在长协矿上，中国钢企还剩最后一个谈判对手——必和必拓(BHP)。双方2008财年铁矿石谈判的大限是6月30日，此后供需双方部分企业可选择取消长期合约。
6月23日，宝钢与另一澳大利亚矿业巨头力拓(RIO)达成2008年度铁矿石基准价格，RIO的PB粉矿、杨迪粉矿、PB块矿将在2007年基础上分别上涨79.88%、79.88%，96.5%，相当于将所有铁矿石产品的年度基准价上调85%。
目前谈下的长协价仍低于我国市场上的现货矿价格。“我的钢铁”网人士认为，澳大利亚长协矿与巴西矿之间原本50美元左右的海运费差价是澳大利亚矿山企业希望补偿的，目前宝钢只满足了其中的12－15美元。
沙钢集团相关负责人、中信证券投行部高级副总裁王治鉴、钢铁专家许中波均对本报记者表示，宝钢与BHP的谈判结果不可能超过“RIO价”。
与 BHP的谈判不同于RIO的是，一，倘若谈判破裂，中国企业损失小。BHP是三大矿山中产量最低者，其谈判的筹码也相对最小，2007年中国进口RIO公司铁矿石8230万吨，比进口BHP产品(4700万吨)多75%，此外从扩张预期上看，联合金属网龙宽认为，2010年以后中国市场可能将形成：RIO、VALE各占30%份额，而BHP和FMG各占10%份额的市场地位。
二，因“两拓”合并案如成功，两拓将占据全球长期合同贸易份额的89%，从而巩固其在铁矿石谈判中的话语权，陷钢铁企业于被动。因此，之前答应力拓涨幅有助于抬高力拓价值，间接阻止两拓合并，但对BHP应持打压原则。目前英国哥鲁氏(Corus)钢铁集团已经就必和必拓向力拓发起的敌意收购行动向欧盟进行了控诉。
三，VALE的首发价格被推翻，谈判机制已经改变，此次与BHP的谈判“开创性意义”已小。
此外，即使BHP终止长期合同，中国方面应可通过VALE、RIO、FMG的新产能补充4000万吨需求，而BHP产品大量进入现货市场，还可能加速现货价格回落。
因此，在可能达成的涨幅上，龙宽认为，应该给予BHP较VALE和RIO更低的价格涨幅，40%—50%应为比较合理的区间。
何况，BHP还有额外要求——采取指数价格系统来代替传统的年度价格谈判。指数价格系统将给予国内靠矿吃饭的钢铁企业更大的波动性，中国企业已表示不会接受。
宝钢与RIO的谈判结果已证明，澳矿企加收海运费的要求中方不能答应。
“与BHP谈判结果如上涨96.5%，我们不能接受。”6月30日，国内某拥有长期协议矿进口资质的特大型钢铁企业副董事长对本报记者表示。
国内有20多家有长协矿进口资质的企业。相关企业告诉记者，宝钢现在的谈判内容应包括，2008年需用BHP多少长协矿，以什么货币或方式结算，运输怎么安排(海运费)，谈下的供矿量会分给哪些企业，是以“和”的目的去谈还是其他。企业最担心20多家企业中有的可能拿不到矿。
“也有企业有另外的想法，”上述人士称，“之前大家主张早点结束，别拖太久，并拟定了60%和70%两种可接受的涨幅。当时澳矿企的开价也并没有达到90%多。在与RIO 签定的协议中，PB粉矿、杨迪粉矿在 2007年基础上分别上涨79.88％、79.88％，这个幅度是大家事先衡量过的，但PB块矿上涨96.5％，是很多企业没有想到的。现在宝钢还在和我们沟通。”
Monday, June 30, 2008
Saturday, June 28, 2008
Moody's downgraded Mogan Stanley's credit rating
NEW YORK (Reuters) - Moody's Investors Service warned on Friday it is likely to cut its credit ratings on Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), saying the U.S. investment bank has made expensive trading mishaps and it's unclear if it can improve its risk management.
"Morgan Stanley is making changes to the risk management organization, but Moody's thinks it is premature to conclude that these changes will be effective considering the complexity of the task," the rating agency said in a statement.
"Since the onset of the credit crisis one year ago, Morgan Stanley's financial performance and risk management has been inconsistent, and below the levels expected of a Aa3-rated financial institution," Moody's said.
The most likely result of the rating review will be a cut from "Aa3," the fourth highest investment grade, by one notch to "A1" Moody's said.
Morgan Stanley has profitable franchises in investment banking, equities, commodities and prime brokerage, but it also has risky concentrations in commercial real estate and leveraged loans, Moody's said.
"The critical issue will be for Morgan Stanley to manage these and other concentrations, and their attendant basis risks such that any losses are well contained within the revenue capacity of the relevant business area," Moody's said.
Morgan Stanley said on Wednesday its fiscal second-quarter earnings dropped 57 percent on weak trading, investment losses and a slowdown in investment banking, even after it realized $1.43 billion in one-time gains.
The recent collapse of Bear Stearns Cos also highlights liquidity challenges faced by investment banks, Moody's added.
Morgan Stanley's 5.25 percent bond due 2012 widened 24 basis points on Friday to 2.62 percentage points over U.S. Treasuries, according to MarketAxess.
(Reporting by Karen Brettell; Editing by Diane Craft)
"Morgan Stanley is making changes to the risk management organization, but Moody's thinks it is premature to conclude that these changes will be effective considering the complexity of the task," the rating agency said in a statement.
"Since the onset of the credit crisis one year ago, Morgan Stanley's financial performance and risk management has been inconsistent, and below the levels expected of a Aa3-rated financial institution," Moody's said.
The most likely result of the rating review will be a cut from "Aa3," the fourth highest investment grade, by one notch to "A1" Moody's said.
Morgan Stanley has profitable franchises in investment banking, equities, commodities and prime brokerage, but it also has risky concentrations in commercial real estate and leveraged loans, Moody's said.
"The critical issue will be for Morgan Stanley to manage these and other concentrations, and their attendant basis risks such that any losses are well contained within the revenue capacity of the relevant business area," Moody's said.
Morgan Stanley said on Wednesday its fiscal second-quarter earnings dropped 57 percent on weak trading, investment losses and a slowdown in investment banking, even after it realized $1.43 billion in one-time gains.
The recent collapse of Bear Stearns Cos also highlights liquidity challenges faced by investment banks, Moody's added.
Morgan Stanley's 5.25 percent bond due 2012 widened 24 basis points on Friday to 2.62 percentage points over U.S. Treasuries, according to MarketAxess.
(Reporting by Karen Brettell; Editing by Diane Craft)
Dow crosses into bear market territory
NEW YORK (Reuters) - The Dow Jones industrial average .DJI of stocks slid on Friday into bear market territory as investors fretted about the impact of record oil prices and mounting credit losses in the financial sector.
To begin a bear market cycle, or prolonged period of falling stock prices, the index needs to end the session at least 20 percent below its closing peak, reached in October.
The Dow was down 124.98 points, or 1.09 percent, at 11,328.44, which was 20 percent below its record close on October 9, 2007.
(Reporting by Ellis Mnyandu, Editing by Kenneth Barry)
To begin a bear market cycle, or prolonged period of falling stock prices, the index needs to end the session at least 20 percent below its closing peak, reached in October.
The Dow was down 124.98 points, or 1.09 percent, at 11,328.44, which was 20 percent below its record close on October 9, 2007.
(Reporting by Ellis Mnyandu, Editing by Kenneth Barry)
Barclays may need 9 billion pounds more in capital: Citigroup
"We believe that it still leaves the company short of capital relative to peers," Citigroup said.
The brokerage estimated that Barclays would need 6.6 billion pounds of additional equity to reach the same capital position as Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and 8.6 billion pounds to meet the European banking sector average.
Barclays, which has lost more than $5 billion on assets hurt by the U.S. subprime crisis and credit crunch, said last week it planned to raise billions of pounds to rebuild its capital base.
Citigroup kept its "sell" rating on the stock and cut its price target to 275 pence from 350 pence.
Citigroup said Barclays' investment bank arm, Barclays Capital (Barcap), is struggling with revenue headwinds and structured credit exposures, whereas the main retail and commercial bank is dominated by UK, South Africa and Spain, all geographies experiencing problems.
