Latin America’s appeal to global investors was highlighted on Wednesday when Advent International, the Boston-based private equity group, raised a record $1.3bn fund for deals in the region.
The new fund, Advent’s fourth, is about 3.5 times larger than its previous pool of money for Latin American deals, which closed in October 2005 at $375m.
Tuesday, July 31, 2007
ABN indicates it still supports Barclays bid
ABN Amro indicated its continued support for a take-over bid by Barclays, even after the Dutch bank formally withdrew its recommendation for the agreed deal.
Rijkman Groenink, chief executive, said it would have “looked a bit silly” for the bank to continue recommending Barclays’ bid, which is currently worth about €34.60 a share – substantially below a €38.10-a-share break-up bid from a consortium led by Royal Bank of Scotland.
However, he said: “We continue to support the Barclays bid, but we will engage with both parties.”
Barclays last week sweetened its bid in an attempt to compete with the consortium’s offer, which is largely in cash. But the value of its cash-and-shares bid has been undermined by the broader stock market sell-off.
The consortium has not asked for ABN Amro to recommend its bid. Some executives believe a hostile bid would make it easier for the consortium to carry out the cost-cutting its members believe is necessary.
Both Barclays and RBS have set out plans to boost ABN Amro’s investment banking profits by cutting costs and selling more products to the Dutch bank’s clients.
People involved in the deal also suggested ABN Amro’s decision to withdraw its recommendation from Barclays’ bid was aimed at limiting the scope for legal action by disgruntled investors.
Mr Groenink was speaking as ABN Amro reported pre-tax profits of €2.1bn for the first half of the year, including a 94 per cent jump in profits from its global markets division.
Mr Groenink said Barclays shares – which closed on Monday at 681p in London – were “structurally undervalued” when compared with its rivals and could rise before the end of the bidding process, which is expected to last at least two months.
He also indicated that the consortium still had to clear several hurdles before ABN Amro could consider recommending its offer. Fortis, the Belgo-Dutch group, will next week seek approval from its shareholders for its portion of the deal, which includes a €13bn rights issue.
The Dutch central bank must also give its approval for both bids. ABN Amro shares closed up slightly at €35.
Rijkman Groenink, chief executive, said it would have “looked a bit silly” for the bank to continue recommending Barclays’ bid, which is currently worth about €34.60 a share – substantially below a €38.10-a-share break-up bid from a consortium led by Royal Bank of Scotland.
However, he said: “We continue to support the Barclays bid, but we will engage with both parties.”
Barclays last week sweetened its bid in an attempt to compete with the consortium’s offer, which is largely in cash. But the value of its cash-and-shares bid has been undermined by the broader stock market sell-off.
The consortium has not asked for ABN Amro to recommend its bid. Some executives believe a hostile bid would make it easier for the consortium to carry out the cost-cutting its members believe is necessary.
Both Barclays and RBS have set out plans to boost ABN Amro’s investment banking profits by cutting costs and selling more products to the Dutch bank’s clients.
People involved in the deal also suggested ABN Amro’s decision to withdraw its recommendation from Barclays’ bid was aimed at limiting the scope for legal action by disgruntled investors.
Mr Groenink was speaking as ABN Amro reported pre-tax profits of €2.1bn for the first half of the year, including a 94 per cent jump in profits from its global markets division.
Mr Groenink said Barclays shares – which closed on Monday at 681p in London – were “structurally undervalued” when compared with its rivals and could rise before the end of the bidding process, which is expected to last at least two months.
He also indicated that the consortium still had to clear several hurdles before ABN Amro could consider recommending its offer. Fortis, the Belgo-Dutch group, will next week seek approval from its shareholders for its portion of the deal, which includes a €13bn rights issue.
The Dutch central bank must also give its approval for both bids. ABN Amro shares closed up slightly at €35.
Goldman Is Working With Law-Enforcement Officials After Threats
Goldman Sachs Group Inc., the world's biggest securities firm, said it's working with law-enforcement authorities after letters making threats against the company were sent to U.S. newspapers.
The letters, all mailed from Queens, New York, were received by papers in states including Texas, Indiana, Tennessee and Idaho, the Star-Ledger reported today. The letters said: ``Goldman Sachs. Hundreds will die. We are inside. You cannot stop us,'' according to the New Jersey newspaper, which also received a letter.
