans and $317 million in a dollar-for-dollar exchange for amounts outstanding under Kodak's current notes. The financing group beat out a separate contingent of second-lien bondholders that had offered financing, a person close to the matter told Reuters earlier. Some second-lien holders on Monday filed court papers objecting to Kodak's request to keep exclusive control of its bankruptcy process through February 28, a move that would allow it to seek court approval of the financing deal without other creditors being able to propose alternative plans. Kodak said it hopes to gain court approval of the plan at a hearing sometime in December, but no date has been set. (Reporting By Nick Brown; Editing by John Wallace, Kenneth Barry and Tim Dobbyn )

Analysis: Hyundai's focus on quality risks emerging market share

Mon Nov 12, 2012 7:16pm EST

http://www.reuters.com/article/2012/11/13/us-hyundai-capacity-idUSBRE8AC00J20121113

SRIPERUMBUDUR, India/SEOUL - Running around the clock and selling everything it can build, Hyundai Motor's ( 005380.KS ) Indian factory is bursting at the seams. But as demand grows and rivals scale up, the car maker has chosen to take its foot off the pedal.

Hyundai's strategic decision to focus on quality over quantity, even as its production lines are stretched in India and elsewhere, risks losing hard-won market share and is forcing it to divert output from its plant outside Chennai away from exports to other high-growth markets to meet domestic demand. The South Korean firm, with affiliate Kia Motors ( 000270.KS ), has surged to the No. 5 spot in the global automaker rankings by offering stylish models at affordable prices. That formula has been especially successful in emerging countries such as India, where it is No.2 by market share. The decision to slow down was prompted by fears a growing reputation for well-built cars could suffer in a headlong dash to churn out more vehicles, but it has sparked rumbles of discontent among some executives at the South Korean firm. "Our operations all over the world are calling for more cars. Executives tell the chairman that capacity should be expanded because they have to sell more cars," a senior Hyundai executive in Seoul told Reuters. "But the chairman says, 'What are you talking about? We have enough capacity. What we need now is stability'," he said, speaking on condition of anonymity due to the sensitivity of the issue. The chairman is Chung Mong-koo, whose father Chung Ju-yung founded the Hyundai Group "chaebol", as South Korea's powerful conglomerates are known. THE SAMSUNG MODEL Hyundai, which, does not yet enjoy the same sort of name cachet as Toyota ( 7203.T ) or Volkswagen ( VOWG_p.DE ), aims to emulate the success of compatriot electronics giant Samsung Electronics Co Ltd ( 005930.KS ), which evolved from a maker of cheaper goods into a powerful global brand in its own right. To that end, Chung has quietly shifted strategy in recent years to put capacity expansion in the backseat and instead focus on building Hyundai's brand and reputation for quality. "In the past, pushed for building more factories, but executives said it would be difficult to sell cars because of quality issues," said the executive in Seoul. "Now, there is a push from the bottom. Executives now say they can sell more cars." The move is "motivated by the chairman's effort to keep Hyundai from making the mistake Toyota made", another source said, referring to a perception that the Japanese automaker lost control of engineering discipline and manufacturing quality during the 2000s, as it expanded too aggressively and its global capacity climbed well above 8 million vehicles a year. Plans to build a factory in Indonesia, another emerging market with large growth potential, were scrapped due to Chung's decree, the source told Reuters. The expansion freeze has already crimped sales growth in the United States. Hyundai's U.S. sales expanded just 8 percent from January to October this year from the same period a year earlier, more than half the 20 percent growth achieved in 2011. Hyundai shares fell 11 percent in October alone, in part on concerns over slower growth. "Investors are concerned that Hyundai's sales volume will not increase much next year because of its limited production capacity," said Jung Sung-man, a fund manager at Plus Asset Management in Seoul. "But Hyundai's growth engine will not stall. Hyundai has piled up cash enough to build new plants." STRATEGIC GAMBLE At its factory 50 km (30 miles) outside Chennai in southern India, a steady stream of buses ferries about 2,000 workers to and from the plant as three shifts run around the clock. Hyundai doubled annual capacity at the plant to 600,000 cars in 2008, and was operating at full tilt within three years. In 2009, it exported nearly half of its Indian production to markets in Asia, Africa, Europe and the Middle East, but only 40 percent last year. Next year, overseas shipments, including to high growth markets such as South Africa and Mexico, will likely account for just 35 percent of India production, the plant's production manager told Reuters, as local demand absorbs output. Capping capacity to focus on quality might be a shrewd move in Europe and other markets where growth is stalling. But in fast-growing lower-priced markets such as India, analysts question whether remodeling itself as a more upmarket brand is the right way for Hyundai to go. "Hyundai has worked well in India because they offered feature-rich products at the right pricing," said Deepesh Rathore, managing director for India at research firm IHS Automotive. "I'm not very convinced about their argument." Cheap, small cars predominate in India. Market leader Maruti Suzuki's ( MRTI.NS ) Alto, the world's biggest-selling small car, starts at around $4,500, and Hyundai's success in the country is built on its low-cost Santro and i10 models. Its 14 percent share of India's passenger vehicle market exceeds that of General Motors ( GM.N ), Volkswagen ( VOWG_p.DE ), Ford ( F.N ) and Nissan ( 7201.T ) combined. But as rivals scale up to meet a forecast doubling in Indian sales to 4.9 million by 2016, according to IHS Automotive, Hyundai will be stuck at its existing capacity for the foreseeable future. "Right now there are no plans," said R. Sethuraman, director of finance and corporate affairs at Hyundai India. "A balancing act has to be done globally." Hyundai's share of the passenger vehicle market has slipped from around 15.8 percent in 2008 to 14.4 percent in the six months through September this year, according to the Society of Indian Automobile Manufacturers, even as it cuts back on export volumes from a peak in 2009. Meanwhile, Maruti is spending 40 billion rupees ($744 million) to increase capacity by 250,000 cars by 2016, while Ford - which has not yet fully utilized its existing Indian operations - is spending $1 billion on a 240,000 cars-a-year factory to serve the local and export markets. PREMIUM BRAND? Hyundai is earmarking up to 20 percent of its marketing expenses on brand investment, from almost none a few years ago, chief marketing officer Cho Won-hong told Reuters, as it aims to surpass Toyota and Volkswagen as the most favored mainstream car maker. Chung previously spearheaded Hyundai's rapid expansion, mainly targeting emerging markets and more than doubling global production between 2002 and last year to 4.07 million. Production outside South Korea accounted for 54 percent of total output, against just 6.5 percent in 2002. The carmaker opened plants in China and Brazil this year, but it has not announced plans for new factories in the past couple of years, despite many of its factories running at full capacity, leaving it short of cars in a recovering U.S. market, where rivals have stolen market share. "I think the strategy not to expand aggressively is reasonable. The global auto market is in an oversupply situation, although emerging markets are growing," said Jeon Nam-joong, a fund manager at Consus Asset Management. "Hyundai is taking a breather after its rapid growth, and it's not that they gave up growth." ($1 = 53.7550 Indian rupees) (The story corrects spelling of executive's name in paragraph 30) (Additional reporting by Norihoko Shirouzu in BEIJING; Editing by Tony Munroe and Alex Richardson )

New body must help U.S. markets prepare for storms - CFTC's Chilton

Tue Nov 13, 2012 5:35pm EST

http://www.reuters.com/article/2012/11/13/us-markets-storm-oversight-idUSBRE8AC18E20121113

NEW YORK - A top U.S. regulator called for the creation of a new body that could prevent a repeat of the confusion that reigned in capital markets when Superstorm Sandy caused widespread damage to New York and New Jersey.

The financial industry was "reckless" in being poorly prepared for Sandy which ravaged the U.S. East Coast in late October, Commodity Futures Trading Commission (CFTC) Commissioner Bart Chilton told a conference on Tuesday. "Given the problems we saw with Sandy, we need (an) organization, with a specific mandate, to make sure we don't have this kind of floundering in an emergency again," Chilton said in his speech for a business audience. He called for a body similar to the Financial and Banking Information Infrastructure Committee (FBIIC) or the Financial Services Sector Coordinating Council (FSSCC). In the immediate aftermath of the storm, it appeared that market participants had not properly tested contingency plans and in many cases were unclear whether they should redirect trades themselves, or whether that exchange operators would do that for them. This had in turn led to anxiety to even use the back-up facilities, according to Chilton, a Democrat. Sandy forced U.S. equities markets to shut down for two days. "Major firms should have people at a high enough level, with necessary training and skills, living and working sufficiently distanced from the main entity site," he said. (Reporting by Douwe Miedema; Editing by Tim Dobbyn )

Goldman Sachs shutting South Korea asset management unit

Tue Nov 13, 2012 4:18am EST

http://www.reuters.com/article/2012/11/13/us-goldmansachs-koreadunds-idUSBRE8AC08G20121113

SEOUL/HONG KONG - Goldman Sachs Group Inc ( GS.N ) is quitting the South Korean asset management business just five years after entering the highly competitive market, the firm's Hong Kong-based spokesman said on Tuesday.

South Korea, Asia's third-biggest asset management market, is dominated by domestic institutions and wafer-thin profit margins have made it difficult for companies with sub-scale operations to make an impact. Goldman's decision to wind down its asset management operations comes at a time when ING Groep NV ( ING.AS ) is struggling to find a buyer for its Asia investment management unit, which includes South Korean operations. Goldman's unit manages about $4 billion in assets and has about 40 staff. While the fate of staff is not clear, the Hong Kong spokesman said Goldman will try to absorb them in other parts of the company. "Our expectations for the local Korean asset management business have not been met," Niklas Ekholm, a London-based spokesman for Goldman Sachs Asset Management, said in a separate statement. Goldman will continue to invest in South Korea through its offshore funds management unit, the Hong Kong spokesman added. Goldman moved into the South Korean market by acquiring a joint venture between Macquarie Group ( MQG.AX ) and local firm IMM Investment Management. (Reporting by Joyce Lee and Nishant Kumar; Writing by Denny Thomas ; Editing by Matt Driskill)

Blackstone and LLOG Exploration to invest $1.2 billion

Tue Nov 13, 2012 3:31am EST

http://www.reuters.com/article/2012/11/13/us-blackstone-llogexploration-idUSBRE8AC09820121113

- Private equity firm Blackstone Group LP ( BX.N ) and LLOG Exploration Company LLC will jointly invest $1.2 billion to strengthen the offshore oil producer's operations in Mexico, the two firms said on Tuesday.