The brokerage estimated that Barclays would need 6.6 billion pounds of additional equity to reach the same capital position as Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and 8.6 billion pounds to meet the European banking sector average.
Barclays, which has lost more than $5 billion on assets hurt by the U.S. subprime crisis and credit crunch, said last week it planned to raise billions of pounds to rebuild its capital base.
Citigroup kept its "sell" rating on the stock and cut its price target to 275 pence from 350 pence.
Citigroup said Barclays' investment bank arm, Barclays Capital (Barcap), is struggling with revenue headwinds and structured credit exposures, whereas the main retail and commercial bank is dominated by UK, South Africa and Spain, all geographies experiencing problems.
Merrill may write off 5.4 billion in Q2
By Elinor Comlay and Tenzin Pema
NEW YORK/BANGALORE (Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz) will likely write down $5.4 billion of securities in the second quarter, mainly due to its exposure to bond insurers, an analyst at Lehman Brothers wrote on Friday.
The quarterly write-down estimate, one of the highest yet for Merrill Lynch, helped sink the company's shares as much as 2.8 percent and highlighted concerns the broker may need to raise capital.
Lehman analyst Roger Freeman raised his write-down view by $3 billion for Merrill, making his estimate the highest among Wall Street analysts. Analysts to date have expected write-downs to range from $3.5 billion to $4.2 billion.
Freeman looked at how recent rating agency downgrades of bond insurers would affect Merrill Lynch, which offloaded some of its risk on bond insurers. With the bond insurers seen as weaker, their protection is not worth as much to Merrill.
Merrill is likely to have to raise capital if it does write down this exposure, because the charges will leave Merrill Lynch with low capital levels relative to the industry, said Brad Hintz, analyst at Sanford C. Bernstein.
Raising capital may also be necessary to maintain credit ratings, Hintz said. Standard & Poor's cut Merrill's debt rating one notch earlier this month.
"Merrill does not want to see their rating go down again," Hintz said.
But Merrill Lynch Chief Executive John Thain may find raising capital difficult, Hintz said.
Merrill cannot easily issue more common equity, because investors who gave money to Merrill in December and January must receive substantial extra compensation if Merrill raises additional capital at too low a price.
At the same time, however, if Merrill decides to sell off assets to raise money, the company may be giving up future sources of revenue.
Merrill's Thain said he would consider selling the company's 20 percent stake in media and information company Bloomberg, which he valued at around $5 billion to $6 billion earlier this month.
To some investors, that move makes sense.
"We have confidence in what John Thain is doing," said Ben Wallace, a securities analyst at investment advisor Grimes & Company, which owns Merrill shares.
Lehman Brothers said it increased its write-down estimate for Merrill after looking at the company's exposure to repackaged debt known as collateralized debt obligations.
Freeman widened his second-quarter loss estimate to $2.78 a share from 64 cents. For 2008, he sees higher losses of $2.99 a share from his prior view of a loss of 53 cents.
The analyst cut his price target to $44 from $47 and rates the stock "equal weight."
Merrill shares closed at $33.05 Thursday on the New York Stock Exchange. Through Thursday, they have plunged 38 percent this year.
In midday trading on Friday, Merrill's shares were up 2 cent at $33.03 after falling as low as $32.11.
(Reporting by Tenzin Pema in Bangalore and Elinor Comlay in New York; Editing by Jarshad Kakkrakandy and Andre Grenon)
NEW YORK/BANGALORE (Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz) will likely write down $5.4 billion of securities in the second quarter, mainly due to its exposure to bond insurers, an analyst at Lehman Brothers wrote on Friday.
The quarterly write-down estimate, one of the highest yet for Merrill Lynch, helped sink the company's shares as much as 2.8 percent and highlighted concerns the broker may need to raise capital.
Lehman analyst Roger Freeman raised his write-down view by $3 billion for Merrill, making his estimate the highest among Wall Street analysts. Analysts to date have expected write-downs to range from $3.5 billion to $4.2 billion.
Freeman looked at how recent rating agency downgrades of bond insurers would affect Merrill Lynch, which offloaded some of its risk on bond insurers. With the bond insurers seen as weaker, their protection is not worth as much to Merrill.
Merrill is likely to have to raise capital if it does write down this exposure, because the charges will leave Merrill Lynch with low capital levels relative to the industry, said Brad Hintz, analyst at Sanford C. Bernstein.
Raising capital may also be necessary to maintain credit ratings, Hintz said. Standard & Poor's cut Merrill's debt rating one notch earlier this month.
"Merrill does not want to see their rating go down again," Hintz said.
But Merrill Lynch Chief Executive John Thain may find raising capital difficult, Hintz said.
Merrill cannot easily issue more common equity, because investors who gave money to Merrill in December and January must receive substantial extra compensation if Merrill raises additional capital at too low a price.
At the same time, however, if Merrill decides to sell off assets to raise money, the company may be giving up future sources of revenue.
Merrill's Thain said he would consider selling the company's 20 percent stake in media and information company Bloomberg, which he valued at around $5 billion to $6 billion earlier this month.
To some investors, that move makes sense.
"We have confidence in what John Thain is doing," said Ben Wallace, a securities analyst at investment advisor Grimes & Company, which owns Merrill shares.
Lehman Brothers said it increased its write-down estimate for Merrill after looking at the company's exposure to repackaged debt known as collateralized debt obligations.
Freeman widened his second-quarter loss estimate to $2.78 a share from 64 cents. For 2008, he sees higher losses of $2.99 a share from his prior view of a loss of 53 cents.
The analyst cut his price target to $44 from $47 and rates the stock "equal weight."
Merrill shares closed at $33.05 Thursday on the New York Stock Exchange. Through Thursday, they have plunged 38 percent this year.
In midday trading on Friday, Merrill's shares were up 2 cent at $33.03 after falling as low as $32.11.
(Reporting by Tenzin Pema in Bangalore and Elinor Comlay in New York; Editing by Jarshad Kakkrakandy and Andre Grenon)
U.S. M&A slumps, but strategic deals help fill the void
By Jessica Hall
PHILADELPHIA (Reuters) - Merger activity in the United States dropped 29 percent in the second quarter, faring better than the 40 percent global slump, as corporations filled the void left by buyout firms and targeted big consumer brands such as Anheuser-Busch Cos Inc (BUD.N: Quote, Profile, Research, Stock Buzz) and Wm. Wrigley Jr Co (WWY.N: Quote, Profile, Research, Stock Buzz).
"Strategic buyers see an opportunity here due to the absence of the financial buyers. For the last 24 months, prior to the downturn, strategic buyers were getting outbid by financial buyers. That's not happening now," said Bob Filek, a partner with PricewaterhouseCoopers' transaction services.
During the first half of the year, private equity deal volume dropped 85 percent in the U.S. and 76 percent globally, according to Thomson Reuters data released on Friday.
The strength of corporate deal-making came as private equity firms were hobbled by the difficulty of borrowing money -- and the high cost -- in the tight credit markets as well as banks' uneasiness to lend in the wake of the subprime mortgage crisis.
Jimmy Elliott, global head of M&A at JP Morgan, said he expected strategic acquisitions to continue in the second half of 2008.
"Once CEOs and boards feel confident that they are at or near the bottom, and believe there is a window of opportunity, they will not stand on the sidelines anymore," Elliott said.
"So, yes, strategic acquisitions will continue to dominate the activity."
Corporations with strong balance sheets have often had cash on hand to make acquisitions, and been able to amass additional funds for large takeovers of well-known brands with proven cash flow and high credit ratings, analysts said.
"Both Mars and Wrigley and InBev and Busch -- those are premium-brand transactions and high quality transactions," Filek said.
"When you have a good corporate buyer and you have a premium transaction, debt funding is available. What is really missing in the market today is debt funding for higher leveraged private equity transaction," Filek said.
Corporate deal-making in the U.S. totaled $402 billion in the second quarter, just shy of the year-ago second-quarter tally of $404 billion. The second quarter also rebounded from the slow start seen in the first quarter, when strategic deals totaled only $136 billion, Thomson Reuters said.
SLOWEST START SINCE 2005
Even though U.S. merger activity showed a 172 percent jump in the second quarter over the first period, the first six months of 2008 overall still marked the slowest start for a deal-making year in the U.S. since 2005, Thomson Reuters said.
