Unstructured Finance

Banks try, but can’t block Facebook

200px-markzuckerberg.jpgThe broad popularity of Facebook has reached the point to where investment banks have blocked employees from using the social networking site. But a financial trade publication has found that, in fact, thousands of banking staff continue to use it. 
  
Citigroup, Goldman Sachs, Lehman Brothers  Holdings, JPMorgan, Bear Stearns and UBS deny access to Facebook because of concerns employees  spend too much time on it, Financial News reported. 
  
Still, nearly 20 percent of Goldman’s employees are members of the Goldman-only network on Facebook, the publication said.  Deutsche Bank was second with 11.3 percent signed up  to the bank’s network and Lehman third with 10.4 percent.

The fact that investment banks are cracking down on Facebook usage comes with a certain amount of irony, considering that Wall Street is throwing itself at the company in hopes of roping in the company and its founder Mark Zuckerberg as a client. Though Facebook has said it’s not up for sale, bankers await the day it files to go public or is sold to a corporate /private equity buyer. Facebook just named an ex YouTube finance chief as its CFO, in a sign the company may be ramping up its IPO plans. 

(Reporting by Jeffrey Goldfarb in London)

(Photo: Facebook founder, Mark Zuckerberg. Wikipedia)

The Redstone Two-Step

Sumner Redstone just won’t stop dancing.

CBS Corp. and Viacom Inc.’s executive chairman keeps getting questions about whether he would take one of his media companies private — and he keeps dodging the issue.

His latest dance came during a conference call to discuss CBS’ quarterly earnings, when he was asked what would “trigger” a decision to go private. Back in June, he fielded a similar question during an interview on CNBC.

Here’s what he said on Tuesday: 

“(We) like the companies the way they are. We think there is an enormous amount of growth in them without any great strategic change. 
However, and I’m very clear on this, we do consider all alternatives. There has been a lot of discussion inside and outside about taking one of these companies private. 
What I can say is, I’ve said it before, it’s not on the front burner. But you can rest assured it will receive the consideration it should as we always consider what’s good for these companies.”

Buy it on Overstock, sell it on eBay

overstock.gifOverstock.com’s Chief Executive Patrick Byrne thinks consumers could make a buck or two by buying low-priced items on Overstock and selling them for a profit on online auction site eBay.

The controversial CEO said some of Overstock’s items are so competitively priced that some people are earning a living reselling the items.

“Our motto is buy it on Overstock, sell it on eBay,” Byrne said on a conference call Tuesday with investors.

TXU rumors swirl, market doubts them

txu.jpgAre the banks ready to yank TXU’s financing in favor of paying a break up fee and walking away?    

According to this Wall Street Journal blog entry on July 26, a novel theory is circulating on Wall Street that banks could decide to pull megabuyout financing deals, pay the break up fees, and walk away. Doing that would be cheaper in the long run than being stuck with all that unwanted debt on their balance sheets, so the theory goes.

An interesting theory, no doubt, but one that sources tell DealZone is far-fetched, or in British terms: “bollocks.” Banks should be able to survive any “hanging” from bridge loans, according to this Reuters article.  In addition, the comments section of the Journal’s blog entry is filled with people throwing cold water on the theory.

Yogis challenge Nike on dogfighting

yogi.jpg

Ok, not that Yogi.

A Los Angeles-area yoga entrepreneur is using her 60,000-person network of teachers and students to spearhead a grassroots protest against Nike’s decision not to terminate its relationship with National Football League star Michael Vick, who pleaded not guilty last week to federal charges of involvement in a dog-fighting operation.

Beth Shaw, whose YogaFit training, publishing and clothing company does about $4 million in sales annually, knows she’s tiny next to Nike. Her power to hurt the athletic apparel giant lies in her influence as a yoga master over thousands of devotees who are also potential Nike customers, she said.

Nike said it would not fire Vick before he received a fair trial,  though on Friday afternoon the company suspended Vick’s contract without pay and said it would not sell any Vick T-shirts or shoes at its company-owned stores, company spokesman Derek Kent said.

Goldman’s ways to cash in on credit freeze

How do you make money when stocks are falling, the credit markets are frozen, private equity titans are muted, and investment banks are treading water in an ocean of debt? All is not lost, Goldman Sachs promises. 

Late last week, Goldman published a note titled “US Equity Views: Hung bridges and deathly hallows.” Below the headline were the words: Sentiment, fundamentals, and three trade ideas.  The note’s tongue-in-cheek Harry Potter references caught the attention of Thomson’s Dan Primack, who concurred wholeheartedly with trade idea No. 1.
     
