debts

Bove says Citi fears are overblown

Jim Kim — Thu, 20 Nov 2008 21:14:50 -0500

"It would take a Depression every bit as large and long as the 1930s debacle to shake this company's viability." So wrote analyst Richard Bove about Citi. He thinks the fears are overblown, even as he admits he has gotten several calls from people wondering if Citi was about to fail. There was a time not so long ago when the idea of Lehman Brothers failing seemed farfetched. While Bove recommends buying the stock, few people seem to be like minded. The recent sell off has been tremendous, and it could get worse if the stock dips below $5 a share. All this is happening even with the TARP injection. The banks will no doubt face pressure on all sorts of debts in 2009, chiefly consumer credits, and toxic assets. But the bank sports a 10.5 percent tier 1 capital ratio. That's plenty of cushion. Still, while the bank may survive and the stock may even bounce a bit, people are right to wonder about the future of the bank.

For more:
- here's an item in the New York Times

Yet another Citi hedge fund stumbles

Jim Kim — Wed, 19 Nov 2008 11:15:30 -0500

Recall that one big issue that led to the estrangement between Citi CEO Vikram Pandit and former head of wealth management Sallie Krawcheck was how to deal with "victims" of Citi's hedge funds. Should they be made whole? It's now clear that such a move could have really been expensive. The latest: Citi's Corporate Special Opportunities sank 53 percent last month and will be shuttered, reports the Financial Times. That marks the ninth fund that Citi has been forced to close or rescue recently. The fund managed almost $4.2 billion at one time. But it apparently invested in lots of European deals, and now has a net asset value of about $58 million against debts of $880 million. The FT says investors will likely receive "no more than 10 cents on the dollar." For Pandit, the hits keep coming.

For more:
- here's the FT article on the CSO fund

No deal yet, tough vote expected

Jim Kim — Mon, 29 Sep 2008 08:07:35 -0400

After a frenzied weekend of haggling and posturing, the administration and Congress hacked out a 110 page document that will be voted on today in the House. Passage is by no means guaranteed. There were a few features thrown in to buy votes: curbs on exec pay and, most importantly, a mechanism to recover capital losses. But not everyone was appeased. Some Dems wanted more relief for individual mortgage holders. Some Republicans wanted a radical new approach that focused on insuring debts rather than buying them. But basically, when you get right down to it, this is an unprecedented bailout package, a massive government intervention for a politically charged industry. It's so easy to portray this as a fat cat bill. We'll see if it can get past the House.

For more:
- here's the article

Financed by UBS, BlackRock purchases UBS portfolio

Fri, 23 May 2008 06:59:55 -0400

Private equity firms and hedge funds are making some massive bets on distressed debts. The terms have been pretty good of late, though the leveraged loan market has rallied. The latest news, as noted by the Financial Times, is that UBS has closed on a deal to sell a portfolio of primarily Alt-A and subprime loans to a new fund managed by BlackRock. It sold securities with a nominal value of $22 billion for just $15 billion. But the real twist, the article notes, is that UBS provided the majority of financing for BlackRock via a collateralized term loan of approximately $11.25 billion. So as long as the securities don't absolutely crater, this looks to be a win-win.

For more:
- here's the article
- here's a AP article

Separating the men from boys in private equity

Fri, 23 May 2008 06:59:54 -0400

These are tough times in the private equity industry. But it's time like these, one could argue, that the strong get relatively stronger as the weak fall by the wayside. The grizzled vets in this industry have seen it all before. They're know now is the time to plan for the next boom. So how are big boys playing the crisis? According to Fortune, they're moving on three fronts: by buying up distressed debts, often from the top banks; by proceeding with plans for a public offerings; and by moving on plans to become more than buyout shops. They aim for a broader menu of services, from various alternative investments to more traditional money management.

For more:
- here's the article

Citigroup analysts: Slowdown in M&A a good thing

Thu, 22 May 2008 06:59:56 -0400

This might get you punched in some offices: The current slowdown in deal making is a healthy thing. The case is really not hard to make, and Citigroup has made it well, according to the Financial Times. Wacky bull markets of the near-bubble variety give rise to deal making frenzies that seem to disregard way-too-high valuations. The report does not think we'll fall off a cliff. Rather, we'll return to normal, with more reasonable debts loaded up on acquired companies, more strategic deals and more reasonable valuations. It would be hard to argue that's a bad thing. But you may want to whisper.

For more:
- here's the Financial Times article

Citigroup to combine debt and equities units

Fri, 16 May 2008 06:59:54 -0400

Financial News Online reports that Citigroup has plans to combine its equity and debt capital markets origination divisions into a single unit. The move follows like-minded moves by JPMorgan Chase and UBS. The point is to unlock efficiencies that might result from integrated product offerings, and to provide customers a single point of contact. Companies have increasingly diverse capital markets needs, and an integrated sell that links debts, stocks and derivatives makes a lot of sense on paper. Of course, the key here is execution, stitching together a cohesive logical pitch to customers. Some might see this as an interesting test of how well Citigroup can adapt in this new era.

For more:
- here's the Financial News Online article

Are prime consumers the next big worry for banks?

Wed, 14 May 2008 06:59:56 -0400

We've spoken ad nauseum about the risks of subprime debts that have filtered through the financial system in many surprising ways. But a lot of prime borrowers have been silently struggling through this economic slowdown. Now there are signs that home equity credits will come under heavy pressure. Bank of America president of global consumer and small business banking, Liam McGee, said that consumers and small businesses are under pressure, according to the AP. The bank now expects losses in its home equity portfolio to increase soon. Projected losses will be higher than expected. Other banks are likely in the same boat. There's a whole host of consumer credit that also might be problematic--auto loans, for example.

For more:
- here's the AP article

Related Article:
Bank of America in sore need of capital

Should Bank of America walk away from Countrywide?

Tue, 06 May 2008 06:59:54 -0400

MarketWatch notes that Countrywide is a bad position. Basically, its debts exceed its assets. Negative equity, of course, doesn't exactly speak well for the mortgage giant's future. Of immediate concern is the deal that Bank of America has struck. As Countrywide's loan problems mount and its stock tumbles, many analysts say the deal will have to be renegotiated. Friedman Billings Ramsey analyst Paul Miller holds that Bank of America should walk away. At a minimum, it may have to make some huge changes, like lower the price and perhaps require Countrywide bondholders to swallow more of the expected losses from loan write downs. This is getting tricky for Ken Lewis, who seemed to have bet the farm on the deal. It may be better for him to take his lumps now by giving up.

For more:
- here's the MarketWatch article