The weak equity markets, the sinking U.S. dollar, skittish consumer confidence, the upcoming U.S. presidential election have compounded the problems of tight credit markets, analysts said.
In the six months of 2008, U.S. deal volume dropped 42 percent to $586.8 billion, while global volume dropped 35 percent to $1.567 trillion, Thomson Reuters said.
The consumer staples sector was the most targeted U.S. industry this year -- attracting $104 billion in deals -- and was the only sector to show increased merger volume, Thomson Reuters said.
The declines in deal activity in other sectors ranged from 17 percent for energy and power, to 80 percent for real estate, Thomson Reuters said.
For the first half of the year, Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) held the No. 1 ranking for U.S. advisory work, while Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) moved to the No. 2 spot, up from No. 4 a year ago. JPMorgan & Co (JPM.N: Quote, Profile, Research, Stock Buzz) remained at No. 3.
Boutique advisory firm Centerview Partners, which has expertise in consumer products and retail sectors, moved to No. 10, up from No. 13, according to Thomson Reuters.
HIGHER PREMIUMS, LOWER STOCK PRICES
The recent spate of corporate deals helped boost the average deal premium -- or the price a buyer paid over the target company's stock price one week prior to a deal announcement.
The average premium paid so far this year was 28 percent, up from 25 percent last year, and 24 percent in 2006, according to Thomson Reuters.
Some of the buoyancy reflects the current weakness in stock prices rather than the generosity of suitors.
"Deal premiums continue to rise, but that is somewhat misleading because stock prices have come down from their highs," said Stefan Selig, global head of mergers and acquisitions at Banc of America Securities.
"Current premiums are not as fulsome compared to where those stocks have traded over a 52-week period. As a result, boards are often rightly concluding that those premiums are illusory," Selig said.
Given the ability of some large corporations to borrow money, and the weaker equity markets, many suitors have been emboldened to make unsolicited or even hostile takeover bids.
So far this year, unsolicited approaches represent about 20 percent of U.S. M&A activity, compared with 6 percent last year. The largest is InBev NV's (INTB.BR: Quote, Profile, Research, Stock Buzz) current offer to acquire Anheuser-Busch, Selig said.
Anheuser-Busch said Thursday it rejected InBev's unsolicited $46.3 billion takeover offer, calling it financially inadequate. It added that it would continue to consider strategic alternatives.
InBev filed a lawsuit Thursday to confirm that Anheuser-Busch shareholders can remove all 13 board members without cause. The move was widely seen as the first step toward a hostile takeover.
HOSTILE
"Hostile activity is up sharply, and I expect it will represent the largest percentage of overall deal activity," Selig said.
JP Morgan's Elliott said he expected to see more unsolicited activity through the rest of 2008. "Strategics are resolute when there is an opportunity to create shareholder value. It goes with the territory when there is a weak stock market ... they are not as easily deterred," he said.
InBev's bid highlights the allure of U.S. companies to foreign firms at a time when the dollar is historically weak. Despite the potential risk of buying a U.S. company and gaining exposure to the weak economy, the risk of a recession may be short term, analysts said.
"Historically, exchange rates don't affect M&A that much because although you're able to get more for your investment when you buy, you get less in cash flow in return," Filek said. "The one exception is that you're looking at a dollar devaluation that is unique in a 25-year window."
For the rest of 2008, analysts and investment bankers expect corporate dealmakers to continue to grab the headlines.
But private equity firms won't disappear. Instead, they will likely cobble together smaller deals or take minority stakes in larger companies.
"There have a number of recent LBOs that suggest that signs of life are beginning to emerge, including Carlyle's purchase of Booz Allen, and Blackstone's deal to acquire Apria," Banc of America's Selig said.
(Additional reporting by Jui Chakravorty Das; editing by Jeffrey Benkoe)
COMMENT
The whole article is very interesting. Several main points:
1. LBOs led by private equities slashed this year, as PE firms found it harder to obtain fund from banks due to the financial crisis in the States and the deteriorating liquidity in the market. The difficulty of borrowing could also be due to the expectation of potential monetary contraction policies as the inflation pressure is high, plus the concern of a continuing economic downturn.
I think that PEs are moving back from M&A perhaps because they are not sure about the America and World economy as well. Firstly, although stock prices have dived since October 2007, whether it has reached the trough remains unsolved. So PEs are concerned about whether it's the right time to enter. In addition, even if it has not much further decline in indexes, how long it will take for the economy and equity market to enter the expansion is still a big question mark. If the investor would like to see a certain return within a given period, it has to worry more about the current situation.
2. Why corporate buyers remain robust? They have cash and could raise cash more easily, that's for sure. Their own business are not and will not be that affected by the downturn in market compared to those financial investors, as although the economy is in its slash, the recession worry is not as huge as the direct write-offs we have seen in the financial industry: so they dare to make the mergers or acquisitions. In addition, PEs may look for financial return only, but corporate buyers consider the profit of syndicate effect brought by M&A as well, such as higher market share, complimentary product lines, strong R&D force, good relationship with suppliers or buyers etc.. So even if a deal looks not very attractive to PEs, it can still be significant to corporates, especially during a period when stock prices are at a low level.
3. Another issue catching attention is the weak dollar. It could attract foreign investors to buy US firms, as US firms often have high values, or overseas brands would like to enter the American market quickly. As mentioned in the article, although M&A at this time is cheap, it can mean less return measured in foreign currencies as well if the USD remains weak. But if investors deem that the USD is at an unprecedented low, and will go strong in future, it would be a smart idea to conduct the M&A now.
PHILADELPHIA (Reuters) - Merger activity in the United States dropped 29 percent in the second quarter, faring better than the 40 percent global slump, as corporations filled the void left by buyout firms and targeted big consumer brands such as Anheuser-Busch Cos Inc (BUD.N: Quote, Profile, Research, Stock Buzz) and Wm. Wrigley Jr Co (WWY.N: Quote, Profile, Research, Stock Buzz).
"Strategic buyers see an opportunity here due to the absence of the financial buyers. For the last 24 months, prior to the downturn, strategic buyers were getting outbid by financial buyers. That's not happening now," said Bob Filek, a partner with PricewaterhouseCoopers' transaction services.
During the first half of the year, private equity deal volume dropped 85 percent in the U.S. and 76 percent globally, according to Thomson Reuters data released on Friday.
The strength of corporate deal-making came as private equity firms were hobbled by the difficulty of borrowing money -- and the high cost -- in the tight credit markets as well as banks' uneasiness to lend in the wake of the subprime mortgage crisis.
Jimmy Elliott, global head of M&A at JP Morgan, said he expected strategic acquisitions to continue in the second half of 2008.
"Once CEOs and boards feel confident that they are at or near the bottom, and believe there is a window of opportunity, they will not stand on the sidelines anymore," Elliott said.
"So, yes, strategic acquisitions will continue to dominate the activity."
Corporations with strong balance sheets have often had cash on hand to make acquisitions, and been able to amass additional funds for large takeovers of well-known brands with proven cash flow and high credit ratings, analysts said.
"Both Mars and Wrigley and InBev and Busch -- those are premium-brand transactions and high quality transactions," Filek said.
"When you have a good corporate buyer and you have a premium transaction, debt funding is available. What is really missing in the market today is debt funding for higher leveraged private equity transaction," Filek said.
Corporate deal-making in the U.S. totaled $402 billion in the second quarter, just shy of the year-ago second-quarter tally of $404 billion. The second quarter also rebounded from the slow start seen in the first quarter, when strategic deals totaled only $136 billion, Thomson Reuters said.
SLOWEST START SINCE 2005
Even though U.S. merger activity showed a 172 percent jump in the second quarter over the first period, the first six months of 2008 overall still marked the slowest start for a deal-making year in the U.S. since 2005, Thomson Reuters said.
The weak equity markets, the sinking U.S. dollar, skittish consumer confidence, the upcoming U.S. presidential election have compounded the problems of tight credit markets, analysts said.
In the six months of 2008, U.S. deal volume dropped 42 percent to $586.8 billion, while global volume dropped 35 percent to $1.567 trillion, Thomson Reuters said.
The consumer staples sector was the most targeted U.S. industry this year -- attracting $104 billion in deals -- and was the only sector to show increased merger volume, Thomson Reuters said.
