Oil giant Shell posted a Q4 loss (the first quarterly loss for 10 years) with oil prices falling to a record low.
NEVERTHELESS, annual profits reached a RECORD level up 14% from $27.6 to $31.4bn. Shell warned conditions remained "challenging". CEO Jeroen Van der Veer,born in Utrecht, boosted dividend by 11%. He said the company would continue "competitive and progressive dividend payouts". Oil is trading below $50 after a record high in mid July 2008 of $147.
China Premier's Wen Jiabao's comments at Davos, that the country had been hit hard by the world financial crisis, raised concerns on falling demand for oil. he also commented that financial regulators had failed to keep pace with "financial innovation" thus facilitating the credit crisis.
Offsetting Shell profits, Ford posted a full year loss for 2008 of $14.6bn, the worst ever performance in its 105 year history (FMC was incorporated in 1903). US rivals GM and and Chrysler have received billions in emergency bailout funding from the US government.
Ford pioneered the moving assembly line, allowing workers to stay in one place and do the same task repeatedly.
Meanwhile, hedge funds fight back with "recessionary innovation" to entice investors "sitting on the sides" in this recession. Osmium Capital Management, a hedge fund based in Bermuda, with $178m worth of assets under management, is launching a new class of shares denominated in troy ounces as opposed to euros, dollars or sterling. The fund hedges its exposure to gold by selling gold for cash and buying gold forward on a monthly basis.
Saturday, 31 January 2009
Friday, 30 January 2009
Rights Issues Rampant in City of London
Industrial materials firm Cookson has launched a rights issue. They are asking for £240m at 37% discount. The underwriters are JP Morgan / Merrill Lynch. The company is also cutting 1,250 jobs. Last December Cookson sold off its ceramic filters business to companies owned by Sud-Chemie AG, a chemicals company specialising in adsorbents. The history of ceramic filters, including piezoelectric ceramics, is detailed in this article by Satoru Fujishima. Cookson is a member of various trade organizations, such as the CEA, which has over 2000 member companies.
A rights issue is when a company issues new shares (which it usually offers at a deep discount to the prevailing market price; 20% is not uncommon) to existing shareholders. For this reason, the share price of a company usually falls after a rights issue. Essentially, a rights issue gives shareholders first refusal on the right to buy additional shares as compensation for the price fall after a rights issue (pre-emption rights, in other words).
Highly leveraged Xstrata also announced a heavily discounted (66%) rights issue in a bid to slash its debt from $16.3bn to $12.6bn. The issue ran into controversy that major shareholder Glencore was being offered favourable terms (underwriters: Glencore, JPM and DB). Dissenters included the ABI whose members, 400-strong, constitute 20% of investments in the London stock market.
A rights issue is when a company issues new shares (which it usually offers at a deep discount to the prevailing market price; 20% is not uncommon) to existing shareholders. For this reason, the share price of a company usually falls after a rights issue. Essentially, a rights issue gives shareholders first refusal on the right to buy additional shares as compensation for the price fall after a rights issue (pre-emption rights, in other words).
Highly leveraged Xstrata also announced a heavily discounted (66%) rights issue in a bid to slash its debt from $16.3bn to $12.6bn. The issue ran into controversy that major shareholder Glencore was being offered favourable terms (underwriters: Glencore, JPM and DB). Dissenters included the ABI whose members, 400-strong, constitute 20% of investments in the London stock market.
Monday, 26 January 2009
Friends Down, Pfizer eats Wyeth, Steel down 50% since Sep08
The Sales for Friends Provident (the UK pensions and insurance tout) were down 27%, but only down 4% in the fourth quarter. Current CEO Trevor Matthews (formerly with Standard Life) joined as CEO in July 2008. It is interesting to understand the origins of Friends Provident. Friends was founded in Bradford in 1832 and has Quaker origins (Samuel Tuke and Joseph Rowntree). Their aim was "to provide the security of life assurance" to Quakers and their families. 45 friends put up an initial £10,700 Guarantee Bond. The company demutualised in 2001, with a big IPO advertising campaign entitled "You're better off with Friends". Its debt issuer credit rating is BBB (good).
Pfizer, the world's biggest pharmaceutical company, is expected to conduct a blockbuster takeover of US rival Wyeth for between $65bn and $70bn (editor: deal closed at $68bn).
Pfizer, being advised by Merrill Lynch and Goldman Sachs, is under pressure from investors to replace >$12bn revenues the company may lose in three years (that's an average $4bn a year) when Lipitor, the cholesterol pill and best-selling medicine in history, faces competition from generic drug makers (the patent expires in November 2011).