Blackstone will invest from its two private equity funds, which aggregate over $19.3 billion of committed capital, including Blackstone Energy Partners. The partnership will boost LLOG's asset base in the Gulf of Mexico and appraisal of about 110 offshore leases. "LLOG is a highly efficient deepwater operator, with the history and ability to accelerate development, minimizing the timeframe to first production and significantly increasing project returns," said Angelo Acconcia, managing director of Blackstone Energy Partners. (This story was fixed to clarify both Blackstone and LLOG Exploration will invest in JV) (Reporting by Neha Dimri in Bangalore; Editing by Mark Potter )

PepsiCo to sign Myanmar bottling deal as rivalry with Coke grows

Tue Nov 13, 2012 3:41am EST

http://www.reuters.com/article/2012/11/13/us-pepsico-myanmar-idUSBRE8AC09A20121113

SHANGHAI - PepsiCo Inc ( PEP.N ) is in talks to sign a bottling agreement in Myanmar, ramping up the competition with Coca-Cola Co ( KO.N ) as they fight for market share in a country emerging from decades of isolation.

Coke, which shipped drinks to customers in Myanmar this year for the first time in six decades, said in September that it is already working on setting up a bottling venture with a local company. Interest in Myanmar by multinational firms has surged after President Thein Sein, who took office in March 2011 at the head of a quasi-civilian government, undertook economic and political reforms that persuaded Western countries to suspend sanctions. "We want to establish local production," Saad Abdul-Latif, chief executive of PepsiCo Asia, Middle East and Africa, told reporters in Shanghai on Tuesday. "We will be signing that within the next year or so." Saad was speaking in Shanghai, where the firm opened its largest food and beverage research center outside of North America. In August, PepsiCo said it has signed an agreement with Diamond Star Co Ltd to distribute PepsiCo beverage brands in Myanmar. Under the terms of the agreement, Diamond Star - one of the largest packaged-goods distributors in Myanmar - has exclusive rights to import, sell and distribute Pepsi-Cola, 7-Up and Mirinda. (Reporting by Melanie Lee ; Editing by Ryan Woo)

Argentina seeks U.S. appeals court rehearing on debt ruling

Tue Nov 13, 2012 6:30pm EST

http://www.reuters.com/article/2012/11/13/us-argentina-bonds-idUSBRE8AC19M20121113

- Argentina filed a petition for a rehearing with a U.S. appeals court on Tuesday over a debt ruling that would force the country to pay holdout creditors owning bonds in default since 2002.

The court filing said Argentina is seeking a rehearing with the three-judge panel that ruled in favor of the holdouts last month, as well as with the entire U.S. Court of Appeals for the Second Circuit. Argentina in its brief said the earlier appellate ruling last month interpreted a "boilerplate" provision underlying trillions of dollars in debt in a way that was "inconsistent with market understanding." If left in place, the 2nd Circuit's initial ruling "will exacerbate future sovereign debt crises by making voluntary debt restructuring essentially impossible," Argentina argued in the brief. The petition marked the latest development in an escalating standoff between Argentina and bondholders including Elliott Management Corp affiliate NML Capital Ltd and the Aurelius Capital Management funds. These creditors refused to participate in restructurings of Argentina's debt in 2005 and 2010. They are suing to recoup $1.4 billion of defaulted debt. After years of litigation seeking payment on the bonds, the holdouts scored a major victory when the 2nd Circuit ruled that Argentina had improperly discriminated against them by paying bondholders who entered the 2005 and 2010 debt swaps sooner. The ruling caused Argentina's bond prices to tumble and prompted Standard & Poor's to downgrade its sovereign debt rating. The 2nd Circuit has sent the case back to U.S. District Court Judge Thomas Griesa in Manhattan to resolve questions about how Argentina would go about paying the holdouts. At a hearing Friday, Griesa said he intended to rule before December 2, when Argentina is scheduled to make the first of three interest payments on the exchange bonds, which will total more than $3 billion over the course of the month. The ruling has raised concerns not only for Argentina but also holders of over 91 percent of Argentina's defaulted debt who participated in the earlier restructurings. Sean O'Shea, lawyer for exchange bond holder Gramercy Funds Management, said at Friday's court hearing that his client was "being held hostage." Gramercy has now also retained prominent New York litigator David Boies and his law firm Boies, Schiller & Flexner LLP to represent it, law firm spokeswoman Dawn Schneider said in a statement Tuesday. Boies gained national attention for representing former Vice President Al Gore during the Gore v. Bush case before the U.S. Supreme Court in 2000. Peter Truell, a spokesman for Elliott, declined to comment on Argentina's rehearing petition. Melissa McNamara, a spokeswoman for Aurelius, declined comment. The case is NML Capital Ltd et al v. Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105. (Reporting by Nate Raymond in New York and Hilary Burke in Buenos Aires; Editing by Leslie Adler, Bernard Orr )

Lonmin warns future at stake with $817 million cash call

Tue Nov 13, 2012 2:46am EST

http://www.reuters.com/article/2012/11/13/us-lonmin-brief-idUSBRE8AC07X20121113

LONDON - Platinum miner Lonmin ( LMI.L ) urged its shareholders on Tuesday to support an $817 million cash call, warning that without the balance sheet boost it would be vulnerable in the face of fresh proposals from top shareholder Xstrata XTA.L.

Lonmin, at the center of a wave of South African mine strikes that left dozens dead, last week detailed a discounted rights issue aimed at repairing its balance sheet, meeting conditions set by its lenders as debt swells, and funding a recovery. But it also surprised investors with news it had rejected a reverse takeover from Xstrata, which owns almost 25 percent in the world's third-largest platinum miner as a result of a failed 2008 takeover attempt. "The board believes that failure to proceed with the rights issue would leave the company in a highly vulnerable position in its discussions with its banking group and, potentially, in relation to Xstrata if it were to make a further proposal," the miner said in Tuesday's statement. It is not yet clear whether Xstrata, which is still considering its options, would vote in favor of the rights issue at a meeting scheduled for November 19, or indeed support it, unless conditions of its previous offers - including a change of management - are met. Under a first proposal made last month, Xstrata would have sold its South African platinum group metals, chrome and vanadium businesses to Lonmin for shares, conditional on a $1 billion rights issue, which they would underwrite. Xstrata - which also demanded the right to appoint the chairman, the chief executive and the chief financial officer - would have ended up with 70 percent of Lonmin. Xstrata made a separate proposal late last week that would have seen it support the rights issue currently planned, but replace Lonmin's executives. This has also been rejected. "The board wishes to confirm that, as in the past, it will consider any revised proposal that Xstrata wishes to make on its merits," Lonmin said in its statement. "(The) board will continue to avoid any structure or process which undermines the financial stability of Lonmin and it will also fight to ensure that the economic terms of any transaction reflect the true value of the company and an appropriate control premium, if relevant." (Reporting by Clara Ferreira-Marques ; editing by Keith Weir )

Argentina seeks U.S. appeals court rehearing on debt ruling

Tue Nov 13, 2012 4:51pm EST

http://www.reuters.com/article/2012/11/13/us-argentina-bonds-idUSBRE8AC17920121113

- Argentina filed a petition for a rehearing with a U.S. appeals court on Tuesday over a debt ruling that would force the country to pay holdout creditors owning bonds in default since 2002.

The court filing said Argentina is seeking a rehearing with the three-judge panel that ruled in favor of the holdouts last month, as well as with the entire U.S. Court of Appeals for the Second Circuit. Argentina in its brief said the earlier appellate ruling last month interpreted a "boilerplate" provision underlying trillions of dollars in debt in a way that was "inconsistent with market understanding." If left in place, the 2nd Circuit's initial ruling "will exacerbate future sovereign debt crises by making voluntary debt restructuring essentially impossible," Argentina argued in the brief. The petition marked the latest development in an escalating standoff between Argentina and bondholders including Elliott Management Corp affiliate NML Capital Ltd and the Aurelius Capital Management funds. These creditors refused to participate in restructurings of Argentina's debt in 2005 and 2010. They are suing to recoup $1.4 billion of defaulted debt. After years of litigation seeking payment on the bonds, the holdouts scored a major victory when the 2nd Circuit ruled that Argentina had improperly discriminated against them by paying bondholders who entered the 2005 and 2010 debt swaps sooner. The ruling caused Argentina's bond prices to tumble and prompted Standard & Poor's to downgrade its sovereign debt rating. The 2nd Circuit has sent the case back to U.S. District Court Judge Thomas Griesa in Manhattan to resolve questions about how Argentina would go about paying the holdouts. At a hearing Friday, Griesa said he intended to rule before December 2, when Argentina is scheduled to make the first of three interest payments on the exchange bonds, which will total more than $3 billion over the course of the month. Peter Truell, a spokesman for Elliott, declined to comment on Argentina's rehearing petition. The case is NML Capital Ltd et al v. Argentina, U.S. District Court, Southern District of New York, No. 08-06978. (Reporting by Nate Raymond in New York and Hilary Burke in Buenos Aires; Editing by Leslie Adler)

Opel cuts won't be as severe as Ford's, union says

Tue Nov 13, 2012 10:47am EST

http://www.reuters.com/article/2012/11/13/us-gm-europe-idUSBRE8AC0KM20121113

FRANKFURT - Ford's ( F.N ) decision to close three factories and cull 5,700 jobs in Europe does not herald more severe downsizing at General Motors' ( GM.N ) Opel unit, which has already made big cutbacks, Opel's top labour leader said.

Mass market manufacturers such as Ford, Opel, Peugeot ( PEUP.PA ) and Fiat ( FIA.MI ) all expect heavy losses in Europe over the next couple of years as painful economic reforms send demand plummeting to levels not seen since in nearly 20 years. But Opel works council Chairman Wolfgang Schaefer-Klug said he aims to reach a deal over the future size of its German workforce with management before Christmas and did not believe the talks would spread into discussions on other major closures. "I don't expect that it will come to some huge number of job cuts as part of the restructuring, rather the opposite, much fewer (than many believe)," Schaefer-Klug told Reuters. "Only Bochum is up for discussion according to GM, no other Opel plants, whether in Germany or elsewhere in Europe." While he reiterated opposition to Opel's plans to close its plant in the western German city of Bochum, he added his top priority was to ensure workers have secure jobs come 2017, when the site could be shuttered, whether at Opel or not. The elected workforce official is negotiating with Opel and trade union IG Metall to extend a blanket job guarantee for the company's four German sites by two years to the end of 2016. DRASTIC ACTION If market conditions worsen, Schaefer-Klug said, Opel could manage by further using "Kurzarbeit", a government-subsidized short-time work scheme that was used widely by German industry during the global financial crisis in 2009. One idea would be to bring production of the Opel Mokka to Europe at the cost of jobs in Korea, where it is assembled now. "The Mokka would fill an important gap in our Spanish plant, and help to improve utilization there ... This volume was never supposed to go to Korea in the first place," he said. The Opel labour leader said he did not believe Ford's move would put pressure on Opel to take more drastic action, dismissing reports that GM is falling behind its U.S. peer in tackling overcapacity in Europe. Opel in recent years has shut a factory in Belgium, its commercial van plant in Portugal and car manufacturing in its Luton, England facility, while Ford had not closed any vehicle assembly plants since Dagenham in 2002, he said. The GM brand has already cut into its fixed cost base so deeply that Opel employs fewer people in its German market than Ford. The U.S. rival has already given a guarantee not to lay off any German workers through 2016. "Opel has taken out 600,000 cars in capacity and cut 12,000 workers since 2006. Additionally, two engine plants were closed and several lines were taken out in European sites, reducing capacity even more," Schaefer-Klug said. "There is no manufacturer that took out as much capacity as Opel has." (Editing by David Holmes )

Budget deficit rises to $120 billion in October

Tue Nov 13, 2012 4:52pm EST

http://www.reuters.com/article/2012/11/13/us-usa-economy-budget-idUSBRE8AC10320121113

WASHINGTON - The budget deficit rose in October, the first month of fiscal year 2013, as looming negotiations over expiring tax cuts and imminent spending reductions dominated the post-election political landscape.