The declines in deal activity in other sectors ranged from 17 percent for energy and power, to 80 percent for real estate, Thomson Reuters said.
For the first half of the year, Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) held the No. 1 ranking for U.S. advisory work, while Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) moved to the No. 2 spot, up from No. 4 a year ago. JPMorgan & Co (JPM.N: Quote, Profile, Research, Stock Buzz) remained at No. 3.
Boutique advisory firm Centerview Partners, which has expertise in consumer products and retail sectors, moved to No. 10, up from No. 13, according to Thomson Reuters.
HIGHER PREMIUMS, LOWER STOCK PRICES
The recent spate of corporate deals helped boost the average deal premium -- or the price a buyer paid over the target company's stock price one week prior to a deal announcement.
The average premium paid so far this year was 28 percent, up from 25 percent last year, and 24 percent in 2006, according to Thomson Reuters.
Some of the buoyancy reflects the current weakness in stock prices rather than the generosity of suitors.
"Deal premiums continue to rise, but that is somewhat misleading because stock prices have come down from their highs," said Stefan Selig, global head of mergers and acquisitions at Banc of America Securities.
"Current premiums are not as fulsome compared to where those stocks have traded over a 52-week period. As a result, boards are often rightly concluding that those premiums are illusory," Selig said.
Given the ability of some large corporations to borrow money, and the weaker equity markets, many suitors have been emboldened to make unsolicited or even hostile takeover bids.
So far this year, unsolicited approaches represent about 20 percent of U.S. M&A activity, compared with 6 percent last year. The largest is InBev NV's (INTB.BR: Quote, Profile, Research, Stock Buzz) current offer to acquire Anheuser-Busch, Selig said.
Anheuser-Busch said Thursday it rejected InBev's unsolicited $46.3 billion takeover offer, calling it financially inadequate. It added that it would continue to consider strategic alternatives.
InBev filed a lawsuit Thursday to confirm that Anheuser-Busch shareholders can remove all 13 board members without cause. The move was widely seen as the first step toward a hostile takeover.
HOSTILE
"Hostile activity is up sharply, and I expect it will represent the largest percentage of overall deal activity," Selig said.
JP Morgan's Elliott said he expected to see more unsolicited activity through the rest of 2008. "Strategics are resolute when there is an opportunity to create shareholder value. It goes with the territory when there is a weak stock market ... they are not as easily deterred," he said.
InBev's bid highlights the allure of U.S. companies to foreign firms at a time when the dollar is historically weak. Despite the potential risk of buying a U.S. company and gaining exposure to the weak economy, the risk of a recession may be short term, analysts said.
"Historically, exchange rates don't affect M&A that much because although you're able to get more for your investment when you buy, you get less in cash flow in return," Filek said. "The one exception is that you're looking at a dollar devaluation that is unique in a 25-year window."
For the rest of 2008, analysts and investment bankers expect corporate dealmakers to continue to grab the headlines.
But private equity firms won't disappear. Instead, they will likely cobble together smaller deals or take minority stakes in larger companies.
"There have a number of recent LBOs that suggest that signs of life are beginning to emerge, including Carlyle's purchase of Booz Allen, and Blackstone's deal to acquire Apria," Banc of America's Selig said.
(Additional reporting by Jui Chakravorty Das; editing by Jeffrey Benkoe)
COMMENT
The whole article is very interesting. Several main points:
1. LBOs led by private equities slashed this year, as PE firms found it harder to obtain fund from banks due to the financial crisis in the States and the deteriorating liquidity in the market. The difficulty of borrowing could also be due to the expectation of potential monetary contraction policies as the inflation pressure is high, plus the concern of a continuing economic downturn.
I think that PEs are moving back from M&A perhaps because they are not sure about the America and World economy as well. Firstly, although stock prices have dived since October 2007, whether it has reached the trough remains unsolved. So PEs are concerned about whether it's the right time to enter. In addition, even if it has not much further decline in indexes, how long it will take for the economy and equity market to enter the expansion is still a big question mark. If the investor would like to see a certain return within a given period, it has to worry more about the current situation.
2. Why corporate buyers remain robust? They have cash and could raise cash more easily, that's for sure. Their own business are not and will not be that affected by the downturn in market compared to those financial investors, as although the economy is in its slash, the recession worry is not as huge as the direct write-offs we have seen in the financial industry: so they dare to make the mergers or acquisitions. In addition, PEs may look for financial return only, but corporate buyers consider the profit of syndicate effect brought by M&A as well, such as higher market share, complimentary product lines, strong R&D force, good relationship with suppliers or buyers etc.. So even if a deal looks not very attractive to PEs, it can still be significant to corporates, especially during a period when stock prices are at a low level.
3. Another issue catching attention is the weak dollar. It could attract foreign investors to buy US firms, as US firms often have high values, or overseas brands would like to enter the American market quickly. As mentioned in the article, although M&A at this time is cheap, it can mean less return measured in foreign currencies as well if the USD remains weak. But if investors deem that the USD is at an unprecedented low, and will go strong in future, it would be a smart idea to conduct the M&A now.
Bristol-Myers could be an acquisition target: Bernstein
(Reuters) - Drugmaker Bristol-Myers Squibb Co (BMY.N: Quote, Profile, Research, Stock Buzz) could be an acquisition target as the industry gets closer to losing exclusivity on several leading drugs, said a Sanford C. Bernstein analyst, who upgraded the stock to "outperform" from "market-perform."
"BMY could ultimately be a take-out candidate, based on our belief that there may be at least some merger and acquisition activity in the pharmaceutical sector as the patent "cliff" of 2011/2012 draws closer," analyst Tim Anderson said.
Makers of branded drugs face a looming patent "cliff" between now and 2012 as many of the world's most lucrative prescription medicines lose protection.
Revenue from these drugs are set to evaporate during this period as cheaper generic forms of the product become available.
COMMENT
Patent could play an important role in M&A decisions, especially in industries which involve a great deal of R&Ds. We shall pay attention to the acquisition and expiration of patent since they will affect the stock prices and management strategies.
"BMY could ultimately be a take-out candidate, based on our belief that there may be at least some merger and acquisition activity in the pharmaceutical sector as the patent "cliff" of 2011/2012 draws closer," analyst Tim Anderson said.
Makers of branded drugs face a looming patent "cliff" between now and 2012 as many of the world's most lucrative prescription medicines lose protection.
Revenue from these drugs are set to evaporate during this period as cheaper generic forms of the product become available.
COMMENT
Patent could play an important role in M&A decisions, especially in industries which involve a great deal of R&Ds. We shall pay attention to the acquisition and expiration of patent since they will affect the stock prices and management strategies.
Friday, June 27, 2008
Sovereign Wealth Fund (管涛）
不久前结束的第四次中美战略经济对话，启动了双边投资保护协定的谈判。主权财富基金是双边投资保护协定的一项重要内容，美国表示欢迎来自中国的主权财富基金，似乎中投公司等将可以顺利地去美国投资。但形势的发展显然不会如此乐观，就在中美第四次战略经济对话之前，美国联邦储备委员会宣布推迟向中国工商银行和中国建设银行发放在美经营的牌照，原因只是它们的最大股东是具有主权财富基金性质的中国投资有限责任公司。虽然美联储近日又放出消息，同意中国工商银行和中国建设银行在美设立分行，但这个事件预示着，中国主权财富基金投资海外的道路不会一帆风顺，围绕主权财富基金的争论仍将持续不断。
主权财富基金由来已久，早在1953年，科威特就成立了科威特投资局，将石油出口赚到的外汇进行投资。到目前为止，已有20多个国家设立了主权财富基金。早期设立主权财富基金的主要是能源和原料出口国，它们拥有较多外汇储备，而且考虑到能源和原料终会枯竭，为了使收益具有可持续性，它们成立专门的投资机构管理国家的财富。这种类型的主权财富基金目前仍然占到总数的60%以上。当然，早期主权财富基金也有新加坡淡马锡这种类型，它们的资金不是来自于能源和原料的出口。但它们都有一个共同的特点，就是经济体的规模较小，美国等国家不会担心它们的威胁。日本拥有巨额外汇储备，一度是世界最多，但并不设立主权财富基金，而是甘心投资于美国国债等固定收益资产。
但近年来形势发生了变化，在主权财富基金的名单上，新增了俄罗斯、中国等大国的名字。主权财富基金威胁论、限制主权财富基金论也随之流行起来，进而导致了一些国家在投资方面的保护主义。那么，主权财富基金是否带来了风险？
围绕主权财富基金的争论还不止于此，风险与收益、与外汇储备管理的关系等问题也是备受关注的焦点。随着中国外汇储备的增长，这些问题变得越来越重要。我们约请中国金融四十人论坛学术委员管涛撰文，对这些问题进行解读，是为21世纪北京圆桌第179期。(欧阳觅剑)
主权财富基金是稳定世界经济的力量.
