Saturday, June 20, 2009

Nortel selling wireless unit to Nokia Siemens

Nortel selling wireless unit to Nokia Siemens
LOS ANGELES (Reuters) - Telecom equipment maker Nortel Networks (NT.TO) said on Friday that it will sell its advanced wireless technology business to Nokia Siemens Networks NSN.UL for US$650 million and that it was making progress in talks to sell its other businesses.
Nortel, once the largest North American maker of telecommunications gear, collapsed into bankruptcy in January, blaming the economic crisis for derailing a turnaround effort that began in 2005.
Nokia Siemens, a joint venture of Nokia (NOK1V.HE) and Siemens (SIEGn.DE), had made an unsolicited offer for parts of Nortel's carrier network group, but the price and scope of a deal had been unclear.
The telecom equipment industry is consolidating and leaving only a few global players -- market leader Ericsson (ERICb.ST), Huawei HWT.UL, Nokia Siemens and Alcatel-Lucent (ALUA.PA).
The deal will allow Nokia Siemens to expand its presence in North America and make it a leading supplier of wireless infrastructure products in the region, it said in a separate statement announcing the deal.
The transaction includes Nortel's CDMA business and LTE assets. CDMA is the technology that lost the battle for global dominance but still has a strong position in some markets, including North America. Nortel has a roughly 30 percent share of the global CDMA market.
LTE is a new high-speed wireless technology that is intended to replace current mobile networks. LTE networks are slated to be deployed in the coming years by large wireless carriers including Vodafone Group Plc (VOD.L) and Verizon Communications Inc (VZ.N)
"This agreement provides an important strategic opportunity for Nokia Siemens Networks to strengthen its position in two key areas, North America and LTE, at a price that makes good economic sense," NSN Chief Executive Simon Beresford-Wylie said in the statement.
Nokia Siemens is now the "stalking horse" bidder, which means its offer sets a floor under other possible offers in the bankruptcy process.
Under the terms of the deal, at least 2,500 Nortel employees in Canada, the United States, Mexico and China have the opportunity to keep their jobs under NSN ownership. A Nortel spokesman said this represented "a majority" of the employees associated with the assets, but would not give a specific percentage.
Nortel once employed more than 90,000 people, but now has about 30,000 staff.
Nortel also said it was advancing discussions to sell its other businesses.
"Maximizing the value of our businesses in the face of a consolidating global market has been our most critical priority," Nortel Chief Executive Mike Zafirovski said in a statement. "We also believe this will help provide clarity for our customers and employees."
The deal is subject to approval by both a U.S. bankruptcy court and the Ontario Superior Court of Justice, Nokia Siemens said in a statement. Final sale hearings are expected on July 28 in the United States and July 30 in Canada.
It is expected to close in the third quarter.
Export Development Canada, Canada's government-owned export credit agency, is supporting the deal with a $300 million loan commitment, NSN said. Continued...
Source: Reuters

