Monday, June 8, 2009

Fidelity to sell shares of KKR IPOs

By Ross Kerber
BOSTON (Reuters) - Boston mutual fund giant Fidelity Investments and New York private equity firm Kohlberg Kravis Roberts & Co.(KFN.N) have struck a deal to sell shares of KKR initial public offerings to retail customers, hoping for a comeback in the frozen market.
KKR has investments in 50 companies with a combined $200 billion of revenue. But KKR hasn't had an IPO since it took Sealy Mattress Co public in 2006.
Just 10 IPOs have been completed this year, down from 97 at the same point a year ago, according to data from Renaissance Capital, an IPO research specialist.
But the market "may be picking up momentum," said Mark Haggerty, president of Fidelity's capital markets unit, based on the deals so far. "Overall it's moving in the direction we hope," he added.
IPOs tend to be riskier investments, their image strongly tied to the dot-com era, and the recession has all but eliminated them this year.
Under the terms of the deal, Fidelity will get the right to sell retail securities to its customers. Traditionally, retail customers had trouble getting IPO shares to buy through their brokers, since underwriters first look to wealthier customers and institutional investors to buy large numbers of the securities. Also, many financial advisers caution that these shares can be too risky for the average investor saving for retirement or similar goals.
Craig Farr, head of KKR's Capital Markets group, said he hopes the deal with Fidelity will increase demand for shares, or what he called greater "pricing tension." If retail customers typically buy around 25 percent of an IPO, he said the new arrangement might increase that to 30 percent.
The record for IPOs came in 2000 when 695 were offered, followed by just 108 the following year. Things picked back up in 2007 when 374, a figure that fell to 151 in 2008 and so far this year there have been just 10 IPOs filed to date, according to a count by Renaissance Capital.
(Reporting by Ross Kerber; Editing by Jason Szep and Steve Orlofsky)

Source: Reuters

McDonald's global May same-store sales up 5.1 percent

McDonald's global May same-store sales up 5.1 percent
CHICAGO (Reuters) - McDonald's Corp (MCD.N) on Monday reported a 5.1 percent increase in May sales at restaurants open at least 13 months, on strong demand in Europe and Asia/Pacific.
May same-restaurant sales were up 2.8 percent in the United States, helped by new coffee drinks and snacks.
The world's largest hamburger chain is one of the restaurant industry's top performers largely because its Dollar Menu has been attracting diners amid a lengthy recession that has sent unemployment sharply higher.
The stronger U.S. dollar -- which lessens the dollar value of overseas sales -- led to an overall 0.4 percent decline at worldwide McDonald's restaurants, the company said. Sales rose 7 percent in constant currencies.
Fast-food restaurants generally have held up better in a tough economy than higher-priced sit-down restaurants.
McDonald's May same-store sales increased 7.6 percent in Europe, and 6.4 percent in the company's Asia/Pacific, Middle East and Africa segment.
McDonald's said the hit by the foreign exchange rates, if they remain around current levels, is expected to be 8 cents to 9 cents a share in the second quarter and about 20 cents for the year.
The company also said second-quarter results, which it is scheduled to report on July 23, are expected to include 2 cents to 3 cents a share of income due to a license deal in Indonesia and the sale of Redbox Automated Retail.
Its shares fell 2.3 percent in premarketing trading to $58.50 from Friday's closing price of $59.87 on the New York Stock Exchange.
(Reporting by Ben Klayman and Lisa Baertlein in Los Angeles; Editing by Maureen Bavdek)

Source: Reuters

Creditors may get control of Tribune Co: paper

Creditors may get control of Tribune Co:  paper
(Reuters) - Tribune Co and its creditors are in early negotiations for a reorganization plan in bankruptcy court that would likely transfer control of the media conglomerate from billionaire Sam Zell to a group of large banks and investors, the Chicago Tribune said, citing sources.
The plan centers on a debt-for-equity swap that would likely give the lenders, who hold $8.6 billion in senior debt, a large majority ownership stake in the reorganized company, the paper said.
Under the plan, a $90 million warrant, which Zell negotiated as part of his $8.2 billion deal to take the company private in 2007, would be wiped out, a source with knowledge of the situation and plan told the paper.
The warrant gives Zell the right to buy about 40 percent of the company for $500 million and is the basis of his control over Tribune Co, according to the paper
Tribune Co's employees own 100 percent of the company's equity through a tax-advantaged corporate structure known as an S-Corp ESOP, the paper said, adding that a tangle of S-Corp rules may make it difficult to give the senior lenders equity and maintain the S-Corp structure.
Zell and his top managers "remain actively engaged and committed to this company," Tribune Co said in a statement to the paper. "The restructuring is still in progress, and it is premature to speculate about the final ownership structure."
Tribune Co could not be immediately reached for comment by Reuters. Tribune Co, which owns the Chicago Tribune and Los Angeles Times newspapers, filed for bankruptcy in December due to its heavy debt load and the weak U.S. publishing sector.
(Reporting by Ajay Kamalakaran in Bangalore; Editing by Muralikumar Anantharaman)