主权财富基金(Sovereign Wealth Fund，简称SWF)兴起是当今国际金融领域的一件新兴事物，也是各界广泛关注的一个热点问题。主权财富基金的重要职责是代表政府对外投资(包括实业投资和金融投资)，这能够促进经济平衡，主要体现在两个方面。
首先，当国际收支尤其是经常项目持续较大顺差时，通过公共部门对外投资，有利于缓解国际收支失衡矛盾。例如，新加坡自1980年代末以来，经常项目持续较大顺差，最近几年其经常项目盈余更是占到了GDP的20%左右。新加坡政府通过实行强积金制度，强制要求居民缴纳养老金，交由政府控制的主权财富基金在境内和境外运作，就是分流外汇的一种重要手段。如果私人部门对外投资意愿或能力不强，或者国家对于私人部门对外投资控制较严，这种形式的对外资本输出就显得尤为重要。当然，通过主权财富基金对外投资，根本上还是行政性而非市场化配置外汇资源，因此，不应完全取代私人部门的对外投资，放弃资本账户尤其对外资本输出的开放。
其次，当汇率制度缺乏弹性时，通过主权财富基金对外投资运作，能够缓解汇率政策与货币政策之间的冲突。根据开放经济的“三元悖论 ”，在资本流动的情况下，一个国家不能既维持固定汇率，又坚持货币政策的自主权。因此，在固定汇率安排下，货币政策无效而财政政策有效。国际收支持续较大的顺差，往往与汇率制度僵化密切相关，货币政策为汇率政策所束缚。通过国家出资，组织主权财富基金购汇对外投资，类似于实施扩张性的财政政策，有利于增加外汇需求，缩小国际收支顺差，缓解货币政策压力。
实际上，不同于我们所熟知的中央银行持有、经营、管理外汇储备的体制，国际上还有一种模式是，国内财政部门出资持有外汇储备，委托央行经营和管理，美国、日本等就是采用这种模式。这有助于隔绝国际收支差额变动对于国内货币政策的影响，增强货币政策的独立性。这类经济体的汇率政策通常由财政部负责，央行货币政策的币值稳定目标只需考虑物价稳定，而无需兼顾对外币值的稳定。
近年来，一些前计划经济国家纷纷建立主权财富基金，大举对外扩张，引起了一些西方国家的疑虑和恐慌。然而，追溯主权财富基金的历史，科威特自 1953年起成立科威特投资局，利用石油外汇收入进行主权投资，迄今已有数十年历史。在过去的几十年里，越来越多的主权财富基金涌现，总资产已有数万亿美元。
历次金融危机或者动荡中，往往是私人对冲基金兴风作浪，而非主权财富基金。在当前的美国次贷危机中，许多主权财富基金一掷亿金，收购美国陷入困境的银行，而且往往出的是“半山腰价格”，以至于它们前期注资的项目现在普遍处于亏损状态。而同样是美国的投资银行收购同行，却是榨干了失败者的最后一滴油，出的是“地板价”，并要求政府质押优质资产作担保。况且，融入全球化，各国经济利益攸关是最好的相互制衡，相互隔绝、孤立反而更易导致对立，相信西方社会对此应该深有体会。
至于主权财富基金对东道国经济金融命脉控制引起的政治担心，则更是杞人忧天。中国有句古话“贫不和富斗，富不和势斗”。国家机器掌握在东道国政府手中，应该是投资国而非东道国更怕投资风险特别是非经济的风险。因此，单纯从政治角度考虑，对主权财富基金而非整个基金业提出强制信息披露的透明度要求，显然是有失公平；对于主权财富基金的股权投资进行额外限制，是投资保护主义，是过去冷战思维的复活，也为不智。
主权财富基金与外汇储备经营的关系
最近一段时期，媒体对于外汇储备经营管理机构资产多元化现象给予了极大关注，其中对于外汇储备可否买卖股票、投资私募股权基金等问题更是众说纷纭。有一种观点认为，这些都应该是主权财富基金的领地，外汇储备经营不应与之竞争。对于这种看法，我不敢苟同。
实践中从没有规定，外汇储备只能买国债不能买别的、只能自己经营管理不能委托他人。据国际货币基金组织2002年对20个国家和地区外汇储备经营机构的抽样调查显示，有3家储备经营机构投资股票，14家机构委托外聘基金经理管理部分储备资产。
外汇储备也是一种官方资本输出，广义上讲也属于主权财富基金的一种形式。在当前全球外汇储备急剧膨胀，个别国家和地区外汇储备已远远超过应付外汇流动性危机所需，而且它们的风险承受能力大大增强，在这样的情况下，一部分外汇储备投资选择更高风险、更高回报的资产是可以理解的。特别是考虑到央行增持巨额外汇储备而不断上升的对冲操作成本，以及持有巨额外汇储备需要分散化投资的客观需要，央行外汇储备经营进行资产多元化选择是理性的。而这势必进一步模糊传统的主权财富基金与外汇储备的界限，具体到外汇储备对私募股权基金的投资，与当前外汇储备经营机构早已普遍采用的委托外聘基金经理经营管理部分外汇储备资产的做法并无实质差异。
即使外汇储备和主权财富基金投资于相同的金融产品，它们也不太可能形成直接的竞争，因为国际金融市场这么大，它们的市场操作策略主要是接受而非影响市场价格。而且，即使二者投资同一类产品，持有目的也可以有差异。就拿股票投资来讲，主权财富基金可以是出于战略控制的目的，甚至应该可以参与被收购企业或项目的经营管理；而外汇储备经营管理遵循“安全、流动、增值”的“三性”原则，更多追求变现能力较强的流动资产，因此主要是一种财务投资，是为了卖而买，赚取差价或者享受分红。
即便二者形成竞争，也是应该允许和鼓励的。国家外汇资产授权不同的经营主体打理，各家按照不同的风险—收益组合进行投资，相互竞争，无疑有利于提高国家外汇资产运用的整体投资回报，于民有利，有何不可。
目前，一些媒体对于主权财富基金和外汇储备经营机构购买股票和投资私募股权基金等很是热衷，总是长篇累牍地跟踪报道，似乎要把每笔买卖都搞清楚。主权财富基金和外汇储备经营机构在进行这些投资时，只是一个普通的交易者。如果其投资达到了信息公开披露的要求，自然必须及时予以披露，否则就可以选择沉默。
主权财富基金由来已久，早在1953年，科威特就成立了科威特投资局，将石油出口赚到的外汇进行投资。到目前为止，已有20多个国家设立了主权财富基金。早期设立主权财富基金的主要是能源和原料出口国，它们拥有较多外汇储备，而且考虑到能源和原料终会枯竭，为了使收益具有可持续性，它们成立专门的投资机构管理国家的财富。这种类型的主权财富基金目前仍然占到总数的60%以上。当然，早期主权财富基金也有新加坡淡马锡这种类型，它们的资金不是来自于能源和原料的出口。但它们都有一个共同的特点，就是经济体的规模较小，美国等国家不会担心它们的威胁。日本拥有巨额外汇储备，一度是世界最多，但并不设立主权财富基金，而是甘心投资于美国国债等固定收益资产。
但近年来形势发生了变化，在主权财富基金的名单上，新增了俄罗斯、中国等大国的名字。主权财富基金威胁论、限制主权财富基金论也随之流行起来，进而导致了一些国家在投资方面的保护主义。那么，主权财富基金是否带来了风险？
围绕主权财富基金的争论还不止于此，风险与收益、与外汇储备管理的关系等问题也是备受关注的焦点。随着中国外汇储备的增长，这些问题变得越来越重要。我们约请中国金融四十人论坛学术委员管涛撰文，对这些问题进行解读，是为21世纪北京圆桌第179期。(欧阳觅剑)
主权财富基金是稳定世界经济的力量.
