stake

The future of AIG?

Jim Kim — Wed, 17 Sep 2008 13:42:08 -0400

AIG survives, but it will be a shell of its former self. Which may not be a bad thing. In agreeing to to an $85 billion bridge loan from the government, the insurer basically gave up operational control. The Federal Reserve could end up owning as much as 80 percent of the company, reports Fortune. The deal also requires AIG to sell businesses to raise capital, and to repay the debt. One unit that is toast: AIG's Financial Products unit, once hugely profitable thanks to the insurance guarantees it sold on credit default swaps tied to mortgages. Most people are guessing assets will be sold at fire sale prices. Just look at Lehman's pitiful deal for its investment bank. AIG competitors will be forced to take a hard look at some assets. You can bet jobs will be at stake.

For more:
- here's the article

Related Article:
Regulators change tune, bail out AIG

More on the man in the middle: Richard Fuld

Jim Kim — Mon, 15 Sep 2008 08:49:24 -0400

Could Lehman Brothers CEO Richard Fuld have saved the firm? There will be plenty of post mortems, and more than a few might conclude that yes, there were deals that could have been struck. Neuberger Berman could have been sold, as could a large stake in the company. But as the Financial Times suggests, the issue always came down to price. Fuld, after nearly 30 years at the same firm; after being so intimately tied up in the trees, just couldn't see the forest to save himself, or his employees. "But his failure goes beyond refusing to make a trade that he did not like. Lehman also displayed confusion and ambiguity about how to address the credit crisis...The investment bank suffered from not conveying a clear message either internally or externally," notes the FT. His fall was classic, downright Shakespearean. A tragedy. At least a b-school case study.

For more:
- here's the article

So what to make of the Lehman news?

Jim Kim — Wed, 10 Sep 2008 21:20:11 -0400

Lehman Brothers' news was designed to quell market fears. It really is being whipped around by extreme stock and CDS action. But did the announcement do the trick? Well, the general view still seems to be that the glass is at least half empty. It's never a good sign to announce deals before they are struck. But CEO Richard Fuld did make clear that he is open to strategic alternatives. CreditSights says this might still happen, counting Nomura, HSBC, Barclays and even Goldman Sachs as potential suitors for either the whole firm or a significant stake. Some private equity firms may also be interested. You get the feeling that any deal would be of the take-under variety. It does seem like a strategic deal of this magnitude is the only answer. Lehman may have found a way to survive, but surviving as a low-tier investment bank may be worse than death.

For more:
- here's an AP article
- here's a Seeking Alpha wrap up

Big day approaches for Lehman Brothers

Jim Kim — Tue, 09 Sep 2008 12:57:32 -0400

The big day for Lehman Brothers is Sept. 18, the day it will announce a big third-quarter loss and most likely some capital raising plans. The conference call is going to be a doozy. Everything is at stake. There needs to be a Plan A, a Plan B and more plans down the alphabet. It would be best to announce a major deal. That may not happen. It's not clear at all that potential Korean investors will agree to anything. Indeed, the talks appear to be dead. (Ditto the private equity firms that took a look at some troubled assets.) Plan B may be to announce some sort of other capital event. Breakingviews reports that Lehman is indeed planning to spin off its real estate assets into a bad company, Spinco, leaving a good company, Cleanco. How they will be capitalized is still a mystery. Mr. Market is very worried.

For more:
- here's the Breakingviews article

How will Lehman raise capital?

Jim Kim — Wed, 13 Aug 2008 17:51:42 -0400

KBW analysts, after meeting with the Lehman Brothers COO, are telling clients that Lehman is not likely to sell its Neuberger Berman asset management unit. The unit is just too integral to its operations and too valuable from a credit ratings agency stand point. So it looks like all that talk that Neuberger Berman--or even the entire wealth management operation--was on the block is not really true. This raises another issue: How will Lehman raise capital? We're operating under the assumption that it will need to--and many analysts would agree--but that may not necessarily be the case. If it is, however, what are its options? Slashing the dividend would not generate much. Issuing more stock might be tricky, risking the ire of current shareholders. KBW says that a sale of a stake to a private equity firm is a possibility. We'll have to see.

For more:
- here's the MarketWatch article

SPOTLIGHT: E*Trade to sell stake in Indian firm

Tue, 20 May 2008 06:59:52 -0400

E*Trade expects a pre-tax gain of up to $30 million from its deal to sell its stake in the India-based IL&FS Investsmart for $145 million for the company to HSBC. Article

BlackRock's Fink stays in the news

Thu, 08 May 2008 06:59:57 -0400

We've become accustomed to reading about Larry Fink, the CEO of asset manager BlackRock, of late. When CEO jobs at Merrill Lynch and Citigroup opened up, he was thought to be a candidate. When the credit crisis escalated, his name reappeared as a kind partner to troubled firms. The most intriguing assignment was BlackRock's deal to manage $30 billion in troubled securities owned by Bear Stearns. The New York Times notes that there's a lot at stake: the Fed and even taxpayers could end up at risk. BlackRock is also advising Florida and managing troubled assets for UBS. So, for big name firms that dodged the bullet, there is opportunity in times like these. The BlackRock stock is up more than 40 percent over the last year.

For more:
- here's the New York Times article

SPOTLIGHT: Kerkorian tenders for Ford

Tue, 29 Apr 2008 06:59:52 -0400

Kirk Kerkorian aims to boost his stake in Ford to 5.6 percent, a show of confidence in the strategy of CEO Alan Mulally. Hopefully, this will hold up in a tough economic environment. Given that he was offering a 13 percent premium, this is a gutsy bet. Article

ALSO NOTED: Carlyle closes leveraged loan fund; Cramer: more gains ahead; and much more...

Wed, 23 Apr 2008 06:59:50 -0400

Company News:
> Cramer: More gains ahead. Video
> Jefferies moves into mortgage-backed securities. Article
> Carlyle closes leveraged loan fund. Article
> German bank gets impound order for Zimbabwe-bound cargo. Article
> Nomura fires employee in insider trading controversy. Article
> Morgan Stanley PE take stake in Learning Care. Article

Industry News:
> Explainer: The vast CDS market. Article

Regulatory News:
> SEC to consider tighter regs on credit raters. Article
> Regulators: trading limits would worsen commodity prices. Article
> Struggling homeowners could get government-backed loans. Article

And Finally... Looking to go organic? Better have some green. Article

ALSO NOTED: Temasek adds to Merrill Lynch stake; More on JP Morgan beating estimates; and much more...

Thu, 17 Apr 2008 06:59:50 -0400

Company News:
> More on JP Morgan beating estimates. Article
> Wells Fargo beats estimates. Article
> Bank of New York Mellon misses estimates. Article
> Temasek adds to Merrill Lynch stake. Article
> UBS faces reputation problems. Article
> Is Goldman Sachs really a superior trader? Article
> Tiger's surgery is a loss for Wachovia. Article
> Analysts expect a 95 cent loss at Citigroup. Article

Industry News:
> Banks holding down the LIBOR? Article
> JP Morgan Chase: Tough economy ahead. Article

And Finally... How to deal with a buffoon boss. Article