Source: Reuters

U.S. top court asked to delay Chrysler sale

U.S. top court asked to delay Chrysler sale
By James Vicini
WASHINGTON (Reuters) - Indiana pension funds and consumer groups asked the U.S. Supreme Court on Sunday to stop the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA while they challenge the deal.
The separate requests, which moved the legal battle to the nation's highest court, were filed after a U.S. appeals court in New York approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments.
The Chrysler case could set a precedent for General Motors Corp, which is using a similar quick sale strategy in its bankruptcy in New York.
The appeals court late on Friday stayed the closing of the sale until Monday afternoon, giving the pension funds and other opponents time over the weekend to ask the Supreme Court to block the sale while they appeal.
The three state pension funds, which hold about $42 million of Chrysler's $6.9 billion in secured loans, argued the sale unlawfully rewarded unsecured creditors such as the union ahead of secured lenders.
"The need for the court to review the profound issues presented by Chrysler's novel bankruptcy sale far outweighs the cost of delaying" a sale, lawyers for the pension funds and the Indiana attorney general said in seeking an immediate stay.
The pension and construction funds also argued the U.S. government, which kept Chrysler afloat with emergency loans before the automaker's bankruptcy and financed its Chapter 11 filing, overstepped its legal authority by using bailout funds Congress intended for banks.
"The public is watching and needs to see that, particularly, when the system is under stress, the rule of law will be honored and an independent judiciary will properly scrutinize the actions of the massively powerful executive branch," the lawyers said.
'IMMEDIATE, ENDURING NATIONAL SIGNIFICANCE'
"The issues presented by this case are of immediate and enduring national significance," they said.
Without a stay from the Supreme Court, the sale will close on Monday, the lawyers said.
The pension funds and the consumer groups seeks to delay the sale so the Supreme Court can hear and then decide their challenges to the deal. The consumer organizations said they planned to file their appeal with the high court by Tuesday.
A federal bankruptcy judge in New York and the three-judge panel of the appeals court rejected the challenges in approving the sale.
Attorneys for Chrysler, the U.S. government and Fiat all have argued the sale should be allowed to go forward. Fiat can walk away from the deal if it does not close by June 15.
The requests to stay the deal were filed with Supreme Court Justice Ruth Bader Ginsburg, who has responsibility for such emergency matters from the New York-based appeals court. Continued...
Source: Reuters

Airline execs say industry outlook still grim

Airline execs say industry outlook still grim
By Neil Chatterjee and Sara Webb
KUALA LUMPUR (Reuters) - Demand for air travel could decline further despite signs of a more stable global economy, and prospects of a recovery this year look slim, industry executives said at a meeting of the world's airlines on Sunday.
Cargo demand may have stabilized, but a pick-up is unlikely until demand recovers in the United States, said the CEO of Korean Air, the world's top air cargo carrier.
"I think we have hit the bottom," Cho Yang Ho told Reuters.
European aircraft manufacturer Airbus said it was sticking to its 2009 sales target of 300 gross orders but that it would be more difficult to accomplish.
"It is more of a stretch now," Airbus Commercial Director John Leahy told Reuters.
"We see the market improving, and we have negotiations for orders ongoing."
International Lease Finance Corp (ILFC), the world's largest plane-leasing company, said it was negotiating for more planes with Airbus and Boeing Co, but "at the right price."
The annual meeting of the International Air Transport Association began on a somber note, with last week's still unexplained crash of an Airbus A330-200 adding to the woes of an industry hurt by the financial crisis and volatile oil prices.
But several airline executives were quick to defend the plane.
"It's a safe plane, it's a good plane," said Chew Choon Seng, the chief executive of Singapore Airlines, which has 16 A330-200s on order. "We should not jump to conclusions."
All 228 people on board the Air France plane were killed when it crashed in the Atlantic Ocean, the world's worst air disaster since 2001.
Airline chiefs saw other concerns ahead, from rising unemployment to a surplus of plane capacity that could hurt profitability.
MAY GET WORSE
"I think it's probably going to get worse," Rob Fyfe, chief executive of Air New Zealand, told Reuters on the sidelines of the meeting.
The bearish comments contrast with the more positive outlook from some global policymakers and economists about a global recovery in the wake of recent data such as the slowing pace of U.S. job losses. Continued...
Source: Reuters