主权财富基金(Sovereign Wealth Fund，简称SWF)兴起是当今国际金融领域的一件新兴事物，也是各界广泛关注的一个热点问题。主权财富基金的重要职责是代表政府对外投资(包括实业投资和金融投资)，这能够促进经济平衡，主要体现在两个方面。
首先，当国际收支尤其是经常项目持续较大顺差时，通过公共部门对外投资，有利于缓解国际收支失衡矛盾。例如，新加坡自1980年代末以来，经常项目持续较大顺差，最近几年其经常项目盈余更是占到了GDP的20%左右。新加坡政府通过实行强积金制度，强制要求居民缴纳养老金，交由政府控制的主权财富基金在境内和境外运作，就是分流外汇的一种重要手段。如果私人部门对外投资意愿或能力不强，或者国家对于私人部门对外投资控制较严，这种形式的对外资本输出就显得尤为重要。当然，通过主权财富基金对外投资，根本上还是行政性而非市场化配置外汇资源，因此，不应完全取代私人部门的对外投资，放弃资本账户尤其对外资本输出的开放。
其次，当汇率制度缺乏弹性时，通过主权财富基金对外投资运作，能够缓解汇率政策与货币政策之间的冲突。根据开放经济的“三元悖论 ”，在资本流动的情况下，一个国家不能既维持固定汇率，又坚持货币政策的自主权。因此，在固定汇率安排下，货币政策无效而财政政策有效。国际收支持续较大的顺差，往往与汇率制度僵化密切相关，货币政策为汇率政策所束缚。通过国家出资，组织主权财富基金购汇对外投资，类似于实施扩张性的财政政策，有利于增加外汇需求，缩小国际收支顺差，缓解货币政策压力。
实际上，不同于我们所熟知的中央银行持有、经营、管理外汇储备的体制，国际上还有一种模式是，国内财政部门出资持有外汇储备，委托央行经营和管理，美国、日本等就是采用这种模式。这有助于隔绝国际收支差额变动对于国内货币政策的影响，增强货币政策的独立性。这类经济体的汇率政策通常由财政部负责，央行货币政策的币值稳定目标只需考虑物价稳定，而无需兼顾对外币值的稳定。
近年来，一些前计划经济国家纷纷建立主权财富基金，大举对外扩张，引起了一些西方国家的疑虑和恐慌。然而，追溯主权财富基金的历史，科威特自 1953年起成立科威特投资局，利用石油外汇收入进行主权投资，迄今已有数十年历史。在过去的几十年里，越来越多的主权财富基金涌现，总资产已有数万亿美元。
历次金融危机或者动荡中，往往是私人对冲基金兴风作浪，而非主权财富基金。在当前的美国次贷危机中，许多主权财富基金一掷亿金，收购美国陷入困境的银行，而且往往出的是“半山腰价格”，以至于它们前期注资的项目现在普遍处于亏损状态。而同样是美国的投资银行收购同行，却是榨干了失败者的最后一滴油，出的是“地板价”，并要求政府质押优质资产作担保。况且，融入全球化，各国经济利益攸关是最好的相互制衡，相互隔绝、孤立反而更易导致对立，相信西方社会对此应该深有体会。
至于主权财富基金对东道国经济金融命脉控制引起的政治担心，则更是杞人忧天。中国有句古话“贫不和富斗，富不和势斗”。国家机器掌握在东道国政府手中，应该是投资国而非东道国更怕投资风险特别是非经济的风险。因此，单纯从政治角度考虑，对主权财富基金而非整个基金业提出强制信息披露的透明度要求，显然是有失公平；对于主权财富基金的股权投资进行额外限制，是投资保护主义，是过去冷战思维的复活，也为不智。
主权财富基金与外汇储备经营的关系
最近一段时期，媒体对于外汇储备经营管理机构资产多元化现象给予了极大关注，其中对于外汇储备可否买卖股票、投资私募股权基金等问题更是众说纷纭。有一种观点认为，这些都应该是主权财富基金的领地，外汇储备经营不应与之竞争。对于这种看法，我不敢苟同。
实践中从没有规定，外汇储备只能买国债不能买别的、只能自己经营管理不能委托他人。据国际货币基金组织2002年对20个国家和地区外汇储备经营机构的抽样调查显示，有3家储备经营机构投资股票，14家机构委托外聘基金经理管理部分储备资产。
外汇储备也是一种官方资本输出，广义上讲也属于主权财富基金的一种形式。在当前全球外汇储备急剧膨胀，个别国家和地区外汇储备已远远超过应付外汇流动性危机所需，而且它们的风险承受能力大大增强，在这样的情况下，一部分外汇储备投资选择更高风险、更高回报的资产是可以理解的。特别是考虑到央行增持巨额外汇储备而不断上升的对冲操作成本，以及持有巨额外汇储备需要分散化投资的客观需要，央行外汇储备经营进行资产多元化选择是理性的。而这势必进一步模糊传统的主权财富基金与外汇储备的界限，具体到外汇储备对私募股权基金的投资，与当前外汇储备经营机构早已普遍采用的委托外聘基金经理经营管理部分外汇储备资产的做法并无实质差异。
即使外汇储备和主权财富基金投资于相同的金融产品，它们也不太可能形成直接的竞争，因为国际金融市场这么大，它们的市场操作策略主要是接受而非影响市场价格。而且，即使二者投资同一类产品，持有目的也可以有差异。就拿股票投资来讲，主权财富基金可以是出于战略控制的目的，甚至应该可以参与被收购企业或项目的经营管理；而外汇储备经营管理遵循“安全、流动、增值”的“三性”原则，更多追求变现能力较强的流动资产，因此主要是一种财务投资，是为了卖而买，赚取差价或者享受分红。
即便二者形成竞争，也是应该允许和鼓励的。国家外汇资产授权不同的经营主体打理，各家按照不同的风险—收益组合进行投资，相互竞争，无疑有利于提高国家外汇资产运用的整体投资回报，于民有利，有何不可。
目前，一些媒体对于主权财富基金和外汇储备经营机构购买股票和投资私募股权基金等很是热衷，总是长篇累牍地跟踪报道，似乎要把每笔买卖都搞清楚。主权财富基金和外汇储备经营机构在进行这些投资时，只是一个普通的交易者。如果其投资达到了信息公开披露的要求，自然必须及时予以披露，否则就可以选择沉默。
Citigroup sinks to 10-year low, Goldman urges short-sell
By Neha Singh
BANGALORE (Reuters) - Citigroup Inc shares fell to their lowest level in nearly a decade after a Goldman Sachs & Co analyst said investors should sell the largest U.S. bank's stock short as losses mount from troubled debt.
In morning trading, the shares were down $1.03, or 5.5 percent, at $17.82 on the New York Stock Exchange. The shares were among the biggest drags on the Dow Jones industrial average and Standard & Poor's 500, which both fell more than 1 percent.
They also touched their lowest level since October 1998, the month that Sanford "Sandy" Weill merged his Travelers Group with Citicorp to create Citigroup.
William Tanona, the Goldman analyst, added Citigroup to Goldman's "Americas conviction sell" list and cut his price target on the stock to $16 from $20.
He recommended a "paired" trade in which investors sell Citigroup shares short, betting on a decline, and buy Morgan Stanley shares.
The analyst said Citigroup might take $8.9 billion of write-downs for the April-to-June period, leading to its third straight quarterly loss. He also said the bank might need to cut its quarterly dividend for a second time this year, after lowering it 41 percent to 32 cents per share in January.
Tanona's forecast suggests deeper problems for Citigroup Chief Executive Vikram Pandit, who is trying to turn the bank around after nearly $15 billion of losses in the last two quarters, and more than $46 billion of credit losses and write-downs since the middle of 2007.
"We see multiple headwinds for Citigroup including additional write-downs, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales," the analyst wrote.
Pandit became chief executive in December, replacing Charles Prince, who resigned under pressure the previous month. Weill had hand-picked Prince as his replacement when he gave up the top job in 2003.
Last week, Chief Financial Officer Gary Crittenden said on a Deutsche Bank conference call that Citigroup could take substantial write-downs this quarter.