Rally's fate hinges on Fed, home sales

Rally's fate hinges on Fed, home sales
By Caroline Valetkevitch
NEW YORK (Reuters) - Without further signs of life in the lackluster economy or hints from the Federal Reserve the outlook is improving, stocks' three-month rally may run into more obstacles next week.
Investors will assess data on new and existing home sales that could point to whether the battered housing sector has bottomed. They will also keep an eye out for profit forecasts or warnings as the second quarter draws to a close.
"The kamikazes who ran the market up three months ago have now paused ... I'm in a situation where I say, 'prove it to me.' I want to see a trend where it really is a little bit better," said Cummins Catherwood, managing director at Boenning and Scattergood in West Conshohocken, Pennsylvania.
The Fed is widely expected to leave rates unchanged after its two-day meeting ends Wednesday, but investors will closely check its statement for clues on the central bank's economic outlook.
All three major U.S. stock indexes ended the week lower, with weaker-than-expected regional manufacturing data on Monday giving the week a negative tone from the start. The Dow Jones industrial average .DJI fell 3 percent, while the Standard & Poor's 500 .SPX index lost 2.7 percent and the Nasdaq .IXIC dropped 1.7 percent.
The benchmark S&P 500 has gained 36 percent since hitting a 12-year closing low in early March, but investors have been eager for signs that early hopes of an economic recovery aren't false.
"I do think now that we're up here, and we're priced for some good news, it's going to be important we have some follow-through," said Frank Lesh, futures analyst and broker at FuturePath Trading LLC in Chicago.
Some other data next week that could shed some light on the economic outlook will include durable goods orders, personal income and spending data, and weekly jobless claims.
FED AND EARNINGS WATCH
While expectations are that the Fed will keep rates steady next week, the question is: How long will the Fed keep rates near historic low levels? The Fed's last decision on rates was in December, when it cut the benchmark fed funds rate to almost zero from 1 percent.
"They will probably have to send a clear, credible signal that rates are not going to be raised in 2009 or even in the first half of 2010," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
In the coming week, Federal Reserve Chairman Ben Bernanke is scheduled to testify on Thursday at a congressional committee hearing on the Bank of America-Merrill Lynch merger. This week, Representative Edolphus "Ed" Towns, a Democrat from New York, issued a second subpoena on Friday to the Fed seeking more documents, dating from last September through January, on the closed-door merger talks.
With the second quarter ending June 30, investors may see some pre-announcements from companies that could provide a better picture of how the corporate reporting period will look. Outlooks for the third quarter also will be crucial.
U.S. corporate earnings, a major influence for the stock market, have been slow to recover since the recession. Data compiled by Thomson Reuters shows a decline in second-quarter earnings of 34.4 percent from a year ago.
"What's going to drive the market is the third-quarter outlook when companies report second-quarter earnings," said Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York. Continued...
Source: Reuters

U.S. regulators close their 40th bank of the year

WASHINGTON (Reuters) - U.S. regulators closed three small banks on Friday, bringing the number of bank failures to 40 so far this year as the recession and delinquent loans erode the health of financial institutions.
The largest of the banks closed on Friday was Cooperative Bank of Wilmington, North Carolina with $970 million in assets and $774 million in deposits, the Federal Deposit Insurance Corp said.
The failure is expected to cost the FDIC deposit insurance fund an estimated $217 million.
First Bank of Troy, North Carolina will purchase all the deposits, except about $57 million in brokered deposits. The FDIC said it will pay the brokers directly.
Cooperative Bank's 24 branches will reopen on Monday as branches of First Bank.
The FDIC also announced the failure of Southern Community Bank of Fayetteville, Georgia, which had $377 million in assets and $307 million in deposits. The failure is expected to cost the FDIC deposit insurance fund an estimated $114 million.
United Community Bank of Blairsville, Georgia, agreed to assume the insured deposits of Southern Community Bank, whose five branches will reopen on Monday as branches of United Community Bank.
In Kansas, the FDIC said regulators closed First National Bank of Anthony, with $156.9 million in assets and $142.5 million in deposits. The failure is expected to cost the FDIC deposit insurance fund an estimated $32.2 million.
Bank of Kansas in South Hutchinson, Kansas, agreed to assume the insured deposits of First National Bank of Anthony, whose six branches will reopen on Monday as branches of Bank of Kansas.
Customers can access their money over the weekend by check, teller machine or debit card, the FDIC said.
The pace of bank failures has accelerated in 2009 as the 18-month-old recession continues. There were 25 failures in all of 2008 and just three in 2007.
Seattle-based Washington Mutual became the biggest bank to fail in U.S. history when it was seized in September with $307 billion in assets. JPMorgan Chase & Co (JPM.N) acquired the assets of Washington Mutual.
The FDIC insures up to $250,000 per account at member institutions.
The agency also has a running tally of problem banks that its examiners closely monitor. At the end of the first quarter, 305 unidentified financial institutions were on that list.
(Reporting by Roberta Rampton; Editing by Richard Chang)