Fans gather for launch of "iPhone killer" Palm Pre

Fans gather for launch of iPhone killer Palm Pre
Palm Pre vs. iPhone
Play Video
By Sinead Carew and Jessica WohlNEW YORK/CHICAGO (Reuters) - Small crowds gathered on Saturday for the official launch of Pre, the smartphone seen as Palm Inc's best chance to claw back market share from Apple Inc's iPhone and Research In Motion Ltd's Blackberry.
The new high-end phone, considered a pivotal product for both Palm and Sprint Nextel, has been greeted by rave reviews.
Lines were far shorter than those that snaked around Apple stores for its first hugely popular iPhone two years ago, but many consumers said they were eager for the new product.
"I wanted their iPhone killer. I've been anticipating this for a while," said Peter Lewis, who bought phones for himself and his wife at a Sprint store in Chicago, where some 45 people were in line when the doors opened at 8 a.m.
"This is my birthday present to myself," said Wilma Rivera, 36, a heating technician who brought her 17-month-old daughter to Sprint's flagship store in Manhattan.
Rivera, a long-time Palm user, said while she had been tempted by iPhone, sold only by AT&T Inc in the United States, she "never wanted to leave Sprint."
Sprint, the No. 3 U.S. mobile telephone service, is depending on Pre to help stem defections and win back subscribers from rivals such as AT&T and Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc.
Sprint spokeswoman Jennifer Walsh Keifer said late on Saturday that Sprint had sold out of Pre phones at a number of different locations around the country and that the company was doing its best to restock stores.
Pre is hitting the shelves just before Apple is widely expected to announce a new iPhone on June 8.
PRICE AND KEYBOARD
The Pre costs $199.99, after a $100 rebate, for customers who sign a two-year service contract. It is priced in line with the $199 smaller-capacity iPhone. Pre's monthly service fees start at $69.99, including unlimited text messaging, lower than the cost of iPhone service plans with similar features.
"It's always nice to see a bunch of people waiting for a product you worked on," Palm Executive Chairman Jon Rubinstein, a former Apple executive who helped create the iPod, said at a Sprint store in San Francisco's financial district, where more than a dozen people lined up to purchase a Pre.
He said the opportunity for smartphones was big enough to sustain a market for three to five successful vendors.
"For us, the opportunity is not to take customers away from RIM or Apple," Rubinstein said, but rather to entice users of lower-level cell phones to upgrade to a more powerful smartphone.
Some who waited in line on Saturday were clearly more technologically savvy. Continued...
Source: Reuters

China influence to grow faster than most expect: Soros

China influence to grow faster than most expect: Soros
By Edmund Klamann
SHANGHAI (Reuters) - Financier George Soros said on Sunday that China's global influence is set to grow faster than most people expect, with its isolation from the global financial system and a heavy state role in banking aiding a relatively swift economic recovery.
He reiterated his cautious views regarding the surge in global stock markets, although he said it may have further to go given liquidity in the markets and that many investors are still sitting on the sidelines.
"In many ways, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system," he told an audience at Shanghai's Fudan University.
China's extensive capital controls have helped to shield its financial institutions from the worst of the global financial crisis.
"The influence of the state is also greater. So when the government says 'lend', banks lend," Soros added. "This puts China in a better position to recover from the recession and that is in fact what has happened."New loans by Chinese banks surged to record levels in the first quarter, spurring optimism over recovery prospects for the world's third-largest economy.
POSITIVE FORCE
"China is going to be a positive force in the world and the market, and as a consequence, its power and influence are likely to grow. Personally, I believe it's going to grow faster than most people currently expect," Soros said.
He acknowledged that some doubts remain over China's economic recovery, however, noting data such as a continued fall in electricity consumption.
He also noted that China's aggressive 4 trillion yuan ($586 billion) economic stimulus program, announced last year, had bolstered the economy.
"If that program proves inadequate, it is in a position to apply additional stimulus. China is also in a position to foster a revival of its exports by extending credit and investing abroad," he said.
He reiterated his view that because China's economy is only one-quarter the size of the U.S. economy, it cannot replace the American consumer as the motor of the global economy, so global growth will be slower than in the past.
He sounded a more upbeat note for China's asset markets than for global markets overall, where he remained wary.
"I'm pretty cautious. Even though I've said prices are cheap, I'm not so optimistic as to put all my money into stocks or assets because I think that the outlook is fairly uncertain.
"I do, however, think that the Chinese economy is a promising economy. I think here it is more a matter of finding the right assets rather than saying that I'm not interested in investing." Continued...
Source: Reuters