Wyeth is being advised by MS and Evercore Partners (based in East 52nd Street, New York). Pfizer's R&D investment is impressive; at Sandwich, Kent, over 2000 drug-searching scientists are employed. The transaction consisted of cash, debt and stock.
Corus, the largest steelmaker in the UK and a subsidiary of Tata Steel, is expected to announce the loss of 3,500 jobs as demand falls from carmakers and the construction industry. Steel prices have dropped 50% since September. Steel derivatives on the LME offer risk management for the steel industry. Hot places to trade steel derivatives include the LME, CME, Shanghai Futures Exchage, India and Dubai.
India is the world's fifth largest steel maker, China is the largest.
Thursday, 22 January 2009
BoA drops 13% Thursday, Thain Leaves Merrills, Tech Ups and Downs, KBC Bailout
Ex-Merrill chief John Thain is ejected from Bank of America.
mba(thain,hbs).
BoA's general counsel Brian Moynihan replaces Thain. ML announced a loss of $15.3 billion in the fourth quarter, or $9.62 a share.
Microsoft, the maniacal operating system giant, announced it was cutting 5,000 employees indicating few companies are immune to recession. Fiscal discipline is necessary for all technology companies in this climate.
Commented one investment firm manager, "it's tough to do well in this environment, and if a company succeeds, it's a huge compliment to management" adding "Microsoft has turned into the big old sluggish company that IBM used to be".
KBC has been bailed out to the tune of €2 billion from the Flemish government (Flemish is Dutch as spoken in Belgium) fueling a rebound in its shares (adding to the existing bailout paid in October). KBC announced it will concentrate its activities on home markets, reduce costs and market risk. It would scale down its derivatives business.
mba(thain,hbs).
BoA's general counsel Brian Moynihan replaces Thain. ML announced a loss of $15.3 billion in the fourth quarter, or $9.62 a share.
Microsoft, the maniacal operating system giant, announced it was cutting 5,000 employees indicating few companies are immune to recession. Fiscal discipline is necessary for all technology companies in this climate.
Commented one investment firm manager, "it's tough to do well in this environment, and if a company succeeds, it's a huge compliment to management" adding "Microsoft has turned into the big old sluggish company that IBM used to be".
KBC has been bailed out to the tune of €2 billion from the Flemish government (Flemish is Dutch as spoken in Belgium) fueling a rebound in its shares (adding to the existing bailout paid in October). KBC announced it will concentrate its activities on home markets, reduce costs and market risk. It would scale down its derivatives business.
Tuesday, 20 January 2009
Monday, 19 January 2009
RBS shares fall 67% to 11.6p (Low of the Day 10p), KBC drops 20%, $19m Compensation for Bartz
RBS, 58% owned by the government, slumped to a 23 year low today. FTSE closed at 4108.5 (38.6 points down).
KBC, whose stock trades on Euronext Brussels, slumped 20%, going from about 16 euro to 12 euro and finishing around 13 euro. The stock has been tumbling since a Moody's report Thursday said it had revised assumptions used to evaluate KBC's CDOs. KBC were forced to issue a statement saying the share price had come under pressure as a result of rumours circulating in the market.
In tech, Yahoo's new CEO, Carol Bartz, will reportedly get $19m in compensation, in addition to bonus and stock options (base == $1m). She will not be able to exercise her options until after 4 years. Carol's board memberships are detailed here. She made her career at Autodesk, her profile is here. In 2007 rumours of a Microsoft bid for Yahoo send YHOO stock up 18% in one day. Will Microsoft bid again for Yahoo in 2009?
KBC, whose stock trades on Euronext Brussels, slumped 20%, going from about 16 euro to 12 euro and finishing around 13 euro. The stock has been tumbling since a Moody's report Thursday said it had revised assumptions used to evaluate KBC's CDOs. KBC were forced to issue a statement saying the share price had come under pressure as a result of rumours circulating in the market.
In tech, Yahoo's new CEO, Carol Bartz, will reportedly get $19m in compensation, in addition to bonus and stock options (base == $1m). She will not be able to exercise her options until after 4 years. Carol's board memberships are detailed here. She made her career at Autodesk, her profile is here. In 2007 rumours of a Microsoft bid for Yahoo send YHOO stock up 18% in one day. Will Microsoft bid again for Yahoo in 2009?