``We take any threat to the safety of our people very seriously,'' Goldman spokesman Michael DuVally said in an e- mailed statement. ``We are working closely with the law- enforcement authorities, who tell us they don't believe the threat to be very credible.''
Supervisory special agent Neil Donovan of the FBI's New York press office didn't immediately return a call for comment. Tom Boyle, the U.S. Postal Service's assistant inspector in charge, also didn't immediately respond to a call.
``We have a broad range of security measures in place to counter all likely threats and we're monitoring the situation closely,'' Goldman's DuVally said.
The letters, all mailed from Queens, New York, were received by papers in states including Texas, Indiana, Tennessee and Idaho, the Star-Ledger reported today. The letters said: ``Goldman Sachs. Hundreds will die. We are inside. You cannot stop us,'' according to the New Jersey newspaper, which also received a letter.
``We take any threat to the safety of our people very seriously,'' Goldman spokesman Michael DuVally said in an e- mailed statement. ``We are working closely with the law- enforcement authorities, who tell us they don't believe the threat to be very credible.''
Supervisory special agent Neil Donovan of the FBI's New York press office didn't immediately return a call for comment. Tom Boyle, the U.S. Postal Service's assistant inspector in charge, also didn't immediately respond to a call.
``We have a broad range of security measures in place to counter all likely threats and we're monitoring the situation closely,'' Goldman's DuVally said.
Corporate Bond Risk Soars as Subprime Mortgage Losses Spread
The risk of owning corporate bonds rose to the highest in at least three years after a German bank slashed its profit forecast because of ``massive uncertainty'' in the market for subprime mortgages and credit.
Indexes linked to credit-default swaps in Europe and the U.S. rose to the highest since they were created in 2004, showing that the perception of credit quality is deteriorating. Contracts on Dusseldorf-based IKB Deutsche Industriebank AG IKB, which allow investors to speculate on its ability to repay debt, jumped to six times the prices of a month ago. Goldman Sachs Group Inc. rose to the highest on record.
`It's pure fear,'' said Gary Jenkins, a partner at London- based hedge fund Synapse Investment Management, which manages $650 million of debt assets. Jenkins was head of fundamental credit at Deutsche Bank AG before joining Synapse in April. ``It's fear of the unknown, fear of hedge funds unwinding, fear of knock-on effects of the subprime meltdown.''
Investors are fleeing corporate credit, causing more than 40 companies to abandon or rework debt sales. The retreat has pushed yield premiums on corporate bonds to the highest relative to U.S. Treasuries since 2003.
Contracts on 10 million euros ($13.8 million) of debt included in the iTraxx Crossover Series 7 Index of 50 European companies rose as high as 504,000 euros before closing up 18,000 euros at 462,000 euros, according to JPMorgan Chase & Co. The CDX North American Investment-Grade Index rose as much as $22,000 to $103,000, Deutsche Bank AG prices show. The index traded at $87,250 as of 12:31 p.m. in New York.
Gaining Pace
Credit-default swaps have risen more quickly in the past two months than in any other eight-week span in the past seven years, Barclays Capital said in a report. The firm based its estimate on so-called QCX indexes that enable it to track credit-default swap benchmarks as if they had been created at the beginning of 2001.
Late payments and defaults among subprime borrowers, who have poor credit or high levels of debt, are at a 10-year high, according to Friedman Billings Ramsey Group in Arlington, Virginia. Delinquencies sparked a decline in the securities that package them.
The rout gained pace in mid-June, when two Bear Stearns Cos. hedge funds posted losses and later collapsed. It widened globally as Blackstone Group LP stepped in to advise Sydney-based Basis Capital Fund Management Ltd. and Absolute Capital Group Ltd., partly owned by ABN Amro Holding NV, froze investor accounts.
`Winds and Rain'
As investors balked at buying loans and bonds, banks were forced to take on at least $32 billion of debt to finance buyouts including the purchase of Chrysler Group by Cerberus Capital Management LP.
Banks are also on the hook for Kohlberg Kravis Roberts & Co.'s buyout of U.K. pharmacy chain Alliance Boots Plc, Europe's biggest leveraged buyout.
