The Wall Street Journal appears to have gotten hold of a rather disturbing AIG memo implying an unseemly threat that angry Americans will undoubtedly feel fits the crime. Unless those who had the audacity to accept bonuses start returning the money, names of bonus recipients will be handed out to the angry mob by New York’s attorney general. On the other hand, if enough people join the giveback, the names won’t be released.

In Washington, the Senate is looking increasingly less likely to vote any time soon on a measure to tax the offending bonuses out of existence. Public ire over the bonuses helped send a similar measure zipping through the House quicker than Treasury Secretary Timothy Geithner can say “too big to fail.”

The AIG memo could be seen as more evidence that the case against the bonuses is flimsy at best. Not that authorities have no right to make this kind of threat - but isn’t it kind of seedy that they think they have to?

As DealZone has argued before, all this political gangsta rap is just tapdancing around the issue that AIG and its attendant contracts could have been legally restructured in a bankruptcy and that, having bailed out AIG, Americans must come to grips with the fact that the company was saved so it could stay in business and honor its contracts, no matter how odious. Either that, or kiss the $180 billion rescue goodbye and put bankruptcy back on the table.

Christopher Kaufman; DealZone Editor

Deals of the Day:

* Swiss drug maker Novartis said it had made an open offer to acquire up to an additional 39 percent in its unit Novartis India at 351 rupees per share.

* U.S. restaurant operator Yum! Brands said that had it agreed to buy about 20 percent of China hot-pot chain operator Little Sheep for $63 million from U.K. private equity firm 3i Group and other sellers.

* The New York Times, which is trying to lighten its debt load as advertising revenue falls, plans to sell the Times Daily newspaper of Florence, Alabama to a regional publisher.

* German retailer Metro AG has taken a controlling stake in Britain’s 24-7 Entertainment, which supplies technology used in music downloads, Metro said.

* When the world’s biggest concert promoter and largest ticket seller announced they would merge last month, it seemed unlikely that antitrust enforcers would approve the creation of such an entertainment giant.

* State-run Indian Oil Corp said the government had approved a proposal to absorb its subsidiary Bongaigaon Refinery & Petrochemicals (BRPL). Indian Oil will issue four shares for every 37 shares in BRPL, it said in a statement.

(PHOTO: Pastor Mary Huguley tries to deliver a letter to a security guard in front of the home belonging to Douglas Poling, one of numerous executives who were recipients of a bonus from American International Group Inc. (AIG) in Fairfield, Connecticut March 21, 2009. REUTERS/Eric Thayer)

So AIG is honoring its contracts using bailout money. Pundits, sputtering with rage that the corporate world engaged in contractual bonuses, are basically rehashing the argument about whether AIG should have been allowed to go bankrupt. After all, the government decided that allowing AIG to pay its bills was better for the world than letting it break or renegotiate its contracts.

French bank Societe Generale has gone public defending the fact that it got $11.9 billion in bailout funds from AIG. France’s third-biggest bank by market value said it had acted within its rights to call on AIG for cash. This speaks directly to the rationale for the bailout — if AIG had been allowed to fail, a global systemic collapse in payments would have followed.

Keep in mind, too, that if it had resisted paying the contractual bonuses, AIG likely would have been dragged into court, spent millions on legal fees, and then been forced to pay up anyway. However ludicrous the concept of a contractually guaranteed bonus may be, they were legally binding contracts.

So what to do with all this political outrage? The Obama administration has made no bones about building up government task forces and bureaucracy to deal with corporate malfeasance. Would it be too much to expect a new office of contract approvals, where companies can have some of their more bizarre practices exposed to common sense stress tests? Maybe we could require boards to be licensed to enter into commercial and employment agreements, and put the new office next door to the DMV.

Deals of the Day:

* Australia extended its review of Chinese aluminium maker Chinalco’s $19.5 billion investment in global miner Rio Tinto.

* BG Plc moved closer to buying Australian coal seam gas producer Pure Energy Resources for A$1.03 billion ($673 million) after rival bidder Arrow Energy decided to let its offer lapse.

* Astellas Pharma, Japan’s second-largest drugmaker, said on Monday it has decided to withdraw a hostile bid for U.S. biotechnology firm CV Therapeutics.

* Italy’s Banco Popolare will launch a buyout offer for affiliated Banca Italease at 1.50 euros a share and delist it as part of a reorganisation, Popolare and other shareholders said.

* Swiss drugmaker Roche Holding said it is buying Innovatis AG, a privately held cell analysis company based in Bielefeld, Germany, for 15 million euros ($19.31 million).

* HSBC, Europe’s biggest bank, wants to increase its stake in Vietnam’s Bao Viet Insurance to 18 percent despite tough global economic times, a senior company official said.