Source: Reuters

Small group of GM bondholders object to sale

Small group of GM bondholders object to sale
By Emily Chasan
NEW YORK (Reuters) - A small group of General Motors Corp (GMGMQ.PK) bondholders formally objected on Friday to the automaker's plans for a speedy sale of its assets in bankruptcy court, according to court documents.
The group, which calls itself the "Unofficial Committee of Family & Dissident GM Bondholders," said in court papers that it wanted the court to reject GM's proposed fast-track sale and rather pursue an accelerated bankruptcy reorganization plan that could still allow GM to emerge from bankruptcy within 60 to 90 days.
GM is proposing to do a speedy "363 sale" of its best assets, named after section 363 of the U.S. bankruptcy code, rather than come up with a typical Chapter 11 reorganization plan.
The bondholders fear that under the government-orchestrated proposed sale of GM's assets, they would not be able to participate in a speedy reorganization process.
The group said it represents the interests of more than 1,500 mainly family and noninstitutional bondholders holding more than $400 million in GM bonds, who had been unfairly excluded from the process.
GM, which filed for bankruptcy protection on June 1, is seeking court approval for a government-backed restructuring plan under which the Obama administration would take a 60 percent stake in the newly formed company made up of GM's most profitable assets.
The UAW would have a 17.5 percent stake in the new company, and the Canadian government would own about 12 percent while GM bondholders are expected to get about 10 percent.
"This 'private' deal was struck in a back room, without any transparency, without any meaningful opportunity for the bondholders represented by the (unofficial committee) to participate in the process," the group said in its objection filed in U.S. bankruptcy court in Manhattan.
The "unofficial committee" said that if the sale was approved, bondholders and unsecured creditors would face "disproportionate losses" on $27 billion in claims they have against the automaker.
The bondholders claimed that GM was pursuing an impermissible covert reorganization known as a "sub rosa" plan, in an argument similar to that made by dissident lenders opposing Chrysler LLC's bankruptcy sale last month.
"New GM could have been created fairly, in accordance with the law, transparently, and urgently, with a plan of reorganization," the group wrote. "It can still be done in that proper manner."
The "unofficial committee" is being by represented by attorney Michael Richman of the Washington, D.C.-based Patton Boggs law firm, according to court documents. It will seek to become an "official" committee at a bankruptcy court hearing next week.
GM is also facing a handful of challenges to its sale, including some limited objections from suppliers or other parties it had business relationships with and one from the state of Texas which claims GM's plans to reject certain dealerships or force other dealers to sign on to new agreements under the threat of rejection violate Texas law.
Some individual bondholders, including a 79-year-old bondholder from New York, and a Connecticut accounting professor and his wife who hold GM debt, have also filed papers opposing the sale with the court.
A court hearing on GM's sale request is scheduled for June 30. Continued...
Source: Reuters

Admiral Prueher, General Franks leave BofA board

Admiral Prueher, General Franks leave BofA board
NEW YORK (Reuters) - Bank of America Corp (BAC.N) said on Friday retired Army Gen. Tommy Franks and retired Navy Adm. Joseph Prueher have resigned from its board, meaning more than a third of its board has stepped aside since late April.
The departures were effective June 17 and come as the bank tries to improve corporate governance and bolster its board's banking and financial expertise at the behest of the U.S. government and investors.
Bank of America said the departures did not result from any disagreement with the company or management. The bank did not immediately return a call seeking further comment.
In the last two months, seven directors have left what had been a 19-person board, including lead director O. Temple Sloan, a longtime supporter of Chief Executive Kenneth Lewis.
The board now has 16 members, including four new directors with banking or regulatory experience. Among these are former Federal Reserve governor Susan Bies and former Federal Deposit Insurance Corp chairman Donald Powell.
Overhauling the board is expected to increase director scrutiny of Lewis, who was stripped in April of his role as chairman after criticism over the Charlotte, North Carolina- based bank's falling share price and the January 1 acquisition of Merrill Lynch & Co.
The bank has taken $45 billion of federal bailout money, including $20 billion to help absorb Merrill. It was not among the 10 large U.S. banks that regulators allowed this week to repay their infusions from the government's Troubled Asset Relief Program.
As part of the Merrill acquisition, three Merrill directors, including Prueher, joined the board. Prueher is the first of the three to step down.
Franks joined the board in January 2006 and is a former Commander in Chief of the U.S. Central Command. He oversaw the 2003 U.S. invasion of Iraq and overthrow of Saddam Hussein.
Prueher and Franks sat on the board's audit committee.
(Reporting by Jonathan Stempel and Phil Wahba; editing by Andre Grenon)