BlackRock pushes on BGI deal, BNY may step in: report

BlackRock pushes on BGI deal, BNY may step in: reportNEW YORK (Reuters) - BlackRock Inc (BLK.N) is trying to clinch a deal for a Barclays (BARC.L) unit, but Bank of New York Mellon (BK.N) could step in with an offer for Barclays Global Investors if the talks drag on, the Financial Times reported on Sunday.
The British lender is likely to take a stake of up to 20 percent in the U.S. money manager if a deal with BlackRock does happen, the paper reported, adding that Barclays was expected to decide on who should buy BGI early this week.
Bob Diamond, president of Barclays and head of BGI, plans to join BlackRock's board if a deal happens, the paper reported.
BlackRock would have the equity and debt financing needed to do the deal, the paper said.
BlackRock Chief Executive Larry Fink went to the Middle East last week to look for funds for the deal from sovereign wealth funds, including the Kuwait Investment Authority and the Qatar Investment Authority, the paper said.
BlackRock spokeswoman Bobbie Collins declined to comment. Barclays could not be immediately reached for comment by Reuters.
A sale of the San Francisco-based unit would sideline private equity houses, which were bidding for iShares, the exchange-traded fund unit that forms part of BGI.
On Friday, a source familiar with the situation told Reuters that Barclays was still in talks with "a couple of interested parties" on BGI and iShares.
Barclays decided to sell iShares to buy-out house CVC for 3 billion pounds in April, but a "go shop" clause allows it to seek higher offers until June 18.
CVC has the right to match any rival bids for iShares -- or all of BGI -- and gets a $175 million break fee if it is left out of the deal. Bankers have said it could team up with a bigger group to buy all of BGI.
Barclays will retain a 20 percent stake in iShares if it sells it separately, and a deal for all of BGI may well be structured similarly, giving it exposure to future gains.
Barclays would be willing to sell BGI if offers approach $12 billion, bankers told Reuters last month.
Private equity firm BC Partners stopped working on its bid for iShares after Barclays seemed to want to sell all of BGI, sources told Reuters last month.
Analysts say iShares, a clear leader in both U.S. and European markets, has strong growth potential. It saw record net inflows of $89 billion last year.

Source: Reuters

Jobs may spark move in Apple shares on Monday

Jobs may spark move in Apple shares on Monday
By Clare Baldwin
SAN FRANCISCO (Reuters) - A surprise appearance by Apple Inc Chief Executive Steve Jobs at the company's annual developer conference could boost its stock on Monday, but his absence might trigger a bigger move in the other direction.
The Wall Street Journal kicked off speculation of an early return by the ailing Jobs, who had said he would be out until the end of June. Blogs and other media jumped on the report that the CEO could appear at Apple's Worldwide Developer Conference in San Francisco on Monday.
Jobs, 54, the quintessential man in black, founded Apple, rescued it from mediocrity in the late 1990s, launched the iPod and the iPhone and is seen as its heart and soul.
Canaccord Adams analyst Peter Misek sees a rally of 1 to 5 percent in Apple's stock if Jobs makes an appearance, but no downside if he doesn't.
Global Equities Research senior analyst Trip Chowdhry said Apple's stock will likely remain high if Jobs appears, but could sell off as much as 10 percent if he doesn't, a scenario he finds more likely.
But the company's strong performance while Jobs has been recuperating indicates he is no longer crucial to the company's success, Broadpoint AmTech analyst Brian Marshall said.
Stock in the Cupertino-based company closed at $144.67, about 85 percent ahead of January's 52-week low of $78.20. But it was up less than 1 percent on Friday after news that Jobs might return early.
"It's not just about Steve Jobs," Marshall said. Investors are "very comfortable" with Chief Operating Officer Tim Cook as Apple's next CEO, he added.
BMO Capital Markets analyst Keith Bachman said a Jobs cameo would strengthen Apple shares, but less than in the past.
"If he made a cameo appearance on Monday and the wind didn't blow right through him, the stock would go up," he said, but the size of the rally would depend on other factors such as announcements regarding Apple's iPhone.
Apple's stock is historically volatile during the company's June developer conference. It dropped about 7 percent over the course of the conference in 2008 and about 4 percent in 2007.
"If this had happened one or two years before, the stock would have (had) huge volatility. But I think investors are conditioned to the fact that Steve's health is a variable that needs to be dealt with on an ongoing basis," Bachman said.
Apple managers are trying to coordinate Jobs' return with a product launch or public event, the Journal reported, but cited sources that Jobs is "one real sick guy."
AllThingsD, a website dedicated to "news, analysis and opinion about the digital revolution," speculated that Jobs, who is known for ending presentations with "one more thing," might himself be the surprise at the Monday keynote.
Wired.com reported that such a Jobs' appearance would be "dramatic" and a "crowd pleaser," but Gawker cautioned that Apple might not want a sickly leader on stage. Continued...
Source: Reuters