* German graphite specialist maker SGL Group said on Monday that BMW shareholder Susanne Klatten, Germany’s wealthiest woman, owns options to lift her stake in SGL to almost a quarter of shares.

* Norilsk Nickel is in talks to sell its Cawse nickel operation in Western Australia to exploration firm Poseidon Nickel <POS.AX> after suspending all of its Australian operations due to the global financial crisis.

(PHOTO: A man walks past a signboard of AIG in Tokyo March 3, 2009. REUTERS/Issei Kato)

Citigroup, which has received $45 billion of U.S. government funds since October, may have had its fill of taxpayer money.

Citi’s chairman thinks the bank does not need any more capital injections from the government and is confident that it will remain in private hands.

“No, I think actually, particularly with the latest conversion … Citi is actually one of the better capitalized banks in the world,” Richard Parsons told Reuters. He also brushed aside any prospect of the U.S. government nationalizing the bank.

Parson’s comments follow CEO Vikram Pandit’s upbeat memo to staff earlier this week, in which he said the bank was profitable in the first two months of 2009 and confident about its capital strength.  

Still, considering that U.S. regulators have been working on a contingency plan to stabilize the bank if its problems mount, it’s worth asking if the sudden wave of euphoria over Citi’s recovery prospects may fade with the latest stock rally.

Other Deals of the Day:

* Japanese non-life insurers Sompo Japan Insurance and NipponKoa Insurance said on Friday they would merge operations in April 2010 to cope with falling demand and rising risks.

* A unit of Indian financial services company Reliance Capital is acquiring 51 percent in UK-based exchange and money transfer firm No 1 Currency, a spokeswoman for the Indian unit said on Friday.

* Sara Lee, which is focusing on its core food and beverage business, is examining a sale of its European household and personal-care business, the Wall Street Journal said.

* Swiss Life said on Friday it was in talks with German insurer Talanx over the Swiss group’s 24 percent stake in pensions specialist MLP, which a source familiar with the situation has told Reuters it wants to reduce.

* The Philippines’ dominant telecommunications firm PLDT said on Friday one of its mobile phone firms will buy about a 20 percent stake in Manila Electric Co for 20.07 billion pesos ($414 million).

* Clothing retailer American Apparel is near a deal to sell a 20 percent stake to British private equity firm Lion Capital for about $80 million, the New York Times said citing people involved in the deal.

* Polish pay-TV operator Cyfrowy Polsat sold an 11 percent stake in phone operator Sferia it bought only two days earlier due to objections raised by minority shareholders, it said on Friday.

(Photo: Richard Parsons. REUTERS/Brendan McDermid)

Now that the government has yet again propped up the embattled insurer, Congress is hauling regulators over hot coals as they try to figure out what happened. Here are some highlights from testimony today:  

Senate Banking Committee Chairman Christopher Dodd:
“That we find ourselves in this situation at all, is in my mind, and in the minds of many of my constituents, quite frankly, sickening. …

“The lack of transparency and accountability in this process has been rather stunning. Throughout the entire fourth quarter last year, it was frankly never clear, who owned AIG, or who was in charge.” 

Federal Reserve Vice Chairman Donald Kohn:
“No one was minding the whole company and looking at how things interacted, and whether the whole company would, under some circumstances, put the financial system at risk.”

Acting Office of Thrift Supervision Director Scott Polakoff:
“It’s time for OTS to raise their hand and say we have some responsibility and accountability here.”

(Reporting by Reuters’ Washington bureau)

(Photo: REUTERS/Yuriko Nakao)

Potential buyers of a large AIG business could be the latest to get some “relief” under the $700 billion Troubled Asset Relief Program (TARP).

In approving a revised AIG rescue package, the government has also agreed to give potential bidders of the insurer’s assets at least a bit of what some of them have been clamouring for – access to capital.

AIG has received significant interest from buyers for its aircraft leasing unit, International Lease Finance Corp, Chief Restructuring Officer Paula Reynolds said.

But despite the interest, the process is taking time as bidders look for the funds to pull off a deal. The company has $33 billion of debt, some of which starts to mature in October. It had a book value of about $7.5 billion as of Sept. 30.

Before AIG tanked in September, ILFC had it good, with access to the insurer’s blue-chip credit ratings. Now, the loss of those ratings along with the upheaval in capital markets would force any bidders for the unit to think carefully not only about how to finance the acquisition but also how to run it on an ongoing basis, not an easy task as the financial crisis persists.

But to potential bidders’ relief, AIG will consider using some of its new $30 billion equity commitment from TARP to help with ILFC debt that comes due this year, if – as a source with direct knowledge of the matter pointed out – that becomes an impediment to the unit’s sale.