The Treasury said on Tuesday the October deficit was $120 billion, larger than economist forecasts for a $114 billion gap and up from $98 billion in October of 2011. Growth in expenditures outpaced rising receipts, deepening the deficit. Outlays grew to $304 billion from around $262 billion in the same month last year while receipts rose to $184 billion from $163 billion. Following President Barack Obama's election to a second term last week, the debate in Washington has quickly shifted to the combination of expiring tax breaks and new spending reductions known as the "fiscal cliff." Lawmakers involved in the debate gathered in Washington on Tuesday for the first time since the elections, setting the stage for a week of trial balloons and rhetorical repositioning. The Congress has just returned from a break after the November 6 elections. Topping the agenda is the year-end convergence of urgent tax and spending issues that, if mishandled, could plunge the economy into another recession. The United States had reported a budget surplus for September, the final month of the 2012 fiscal year, but the tiny bump in revenues did not prevent the country's deficit from exceeding $1 trillion for the fourth year in a row. The 2012 budget gap was $1.089 trillion, smaller than last year's deficit of $1.297 trillion largely because of higher corporate income tax receipts and less spending. (Reporting by Pedro Nicolaci da Costa ; Editing by Andrea Ricci )

Olympus says investors sue for $240 million damages

Tue Nov 13, 2012 4:14am EST

http://www.reuters.com/article/2012/11/13/us-olympus-lawsuit-idUSBRE8AC08O20121113

TOKYO - Olympus Corp ( 7733.T ) shareholders have filed suit against the company in a Tokyo court seeking 19.1 billion yen ($240.5 million) in compensation over an accounting fraud that was one of corporate Japan's biggest scandals.

The camera and medical equipment maker said on Tuesday that 48 institutional investors and pension funds, mostly foreign investors and pension funds including the Teachers' Retirement System of the State of Illinois and Pioneer Asset Management SA in Luxembourg, had filed the suit in Tokyo District Court. "It is still unclear at this point how much this may affect our financial results," said Olympus spokesman Tsuyoshi Oshima. Speaking at a quarterly earnings briefing on Monday, Olympus President Hiroyuki Sasa said the firm had accounted for potential lawsuits from shareholders in its outlook for the financial year to March. The firm lifted its annual net profit forecast to 8 billion yen from 7 billion yen, sparking a 5.9 percent rise in its share price on Tuesday. The news of the shareholder lawsuit came after the close of Tuesday's share trading. Shares in Olympus sank nearly 60 percent in 2011 due to the $1.7 billion accounting fraud, which came to light in October of that year. The shares have recaptured some of that lost ground this year, gaining 30 percent compared with a 2 percent rise in Tokyo's benchmark Nikkei average .N225 . Three former Olympus executives and the company itself pleaded guilty in a Tokyo court in September to charges related to the scandal, which forced it to restate several years of earnings. ($1 = 79.4200 Japanese yen) (Reporting by Mari Saito ; Editing by Michael Watson )

Airshow: Airbus confident on China deliveries as EU row eases

Tue Nov 13, 2012 9:36am EST

http://www.reuters.com/article/2012/11/13/us-china-airshow-airbus-idUSBRE8AC0O420121113

ZHUHAI, China - Europe's Airbus expressed optimism it could rescue dozens of deliveries of wide-body passenger jets to China after the European Union agreed to freeze a carbon emissions scheme fiercely opposed by Beijing.

The EU said on Monday it would "stop the clock" for a year on plans to force non-EU airlines to adopt its Emissions Trading Scheme (ETS) in the face of opposition led by China and the United States, which say it would violate their carriers' rights. At the height of the row, Airbus (part of aerospace group EADS ( EAD.PA )) had said China was blocking deals to buy passenger jets worth at least $12 billion, forcing the planemaker to put off part of a planned production increase that would have generated an extra 1,000 jobs. "We hope we will go back to business as usual ... and that we won't have to worry about ETS w hen we do business here," said Laurence Barron, president of Airbus China. According to Airbus, contracts held up by the dispute include Chinese purchases of 35 long-haul A330 jetliners. Industry sources have said another 10 may be caught in the net. "I believe we will deliver those airplanes," Barron told Reuters at a Chinese air show, asked whether Airbus would be able to restore any frozen business. The dispute concerns a market-based scheme to make airlines account for their emissions by forcing them in many cases to buy allowances based on the length of the flight. Countries opposing the scheme say it would violate the sovereignty of their airspace and have warned of a trade war. The EU says action is urgently needed to help the bloc meet its climate obligations and has accused the international community of dragging its feet over the issue. Announcing a one-year moratorium for flights into and out of EU airports, the European Union said it hoped to create a positive atmosphere for talks on an alternative global plan. GLOBAL SOLUTION The matter is being discussed at the United Nations body responsible for harmonizing air transport rules, the Montreal-based International Civil Aviation Organization. "We support a global solution and the EU is going in that direction so we think it is a good decision," Barron said. China is the world's fastest-growing air transport market and is set to overtake the United States as the world's biggest within 20 years, Barron said. To help meet fast-growing demand in Asia, Airbus is in the midst of plans to increase production of the A330, its best-selling wide-body jet, to 10 aircraft a month from next year. But it suspended a plan to boost production still further to 11 a month in 2014, citing doubts over the delivery of jets held up by the diplomatic row between the EU and China. Barron's confidence that the jets would now be delivered indicates the higher production plans could be reinstated, if Airbus sticks by the logic of its previous announcements. An Airbus spokeswoman said no decision had been taken on further increases in A330 production, which stands at 9.5 month and will reach 10 a month in the second quarter of 2013. Barron, the top Airbus executive in China, where it delivers over 20 percent of its aircraft, declined to comment on doubts over the future of a $4 billion A380 plane order for Hong Kong. Airbus said in March that unidentified orders for 10 A380s could be swept up in the emissions row and industry sources said they were earmarked for Hong Kong Airlines, a unit of the HNA Group, which also owns Hainan Airlines Co Ltd ( 600221.SS ). The chairman of HNA Group, China's fourth-largest aviation group, said last week he may cancel the order but cited weak market conditions. (Reporting by Tim Hepher and Alison Leung; Editing by David Holmes )

Best Buy sets long-term targets, aims for stable sales

Tue Nov 13, 2012 6:25pm EST

http://www.reuters.com/article/2012/11/13/us-bestbuy-meeting-idUSBRE8AC0V120121113

- Best Buy Co Inc ( BBY.N ) hopes to triple its operating margins over time, the company said on Tuesday, though investors and analysts were left wanting for details on how - and how soon - the new chief executive would turn around the world's largest consumer electronics chain.

The aggressive new targets come as Best Buy faces cut-throat competition from online and discount retailers like Wal-Mart Stores Inc ( WMT.N ) and Amazon.com Inc ( AMZN.O ). CEO Hubert Joly got a difficult reception at an investor day in New York, as people questioned whether management was focusing too much on wringing higher sales out of existing customers rather than attracting new ones. Joly was named CEO on August 20. "I still think I am a little bit mixed on digesting the take-aways of the presentation. I think they said a lot of good things, but I think people were looking for a little bit more of a playbook and the next steps," said John Tomlinson, an analyst with ITG Investment Research, in New York. "There's a lot of pieces to the fixing story that seemed a little opaque and vague." Best Buy's stock closed nearly 1 percent lower at $15.70 on Tuesday, continuing a slide that has knocked off a third of the company's market capitalization this year. The stock touched a 10-year low of $14.39 a week ago. Dimitri van Toren, senior portfolio manager at Dutch asset manager Syntrus Achmea, which holds about 200,000 Best Buy shares, said he was worried about structural issues and a "management vacuum" at the retailer, but that he would stay in the stock despite concerns about the upcoming holiday season. The meeting took place against the backdrop of a potential buyout offer from founder and former CEO Richard Schulze, who is expected to make an offer as soon as next month. "I spend no time worrying about what our corporate structure will be," Joly told reporters after the event. "I tend to focus on decisions I can influence rather than decisions I can't influence." Joly said "it would have been ridiculous" to offer more concrete details after only a few weeks on the job. He said this meeting was more about setting the record straight and reassuring investors about the company's future. "The perception was that Best Buy was dying," Joly said. MARGIN TARGETS In a statement on Tuesday, the company said its short-term goal will be "to stabilize and then begin increasing its comparable-store sales and operating margin." Over time, it is aiming for a return on invested capital of 13 percent to 15 percent, in addition to a 5 percent to 6 percent operating margin target. In the last fiscal year, Best Buy had an operating margin of about 2.1 percent. The last time that margin exceeded 5 percent was in the fiscal year that ended in early 2008. Joly said a mixture of excessive costs and price competition hurt margins, and that the retailer would turn to a wider variety of higher-margin, private-label products to boost results. One example is the company's own Insignia-brand electronics. Best Buy has been struggling to combat a phenomenon known as "showrooming," where people visit its stores to look at products and then buy them online for less. Joly acknowledged the company has suffered from a "price perception issue" among customers that it needed to address, as well as weakness in its online operations. The head of the company's digital business said its online conversion rate - which measures how successfully Best Buy translates customer visits into actual sales - was only about half of what it should be. "Many of these problems are a result of our own making," Joly said during the investor presentation. HOLIDAYS COMING Best Buy also said on Tuesday that it would pursue a plan to "optimize its store footprint on an ongoing basis," which suggested the company may look at ways to shrink or close stores, as some other big-box retailers have done. In late March, the company said it would close 50 large U.S. stores. Joly warned that merely closing stores would not boost operating income, as most of the big-box stores are already profitable. Relocation to smaller space may be an option, however; he said 71 percent of the large-format stores have leases expiring within the next six years. The details of Joly's long-awaited plan came roughly a week before the unofficial start of the year's biggest selling season. The retailer, which has posted declines in same-store sales in eight of the last nine quarters, warned last month it expected earnings and same-store sales to fall again in the third quarter. "I am already sick and tired of negative comps," Joly said, referring to same-store sales figures. The CEO also admitted a number of past investments have not paid off and promised the new leadership would be "prudent" about that in the future, a nod to Wall Street's lingering concerns about spending by past management. (Reporting by Dhanya Skariachan in New York; Writing by Ben Berkowitz ; Editing by Maureen Bavdek, Phil Berlowitz, Matthew Lewis and Jan Paschal )

Vodafone takes 6 billion pound writedown on Europe

Tue Nov 13, 2012 4:51am EST

http://www.reuters.com/article/2012/11/13/us-vodafone-idUSBRE8AC07A20121113

LONDON - Vodafone ( VOD.L ) wrote down the value of its business in Spain and Italy by 5.9 billion pounds ($9.4 billion) and lowered its full-year outlook on Tuesday after reporting its first fall since 2010 in its key organic service revenue metric.