Source: Reuters

SEC spotlight puts "dark pool" venues on defensive

By Jonathan Spicer
NEW YORK (Reuters) - The operators of anonymous stock trading venues called 'dark pools' defended their existence on Friday, but conceded they could be more transparent after the U.S. Securities and Exchange Commission warned they posed "emerging risks."
The venues allow stock traders to hide their intentions and have come under increased scrutiny as they have grown, and as the United States scrambles to rewrite market rules and bulk up oversight.
SEC Chairman Mary Schapiro said on Thursday she was worried about the effect of dark pools on price discovery, particularly their use of pre-trade messages that tip off certain market participants to upcoming orders, adding the agency is considering taking action.
Dark pools have proliferated as markets have gone electronic. Some operators, which include big banks, told Reuters dark pools could adopt better trade reporting standards, but warned against new rules that would wipe out the benefits of having multiple trading venues.
"If they do something that makes the dark pool light and eliminates the reasons for institutions to trade on our vehicles, that would be a disaster for a hundred million people out there," said Seth Merrin, chief executive of electronic marketplace Liquidnet, a dark pool used by buy-siders.
"I'm definitely afraid of knee-jerk reactions," Merrin said in an interview, adding dark pools may need to improve the way they report trading volumes. "But who knows what could happen in this environment."
The Obama administration unveiled sweeping financial reform plans this week promoting market transparency and regulatory oversight, following the worst financial crisis since the Great Depression.
The next day, Schapiro told a New York Financial Writers Association dinner the SEC, "will be taking a serious look at what regulatory actions may be warranted in order to respond to the potential investor protection and market integrity concerns raised by dark pools."
Other SEC officials have raised similar concerns, but it was the first time Schapiro, who was sworn in to the powerful post in January, raised the dark pool issue in a speech.
The widespread practice of sending pre-trade messages, known as indications-of-interest, or IOIs, could spawn big private markets to which the public does not have fair access, the chairman said.
"Chairman Schapiro opened up a whole other kettle of worms" with IOIs, said Larry Tabb, chief executive of TABB Group, a research and advisory firm that tracks dark pools. "Now the question is how do these actually work and do we really need to rethink how this information gets disseminated."
Tabb said the SEC "could conceivably" wipe out dark pools, but that would make it very difficult to trade large "block" orders and would drive up trading costs.
Liquidnet's Merrin added institutions would have trouble efficiently investing the assets they now manage, and that higher trading fees would eat into profits, if the SEC cracked down on dark pools.
New U.S. rules in the last few years forced exchanges and their non-displayed rivals to link up so investors get fair prices. There are now more than 40 dark pools representing an estimated 9 percent of trading in the United States, with Europe and other regions following suit.
Observers wonder whether the SEC will crack down on flashes and IOIs, require details on those who participate in dark pools, or simply mandate better trade reporting from the murky industry. Continued...
Source: Reuters