Sunday, 18 January 2009
RBS set to reveal "Biggest Loss in UK Corporate History"
"Royal Bank of Scotland is on Monday expected to announce it suffered a £20bn loss last year as the state-controlled lender unveiled further damage as a result of the credit crunch" reports the FT, exceeding Vodafone's record trading deficit of £15bn in 2006. £7-8bn comes from the writedown of complex debt-related securities and more than £19bn loss has been generated in the second half of 2008 alone.
Saturday, 17 January 2009
Barclays Bank Shares Tumble 25% in Friday Trading, BoA drops 13.7% on Q4 Results
Barclays shares fell 25%, hours after the ban on short-selling was lifted. Speculation surrounds further credit writedowns at Barclays Capital (managed by this team). Are we heading for nationalisation of Barclays?
BoA reported 2008 full-year profit of $4.01 billion compared with net income of $14.98 billion for 2007. The full-year profit was greatly impacted by a Q4 loss of $1.79 billion. These results include Countrywide Financial, acquired 1 Jan 2009, but not Merrill Lynch. Bank of America this month raised $2.8 billion by selling under 15% of its shares in China’s second-largest bank, China Construction Bank.
According to their press release, Bank of America ended 2008 with a Tier 1 capital ratio of 9.15 percent. Additional capital from the Treasury will boost the company's Tier 1 capital ratio to approximately 10.70 percent, on a pro-forma basis. T1C is a Basel-measure, measuring the ratio of the bank's core equity capital to risk-weighted assets. The Basel accord specifies capital adequacy requirements for banks, "le contrôle bancaire".
BoA reported 2008 full-year profit of $4.01 billion compared with net income of $14.98 billion for 2007. The full-year profit was greatly impacted by a Q4 loss of $1.79 billion. These results include Countrywide Financial, acquired 1 Jan 2009, but not Merrill Lynch. Bank of America this month raised $2.8 billion by selling under 15% of its shares in China’s second-largest bank, China Construction Bank.
According to their press release, Bank of America ended 2008 with a Tier 1 capital ratio of 9.15 percent. Additional capital from the Treasury will boost the company's Tier 1 capital ratio to approximately 10.70 percent, on a pro-forma basis. T1C is a Basel-measure, measuring the ratio of the bank's core equity capital to risk-weighted assets. The Basel accord specifies capital adequacy requirements for banks, "le contrôle bancaire".
Wednesday, 14 January 2009
Morgan Stanley Smith Barney is Born
Citi Sale
Citigroup has sold a majority stake in Smith Barney for $2.7 billion in cash in return for a 51% share in the Joint Venture (creating the world's biggest wealth manager with $1.7 trillion in client assets). Citi is expected to reveal up to $10bn in losses on Jan 22 when it releases figures for Q4 2008, including a$5bn credit-value adjustment on derivative positions, excluding monolines.
Deal Rationale
The JV is expected to achieve cost savings of about $11bn, partly by rationalizing and consolidating key functions e.g. technology, operations, support, product development and marketing, which consitute approximately 15% of the combined firm's expense base (excluding FinAdvisor commission compensation).
Citigroup has sold a majority stake in Smith Barney for $2.7 billion in cash in return for a 51% share in the Joint Venture (creating the world's biggest wealth manager with $1.7 trillion in client assets). Citi is expected to reveal up to $10bn in losses on Jan 22 when it releases figures for Q4 2008, including a$5bn credit-value adjustment on derivative positions, excluding monolines.
Deal Rationale
The JV is expected to achieve cost savings of about $11bn, partly by rationalizing and consolidating key functions e.g. technology, operations, support, product development and marketing, which consitute approximately 15% of the combined firm's expense base (excluding FinAdvisor commission compensation).
Saturday, 10 January 2009
US broker Ameritrade expands into Options Market
America's 3rd largest online stockbroker TD Ameritrade agreed to acquire Thinkorswim Group for $606m (€444m) in cash and stock, in a move to push further into the fast-growing options market and build up its investor-education programs, reports efinancialnews. Other online options brokers include optionsexpress.
The FT reports the deal is expected to close in six months, subject to shareholder and regulatory approval. Ameritrade is being advised by Merrill Lynch, while thinkorswim is being advised by Park Avenue-based Paragon Capital Partners.
In other banking news, BoA has completed its acquisition of Merrill Lynch, creating the world's largest wealth management business. BoA expects to make $7bn in pre-tax expense savings, fully realised by 2012. Sources of cost reduction include elimination of positions, reduction of overlapping technology, vendor and marketing expenses.