The British company posted a 1.4 percent fall in group organic service revenue in the second quarter due to the sharp slowdown in its southern European business. It also said it expected its free cash flow for the year to be in the lower half of the guidance range for the full year. Vodafone was hit by customers trying to make fewer calls in southern Europe, the weakening of currencies in its major markets and the slowdown of still-solid growth in emerging markets such as India and South Africa. It has been helped however by the strong performance of its joint venture Verizon Wireless in the United States. It said it expected to get a 2.4 billion pound dividend from Verizon Wireless by the end of the year and said it would start a 1.5 billion pound share buyback program. "We have continued to make progress on our strategic priorities over the last six months, with good growth in data and emerging markets in particular," Chief Executive Vittorio Colao said. "In the short-term, however, our results reflect tougher market conditions, mainly in Southern Europe." Group service revenue, which reflects ongoing income and not one-off items such as handsets, was down 1.4 percent on an organic basis in the second quarter. It was down by 11.3 percent in southern Europe, up 0.7 percent in northern Europe and up 4.1 percent in its emerging markets. Espirito Santo analyst Will Draper said the top-line revenue and earnings looked to be in line but said free cash flow had missed forecasts. Free cash flow for the first half was 2.2 billion pounds, compared with an analyst forecast of 2.5 billion pounds. (The story was refiled to fix headline) (Reporting by Kate Holton ; editing by Paul Sandle )

Comcast's NBCUniversal unit lays off 500 employees: source

Mon Nov 12, 2012 10:37pm EST

http://www.reuters.com/article/2012/11/13/entertainment-us-comcast-nbc-idUSBRE8AC04420121113

LOS ANGELES - Comcast Corp's NBCUniversal entertainment unit is laying off about 500 employees at cable channels, Jay Leno's late-night TV show and the Universal Pictures movie studio, a person with knowledge of the matter said on Monday.

The cuts add up to about 1.5 percent of the company's workforce of 30,000 employees, the source said. A large portion of the layoffs occurred at the G4 cable channel, a network about video games and the gaming culture, the source said. Two of the network's shows were recently canceled. Other layoffs occurred about two months ago at "The Tonight Show with Jay Leno," which cut about two dozen crew members. The company's movie studio, Universal Pictures, also eliminated about 20 jobs, including some at the home entertainment division. Home entertainment sales have suffered across the industry as traditional DVDs fall from favor with consumers. Other job cuts are expected at NBC News group and the company's cable channels, which include USA, Bravo and E!, the source said. Comcast bought a 51 percent controlling stake in NBC Universal in January 2011. (Reporting By Ronald Grover; Writing by Lisa Richwine ; Editing by Peter Lauria and Paul Tait )

AMF Bowling files for bankruptcy again

Tue Nov 13, 2012 1:35pm EST

http://www.reuters.com/article/2012/11/13/us-amfbowling-bankruptcy-idUSBRE8AC0YV20121113

- AMF Bowling Worldwide Inc, the world's largest bowling alley operator, on Tuesday filed for bankruptcy protection for the second time in 12 years, saying recent economic weakness has cost it business and left it with an unmanageable debt burden.

The Mechanicsville, Virginia-based company said it has agreed on a plan to significantly reduce its debt and turn over control to its lenders, enabling it to emerge from Chapter 11 before the end of April 2013. AMF and 15 affiliates sought protection from creditors in the U.S. bankruptcy court in Richmond, Virginia. It said it had between $100 million and $500 million of both assets and liabilities. The company said it operates 270 bowling centers in the United States and Mexico - more than three times as many as its nearest rival. It also said it has more than 20 million customers a year and employs about 7,000 people. AMF Chief Financial Officer Stephen Satterwhite said in a court filing the company has been unable to sufficiently reduce costs to combat falling revenue, amid a 36 percent decline in large U.S. bowling league memberships since 1998. "Unfortunately for AMF, the lasting effects of the recession and economic downturn have proven too difficult to overcome," he said. Satterwhite said AMF had hired Moelis & Co to help sell its assets, but that the efforts proved unsuccessful as purchasers expressed concern about restrictions under lease agreements with iStar Financial Inc ( SFI.N ), AMF's main landlord. The restructuring calls for Credit Suisse AG ( CSGN.VX ) and other first-lien lenders to convert their claims into all the equity in a reorganized company, and for modifications to be made to the iStar leases, court papers show. Lenders would also provide $150 million of financing to help AMF operate after emerging from Chapter 11. AMF said it has lined up $50 million of financing to keep operating now, and that customers should see no difference. The company also said its restructuring is subject to better offers from third parties in a court-supervised sales process. AMF's roots date to 1900, when it was known as American Machine & Foundry Co and made equipment for the tobacco industry. The company in 1946 introduced the automated pinspotter, which allowed the bowling pins to be reset automatically rather than by hand. For many years, AMF also sold recreational products such as Ben Hogan golf clubs and Harley-Davidson ( HOG.N ) motorcycles. AMF had previously filed for protection from creditors in July 2001 and emerged from bankruptcy the following year. The case is In re: AMF Bowling Worldwide Inc, U.S. Bankruptcy Court, Eastern District of Virginia, No. 12-36495. (Reporting by Jonathan Stempel in New York, editing by Martha Graybow)

Goldman using technology to cut costs, manage capital

Tue Nov 13, 2012 10:35am EST

http://www.reuters.com/article/2012/11/13/us-goldman-blankfein-idUSBRE8AC0QI20121113

NEW YORK - Goldman Sachs Group Inc ( GS.N ) is deploying more information technology to handle trades and manage its capital as the firm cuts its payroll, CEO Lloyd Blankfein said on Tuesday.

The firm is hiring additional technology workers while cutting its total payroll, Blankfein said at an investor conference. Total staff at the investment bank was down 8 percent at the end of September to 32,600 people from 35,500 in June 2011, he said. Goldman has deployed technology systems to show the impact of buying, selling or holding individual securities on regulatory measurements of bank assets. The information is being used to improve Goldman's capital strength as measured under new standards being imposed by regulators, he said. At the same time, trading currently done with "high touch" by individuals will increasingly be done with computers. Roughly 65 percent of the firm's equity trading for clients now goes through what Goldman calls "low touch" electronic channels, he said. In response to a question, Blankfein said he "would be shocked" if federal government officials do not to find a solution to the approaching Federal fiscal cliff when tax rates are scheduled to spike and government spending plunge on December 31. He said, however, that the Goldman expects a lot of uncertainty about the outcome of talks in Washington before a deal is reached. "We are at least braced for a ride here," Blankfein said. (Reporting by Lauren Tara LaCapra and David Henry in New York; Editing by Marguerita Choy)

Cisco sees slower growth in second quarter

Tue Nov 13, 2012 6:10pm EST

http://www.reuters.com/article/2012/11/13/us-cisco-earnings-idUSBRE8AC16520121113

- Cisco Systems Inc reported first quarter results that beat estimates but expects flat earnings and slower revenue growth for the current quarter.

"We are modeling Europe to get worse before it gets better," Chief Executive John Chambers said on Tuesday, echoing his comments from the company's fourth-quarter earnings call in August. However, he added that "we see signs of improvement in the U.S. in enterprise, service provider and commercial." Still, Chamber said, it was too early to speak of a trend "though we are continuing to see what we like." Cisco said it expects earnings per share, excluding items, of 47 cents to 48 cents in its fiscal second quarter, which runs until the end of January. A year earlier it reported EPS of 47 cents. It also said it sees revenue growth in a range of 3.5 percent to 5.5 percent, compared with 11.6 percent growth in the second quarter of 2012. Chambers said he would give a long-term outlook at the company's financial analyst day next month. In its first quarter, which ran until the end of October, Cisco surprised analysts with a solid beat, due to cost cuts and the company's broad product range. First-quarter net income, excluding items, rose 10.6 percent to $2.6 billion, or 48 cents per share, compared with analysts' average estimate of 46 cents a share as compiled by Thomson Reuters I/B/E/S. Revenue rose 6 percent from the year-ago quarter to $11.9 billion, compared with a Street view of $11.77 billion. Cisco's shares rose 6.7 percent to $17.98 in after-hours trading. Analysts applauded the company's cost discipline and welcomed solid results in a tough environment. "Given concern about enterprise spending, the company seems to be bucking the trends," said Bill Kreher, senior technology analyst at Edward Jones. "The bar was low but the company did exceed those expectations. The company appears to be using strong cost discipline in meeting their numbers." Mizuho Securities analyst Joanna Makris said "at first blush these are good numbers in a bad macro (environment)." "It's largely due to a product mix - a larger shift to routing - and cost cutting," adding that "this is better than expected. We have been thinking they would squeak by on the top line." (Reporting by Nicola Leske ; additional reporting by Liana Baker and Jennifer Saba; Editing by Phil Berlowitz)

U.S. warns against kicking fiscal crisis down the road

Tue Nov 13, 2012 5:53pm EST

http://www.reuters.com/article/2012/11/13/us-usa-fiscal-geithner-idUSBRE8AC17120121113

WASHINGTON - Treasury Secretary Timothy Geithner on Tuesday warned against extending all the U.S. tax breaks to give Washington additional time to broker a deficit reduction deal, saying it would create more uncertainty in the markets.