``The winds and rain have not fully subsided,'' Lehman Brothers Holdings Inc. fixed-income analysts led by Jack Malvey said in a research note dated today.
IKB, a bank that focuses on small and medium-sized companies, said in a statement today that profit will be ``significantly'' lower than forecast because of losses on bonds linked to subprime loans. Ten days ago, the company said it wouldn't be affected.
Concern Rise;
The bank replaced its chief executive officer and said its access to funding was threatened. State-owned KfW Group, which holds a 38 percent stake in IKB, said it will cover the company against potential losses.
Credit-default swap contracts based on 10 million euros of IKB debt, which traded at 15,000 euros a month ago, were at 95,000 euros today, according to Royal Bank of Scotland Group Plc.
The iTraxx Europe Series 7 Index of 125 companies with investment-grade credit ratings including Europe's major banks jumped 16,000 euros to 72,000 euros, signaling risk perceptions have increased, JPMorgan prices show. The rise was the biggest increase since the index started three years ago.
Credit-default swaps on New York-based Goldman Sachs, the world's biggest securities firm, rose $2,000 to $94,000 after earlier rising to $104,000, according to CMA Datavision.
Credit swaps on Fannie Mae and Freddie Mac, the U.S. government-chartered companies that are the largest providers of money for U.S. home loans, have tripled this month. Fannie Mae contracts are trading at $32,000 and Freddie at $30,000 today, according to CMA.
``There's a lot of pain out there, and there's a lot of risk aversion,'' said Abdul K. Hussain, a portfolio manager at Dubai, United Arab Emirates-based hedge fund Mashreq Capital DIFC Ltd., which manages $250 million in fixed-income assets. ``You can't go through the volatility we've seen in the past week without seeing longer term repercussions.''
`Significant Losses'
While Federal Reserve Chairman Ben S. Bernanke on July 19 predicted ``significant financial losses'' from the subprime rout, citing estimates of as high as $100 billion, U.S. Treasury Secretary Henry Paulson said in an interview last week that the turmoil doesn't pose a threat to the U.S. economy.
Risk premiums are rising even as the global corporate default rate hovers near its lowest in 12 years and most of the companies reporting second-quarter earnings post larger profits than analysts predicted.
The global default rate among speculative-grade companies in June was 1.4 percent, the lowest since March 1995, according to Moody's Investors Service. As of July 27, 65 percent of the 201 companies in the Standard & Poor's 500 index had reported higher profits than estimated, according to Bloomberg data.
Widening Spreads
The spread investors demand to own investment-grade corporate bonds instead of Treasuries widened 20 basis points last week to 128 basis points, according to index data compiled by Merrill Lynch & Co. Spreads on high-yield bonds rose 91 basis points to 428 basis points, the highest since May 2005, Merrill indexes show.
Still, that would be less than half that of the 1,120 basis points reach in 2002, based on the Merrill Lynch indexes. A basis point is 0.01 percentage point.
Investor confidence in high-risk, high-yield loans fell.
In the U.S., the LCDX index tied to loans of 100 companies dropped to as low as 90, the lowest since the index was created May 22, according to Goldman. The index was unchanged at 92 as of 11 a.m. in New York, Goldman prices show. In Europe, the iTraxx LevX Index of credit-default swaps on loans to 35 European companies dropped 2.25 to 92.5, according to Bear Stearns Cos., the lowest since that index started trading in October.
The CDX North America High-Yield Index of 100 companies, which falls as investor confidence deteriorates, earlier dropped 1.38 to 89.13 before rallying back to 90.75, according to Lehman Brothers Holdings Inc.
The price implies it costs about $535,000 to protect $10 million in junk bonds, down from $586,000 earlier today, according to a JPMorgan Chase model.
Indexes linked to credit-default swaps in Europe and the U.S. rose to the highest since they were created in 2004, showing that the perception of credit quality is deteriorating. Contracts on Dusseldorf-based IKB Deutsche Industriebank AG IKB, which allow investors to speculate on its ability to repay debt, jumped to six times the prices of a month ago. Goldman Sachs Group Inc. rose to the highest on record.