DIVIDEND CUT MAY BE NEEDED
Tanona said Citigroup might write off $7.1 billion related to collateralized debt obligations and associated hedges related to monoline insurers, $1.2 billion for other asset classes and $600 million for structured note liabilities.
He now expects Citigroup to lose 75 cents a share this quarter, compared with his earlier forecast of a profit of 25 cents. He also expects a full-year loss of $1.20 a share, compared with his prior view for a profit of 30 cents.
As of May, Citigroup had raised some $42 billion since last fall, including injections from sovereign wealth funds, data compiled by Reuters News show.
Tanona said the bank may now need to issue common stock or sell assets to raise capital, because regulators may forbid it from issuing more preferred or convertible securities. He also said halving the dividend could preserve $3.5 billion a year.
"Given the firm's current level of earnings power, we do not believe the dividend is safe," Tanona wrote.
A Citigroup spokeswoman declined to comment.
On June 24, Merrill Lynch analyst Guy Moszkowski projected $8 billion of write-downs for Citigroup.
Tanona also downgraded the U.S. brokerage sector to "neutral" from "attractive," saying deteriorating fundamentals will likely prolong any recovery from the credit crunch.
He projected a $4.2 billion second-quarter write-down for Merrill Lynch & Co, leading to a quarterly loss for the largest U.S. brokerage.
"We expect write-downs for Citigroup and Merrill to outpace what we saw from Morgan Stanley and Lehman Brothers Holdings recently, due to Citigroup's and Merrill's large exposures to ABS CDOs (asset-backed security CDOs) and associated hedges with the monolines," Tanona wrote.
Brad Hintz, a Sanford C. Bernstein & Co analyst, on Thursday projected a $3.5 billion second-quarter write-down for Merrill. Banc of America Securities analyst Michael Hecht made the same forecast earlier this month.
On June 17, Goldman analysts led by Richard Ramsden said U.S. banks may need $65 billion more capital to cope with a global credit crisis that will not peak until 2009.
(Additional reporting by Tenzin Pema in Bangalore; Editing by Vinu Pilakkott)
BANGALORE (Reuters) - Citigroup Inc shares fell to their lowest level in nearly a decade after a Goldman Sachs & Co analyst said investors should sell the largest U.S. bank's stock short as losses mount from troubled debt.
In morning trading, the shares were down $1.03, or 5.5 percent, at $17.82 on the New York Stock Exchange. The shares were among the biggest drags on the Dow Jones industrial average and Standard & Poor's 500, which both fell more than 1 percent.
They also touched their lowest level since October 1998, the month that Sanford "Sandy" Weill merged his Travelers Group with Citicorp to create Citigroup.
William Tanona, the Goldman analyst, added Citigroup to Goldman's "Americas conviction sell" list and cut his price target on the stock to $16 from $20.
He recommended a "paired" trade in which investors sell Citigroup shares short, betting on a decline, and buy Morgan Stanley shares.
The analyst said Citigroup might take $8.9 billion of write-downs for the April-to-June period, leading to its third straight quarterly loss. He also said the bank might need to cut its quarterly dividend for a second time this year, after lowering it 41 percent to 32 cents per share in January.
Tanona's forecast suggests deeper problems for Citigroup Chief Executive Vikram Pandit, who is trying to turn the bank around after nearly $15 billion of losses in the last two quarters, and more than $46 billion of credit losses and write-downs since the middle of 2007.
"We see multiple headwinds for Citigroup including additional write-downs, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales," the analyst wrote.
Pandit became chief executive in December, replacing Charles Prince, who resigned under pressure the previous month. Weill had hand-picked Prince as his replacement when he gave up the top job in 2003.
Last week, Chief Financial Officer Gary Crittenden said on a Deutsche Bank conference call that Citigroup could take substantial write-downs this quarter.
DIVIDEND CUT MAY BE NEEDED
Tanona said Citigroup might write off $7.1 billion related to collateralized debt obligations and associated hedges related to monoline insurers, $1.2 billion for other asset classes and $600 million for structured note liabilities.
He now expects Citigroup to lose 75 cents a share this quarter, compared with his earlier forecast of a profit of 25 cents. He also expects a full-year loss of $1.20 a share, compared with his prior view for a profit of 30 cents.
As of May, Citigroup had raised some $42 billion since last fall, including injections from sovereign wealth funds, data compiled by Reuters News show.
Tanona said the bank may now need to issue common stock or sell assets to raise capital, because regulators may forbid it from issuing more preferred or convertible securities. He also said halving the dividend could preserve $3.5 billion a year.
"Given the firm's current level of earnings power, we do not believe the dividend is safe," Tanona wrote.
A Citigroup spokeswoman declined to comment.
On June 24, Merrill Lynch analyst Guy Moszkowski projected $8 billion of write-downs for Citigroup.
Tanona also downgraded the U.S. brokerage sector to "neutral" from "attractive," saying deteriorating fundamentals will likely prolong any recovery from the credit crunch.
He projected a $4.2 billion second-quarter write-down for Merrill Lynch & Co, leading to a quarterly loss for the largest U.S. brokerage.
"We expect write-downs for Citigroup and Merrill to outpace what we saw from Morgan Stanley and Lehman Brothers Holdings recently, due to Citigroup's and Merrill's large exposures to ABS CDOs (asset-backed security CDOs) and associated hedges with the monolines," Tanona wrote.
Brad Hintz, a Sanford C. Bernstein & Co analyst, on Thursday projected a $3.5 billion second-quarter write-down for Merrill. Banc of America Securities analyst Michael Hecht made the same forecast earlier this month.
On June 17, Goldman analysts led by Richard Ramsden said U.S. banks may need $65 billion more capital to cope with a global credit crisis that will not peak until 2009.
(Additional reporting by Tenzin Pema in Bangalore; Editing by Vinu Pilakkott)
Buyers Shying Away from GE's Credit Business
NEW YORK (Reuters) - General Electric Co's (GE.N: Quote, Profile, Research, Stock Buzz) auction of its $30 billion credit-card business is attracting only tepid interest, according to an article on the Wall Street Journal's website.
Prospective buyers are afraid that customers of stores like Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz), J.C. Penney Co (JCP.N: Quote, Profile, Research, Stock Buzz) and Lowe's (LOW.N: Quote, Profile, Research, Stock Buzz) are having trouble paying their bills, said the report.
JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), which was seen as a likely acquirer of the business, recently dropped out of the bidding, the article said, citing people familiar with the situation.
Other companies with large credit-card portfolios, such as Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) and Capital One Financial Corp (COF.N: Quote, Profile, Research, Stock Buzz), also aren't expected to submit bids, as a result of rising delinquencies and charge-offs in their own card portfolios, said the report.
In addition to Wal-Mart, J.C. Penney and Lowe's, GE also issues cards for a other retailers, including Brooks Brothers, home-furnishing chain Ikea and the Dillard's department-store chain.
GE is one of the largest issuers of so-called private-label credit cards, which can be used only in specific stores.
Retailers may help to pitch these cards to customers, but GE -- or any other private-label issuer -- bears the financial responsibility of owning the loans, the article noted.
Jeffrey Immelt, GE's chairman and chief executive, has personally reached out to prospective buyers, said the report, citing a person familiar with the situation.
(Reporting by Euan Rocha; Editing by Kim Coghill)
Prospective buyers are afraid that customers of stores like Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz), J.C. Penney Co (JCP.N: Quote, Profile, Research, Stock Buzz) and Lowe's (LOW.N: Quote, Profile, Research, Stock Buzz) are having trouble paying their bills, said the report.
JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), which was seen as a likely acquirer of the business, recently dropped out of the bidding, the article said, citing people familiar with the situation.
Other companies with large credit-card portfolios, such as Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) and Capital One Financial Corp (COF.N: Quote, Profile, Research, Stock Buzz), also aren't expected to submit bids, as a result of rising delinquencies and charge-offs in their own card portfolios, said the report.
In addition to Wal-Mart, J.C. Penney and Lowe's, GE also issues cards for a other retailers, including Brooks Brothers, home-furnishing chain Ikea and the Dillard's department-store chain.
GE is one of the largest issuers of so-called private-label credit cards, which can be used only in specific stores.
Retailers may help to pitch these cards to customers, but GE -- or any other private-label issuer -- bears the financial responsibility of owning the loans, the article noted.
Jeffrey Immelt, GE's chairman and chief executive, has personally reached out to prospective buyers, said the report, citing a person familiar with the situation.