Seven weeks are left for the Obama administration and Congress to deal with the so-called fiscal cliff, or $600 billion worth of tax hikes and spending cuts that will go into effect next year and may trigger a recession if Washington does nothing. With lawmakers and the White House bickering over how to put the country on a sustainable fiscal path, a number of lawmakers and think tanks have argued for more time. "That will leave all the uncertainty you don't like on the table," said Geithner at an event sponsored by the Wall Street Journal, in his first public comments on the looming fiscal crisis since U.S. President Barack Obama won re-election last week. Earlier, Geithner and Obama met with leaders from the country's biggest labor unions and liberal groups where Obama repeated his campaign promise to raise taxes on the wealthiest and hold tax rates down for those earning below $250,000, according to attendees. At the event, Geithner said it was not feasible to reduce the deficit over the long term without additional revenues. "If you believe ... we shouldn't be asking middle class Americans to pay more in taxes, then I don't see how you do this without higher rates," said Geithner, who is expected to stay into early next year to help the White House negotiate with Congress. Obama has made an effort to reach out to congressional leaders since winning re-election and on Friday will meet with top Democratic and Republican lawmakers to start budget negotiations. (Reporting by Rachelle Younglai , editing by Gary Crosse and Prudence Crowther)

Blackstone invests $1.2 billion in LLOG Exploration

Tue Nov 13, 2012 2:54am EST

http://www.reuters.com/article/2012/11/13/us-blackstone-llogexploration-idUSBRE8AC08220121113

- Private equity firm Blackstone Group LP ( BX.N ) is investing $1.2 billion in LLOG Exploration Company LLC to strengthen the offshore oil producer's operations in Mexico, the two firms said on Tuesday.

Blackstone will invest from its two private equity funds, which aggregate over $19.3 billion of committed capital, including Blackstone Energy Partners. The partnership will boost LLOG's asset base in the Gulf of Mexico and appraisal of about 110 offshore leases. "LLOG is a highly efficient deepwater operator, with the history and ability to accelerate development, minimizing the timeframe to first production and significantly increasing project returns," said Angelo Acconcia, managing director of Blackstone Energy Partners. (Reporting by Neha Dimri in Bangalore; Editing by Mark Potter )

Schaeuble: 2020 could be too ambitious for Greek debt target

Tue Nov 13, 2012 4:21am EST

http://www.reuters.com/article/2012/11/13/us-eurozone-greece-schaeuble-idUSBRE8AC0AL20121113

BRUSSELS - EU finance ministers meet on Tuesday seeking to break an impasse over a new regime to supervise banks, but with much of the plan contested and time running short to agree, the European Union risks seeing this centerpiece reform unravel.

Their talks follow a meeting of euro zone finance ministers where disagreement between Greece's international lenders over how long to give Athens to get its debts down to a sustainable level reignited fears that the euro zone debt crisis could flare anew. For highlights of comments from ministers and officials ahead of the talks click on: (Reporting by Annika Breidthardt )

"Fight Club" of corrupt analysts cited at insider trial

Tue Nov 13, 2012 6:34pm EST

http://www.reuters.com/article/2012/11/13/us-insidertrading-trial-idUSBRE8AC14M20121113

NEW YORK - Two former hedge fund managers reaped a total of $70.8 million in illegal profits by tapping a "corrupt network" of Wall Street analysts, a U.S. prosecutor said at the start of an insider trading trial on Tuesday.

Todd Newman, who was a portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors, were charged in January in a sweep dubbed "Operation Perfect Hedge" by the Federal Bureau of Investigation. More than 70 people have been charged in the government's broad probe of Wall Street trading. Chiasson, 39, and Newman, 48, are accused of illegally trading ahead of computer maker Dell Inc's earnings reports for the first and second quarters of 2008, netting profits of $57 million and $3.8 million, respectively. Chiasson is also accused of netting $10 million in illegal profits ahead of the May 2009 results of chipmaker Nvidia Corp. Prosecutor Richard Tarlowe told jurors in U.S. District Court in Manhattan that Newman and Chiasson had made huge trades based on confidential company secrets obtained by a close-knit group of research analysts. "This is a case about how the defendants got secret, confidential information about publicly traded companies," Tarlowe said. "They chose to break the law and to use (the information) anyway. Why? To make big money for themselves and for their hedge funds." Lawyers for Newman and Chiasson countered that their clients did not know that any of the information was secret because the analysts who provided it had made their stock recommendations appear legitimate. Several of those analysts have previously pleaded guilty to related insider trading charges. One of them, Jesse Tortora, began testifying for the prosecution on Tuesday. "What Mr. Newman did not know was that mixed in Mr. Tortora's information... was information that Mr. Tortora now says was obtained improperly," Newman's lawyer, Stephen Fishbein, said in his opening statement. Tortora, who worked for Newman as an analyst, made his work appear like "legitimate, honest research," Fishbein said. Former Level Global analyst Spyridon Adondakis, who has also pleaded guilty, is expected to testify at a later date. Together with Sandeep "Sandy" Goyal - who is cooperating with the government - and others, the analysts formed a "corrupt network of professionals who chose to break the rules," Tarlowe said. THE CLIQUE Reid Weingarten, a lawyer for Chiasson, went even further, saying the group of analysts had built a friendship around obtaining insider secrets. "They likened themselves to the 'Fight Club,'" Weingarten said, referring to the 1999 hit movie starring Brad Pitt. "They traveled together, they partied together, they ate together, they went on vacation together and they shared information together," Weingarten said. "We call them the clique." Weingarten also said that the Level Global fund, which Chiasson founded with his former boss David Ganek in 2003, placed a "huge emphasis on research" and every trade was backed up by a transparent investment theory. Ganek has not been accused of any wrongdoing. The defendants face one count each of conspiracy to commit securities fraud and multiple counts of securities fraud. If convicted, they could face at least 25 years in prison. The judge overseeing the case, Richard Sullivan, has denied repeated requests by the defendants to be tried separately. Level Global was shut down in early 2011 following an FBI raid. Diamondback, which settled civil charges and entered into a non-prosecution agreement with the Justice Department, continues to operate. Jon Horvath, a former analyst at a division of SAC Capital, the hedge fund founded by Steven Cohen, was arrested along with Newman and Chiasson. Horvath, a technology sector analyst, pleaded guilty in September to insider trading charges and agreed to cooperate with prosecutors. Tuesday's trial, which could last more than five weeks, follows the sentencing last month of onetime Wall Street luminary Rajat Gupta on insider trading charges. Gupta was found guilty of leaking Goldman Sachs boardroom secrets to his friend Raj Rajaratnam and sentenced to two years in prison. Rajaratnam, founder of the Galleon Group hedge fund, received an 11-year prison sentence last year, one of the longest ever for insider trading. The case is US v. Todd Newman et al, U.S. District Court for the Southern District of New York, No. 12-cr-121. (Reporting By Basil Katz; Editing by Ciro Scotti)

Obama win should fuel electric car production, says Tesla CEO

Mon Nov 12, 2012 9:53pm EST

http://www.reuters.com/article/2012/11/13/us-tesla-ev-idUSBRE8AC03O20121113

NEW YORK - The re-election of President Barack Obama will likely mean a continuation of the U.S. government's policy promoting electric and hybrid vehicles, Elon Musk, the chief executive of electric car maker Tesla Motors Inc ( TSLA.O ), said on Monday.

"I think that we can expect at least that things will continue as they have," Musk told reporters at an event in New York. "I wouldn't expect it to get any worse for electric vehicles, hopefully it will get a little better." Musk also said he would back any effort to boost federal tax credits for electric cars to as much as $10,000. He also said the company would install fast-charging stations on major routes throughout the United States by the end of next year. Obama has said he would like one million plug-in hybrids, extended-range electric cars and pure electric vehicles on U.S. roads by 2015, a target that many analysts view as unrealistic given high EV prices and the lack of charging infrastructure. Tesla's electric car, the Model S, costs between $49,900 to $69,900 after a $7,500 federal tax credit. On Monday, the car won Motor Trend magazine's 2013 "Car of the Year." Next year, the bulk of Tesla's engineering will be devoted to the Model X, a crossover utility vehicle that will be rolled out in 2014. Tesla is also about to begin designing its third-generation car, a mass-market car that will cost around $30,000. "We've got to stay the course, ramp up production, we've got to start making the next generation of vehicles affordable," he said during an event to announce the Motor Trend award. Tesla received a $465 million loan from the U.S. Department of Energy in early 2010, under the same program that provided federal loans to Ford Motor Co and Fisker Automotive to develop green cars and advanced batteries, as well as create jobs. But slow sales of electric cars even with the federal tax credit have cast doubt on the program. Musk said in the long-term Tesla's sales would probably be evenly divided between Asia, the Americas and Europe. Tesla is considering installing "superchargers" at hotels to address the spotty access to car charging stations in the United States. By the end of next year, Tesla expects all major routes in the United States will have access to superchargers that replenish electric car battery within 30 minutes. Washington D.C. and Boston will be covered within the next month, he said. (Reporting By Phil Wahba; writing by Deepa Seetharaman in Detroit; Editing by Michael Perry )

Microsoft's Windows head, once a possible CEO, exits

Tue Nov 13, 2012 8:32am EST

http://www.reuters.com/article/2012/11/13/us-microsoft-windows-sinofsky-idUSBRE8AC02Z20121113

SEATTLE - The executive most widely tipped to be the next chief executive of Microsoft Corp has left the world's largest software maker barely two weeks after launching the flagship Windows 8, as CEO Steve Ballmer moved to tighten his grip on the company.