The FT reports the deal is expected to close in six months, subject to shareholder and regulatory approval. Ameritrade is being advised by Merrill Lynch, while thinkorswim is being advised by Park Avenue-based Paragon Capital Partners.
In other banking news, BoA has completed its acquisition of Merrill Lynch, creating the world's largest wealth management business. BoA expects to make $7bn in pre-tax expense savings, fully realised by 2012. Sources of cost reduction include elimination of positions, reduction of overlapping technology, vendor and marketing expenses.
Wednesday, 7 January 2009
Exxon Flush With Cash (Forty Billion Dollars)
Exxon Mobil has nearly $40bn in cash reserves, thanks to conservative investment and high oil prices in 2008. Add to this $225 billion in repurchased stock, and Exxon has enough resources to buy oil major Shell for a 60% premium. Shell India is currently importing LNG at a price of $9.06 per mmBtu (1 mmBtu == 1 GJ or 1 thousand million Joules of energy) from Australia's North West Shelf. The gas is destined for Hazira terminal, Gujarat (India West Coast), a joint venture between Shell and Total. Hazira was developed at a cost of Rs 3,000 crore (which is 30 billion rupees). Currently (Jan09) 1USD is about Rs 50, so the cost of the terminal is about $600m (at current x-rates). Shell owns 74% of the Hazira companies.
Exxon CEO Rex Tillerson from Wichita Falls, Texas has also spoken out about opening up US supplies of oil and natural gas which would boost jobs.
Need to brush up on SI Units? Check out this data sheet from Berlin.
Exxon CEO Rex Tillerson from Wichita Falls, Texas has also spoken out about opening up US supplies of oil and natural gas which would boost jobs.
Need to brush up on SI Units? Check out this data sheet from Berlin.
Friday, 2 January 2009
Return of the Mac: A Recipe for Buying and Selling America's Failed Banks
Two of the America's top banking regulators - the OCC (Office of the Comptroller of the Currency) and FDIC (Federal Deposit Insurance Corporation) have widened the pool of buyers for failed banks by opening up bidding to both investor groups and individuals.
The bidding process was previously opened only to chartered banks and savings institutions but now virtually anyone can put up money to buy a bank. Open Sesame!
The recipe appears to have worked, with IndyMac being sold to a private group of investors (which included Michael Dell) for $13.9bn. (The Federal government took control of IndyMac in July 2008, a historical move documented in this CNN report entitle "The Fall of IndyMac"). The article also covers the rise of IndyMac and its asset class of "Alt A" loans (which has more relaxed documentation requirements than "A-paper" - considered to be "prime" lending).
The bidding process was previously opened only to chartered banks and savings institutions but now virtually anyone can put up money to buy a bank. Open Sesame!
The recipe appears to have worked, with IndyMac being sold to a private group of investors (which included Michael Dell) for $13.9bn. (The Federal government took control of IndyMac in July 2008, a historical move documented in this CNN report entitle "The Fall of IndyMac"). The article also covers the rise of IndyMac and its asset class of "Alt A" loans (which has more relaxed documentation requirements than "A-paper" - considered to be "prime" lending).
GazProm saga continues...IMF extends loans...Rouble Devaluation Results
Gazprom accuses Ukraine of stealing gas.
In the supply dispute of 2006 there were similar claims.
25% of EU gas consumption (it is estimated) comes from Russia. 80% of the 25% comes from Ukraine, the rest through Belarus (landlocked country south of Lithuania) and Poland.
Belarus also landed a $2.5bn loan from the IMF following a sharp decline in its international reserves, sparked by falling demand for exports and lack of external financing (a direct result of the global financial turmoil). The Central Bank of Belarus allowed the Belarusian rouble to tumble thus increasing competitiveness of exports and stemming the decline in reserves, something the IMF insisted on as a precondition for the loan. Earlier the Russian government had agreed to grant Belarus a $2bn stabilization loan.
In the supply dispute of 2006 there were similar claims.
25% of EU gas consumption (it is estimated) comes from Russia. 80% of the 25% comes from Ukraine, the rest through Belarus (landlocked country south of Lithuania) and Poland.
Belarus also landed a $2.5bn loan from the IMF following a sharp decline in its international reserves, sparked by falling demand for exports and lack of external financing (a direct result of the global financial turmoil). The Central Bank of Belarus allowed the Belarusian rouble to tumble thus increasing competitiveness of exports and stemming the decline in reserves, something the IMF insisted on as a precondition for the loan. Earlier the Russian government had agreed to grant Belarus a $2bn stabilization loan.
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