`It's pure fear,'' said Gary Jenkins, a partner at London- based hedge fund Synapse Investment Management, which manages $650 million of debt assets. Jenkins was head of fundamental credit at Deutsche Bank AG before joining Synapse in April. ``It's fear of the unknown, fear of hedge funds unwinding, fear of knock-on effects of the subprime meltdown.''
Investors are fleeing corporate credit, causing more than 40 companies to abandon or rework debt sales. The retreat has pushed yield premiums on corporate bonds to the highest relative to U.S. Treasuries since 2003.
Contracts on 10 million euros ($13.8 million) of debt included in the iTraxx Crossover Series 7 Index of 50 European companies rose as high as 504,000 euros before closing up 18,000 euros at 462,000 euros, according to JPMorgan Chase & Co. The CDX North American Investment-Grade Index rose as much as $22,000 to $103,000, Deutsche Bank AG prices show. The index traded at $87,250 as of 12:31 p.m. in New York.
Gaining Pace
Credit-default swaps have risen more quickly in the past two months than in any other eight-week span in the past seven years, Barclays Capital said in a report. The firm based its estimate on so-called QCX indexes that enable it to track credit-default swap benchmarks as if they had been created at the beginning of 2001.
Late payments and defaults among subprime borrowers, who have poor credit or high levels of debt, are at a 10-year high, according to Friedman Billings Ramsey Group in Arlington, Virginia. Delinquencies sparked a decline in the securities that package them.
The rout gained pace in mid-June, when two Bear Stearns Cos. hedge funds posted losses and later collapsed. It widened globally as Blackstone Group LP stepped in to advise Sydney-based Basis Capital Fund Management Ltd. and Absolute Capital Group Ltd., partly owned by ABN Amro Holding NV, froze investor accounts.
`Winds and Rain'
As investors balked at buying loans and bonds, banks were forced to take on at least $32 billion of debt to finance buyouts including the purchase of Chrysler Group by Cerberus Capital Management LP.
Banks are also on the hook for Kohlberg Kravis Roberts & Co.'s buyout of U.K. pharmacy chain Alliance Boots Plc, Europe's biggest leveraged buyout.
``The winds and rain have not fully subsided,'' Lehman Brothers Holdings Inc. fixed-income analysts led by Jack Malvey said in a research note dated today.
IKB, a bank that focuses on small and medium-sized companies, said in a statement today that profit will be ``significantly'' lower than forecast because of losses on bonds linked to subprime loans. Ten days ago, the company said it wouldn't be affected.
Concern Rise;
The bank replaced its chief executive officer and said its access to funding was threatened. State-owned KfW Group, which holds a 38 percent stake in IKB, said it will cover the company against potential losses.
Credit-default swap contracts based on 10 million euros of IKB debt, which traded at 15,000 euros a month ago, were at 95,000 euros today, according to Royal Bank of Scotland Group Plc.
The iTraxx Europe Series 7 Index of 125 companies with investment-grade credit ratings including Europe's major banks jumped 16,000 euros to 72,000 euros, signaling risk perceptions have increased, JPMorgan prices show. The rise was the biggest increase since the index started three years ago.
Credit-default swaps on New York-based Goldman Sachs, the world's biggest securities firm, rose $2,000 to $94,000 after earlier rising to $104,000, according to CMA Datavision.
Credit swaps on Fannie Mae and Freddie Mac, the U.S. government-chartered companies that are the largest providers of money for U.S. home loans, have tripled this month. Fannie Mae contracts are trading at $32,000 and Freddie at $30,000 today, according to CMA.
``There's a lot of pain out there, and there's a lot of risk aversion,'' said Abdul K. Hussain, a portfolio manager at Dubai, United Arab Emirates-based hedge fund Mashreq Capital DIFC Ltd., which manages $250 million in fixed-income assets. ``You can't go through the volatility we've seen in the past week without seeing longer term repercussions.''
`Significant Losses'
While Federal Reserve Chairman Ben S. Bernanke on July 19 predicted ``significant financial losses'' from the subprime rout, citing estimates of as high as $100 billion, U.S. Treasury Secretary Henry Paulson said in an interview last week that the turmoil doesn't pose a threat to the U.S. economy.
Risk premiums are rising even as the global corporate default rate hovers near its lowest in 12 years and most of the companies reporting second-quarter earnings post larger profits than analysts predicted.