The exit of 23-year veteran Steven Sinofsky, head of Microsoft's Windows unit, is the latest - and most prominent - in a line of high-profile departures from the Redmond, Washington-based company, which is struggling to keep pace with Apple Inc and Google Inc in mobile computing. It comes hard on the heels of Sinofsky unveiling the most radical revamp of Windows since 1995, designed to catapult Microsoft back into the forefront of Internet-based, touch-screen technology and reinvigorate a stock price that has been static for the past decade. The move was unexpected and neither Microsoft nor Sinofsky gave an explanation, although an executive at the company, who asked not to be named, said the decision was "mutual" and said he was not expecting Sinofsky to take a job at another company soon. "This is shocking news. This is very surprising," said Brendan Barnicle, an analyst at Pacific Crest Securities. "Like a lot of people, I thought Sinofsky was in line to potentially be Ballmer's successor." Sinofsky, 47, joined Microsoft in 1989 and made his mark as Bill Gates' technical assistant. He grew into an uncompromising leader whose ruthless style of cutting layers of management and formalizing the process of software development gave rise to the term "Sinofskyization" in the company. He wielded immense power as head of the Windows unit, the traditional center of Microsoft's business, but was not known for working well with other executives. One former Microsoft staffer who worked with Sinofsky and other executives said his relentlessly aggressive style exasperated other leaders and may have alienated too many people, including his mentor Gates. "He had no one left to fight for him," said the staffer, who asked not to be named. "Gates gave him cover, so he must have eventually caved." LEADERSHIP STYLE Ballmer, 56, shows no sign of leaving after almost 13 years in the job, despite almost constant criticism. He has now replaced all the leaders of Microsoft's five main operating units in the past four years. He told employees in a memo on Monday simply that: "Steven Sinofsky has decided to leave the company." In a later media statement, he added that it was "imperative that we continue to drive alignment across all Microsoft teams, and have more integrated and rapid development cycles for our offerings". That could be interpreted as disappointment in Sinofsky's ability, or willingness, to work with other units. "Windows has to be much more thoroughly integrated with Xbox, with other parts of the company," said Barnicle. "I don't know that was something Steven was as excited about as focusing on Windows." It could also suggest that Ballmer was not happy with the pace of progress under Sinofsky. "Within Microsoft's lead cycle, Sinofsky was delivering at the early edge of it," said Colin Gillis, an analyst at BGC Financial. "But now the competition has moved from a one-year cycle to a six-months cycle." Sinofsky had a stellar career at Microsoft, overhauling the hugely profitable Office division before going over to manage the release of Windows 7 in 2009. That was regarded as a success and Sinofsky was then tasked with overseeing Windows 8, Microsoft's new-look, touch-friendly operating system designed to bridge the gap with mobile computing leaders Apple and Google. At the same time, Sinofsky led the development of Microsoft's Surface tablet, its first own-brand computer, aimed at tackling Apple's wildly successful iPad head on. Analysts said it may be too early to judge whether Windows 8 and the Surface have been a success, after launching on October 26, but Sinofsky's departure could have been tied to his abrasive management and ambition for the top job. "It sounded like it had more to do with his leadership style," said Barnicle at Pacific Crest. "There wasn't really a next move for Steven at this point." Sinofsky forfeited some of his bonus this year due to falling sales of Windows and Microsoft's embarrassing failure to comply with an agreement with European regulators to allow users a choice of browsers, which could cost the company millions of dollars in fines. Sinofsky himself shed no light on his exit. "It is impossible to count the blessings I have received over my years at Microsoft," he said in a statement. "I am humbled by the professionalism and generosity of everyone I have had the good fortune to work with at this awesome company." He did not announce any plans to take a job elsewhere. Sinofsky will be succeeded by Julie Larson-Green, who will head the Windows hardware and software division, and Tami Reller, who will remain chief financial officer of the Windows unit. Together, they will report directly to Ballmer. Sinofsky's departure comes two weeks after rival Apple shook up its own top management, forcing out mobile head Scott Forstall and retail chief John Browett. One analyst cited talk that the moves might be related. "Some are speculating that the availability on the market of Forstall might have something to do with Sinofsky's departure," said Gartner analyst Carolina Milanesi. "I doubt we will have to wait long to know if this is the case." (Additional reporting by Sakthi Prasad , Nicola Leske and Sarah McBride ; Editing by Edmund Klamann)

Microsoft leads Wall Street lower, but retailers gain

Tue Nov 13, 2012 5:20pm EST

http://www.reuters.com/article/2012/11/13/us-markets-stocks-idUSBRE8AB08Y20121113

NEW YORK - Stocks sold off late in the session on Tuesday, led by a slide in Microsoft shares, though retailers were a notable bright spot after Home Depot raised its outlook.

Microsoft Corp ( MSFT.O ) was the most actively traded on Nasdaq, weighing on the tech-heavy Nasdaq Composite after the surprising departure of a key executive. The stock fell 3.2 percent to $27.09. After the closing bell, Cisco Systems ( CSCO.O ) shares rose 6.8 percent to $18 after it reported quarterly revenue and earnings that beat analysts' estimates. Home Depot ( HD.N ) shares hit during the regular session levels not seen since April 2000 and the company's raised outlook suggested a revival in the long-dormant U.S. housing market. The S&P retail sector index .SPXRT advanced 1 percent. "Home Depot did say something about housing, which was perceived as positive and was behind the earlier rally," said Richard Sichel, chief investment officer at Philadelphia Trust Co. "That was tempered by Microsoft, to some extent, and probably more so by the 'fiscal cliff,'" he said. The S&P 500 is down 2.7 percent so far this month and closed below its 200-day moving average for a fourth day in a row, a technical indicator that suggests the recent declines could gain momentum. The moving average is currently at 1,381.58, and failure to rise above that level suggests market weakness. Concerns about the looming "fiscal cliff" kept investor activity subdued as lawmakers returned to Washington after the November 6 election, when President Barack Obama won a second term while Democrats added to their margin in the U.S. Senate and picked up seats in the House of Representatives. The market is grappling with how a divided U.S. Congress will deal with the series of mandated tax hikes and spending cuts that start to take effect next year and could take the world's largest economy back into recession. However, serious negotiations are still weeks away, analysts said. The Dow Jones industrial average .DJI fell 58.90 points, or 0.46 percent, to 12,756.18 at the close. The S&P 500 .SPX dropped 5.50 points, or 0.40 percent, to 1,374.53. The Nasdaq Composite .IXIC lost 20.37 points, or 0.70 percent, to 2,883.89. Dow component Home Depot Inc ( HD.N ) raised its full-year outlook even before accounting for any future lift in sales in the aftermath of super storm Sandy, as the retailer benefited from a recent uptick in the U.S. housing market. Home Depot's stock rose 3.6 percent to $63.38, its highest close in more than 12 years. TJX Cos ( TJX.N ), which owns the Marshalls and T.J. Maxx retail chains, reported results that beat analysts' forecasts and its shares added 2.7 percent to $42.06. Microsoft shares fell after Steve Sinofsky, head of the Windows unit, left the company. Sinofsky was considered the driving force behind Windows, the company's biggest product. Technology shares led the market's decline, with an S&P technology index .GSPT down 0.8 percent. AK Steel Holding ( AKS.N ) shares fell 17.6 percent to $4.50 after the company forecast a fourth-quarter loss. Just over 6.2 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average during November last year of 7.33 billion shares. More than two issues fell for every one that rose on both the NYSE and the Nasdaq. (Reporting by Rodrigo Campos; Editing by Jan Paschal )

Oil seen above $100 by 2011 on shortages: Bernstein

Tue Aug 11, 2009 2:40am EDT

http://www.reuters.com/article/2009/08/11/us-oil-demand-bernstein-sb-idUSTRE5793EW20090811

NEW YORK - Oil prices may rise above $100 a barrel by early 2011, as global demand rises and producers fail to boost supply, Bernstein Research forecast on Monday.

Oil prices in the near-term should remain at or below $75 a barrel, moving higher in 2010 as global demand grows, and into triple-digits by late 2010 or early 2011, as demand outpaces supply, Bernstein analysts said. "We believe that the stage is set for a sustained commodities bull run," Bernstein said in a note to clients. "Demand will likely be better in late 2009/early 2010 than consensus estimates assume, and this combined with non-OPEC supply reductions should cause spare capacity to decline in 2010." Bernstein's forecasts are driven by IMF estimates for 2.5 percent real global GDP growth next year. But Bernstein rejected forecasts from the U.S. Energy Information Administration, which call for non-OPEC countries to boost oil supplies this year and next. Under-investment in oil fields means a slow recovery for non-OPEC oil output, since drillers need oil prices at or above $75 a barrel to push them to expand production capacity any quicker, Bernstein said. "The (EIA) agency predicts positive non-OPEC supply growth in both 2009 and 2010. We find such bullishness on the supply side hard to fathom." Oil futures surged to almost $150 a barrel last July, before plunging to nearly $30 in December as the recession deepened. U.S. oil futures edged above $71 a barrel on Monday. (Reporting by Joshua Schneyer ; Editing by Lisa Shumaker )

Madoff firm's CFO pleads guilty, denied bail

Tue Aug 11, 2009 6:57pm EDT

http://www.reuters.com/article/2009/08/11/us-madoff-dipascali-idUSN1152533220090811

NEW YORK - Bernard Madoff's long-time deputy, Frank DiPascali, on Tuesday pleaded guilty to financial crimes including helping others carry out Wall Street's biggest investment fraud, but shed little more light in court on the decades-long swindle.

"I'm standing here today to tell you that from the early 1990s to 2008 I helped Bernie Madoff and other people carry out a fraud that hurt thousands of people. I am guilty," DiPascali, 52, said in Manhattan federal court in a dark suit and reading from a prepared statement. U.S. District Judge Richard Sullivan denied DiPascali bail. He was handcuffed and escorted out of court after pleading guilty under a cooperation deal with the government. DiPascali did not identify the other people, only the disgraced financier, who is incarcerated at a medium-security prison in Butner, North Carolina, after a judge sentenced him on June 29 to an effective life term of 150 years. Madoff, 71, pleaded guilty in March to orchestrating a worldwide $65 billion Ponzi scheme over 20 years in which early investors are paid with the money of new clients. Madoff said he acted alone in the fraud at Bernard L. Madoff Investment Securities LLC in New York. He was arrested by the FBI in December after the number of redemption requests in the declining economy overwhelmed his ability to pay. PLEA DEAL Unlike his former boss, DiPascali pleaded guilty under a cooperation agreement with the U.S. government but the judge who heard his plea on Tuesday was not convinced he should remain at liberty. He pleaded guilty to 10 charges by U.S. prosecutors including conspiracy, securities fraud, money laundering and perjury. He faces a maximum possible sentence of 20 years each on some of the charges. Sentencing was scheduled for May 15. "I'm not persuaded he will be here at the time of sentencing given the monumental sentence he's facing," U.S. District Judge Richard Sullivan said. Both DiPascali's lawyer Marc Mukasey and U.S. prosecutor Marc Litt objected, saying his cooperation was essential to finding out more about the massive fraud and their work would be more efficient if he were not in jail. DiPascali, who worked for Madoff for 33 years from the age of 18, appeared stunned at the judge's ruling at the end of a two-hour long court hearing. DiPascali told the court that he recorded securities trades for clients that were "all fictitious" and that in January 2006, "under Bernie Madoff's direction, I lied to the SEC about the activities of the firm." He admitted wiring money from the Madoff firm's London office to New York and falsifying trading tickets. "I don't how I went from being an 18 year old kid who didn't have a job to standing here in the court today," DiPascali said, his voice breaking with emotion. "I didn't know anything about Wall Street." Public records show DiPascali has a home in Bridgewater, New Jersey, 42 miles southwest of New York. At the Madoff firm, he worked with separate staff and Bernard Madoff on the 17th floor of the firm's office at the Manhattan building known as the Lipstick Tower. The firm's stock traders and other staff worked on the 18th and 19th floors, where they were supervised by Madoff's brother, Peter. Only Madoff, DiPascali and the firm's outside accountant David Friehling have been charged in the massive fraud, but law enforcement sources say the FBI is investigating 10 or more people who could be charged in coming months. "I don't believe the quest for the truth ends today," the judge said after defrauded investor Miriam Siegman asked him to reject the plea deal. "Before imposing sentence I would expect to have more information than I have heard today." Also on Tuesday, the U.S. Securities and Exchange Commission (SEC) filed civil charges against DiPascali. The SEC accused him of creating millions of phony documents and tracking records to conceal fraud from regulators and investors. The SEC said DiPascali helped Madoff avoid detection of his scheme by designing, developing and overseeing a wide array of fictitious books and records to conceal the scam. The case is USA v Frank DiPascali in U.S. District Court for the Southern District of New York (Manhattan) (Reporting by Grant McCool; Additional reporting by Christine Kearney; Editing by Gary Hill )

U.S. productivity rises at fastest pace in six years

Tue Aug 11, 2009 11:47am EDT

http://www.reuters.com/article/2009/08/11/us-usa-economy-productivity-idUSTRE57A2YP20090811

WASHINGTON - U.S. non-farm productivity in the second quarter rose at its fastest pace in six years as companies slashed costs to protect profits, government data showed on Tuesday.