(Photo: REUTERS/Eric Thayer)

You can almost hear the outrage machines coughing and spluttering to life in Congress. GM and Chrysler’s latest bailout requests, though well telegraphed, will be reviewed by their own special branch of government - call it the Car Komintern, perhaps, since it took over from the Car Czar concept. But legislators who are concerned that they are being bullied into throwing good money after bad will have plenty to say about the nearly $22 billion in additional government loans the automakers say they need.

The sum is nearly $5 billion more than the automakers have already received from the Treasury. And despite having provided more detail on how the money is to be spent, the industry’s viability is intrinsically linked to economic recovery. There is no Car Czar, and there certainly is no Economy Fairy.

The Detroit Free Press argues that the automakers are being a whole lot more candid about what they plan to do with the funds than the banks were when they got bailed out. And politicians supporting the automaker rescue may be able to get a lot more mileage out of the dangers of bankrupting the Midwest labor force than Wall Street has gotten convincing America that bankers deserve subsidized golden parachutes and bonuses for running their companies into the ground.

One thing Detroit should have learned from Wall Street is how to scare Congress. According to GM and Chrysler, the cost to the government of financing a bankruptcy of both could be nearly $125 billion.

Other Deals News:

* Japanese trading house Mitsui & Co is among potential bidders for Teck Cominco’s Elk Valley metallurgical coal operation in a deal that could be worth roughly $2.5 billion, three sources with direct knowledge of the matter said.

* Australia’s Pure Energy unanimously recommended shareholders accept Britain’s BG Group’s sweetened offer of A$995 million ($637 million), or A$8 per share, aimed at trumping a rival bid linked to Royal Dutch Shell.

* Aquarius Platinum plans to make an all-share bid for Ridge Mining valuing the firm at 63.9 million pounds ($90.37 million) to expand its resource base and output.

* British-based newspaper publisher Mecom said it had agreed to sell Norway’s Sunnmorsposten and Romsdals Budstikke daily newspapers to Polaris Media for an enterprise value of about 55.9 million pounds ($79.1 million).

* Russian billionaire Oleg Deripaska has no plan to sell his 25 percent stake in Austrian builder Strabag, an official at his investment vehicle Basic Element (BasEl) said. “We have not taken any decision about selling out of Strabag,” he said following a report in an Austrian newspaper that indebted BasEl could sell its stake to Strabag’s other shareholders.

* Shares of Air Berlin sold by U.S. investor Len Blavatnik are parked at investment bank UBS and are for sale, Handelsblatt reported, citing industry and financial sources. It was not immediately clear if UBS had bought the stake from Blavatnik or was acting on behalf of another seller.

* Canada’s Bank of Nova Scotia has expressed interest in buying a stake in Thailand’s Siam City Bank (SCIB), the Nation newspaper reported, quoting an industry source.

* Australia’s Fortescue Metals Group said it has held talks with Anglo American and China’s sovereign wealth fund about possible investment opportunities, and sources said top Chinese steel maker Baosteel has also been in talks to buy assets.

* British venture capital firm 3i Group cut its stake in IT consultancy group Morse Plc to less than 3 percent from about 15 percent, a regulatory filing showed.

(PHOTO: General Motors Chairman and CEO Rick Wagoner addresses the media during a news conference at GM World Headquarters in Detroit, Michigan February 17, 2009. REUTERS/Rebecca Cook)

When the U.S. government started handing out taxpayer dollars to banks under TARP last fall, hundreds of banks lined up. To many, government money was cheaper than the terms they were getting in private and public markets.

“That really, in effect for several months, put a lot of our discussions with issuers really on hold,” said John Duffy, CEO of investment bank KBW, which specializes in the financial services sector.

Now, the pendulum may be swinging away from the government.

The Obama administration has made it clear that the recipients of more capital will have to live under dictates on what they can and cannot do with the money — dividend restrictions, executive compensation caps and such.  

And now the private market may be becoming more attractive to banks, despite private equity seeking better terms like asking for a more senior position than just common shares in investments, Duffy said.

“The longer this environment exists, the more there will be capitulation on the part of banks or potential issuers that the government is forcing them to go get that capital,” Duffy said on a conference call after announcing results. “And I think the capital out in the public or private markets is maybe more appealing than the terms attached on the latest government plan.”

(Photo: REUTERS/Romeo Ranoco)

First Bill Perkins likened the architects of the $700 billion U.S. bailout to communists. Now the Houston-based venture capitalist is going after the capitalists.

In his latest full-page ad in the New York Times, Perkins raises a question about the propriety of Goldman Sachs buying the majority of Constellation Energy’s London-based commodities business.

“Question #1: Does anyone else find it troubling that a government bailed out bank (Goldman Sachs) is buying a European Energy Speculation Outfit? It’s your money!!!”