The global default rate among speculative-grade companies in June was 1.4 percent, the lowest since March 1995, according to Moody's Investors Service. As of July 27, 65 percent of the 201 companies in the Standard & Poor's 500 index had reported higher profits than estimated, according to Bloomberg data.
Widening Spreads
The spread investors demand to own investment-grade corporate bonds instead of Treasuries widened 20 basis points last week to 128 basis points, according to index data compiled by Merrill Lynch & Co. Spreads on high-yield bonds rose 91 basis points to 428 basis points, the highest since May 2005, Merrill indexes show.
Still, that would be less than half that of the 1,120 basis points reach in 2002, based on the Merrill Lynch indexes. A basis point is 0.01 percentage point.
Investor confidence in high-risk, high-yield loans fell.
In the U.S., the LCDX index tied to loans of 100 companies dropped to as low as 90, the lowest since the index was created May 22, according to Goldman. The index was unchanged at 92 as of 11 a.m. in New York, Goldman prices show. In Europe, the iTraxx LevX Index of credit-default swaps on loans to 35 European companies dropped 2.25 to 92.5, according to Bear Stearns Cos., the lowest since that index started trading in October.
The CDX North America High-Yield Index of 100 companies, which falls as investor confidence deteriorates, earlier dropped 1.38 to 89.13 before rallying back to 90.75, according to Lehman Brothers Holdings Inc.
The price implies it costs about $535,000 to protect $10 million in junk bonds, down from $586,000 earlier today, according to a JPMorgan Chase model.
Sustainable business 2006
Survival in a changing world:
Times are changing. A two-hour lecture by a failed politician has attracted audiences across the globe to become one of the biggest grossing cinema documentaries yet seen. This alone is sufficient testament to the growing concern over the probable effects of climate change.
Melting glaciers, rising sea levels, droughts and floods, stronger hurricanes: these are the likely effects of climate change, and Al Gore, in his recent film An Inconvenient Truth, gives us a whirlwind tour through the worst of them. He describes it as “a nature hike through the Book of Revelations”.
Scientists have known of these probable effects of climate change for some time. What is new, and one of the main points of Mr Gore’s film, is the increasing sense of urgency among many climatologists. They are warning that, rather than cosily imagining that these effects would not be felt for several decades, we are beginning to see them already, and happening at a much faster pace than had been predicted.
That sense of urgency is becoming increasingly apparent, too, in the business world, where companies are responding to consumer demands that they help to tackle the problem of climate change. At a conference held by Mr Gore’s former boss, Bill Clinton, in New York in September, leading business figures such as Richard Branson, of Virgin Group, and Rupert Murdoch, of News Corp, announced that they would undertake significant initiatives aimed at reducing greenhouse gas emissions, and thus climate change. They joined the likes of Jeff Immelt of General Electric and Lee Scott of Wal-Mart in leading their companies to reduce their “environmental footprint” through means such as cutting energy use.
A long roll call of some of the world’s biggest companies and most famous household names are now committed to the cause of “sustainable business”. Banks, oil companies, manufacturers and marketers have signed up to reduce their greenhouse gas emissions and seek ways to help their customers do the same. The outlook for pressure groups trying to foster environmental concern among businesses has never been better – even as the outlook for the planet, according to climate scientists, has never been worse.
Mr Murdoch pledged to make News Corp “absolutely carbon neutral”. To be carbon neutral, a company must first reduce its emissions from activities such as transport and energy use, and then “offset” any remaining emissions.
This can be done by investing in projects, usually in developing countries, that reduce carbon dioxide emissions by the equivalent of the company’s remaining carbon output. This both balances out a company’s effect on the environment and gives poor countries access to environmental technologies such as wind farms and solar panels.
His son and heir apparent, James Murdoch, had previously taken British Sky Broadcasting carbon neutral in May, saying: “There’s simply no bigger challenge we face [than climate change].”
Environmental groups caution, however, that companies seeking to become carbon neutral must reduce their own emissions rather than simply pay for emissions reductions elsewhere.
Times are changing. A two-hour lecture by a failed politician has attracted audiences across the globe to become one of the biggest grossing cinema documentaries yet seen. This alone is sufficient testament to the growing concern over the probable effects of climate change.