The Labor Department said non-farm productivity rose at a 6.4 percent annual rate, the biggest gain since the third quarter of 2003, from a revised 0.3 percent gain in the first quarter. Productivity for the January-March quarter was previously reported as a 1.6 percent gain. Analysts polled by Reuters had forecast productivity, which measures the hourly output per worker, rising at a 5.3 percent rate in the second quarter. "It's good because it helps keep inflation low; labor costs are pretty benign," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida. "On the other hand it means you can do more with fewer people," he said. U.S. Treasury debt prices held gains on the data, while stock index futures were little moved. Hours worked plunged at a 7.6 percent rate in the second quarter, the Labor Department said. Unit labor costs, a gauge of inflation and profit pressures closely watched by the Federal Reserve, fell 5.8 percent, the biggest decline since the second quarter of 2000. Analysts had expected unit labor costs to fall 2.4 percent in the second quarter. Unit labor costs dropped by a revised 2.7 percent in the January-March quarter. The government also published revisions to productivity for 2006 through 2008 following adjustments to gross domestic product estimates. Compensation per hour rose at a 0.2 percent pace and, adjusted for inflation, was down 1.1 percent, while output fell at a 1.7 percent rate in the second quarter. Compared with the April-June quarter of 2008, non-farm productivity was up 1.8 percent. Unit labor costs fell 0.6 percent year-on-year. Compensation from a year earlier rose 1.3 percent and was up 2.2 percent once adjusted for inflation. Output, measured on a year-on-year basis, was down 5.6 percent. (Reporting by Lucia Mutikani ; Editing by Neil Stempleman )

Judge will not sign off on BofA, SEC bonus pact

Tue Aug 11, 2009 6:36am EDT

http://www.reuters.com/article/2009/08/11/us-bankofamerica-bonuses-hearing-idUSTRE57957620090811

NEW YORK - A federal judge refused to approve a proposed settlement between the U.S. Securities and Exchange Commission and Bank of America Corp over the payment of bonuses to Merrill Lynch & Co employees, saying he was unable to determine if it was fair to the public.

The largest U.S. bank had agreed on August 3 to pay $33 million to resolve an SEC civil lawsuit accusing it of misleading shareholders by not disclosing it had authorized the payment of up to $5.8 billion of bonuses to Merrill employees. About $3.6 billion was awarded. But at a hearing on Monday, Judge Jed Rakoff of the federal court in Manhattan said he needed a "much more detailed account of the underlying facts" before signing off. He suggested the settlement might not be "remotely reasonable" if the SEC were right that the bank lied about the bonuses. "I would be less than candid if I didn't express my continued misgivings about this settlement at this stage," Rakoff said. He said the settlement "seems to be lacking in transparency." Bank of America spokesman Scott Silvestri said the bank views the settlement as "a constructive conclusion" to the matter. "In our presentation today we demonstrated that not one penny of taxpayer money will be included in the payment of the settlement, and the SEC complaint does not allege that anyone did anything intentionally wrong or knowingly wrong," he said. SEC spokesman John Nester had no immediate comment. Rakoff said he could not reconcile the SEC's position that Bank of America "effectively lied" to shareholders with its decision not to force the Charlotte, North Carolina-based bank to admit wrongdoing. Noting that the government had pumped $45 billion of taxpayer money into Bank of America from the federal bank bailout plan, including $20 billion to help absorb Merrill, Rakoff said that "one might infer that public money was used, in effect, to pay the bonuses. "Don't I need to know what the truth is before I could make a determination here?" Rakoff said. "Is there not something strangely askew in a fine of $33 million?" Bank of America denied misuse of the bailout money. "This is not a case in which there is any risk or threat to TARP funds," Lewis Liman, a lawyer for the bank, told the judge. The judge directed both sides to make new submissions on August 24 and September 9. DID THE CEOS KNOW? According to the SEC complaint, Bank of America told investors in proxy documents that Merrill agreed not to award bonuses or incentive pay before the merger closed, when in fact the bank had authorized Merrill to pay bonuses. Rakoff appeared skeptical that Kenneth Lewis and John Thain, the chief executives of Bank of America and Merrill, should not be held to account for the decision not to disclose the bonuses to shareholders before they voted on the merger. "If you are correct that this proxy statement was materially misleading," Rakoff told an SEC lawyer, "then at a minimum Mr. Thain and Mr. Lewis would seem to be responsible for that." He asked rhetorically whether "some sort of ghost" were responsible for drafting the bonus agreement. Maureen Lewis, an SEC lawyer, responded that Lewis and Thain "relied on the lawyers' advice and didn't know what was in the disclosure schedule." The $33 million penalty was below the $50 million that General Electric Co agreed last week to pay to settle SEC fraud charges. Lawyers said it is rare for judges to delay so-called SEC consent agreements, but Rakoff has done it before. In 2003, he blocked a $500 million settlement with WorldCom Inc over the accounting fraud that led to the phone company's bankruptcy. He later approved a $750 million payout. The Merrill merger has weakened Lewis, whose bank faces many lawsuits, regulatory probes and anger of shareholders and lawmakers over the bonuses and the extent of Merrill's losses. Since April, Lewis has lost his job as chairman and more than half of his long-supportive board of directors. In a separate case, Bank of America agreed to pay $55 million to settle a lawsuit by former Countrywide Financial Corp employees over losses in their retirement accounts. Bank of America acquired what had been the largest U.S. mortgage lender in July 2008. Shares of Bank of America have fallen 51 percent since the Merrill merger was announced last September 15. They closed Monday up 26 cents at $16.68 on the New York Stock Exchange. The case is SEC v. Bank of America Corp, U.S. District Court, Southern District of New York (Manhattan), No. 09-6829. (Reporting by Jonathan Stempel; Additional reporting by John Poirier ; editing by Andre Grenon , Carol Bishopric and Steve Orlofsky)

Second-quarter productivity report contains errors: BLS

Tue Aug 11, 2009 3:21pm EDT

http://www.reuters.com/article/2009/08/11/us-usa-economy-productivity-sb-idUSTRE57A57C20090811

WASHINGTON - A report on second-quarter U.S. productivity released earlier on Tuesday contained mistakes on compensation and unit labor costs, but the errors would not affect overall productivity data, the Department of Labor said.

It said it would issue a corrected version "as soon as possible. The department earlier reported non-farm productivity, a gauge of hourly output per worker, had surged at a 6.4 percent rate in the second quarter after gaining 0.3 percent in the first quarter. "The series containing the errors are compensation per hour, real compensation per hour, unit labor costs, and unit non-labor payments," the department said in a note published on its website. An official with the department told Reuters that the overall productivity figures would not be affected. "It will not affect the second quarter (productivity) data. What is going to be affected are indexes that include compensation as one of their components," he said. "There are a few scattered changes to percent changes due to rounding. The indexes were re-based and we incorporated some of them on the wrong base year." The department had reported unit labor costs down 5.8 percent in the second quarter, the biggest decline since the second quarter of 2000, after dropping a revised 2.7 percent in the January-March quarter. Compensation per hour had been reported to have risen at a 0.2 percent pace, but adjusted for inflation, it was down 1.1 percent. Unit labor costs were reported to have fallen 0.6 percent year-on-year. Compensation from a year earlier was reported to have increased 1.3 percent and was up 2.2 percent once adjusted for inflation. (Reporting by Lucia Mutikani )

InterContinental warns recovery may take 2 years

Tue Aug 11, 2009 5:32am EDT

http://www.reuters.com/article/2009/08/11/us-intercontinental-idUSTRE57A1XG20090811

LONDON - InterContinental Hotels, the world's biggest hotelier, said a recovery for the industry might be two years away after reporting first-half profit that fell but beat forecasts.

The British group, which operates the InterContinental, Crowne Plaza and Holiday Inn brands, declined to call the bottom of the hotel market as the economic downturn continued to crimp the travel budgets of its key customers from the business community. "We can't see any sign of recovery and it could be two years before we get back to levels of travel we were at before," Chief Executive Andrew Cosslett told a results briefing on Tuesday. The firm's shares were down 1 percent at 750.5 pence by 0852 GMT in a slightly firmer overall market. "This is one of the toughest years on record with little respite and it will continue to be challenging this year and into next," Cosslett said. ROOM RATES UNDER PRESSURE He said forward booking data showed no further deterioration in demand, with July benefiting from stronger leisure demand from holidaymakers, but while occupancy levels were stabilizing, hotel room rates were still very much under pressure. Analysts expect revenue per available room (RevPAR) to fall in the second half after the British hotelier said the key industry measure fell 16.2 percent in the first half and 18.6 percent in the second quarter. Although deeper cost cuts helped offset tough trading in the first half, analysts said further cuts are unlikely to offset fully further declines in business as the group raised its cost savings target for 2009 to $80 million from $70 million. "InterContinental says that occupancy has shown signs of stabilization but room rates continue to decline in a very competitive market," said analyst Ian Rennardson at house broker Bank of America/Merrill Lynch. The hotelier, which typically manages or franchises hotels instead of owning them and earns 70 percent of its profit in the United States, has been hit by the fall in global travel from leisure and business guests, especially since September. RIVALS CUT FORECASTS Last month, U.S. group Marriott International reported a plunge in second-quarter profit while it and rival Starwood, which owns the Sheraton brand, cut their 2009 earnings forecasts and reported few signs of recovery. InterContinental, which runs almost 630,000 rooms in over 4,300 worldwide hotels, reported adjusted operating profit down 38 percent at $179 million for the first half of 2009, while its half-year dividend was unchanged at 12.2 cents. Continuing operating profit dipped to $174 million, above a consensus of $162 million and a range of $152-$173 million in a survey of eight analysts by Reuters. The firm gave no comparative figure for continuing profit. The group, which also runs Staybridge Suites and Hotel Indigo, said it was still on track to add 400 hotels this year and on target with a $1 billion relaunch of its Holiday Inn brand with 1,040 hotels operating under its new standards. Its shares have outperformed London's FTSE 100 by over 20 percent this year, meaning the shares trade on nearly 17 times 2009 forecast earnings, at a discount to Marriott on 32. (Reporting by David Jones; Editing by Dan Lalor, Rupert Winchester, John Stonestreet)

Resolution in $3.1 billion Friends buy, seeks more deals

Tue Aug 11, 2009 9:58am EDT

http://www.reuters.com/article/2009/08/11/us-friends-resolution-idUSTRE57A11520090811

LONDON - Britain's Resolution, an acquisition vehicle founded by tycoon Clive Cowdery, clinched the first of a hoped-for trio of deals with the 1.86 billion pound ($3.1 billion) takeover of insurer Friends Provident.