(Reporting by Euan Rocha; Editing by Kim Coghill)
Bank of America to cut 7,500 jobs post merger
BANGALORE (Reuters) - Bank of America Corp on Thursday said it expects to eliminate about 7,500 jobs over the next two years after it completes its acquisition of Countrywide Financial Corp, the largest U.S. mortgage lender.
The job cuts amount to about 3 percent of the combined companies' work forces. Bank of America said it ended March with about 209,100 employees while Countrywide said it employed about 50,400 at the time.
Bank of America, the second-largest U.S. bank, said the cuts will be nationwide and mostly in areas where the companies have significant overlap, such as staff support.
The bank said it expects to begin notifying affected employees in the third quarter and will offer severance packages to eligible workers. It expects "substantial cost savings" from the merger.
Charlotte, North Carolina-based Bank of America expects to complete the transaction on July 1.
Calabasas, California-based Countrywide has already cut some 11,000 employees since the middle of 2007 as loan losses began to mount and it curtailed offerings of risky loans such as subprime mortgages and "option" adjustable-rate mortgages.
Shareholders of Countrywide are expected to receive 0.1822 of a Bank of America share for each of their shares.
Those terms valued Countrywide at about $4 billion when the companies announced the merger on Jan 11. That sum has fallen by about one-third, however, because Bank of America's shares have also declined. Bank of America shares fell on Thursday to their lowest level since April 2001.
Regulators have approved the merger, and Countrywide shareholders overwhelmingly approved it on Wednesday.Bank of America shares were down $1.80, or 6.8 percent, at $24.81 while Countrywide shares were off 13 cents, or 2.8 percent, to $4.45 in late afternoon trading on the New York Stock Exchange,
(Reporting by Jonathan Stempel in Bangalore; Editing by Gerald E. McCormick)
The job cuts amount to about 3 percent of the combined companies' work forces. Bank of America said it ended March with about 209,100 employees while Countrywide said it employed about 50,400 at the time.
Bank of America, the second-largest U.S. bank, said the cuts will be nationwide and mostly in areas where the companies have significant overlap, such as staff support.
The bank said it expects to begin notifying affected employees in the third quarter and will offer severance packages to eligible workers. It expects "substantial cost savings" from the merger.
Charlotte, North Carolina-based Bank of America expects to complete the transaction on July 1.
Calabasas, California-based Countrywide has already cut some 11,000 employees since the middle of 2007 as loan losses began to mount and it curtailed offerings of risky loans such as subprime mortgages and "option" adjustable-rate mortgages.
Shareholders of Countrywide are expected to receive 0.1822 of a Bank of America share for each of their shares.
Those terms valued Countrywide at about $4 billion when the companies announced the merger on Jan 11. That sum has fallen by about one-third, however, because Bank of America's shares have also declined. Bank of America shares fell on Thursday to their lowest level since April 2001.
Regulators have approved the merger, and Countrywide shareholders overwhelmingly approved it on Wednesday.Bank of America shares were down $1.80, or 6.8 percent, at $24.81 while Countrywide shares were off 13 cents, or 2.8 percent, to $4.45 in late afternoon trading on the New York Stock Exchange,
(Reporting by Jonathan Stempel in Bangalore; Editing by Gerald E. McCormick)
Monday, June 16, 2008
how to solve the inflation crisis in China
A股9月转折？
在诸多接受采访的分析师看来，同次贷风暴与通胀压力双线作战的美联储，没有两全的解决方案。
而在短期内难见油价下行的背景下，中国内地机构投资者的争论开始集中于资源品价格的收放。在近期公布的工业企业利润增加值中，价格受管制的石化与电力行业，成为拖累利润增长的核心因素。
“石化与电力企业占目前A股利润构成的大头，约25%权重。一旦价格放开，对整体A股将有明显提振。”银河证券策略分析师秦晓斌对记者表示。他也对下游行业的转移定价能力表示乐观，认为相当比重的上市公司可以通过转移定价将上游价格上涨的问题化解。
秦晓斌预测，可期的放开时间或在9月。那时，在经过北半球夏季用电高峰后，石油供需关系将有所改善，国际油价或许有所回落；而随着国内CPI翘尾因素的彻底消除，货币政策压力也将变小。
申银万国也在之前的一份报告中认为，放松资源价格管制，是现阶段相较提高存款准备金率和加息更好的解决方案。该行称，由于银行可贷资金迅速上升且趋势持续，通过准备金被动收缩信贷的效果不会太明显，而贸然加息必然加速热钱流入；相反，放松资源价格管制，将大大增加企业的非资金投资成本，使企业的预期投资收益率下降，从而遏制对信贷的需求。
但中金公司与光大证券却对此不以为然。
中金公司在报告中称，能源价格调整难以实施的主要压力不是来自于中下游行业企业盈利的承受能力，还是来自通胀压力。根据该行的静态敏感性分析，电价上调5%和成品油价上调10%的情况下，工业企业的利润约减少3.5%和0.6%，影响有限。
光大证券首席宏观分析师潘向东则表示，在目前CPI还面临上行风险的时候，国家不会轻易去理顺资源品价格体系。“要理顺也是选择4季度物价水平降到5%附近。”
他认为，尽管目前国内国际原油价格价差在加大，国内电力价格也存在扭曲，但这两方面价格目前对国家来说还是可控的。对于电力价格的短期理顺，国家完全可以做到提高发电价格，但不提高终端消费价格，将煤价上涨提高的发电成本由两大电网公司去承担，保证发电企业的有效运行。而一旦两大电网公司短期内出现亏损，国家要进行财政方面的补贴也容易操作。对于石化行业，目前地方绝大部分炼油企业已经与中石化挂钩，即地方炼油企业只收取加工费，其它风险由中石化承担，所以国家要进行财政补贴也只需针对中石化。
在诸多接受采访的分析师看来，同次贷风暴与通胀压力双线作战的美联储，没有两全的解决方案。
而在短期内难见油价下行的背景下，中国内地机构投资者的争论开始集中于资源品价格的收放。在近期公布的工业企业利润增加值中，价格受管制的石化与电力行业，成为拖累利润增长的核心因素。
“石化与电力企业占目前A股利润构成的大头，约25%权重。一旦价格放开，对整体A股将有明显提振。”银河证券策略分析师秦晓斌对记者表示。他也对下游行业的转移定价能力表示乐观，认为相当比重的上市公司可以通过转移定价将上游价格上涨的问题化解。
秦晓斌预测，可期的放开时间或在9月。那时，在经过北半球夏季用电高峰后，石油供需关系将有所改善，国际油价或许有所回落；而随着国内CPI翘尾因素的彻底消除，货币政策压力也将变小。
申银万国也在之前的一份报告中认为，放松资源价格管制，是现阶段相较提高存款准备金率和加息更好的解决方案。该行称，由于银行可贷资金迅速上升且趋势持续，通过准备金被动收缩信贷的效果不会太明显，而贸然加息必然加速热钱流入；相反，放松资源价格管制，将大大增加企业的非资金投资成本，使企业的预期投资收益率下降，从而遏制对信贷的需求。
但中金公司与光大证券却对此不以为然。
中金公司在报告中称，能源价格调整难以实施的主要压力不是来自于中下游行业企业盈利的承受能力，还是来自通胀压力。根据该行的静态敏感性分析，电价上调5%和成品油价上调10%的情况下，工业企业的利润约减少3.5%和0.6%，影响有限。
光大证券首席宏观分析师潘向东则表示，在目前CPI还面临上行风险的时候，国家不会轻易去理顺资源品价格体系。“要理顺也是选择4季度物价水平降到5%附近。”
他认为，尽管目前国内国际原油价格价差在加大，国内电力价格也存在扭曲，但这两方面价格目前对国家来说还是可控的。对于电力价格的短期理顺，国家完全可以做到提高发电价格，但不提高终端消费价格，将煤价上涨提高的发电成本由两大电网公司去承担，保证发电企业的有效运行。而一旦两大电网公司短期内出现亏损，国家要进行财政方面的补贴也容易操作。对于石化行业，目前地方绝大部分炼油企业已经与中石化挂钩，即地方炼油企业只收取加工费，其它风险由中石化承担，所以国家要进行财政补贴也只需针对中石化。
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