S&P, Nasdaq gain on Microsoft; stocks slip for week

S&P, Nasdaq gain on Microsoft; stocks slip for week
By Leah Schnurr
NEW YORK (Reuters) - The S&P 500 and Nasdaq rose on Friday as positive broker comments on Microsoft boosted technology shares, but the major averages lost ground for the week for the first time in five weeks.
Microsoft Corp (MSFT.O) jumped 2.4 percent to $24.07 after Goldman Sachs added shares of the world's largest software company to its Americas "conviction buy" list and said new products and an increase in information technology spending should underpin growth.
Apple Inc (AAPL.O) rose 2.7 percent to $139.48 as its latest iPhone hit stores. While the new product release drew crowds to Apple's flagship New York store, the line was shorter than for previous launches.
After a sharp three-month rally, indexes eased this week as investors increasingly questioned if stocks are due for a correction. Worries that the economic recovery could be tepid have dented optimism that has driven the S&P 500 up as much as 40 percent from March's 12-year low.
"We've had the survival bounce and the end of the month-after-month declines in economic data," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.
"But it seems the debate is emerging: 'Do we need to rest here? Do we need to pull back? Or can it continue?'"
The Dow Jones industrial average .DJI fell 15.87 points, or 0.19 percent, to 8,539.73. But the Standard & Poor's 500 Index .SPX added 2.86 points, or 0.31 percent, to 921.23. And the Nasdaq Composite Index .IXIC rose 19.75 points, or 1.09 percent, to 1,827.47.
DOW LOSES 3 PERCENT FOR THE WEEK
After four weeks of gains, the Dow fell 3 percent, the S&P lost 2.6 percent, and the Nasdaq dropped 1.7 percent for the week.
Nonetheless, the S&P 500 is up 36.2 percent in an impressive run-up from March 9's closing low.
In Friday's session, energy shares pulled the Dow lower and dragged on the S&P 500 as oil prices fell below $70 a barrel on bets there would be ample fuel supply for the summer vacation season.
While rising oil prices can be a positive signal that demand and the global economy are strengthening, higher prices prompt already thrifty consumers to keep a tight grip on their wallets. Exxon Mobil (XOM.N) shed 0.6 percent to $71.05.
Stocks also were buffeted by the end of the two-day quadruple witching period, the expiration and settlement of June stock and index futures and options. Volume was higher due to the expiration.
Four types of June futures and options contracts expire or settle on Friday, a quarterly event that tends to generate high volume as investors adjust or exercise their derivative positions.
Financial shares helped support the S&P 500 after the sector retreated earlier in the week. JPMorgan Chase & Co (JPM.N) gained 2.4 percent to $35 and ranked among the Dow's biggest advancers. Bank of America (BAC.N) was up 2.5 percent at $13.22. Continued...
Source: Reuters

House panel subpoenas Fed over BofA/Merrill merger

House panel subpoenas Fed over BofA/Merrill merger
NEW YORK (Reuters) - A congressional committee said on Friday it has served the Federal Reserve with a second subpoena for documents related to Bank of America Corp's purchase of Merrill Lynch & Co.
The demand from the U.S. House Oversight and Government Reform Committee was announced six days before Fed Chairman Ben Bernanke is scheduled to testify about the central's bank's role in the weeks surrounding the January 1 purchase.
Edolphus Towns, the New York Democrat who chairs the panel, is seeking documents that discuss "closed-door discussions" that took place between September and January among the Fed, the Treasury Department and Bank of America.
The Fed was not immediately available for comment.
Lawmakers have accused Bernanke and former U.S. Treasury Secretary Henry Paulson of pressuring Charlotte, North Carolina-based Bank of America to complete the merger and not reveal Merrill's financial problems, so as to not destabilize the world's markets.
Kenneth Lewis, Bank of America's chief executive, told the committee at a June 11 hearing that the bank had in December considered backing out of the merger when it learned that Merrill's losses were much larger than it expected.
Merrill would lose $15.84 billion in the fourth quarter. Two weeks after the merger closed, Bank of America accepted $20 billion of federal bailout money, and has now taken $45 billion from the government's Troubled Asset Relief Program.
It was not among the 10 large U.S. banks that the government this week allowed to repay their taxpayer-funded infusions. Bank of America has said it hopes to begin repaying TARP this year. The bank is the nation's largest by assets.
Bank of America shares were up 33 cents at $13.23 in late afternoon trading on the New York Stock Exchange. They traded at $33.74 before the Merrill purchase was announced September 15.
(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)

Source: Reuters
 

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