Resolution, created last year to buy life insurers and asset managers, said on Tuesday Friends Provident's management had backed an improved bid giving shareholders 0.9 Resolution shares per Friends share, a month after rejecting an initial offer. Cowdery told reporters Resolution was looking for at least two more acquisitions which would be merged with Friends and floated on the stock market after two to three years of restructuring. The group's next takeover targets would probably be life insurers rather than asset managers and could include local subsidiaries of foreign insurers and local subsidiaries of banks or large British insurers that may not wish to continue to focus on the UK market, Cowdery said on a conference call. Future deals would be financed by raising funds from shareholders, Cowdery said, estimating the group's 660 million pound stock market listing in December had raised only a fifth of the total sum investors were willing to commit. "We remain confident that there is substantial capital that can be attracted into the restructuring of the life sector," he said. PROFITS SLUMP Resolution's bid values Friends -- Britain's sixth-biggest life insurer and an acquisition target since it demutualised and listed in 2001 -- at 79.4 pence per share, a 6 percent premium to Monday's closing price, but little more than a third of the 225 pence at which it was floated. Friends, which also reported a lower-than-expected first half profit, saw its shares rise 1.1 percent to 75.9 pence by 1155 GMT (7:55 a.m. EDT), off earlier highs, while Resolution shed 3.6 percent to 85.25 pence. Manoj Ladwa, a senior trader at ETX Capital, said Resolution's potential targets included Scottish Widows, the life business of Lloyds Banking Group Plc and the British life units of companies such as Prudential Plc, Aegon NV, Axa and Zurich Financial Services. "There's a lot of rumors flying about. The one that I would give a bit more credence to would be the life companies belonging to Lloyds," said Shore Capital analyst Eamonn Flanagan, citing forthcoming capital rule changes which could prevent Lloyds from counting its life businesses toward its capital base. PAY DEAL The Friends buy marks a critical first deal for Cowdery's Resolution as it seeks to exploit an anticipated bout of insurance industry consolidation, driven by falling sales due to a weak economy, stricter capital rules and tax changes. Resolution also said it was considering changes to its top executives' pay arrangements, which had been cited as an obstacle to a deal with Friends Provident. Resolution executives currently stand to get 10 percent of any profit on its takeovers over and above the risk-free rate, based on the yield on three-month government bonds. This hurdle rate may be replaced because efforts by the Bank of England to stimulate the economy have caused a sharp drop in the risk-free rate this year, tilting the pay structure in the executives' favor, Cowdery said. Resolution and Friends started talks in July but broke them off the same month. A source close to the matter said pressure from shareholders pushed Friends into allowing due diligence only two days later. Friends posted a 38 percent drop in first-half underlying profit to 131 million pounds, missing a consensus forecast of 148 million based on seven analyst estimates. The insurer maintained its dividend. Friends shareholders will be given the option of taking a cash payment for up to 2,500 of their shares, to a maximum total value of 500 million pounds. (Additional reporting by William James ; Editing by David Holmes ) ($1 = 0.6000 pound)

Oil falls as U.S. data damps recovery hopes

Tue Aug 11, 2009 3:24pm EDT

http://www.reuters.com/article/2009/08/11/us-markets-oil-idUSTRE56T3EA20090811

NEW YORK - Oil prices fell on Tuesday as doubts resurfaced over the pace of economic recovery after data showed another drop in U.S. wholesale business inventories and the U.S. government revised lower its forecast for global oil demand.

The U.S. Commerce Department reported that U.S. wholesale inventories plummeted 1.7 percent in June, and investors worried that businesses were running as lean as possible because of doubts about an economic recovery. The decline, nearly double analyst expectations and the 10th straight monthly drop, pushed inventories to their lowest level in more than two years and weighed on U.S. equity markets. .N U.S. crude fell $1.15 to settle at $69.45 a barrel. In London, Brent crude dropped $1.04 to settle at $72.46 a barrel. "I think the market will continue to test resistance and support levels in the recent range until further evidence surfaces that addresses the alleged recovery's sustainability," said Mike Fitzpatrick, vice president at MF Global in New York. Optimism that a turnaround in the economy could bolster weak energy demand has helped oil prices recover in the months since crude dropped below $33 a barrel in December. The U.S. Energy Information Administration cut its 2009 oil demand forecast, predicting consumption would fall by 1.71 million barrels per day this year, compared with previous estimates of a 1.56-million bpd drop. The Organization of the Petroleum Exporting Countries forecast that the slow recovery in global consumption and rival oil supplies will shrink demand for its crude next year. "In light of weakening fundamentals, the sustainability of current prices will mainly depend on clearer signs of improvement in the global economy," OPEC economists said in a report. Oil prices rose earlier on news that crude imports by China, the No. 2 consumer, had surged by 42 percent in July to a record 4.62 million bpd. Traders were also awaiting weekly American Petroleum Institute inventory data late on Tuesday, followed by weekly U.S. government data on Wednesday. Analysts polled by Reuters forecast the data will show a 700,000-barrel build in crude oil inventories in the week to August 7, while gasoline inventories were seen down 1.3 million barrels and distillate stocks off by 200,000 barrels. (Additional reporting by Gene Ramos and Robert Gibbons in New York; Emma Farge, Maryelle Demongeot and David Sheppard in London; Editing by Marguerita Choy)

U.S. economy has bottomed: George Soros

Tue Aug 11, 2009 3:13pm EDT

http://www.reuters.com/article/2009/08/11/us-economy-usa-soros-idUSTRE57A4LN20090811

NEW YORK - The U.S. economy has hit bottom and the current quarter will see positive growth due to the government's stimulus spending, billionaire financier George Soros said on Tuesday.

"I think it (the stimulus) has made a difference, the economy has actually bottomed and I think we are facing a positive quarter, and I think that is largely due to the stimulus," he said in an interview with Reuters Television in New York. The Obama administration is pumping $787 billion into the economy in a bid to turn around the deepest recession since the 1930s. The U.S. economy shrank by 1 percent in the second quarter after tumbling 6.4 percent in the quarter before that, the biggest decline since 1982. Soros said he did not believe the economy needed more stimulus money, despite calls for a second round of spending. Notably, in July, House of Representatives Majority Leader Steny Hoyer said the U.S. should be open to more government spending if needed. Also on Tuesday, U.S. President Barack Obama sounded a cautious note, saying the economy is "not out of the woods" despite signs lagging business investment was reviving. Last week the White House said there are no plans for a second stimulus package. Back in June Soros said the United States faces a "stop-go" economy because rising borrowing costs could generate major headwinds for the still-fragile economy. Soros is Chairman of Soros Fund Management. (Reporting by Edward Krudy; Editing by Andrew Hay)

Lawyers propose $2.5 million bail for Madoff deputy

Tue Aug 11, 2009 11:43am EDT

http://www.reuters.com/article/2009/08/11/businesspro-us-madoff-dipascali-bail-idUSTRE57A3WK20090811

NEW YORK - Bernard Madoff's long-time right-hand man, Frank DiPascali, should be released on $2.5 million bond and his travel restricted following an expected guilty plea to criminal charges later on Tuesday, according to a proposal by U.S. prosecutors and his lawyer.

DiPascali, who worked for Bernard L. Madoff Investment Securities LLC for 33 years, including as chief financial officer, faces charges in Wall Street's biggest investment fraud of as much as $65 billion. He will make his first court appearance and plead guilty to criminal charges, according to court documents. Acting federal prosecutor Lev Dassin said in a letter to presiding Manhattan federal court Judge Richard Sullivan that the personal recognizance bond would be signed by three financially responsible people and secured by $400,000 of equity in the house of DiPascali's sister by August 18. The letter, which said the bail conditions were jointly proposed by prosecutors and DiPascali, proposed a tentative sentencing date for May 2010. Court documents released last Friday said U.S. prosecutors expect DiPascali to plead guilty to "a criminal information," which is an alternative charging document to a grand jury indictment. No further details have been provided on the charges, and his lawyer declined to comment. Madoff, 71, pleaded guilty to securities fraud, money laundering, perjury and other charges in March. He is serving an effective life term of 150 years in prison. (Reporting by Grant McCool ; editing by John Wallace)

OPEC sees demand for its oil falling further

Tue Aug 11, 2009 8:13am EDT

http://www.reuters.com/article/2009/08/11/us-opec-oil-sb-idUSTRE57A2UV20090811

LONDON - Rival oil supplies and the sluggish pace of recovery in world consumption will shrink demand for OPEC's crude oil next year, the producer group said on Tuesday.

The Organization of the Petroleum Exporting Countries also left its forecast for total world oil consumption this year and next unchanged, suggesting the outlook has reached a turning point after months of lowering forecasts. Demand for OPEC crude will average 27.97 million barrels per day (bpd) next year, down 480,000 bpd from 2009, OPEC said in its Monthly Oil Market Report. It previously expected a fall of 380,000 bpd. Oil prices are close to the high for the year above $70 a barrel, having more than doubled from below $33 in December partly on optimism about economic recovery. But OPEC remained cautious about the strength of the rally. "In light of weakening fundamentals, the sustainability of current prices will mainly depend on clearer signs of improvement in the global economy," it said in the report. "If market expectations for an economic recovery are not fully realized, current price levels could face increasing pressure." OPEC, which pumps more than a third of the world's oil, said world oil demand will fall 1.65 million bpd in 2009 before rising by 500,000 bpd in 2010 as economic growth returns. Both forecasts were unchanged from last month. Late last year, OPEC agreed to cut output by 4.2 million bpd, equal to about 5 percent of daily world demand, as recession eroded fuel use and sent oil prices sliding. While OPEC predicts a small rise in world oil demand next year, rising supply from producers outside the 12-member group is expected to crimp demand for OPEC's oil in 2010. OPEC said supply from non-OPEC countries would rise by 430,000 bpd in 2010, supported by higher output from Russia and revisions to historical data. The increase is 100,000 bpd more than previously forecast. The report also pointed to a further erosion in OPEC's compliance with agreed supply cutbacks. OPEC, excluding Iraq, raised output in July to 26.20 million bpd, up from 26.09 million bpd in June, the report said, suggesting higher prices have encouraged members to relax adherence to output curbs. The rise in OPEC's output in July reduced compliance with the supply curbs to 68 percent from 70 percent in June, according to Reuters calculations based on OPEC figures. (Editing by Alex Lawler )