Melting glaciers, rising sea levels, droughts and floods, stronger hurricanes: these are the likely effects of climate change, and Al Gore, in his recent film An Inconvenient Truth, gives us a whirlwind tour through the worst of them. He describes it as “a nature hike through the Book of Revelations”.
Scientists have known of these probable effects of climate change for some time. What is new, and one of the main points of Mr Gore’s film, is the increasing sense of urgency among many climatologists. They are warning that, rather than cosily imagining that these effects would not be felt for several decades, we are beginning to see them already, and happening at a much faster pace than had been predicted.
That sense of urgency is becoming increasingly apparent, too, in the business world, where companies are responding to consumer demands that they help to tackle the problem of climate change. At a conference held by Mr Gore’s former boss, Bill Clinton, in New York in September, leading business figures such as Richard Branson, of Virgin Group, and Rupert Murdoch, of News Corp, announced that they would undertake significant initiatives aimed at reducing greenhouse gas emissions, and thus climate change. They joined the likes of Jeff Immelt of General Electric and Lee Scott of Wal-Mart in leading their companies to reduce their “environmental footprint” through means such as cutting energy use.
A long roll call of some of the world’s biggest companies and most famous household names are now committed to the cause of “sustainable business”. Banks, oil companies, manufacturers and marketers have signed up to reduce their greenhouse gas emissions and seek ways to help their customers do the same. The outlook for pressure groups trying to foster environmental concern among businesses has never been better – even as the outlook for the planet, according to climate scientists, has never been worse.
Mr Murdoch pledged to make News Corp “absolutely carbon neutral”. To be carbon neutral, a company must first reduce its emissions from activities such as transport and energy use, and then “offset” any remaining emissions.
This can be done by investing in projects, usually in developing countries, that reduce carbon dioxide emissions by the equivalent of the company’s remaining carbon output. This both balances out a company’s effect on the environment and gives poor countries access to environmental technologies such as wind farms and solar panels.
His son and heir apparent, James Murdoch, had previously taken British Sky Broadcasting carbon neutral in May, saying: “There’s simply no bigger challenge we face [than climate change].”
Environmental groups caution, however, that companies seeking to become carbon neutral must reduce their own emissions rather than simply pay for emissions reductions elsewhere.
Sunday, July 8, 2007
Lehman seen close to buying 51% in Brics Sec
Lehman Brothers, one of the biggest global financial services providers, is in advanced stages of picking up a 51% controlling stake in local securities firm Brics Securities. The Wall Street major will scale up its stake in the Mumbai-based brokerage firm to 100% over the next three years, if the deal goes through, according to sources close to the development. They said Lehman is picking up a stake in Brics Securities which is the financial services arm of the JV Gokal Group. It was created in October 2003, following the acquisition and rechristening of Birla Sun Life Securities — joint venture between the Aditya Birla Group and Sunlife Group of Canada. The Mumbai-based brokerage has a retail and private client business. It offers portfolio management services, besides distributing third-party products. It also has an NBFC licence, which currently does lending against shares, albeit in a small way and a commodities broking business. However, sources said this business would not be a part of the deal. Brics focuses mainly on institutional broking which makes up for a bulk of its revenues. Lehman Brothers, however, declined to comment on the transaction. Currently, employees of Brics have a stake of close to 15% in the company. Key staffers of the company have been seeking a higher share in the deal. However, the deal is being structured in a way that the employees will get part of the profits now, and will stand to rake the benefits over the next three years. An in-principle approval between both firms for the buyout is said to have been reached, sources quoted above said. The transaction size of the deal is likely to be much less than Rs 200 crore reported earlier. Recent deal valuations for brokerage deals include Rs 150 crore by IDFC for an additional 33% stake in SSKI which valued the firm at Rs 456 crore and the JM Financial and ASK deal where JM paid Rs 58.14 crore for a 60% stake in the institutional brokerage. The proposed arrangement envisages the acquirer-fixing targets to be achieved by the firm in the course of the next three years. Foreign players have been targeting existing brokerages not only for the client base, but also for the existing talent pool. With a host of international majors looking at expanding operations in the country, there has been shortage of experienced professionals in the financial sector. Lehman, which entered the country late last year, already has a merchant banking licence and a primary dealership.
Subscribe to:
Posts (Atom)