U.S. bailout repayment seen bigger than expected: report

U.S. bailout repayment seen bigger than expected: report
WASHINGTON (Reuters) - The Obama administration is expected to announce next week that a higher-than-expected number of large financial institutions will be allowed to repay their government bailout funds, the Washington Post reported in its Saturday edition.
Citing unnamed sources who spoke on the condition of anonymity because the official announcement has not been made yet, the newspaper report said the size of the repayments may be twice the initial estimate of $25 billion.
That could mean that nearly all of the nine institutions found to have sufficient reserves in a recent government-run "stress test" might be allowed to return the money under the Treasury Department's Troubled Asset Relief Program.
The companies include JPMorgan Chase & Co, American Express Co, Bank of New York Mellon Corp, BB&T Corp, Capital One Financial Corp, Goldman Sachs Group Inc, State Street Corp and U.S. Bancorp. MetLife Inc>, the ninth company, did not take money from TARP.
Institutions want to repay the government as soon as they can in order to get out from under some unwanted obligations such as executive compensation restrictions, dividend payments, among others.
The government also sees repayments as a positive sign for financial institutions that have raised more capital than needed to exit the bailout program.
The newspaper report also said Treasury could unveil rules on executive compensation for bailout-assisted institutions as early as next week.
Executive compensation practices at Wall Street firms will be the subject of a congressional hearing scheduled for next week.
The House Financial Services Committee is planning a June 11 hearing focusing on how to eliminate compensation practices that encouraged excessive risk-taking and contributed to the financial collapse and ultimately hurt the U.S. economy.
"Executives have a perverse incentive to expose their companies to more and more risk, but only the shareholders realize the downside of bad bets," the committee's chairman, Democrat Barney Frank, said in a statement.
(Reporting by John Poirier; Editing by Eric Beech)

Source: Reuters

Canadians angered over "Buy American" rule

Canadians angered over Buy American rule
By Allan Dowd
WHISTLER, British Columbia (Reuters) - Canadian municipal leaders threatened to retaliate against the "Buy America" movement in the United States on Saturday, warning trade restrictions will hurt both countries' economies.
The Federation of Canadian Municipalities endorsed a controversial proposal to support communities that refuse to buy products from countries that put trade restrictions on products and services from Canada.
The measure is a response to a provision in the U.S. economic stimulus package passed by Congress in February that says public works projects should use iron, steel and other goods made in the United States.
The United States is Canada's largest trading partner, and Canadians have complained the restrictions will bar their companies from billions of dollars in business that they have previously had access to.
"This U.S. protectionist policy is hurting Canadian firms, costing Canadian jobs and damaging Canadian efforts to grow our economy in the midst of a worldwide recession," said Sherbrooke, Quebec, Mayor Jean Perrault, also president of the federation that represents cities and towns across Canada.
The municipal officials meeting at the federation's convention in Whistler, British Columbia, endorsed the measure despite complaints by Canadian trade officials.
Trade Minister Stockwell Day told the group on Friday that Ottawa was actively negotiating with Washington to get the "Buy American" restrictions removed.
The measure's supporters agreed to modify it slightly by suspending implementation for 120 days, in order to give Canadian trade officials and U.S. critics of the "Buy America" rules more time to work on the issue.
'UNINTENDED CONSEQUENCES'
The only Canadian community to enact an anti-"Buy American" purchasing rule so far is Halton Hills, Ontario, where a major employer, Hayward Gordon, is worried about losing its access to the United States.
The company's water treatment equipment includes parts that are produced in the United States, and critics of the "Buy American" rule say that is an example of how the restriction could end up costing U.S. jobs.
"Leaders in the United States have to understand this could have unintended consequences," said Clark Somerville, acting mayor of Halton Hills, which sponsored the measure approved by the federation delegates.
Some Canadian communities complained any retaliation effort could have unintended consequences of its own, including driving up the cost of infrastructure projects being considered to help stimulate Canada's economy.
"We as local officials have a responsibility to get the best possible deal we can for taxpayers," said Jim Stevenson, a city alderman in Calgary, Alberta.
Halton Hills councilor Jane Fogal acknowledged the views of Canada municipal officials will likely carry little weight with the American public, but she hoped it would at least make them take notice of the issue. Continued...
Source: Reuters
 

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