A Barack Obama fundraiser, Perkins made a $1.25 million profit on volatile banking shares and decided to use the proceeds to campaign against the bailout, according to media reports.

As far back as Sept. 23, in a full-page Times ad that cost $130,000, Perkins accused then President George W. Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke of being “new communists.”

Perkins attack on the use of TARP money comes as the House of Representatives approved a bill to impose new rules on the bailout program.

The House bill, authored by Massachusetts Democratic Rep. Barney Frank, calls for among other things limiting the use of TARP funds in bank buyouts.

(Photo: People enter and exit 85 Broad Street, headquarters of investment bank Goldman Sachs in New York, October 23, 2008. REUTERS/Brendan McDermid)

Chrysler’s got $4 billion in emergency aid from the U.S. government and has said it will seek another $3 billion in government loans. And yesterday it agreed to form an alliance with Italy’s Fiat as it looks for the road out of the woods.

(The Fiat deal fine print reportedly makes it conditional on Chrysler’s getting that extra U.S. loan.)

But the troubled auto maker is not letting its economic ails keep it from going to the movies.

Chrysler plans to help underwrite the fourth installment of the “Terminator” movie series, “Terminator Salvation,” where it will place its vehicles in cameo roles. The film is scheduled for release later this year. Financial terms of the sponsorship deal were not disclosed.

“This spring, Terminator 4 comes out and we will be one of the sponsors,” Chrysler director of media Susan Thomson said in a presentation at the Automotive News World Congress. “We have a following with the Terminator movies and we are going to continue with that.”

First released in 1984, “The Terminator” starred now-California Gov. Arnold Schwarzenegger as a cyborg sent from the future to kill a woman whose son would lead a resistance to a worldwide takeover by machines.

DEALS OF THE DAY

Ball bearings maker Schaeffler said it was not reviewing a complete takeover of Continental, an automotive supplier company.

Libertas Capital Group said it has abandoned Avis Energy alliance. Avis Energy has failed to provide any funds and accordingly this agreement has been cancelled, Libertas said.

Britannia Building Society and Co-operative Financial Services said they had agreed to merge, forming what the companies described as a “super-mutual”.

Japan’s Elpida Memory said it was in talks with Taiwanese DRAM makers including Powerchip, ProMOS Technologies and Rexchip, on a possible merger as well as some other options.

(Photo: A scene from the 2003 film “Terminator 3: Rise of the Machines” in an image courtesy of Warner Bros. REUTERS/Handout)

Unsurprisingly, scandal-slammed Indian outsourcing firm Satyam says it may need some liquidity support to stay alive. Satyam founder and chairman Ramalinga Raju said he inflated his company’s reported cash and bank balances by more than 50 billion rupees ($1 billion). He seems to have taken to the Hyderabad hills — the company says it has no idea where he is. In a state known for its separatist tendencies, he may well stay disappeared for some time.

The interim CEO and company officers say they are committed to picking up the pieces. But this little “liquidity support” bombshell could prove to be a tricky one if it is directed at the biggest bail-out office currently handing out cash: the U.S. Treasury. Not being a U.S. company, Satyam probably doesn’t have the chutzpah to seek TARP funds directly. The company’s primary function as an outsourcing center would make the use of U.S. bailout funds politically repugnant to U.S. officials.

But the idea of foreign companies applying for U.S. taxpayer support is not a new one. Financial institutions the world over, saddled with dud U.S. mortgage-backed debt, have grumbled that they should get the same consideration as U.S. investors.

Having invested a lot of time and energy firing Americans and outsourcing their work to companies like Satyam, U.S. companies would face some risk from a meltdown in the outsourcing business. Might it even cloud their chances for recovery, or - gulp - force them to reverse the outsourcing trend and start hiring at home again? Sounds like a recipe for economic recovery.

Other Deals News:

* Privately held bearings maker Schaeffler is poised to take control of larger auto parts rival Continental, when it collects the bulk of shares tendered after its 11.3 billion euro ($15.4 billion) bid.

* German utility RWE is the leading candidate to take over Dutch peer Essent, Dutch financial daily Het Financieele Dagblad reported, adding bids were around 10 billion euros ($13.6 billion).

* Land Securities Group is to sell its Trillium outsourcing unit for 750 million pounds ($1.13 billion) to property investment and services firm Telereal, streamlining Land Securities’ business and bolstering its balance sheet amid miseries in the UK property market.

* Aviva, Britain’s biggest insurer, said its joint venture with state-owned ABN AMRO in the Netherlands would continue after the Dutch government reversed a decision by ABN’s previous owner to end the deal.

(Photo: Labourers clean Satyam building in Hyderabad. REUTERS/Krishnendu Halder)