From Goldman’s note, the top “trade idea” in this credit market craziness:

    “1. Buy 22 pending LBO deals for 36% percent average annualized return. It is  impossible even for a wizard like Harry Potter to reconcile two facts: Stocks cannot BOTH melt down because the market fears financial institutions will have to fund and hold levered loan commitments while at the same time shares of target companies sell off on the belief the same transactions will not close. This inconsistency presents an attractive entry point for investors. The stock market assigns a roughly 62% probability that the deals will be consummated. We believe the likelihood of closing is much higher. ”

What goes up, must come down

jarden1_updated.jpgDiversity is Jarden’s best friend. 
 
Last year, when almost every retailer in sight was bemoaning a startlingly warm winter, folks at Rye, New York-based Jarden Corp., which sells everything from camping gear and coffee makers to playing cards and plastic spoons, sat back while consumers bought kitchen appliances and outdoor products like camping gear.

Then, as the weather flipped an turned freezing in February, it sold fire logs and electric blankets, while retailers with spring products in stores threw up their hands in despair. 

The company is still touting its diverse product portfolio for its success. This quarter, the company’s earnings were boosted by sales in its outdoor products segment, mainly due to the acquisition of fishing tackle company Pure Fishing.

Consumers still treating themselves — Alberto-Culver CEO

vo5.jpgAlberto-Culver, whose products range from Nexxus shampoo to Mrs. Dash seasoning, reported third-quarter results on Monday. Sales growth was better-than-expected, driven by the TRESemme and Nexxus brands, but St. Ives lotions struggled.
 
In an interview, President and Chief Executive V. James Marino said the company plans to launch a retooled line of Alberto VO5 styling products this quarter aimed at a younger consumer. He also said that the company will increase advertising spending in the current fiscal fourth quarter, just as it did in the third quarter.

In the following excerpt, Marino comments about consumer trends:
 
Q: Do consumers seem to still be treating themselves to little luxuries like a new hairstyling product or things like that, or are people getting more concerned about gas prices, the housing slump and the market (decline) we saw last week?
    
A: We haven’t really seen that, in these categories at least. What we do know is the consumer is not taking as many trips to the store as they have before and I’m sure that’s a function of gas prices, that kind of thing. But apparently when they’re there … the purchase habits continue to be about the same.

Hair care in the U.S. has never been a big growth category, it’s a big category, and it continues to grow in low single digits, which is not a whole lot different than what it has been for quite some time, so I don’t see a whole lot of change there. Likewise, if you look at the styling sub-segment the same is true, it’s low single digit growth.

Oil services M&A boom coming; ‘Hold on’ Bear Stearns says

rig1.jpgThe queasy credit markets is bad news for private equity buyers and the M&A banking groups that have financed the leveraged buyout boom.  Stocks have sold off partly on the assumption that the LBO premium is wearing off all sectors.

But Bear Stearns says don’t count the oil service and equipment industry out of the M&A game.

Bear Stearns analyst Robin Shoemaker predicts the sector will soon experience a “transformation” through mergers and acquisitions.

How to bury a subprime mortgage warning

default2.jpgIf American Home Mortgage Investment Corp. makes a noise on a Friday night, and nobody is there to hear, does it fall? 
 
The answer would seem to be yes. The mortgage lender’s shares plummeted 40 percent on Monday morning, after the company put out a press release at 10:19 p.m. EDT on Friday saying that it was writing down assets and receiving margin calls on credit facilities.

The move comes as the subprime mortgage bond market enters deep freeze mode amid a broad credit market pullback hitting everyone from newlywed home buyers to leveraged buyout artists.
 
There are sometimes fair reasons for putting out a press statement late at night before a weekend or a holiday. For example, parties may agree to a merger deal late at night, and may want to put out a statement immediately.  Or maybe rumors are moving a company’s stock, forcing a release.
 
But timing a release for when people are unlikely to see it is a time-honored practice for companies hoping to evade scrutiny. 
 
Buyout giant KKR & Co. LP filed for its IPO late on July 3 the day before the U.S. Independence Day holiday, in a move likely designed to minimize publicity for a sector that had received unwanted Congressional attention after Blackstone’s IPO. That move prompted this DealZone blog post. 
 
American Home Mortgage has been a reluctant communicator in the past. On July 19, its shares dropped more than 20 percent on a rumor that one of its banks had withdrawn a credit facility. The New York Stock Exchange requested the company issue a statement indicating whether there were any corporate developments to explain the move, and the company declined to comment.  The company was not immediately available for comment for this blog post.
 
Whether the company chooses not to communicate, or to communicate late at night, its shares are undoubtedly suffering–they were quoted on Mondy morning at about a fifth of their value at the beginning of the year. 

(Photo: Reuters file)

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