Unstructured Finance

Hot pursuit of remaining LBOs

dogs.jpgThe buzz around the handful of LBOs yet to close is reaching fever pitch. 

One deal in particular was on everyone’s lips at a two-day private equity conference sponsored by Dow Jones this week – Clear Channel. Leaning against walls in corridors and settled in armchairs, conference-goers had hushed cellphone conversations about the $20 billion deal, still to close.

Two executives at the private equity firms buying the radio operator – Bain and Thomas H. Lee – showed up to talk about trends in the buyout industry. That wasn’t quite satisfying enough for a pack of investors who hotly pursued them after the conference (admittedly that’s an assumption that they all hold positions in the stock but one wonders why the frenzied interest otherwise). The Bain exec managed to escape by squeezing into an elevator with his press representative. ”No comment” was about the sum total that the crowd got. 

Betting on Buffett

Reuters correspondent Jonathan Stempel reports that whenever the dust settles from turmoil in the bond industry, there’s likely to be one familiar winner sitting atop the debris.

Berkshire Hathaway’s Warren Buffett is well-positioned to cash in whether bond insurers get rescued as regulators seek possible new sources of capital for them, or suffer credit rating downgrades that threaten their business, or even their survival.

Berkshire, which created Berkshire Hathaway Assurance Corp on December 28 to enter the bond insurance market, has the balance sheet, credit ratings and pedigree to gain a strong foothold and become a major force, experts said. In creating a bond insurer, Buffett is counting on issuers paying him higher fees for the security of having the backing of “triple-A” rated Berkshire and its $47.08 billion cushion of cash.

Check Out Line: U.S. girls shun Barbie again

barbie.jpgCheck out American girls continuing to shun Barbie,  despite Mattel’s attempts to revitalize the once-dominant brand with sleek, new products.

Since coming to market in 1959, Barbie has played a key role in Mattel’s profits.  But that may be changing as Mattel posted a profit despite another decline in U.S. sales of the flagship line.

“Innovation has been lacking, in our view, on the Barbie line,”  Sterne Agee analyst Margaret Whitfield said in a Jan. 25 research note.

Daily Briefing: Betting on a better bid

The BHP-Rio Tinto saga is heating up again, with a growing consensus among investors that BHP will issue a sweetened offer by next Wednesday’s “put up or shut up” deadline set by Australia’s Britain’s Takeover Panel. Rio Tinto shares surged 7.6 percent and BHP climbed 2.6 percent. “I just expect them to come back with a definite offer and get the ball rolling. And their first offer won’t be their last offer,” said Warwick Cumming, deputy head of equities at Tyndall Investment Management, which holds shares in both companies.

Surprising absolutely no one, BNP Paribas has confirmed that it is indeed weighing a takeover bid for its weakened compatriot Societe Generale, laid low by a rogue trading scandal. “We are studying it because all Europe’s banks are studying it,” said a spokesman. Of course, all of Europe’s banks except the French ones would have to overcome the government’s determination to fend off foreign “predators.”

Tata Group isn’t about to stop its acquistion binge. Already on the verge of buying Jaguar from Ford, the Indian conglomerate’s Tata Chemicals unit has agreed to acquire U.S. soda ash maker General Chemical Industrial Products for $1.005 billion from Harbinger Capital Partners.

Cov lite hangover a headache for LBO lenders

Private equity’s “golden age” is looking a little less shiny for lenders behind the LBO boom.

Here’s what has them nervous: many LBOs were in industries which are vulnerable in a downturn; borrowers were leveraged to the hilt after a buyout, and a lot of leveraged loans are “covenant lite” — which means they lack fundamental control mechanisms.

With the specter of a recession looming, that’s enough to make even the most solid LBO credit loose its luster — which may be why banks have struggled placing $2 billion in loans behind the LBO of computer retailer CDW Corp by Madison Dearborn and Providence Equity Partners.

Opportunity knocks in the garage

gladiator.JPGOne research group says department stores and other retailers could be missing out on an opportunity to gain sales in a part of the home that doesn’t seem to be affected by the current U.S. housing slowdown: the garage.

NPD Group said on Wednesday that garage storage products are bought mostly by high-income men. For the year ended in October, men accounted for 64 percent of dollars spent in this segment, it added.

The garage spending isn’t just confined to products like bicycle racks and tool chests, but now includes refrigerators and flat-screen TVs, NPD said. Appliance maker Whirlpool, for instance, sells cabinets, work surfaces and refrigerators to meet lifestyle needs under its Gladiator GarageWorks brand (products shown in picture).

Check Out Line: Costs eating away at profits

Check out higher commodity costs taking a big bite out of corporate profits.

cow.jpgOn Wednesday, Kraft Foods posted a lower quarterly profit after higher costs for dairy products and other ingredients offset an 11 percent increase in sales.

While the sales jump showed Kraft is having some success with new products like Oscar Mayer packaged sandwich kits and Crystal Light drink powder sticks, the food maker could not overcome higher costs for ingredients and energy.

Meanwhile, Kellogg’s  fourth-quarter profit fell after the world’s largest breakfast cereal maker was hurt by rising costs for wheat and other commodities. Although Kellogg,  the maker of Frosted Flakes cereal, Eggo waffles and Keebler cookies, has increased prices and looked for ways to cut costs to try to offset higher commodity costs, it continues to be hit by soaring costs for ingredients and energy.

Daily Briefing: The French Connection

Talk of a potential bid by BNP Paribas for its rogue trading-stricken compatriot Societe Generale pushed up SocGen shares by more than 10 percent on Tuesday, and BNP isn’t doing much to squelch the rumors. Chief Financial Officer Philippe Bordenave ducked questions on whether BNP might bid for its French rival, which it previously tried to buy in 1999, saying: “My team and I have worked around the clock to get the figures that we are publishing today. During that very short timeframe I have not had much time to elaborate much further on SocGen.” Given the French government’s determination to fend off foreign aggressors, the market seems to like BNP’s chances.

The cheap dollar has Italy’s biggest insurer Generali hunting for bargains in the United States, particularly in specialized sectors like pensions and long-term care, its co-CEO said on Wednesday. Even if the dollar strengthens, “an investment in the United States does not depend only on that, the first objective is to create value,” Sergio Balbinot said.

Lazard Chief Bruce Wasserstein has received a hefty payday: restricted stock worth $96.3 million as part of new five-year employment agreement, plus additional shares to be granted over three years at the discretion of the merger advisory firm’s compensation committee. Lazard shares are down 31 percent over the past year.

Lazard’s results nearly a private affair

top_secret_ver1.jpgAfter 157 years as an elite private partnership steeped in Old World secrecy and intrigue, investment bank Lazard went public in May 2005 on the New York Stock Exchange. Alas, old habits die hard.

We submit as evidence this late breaking news release from Lazard, which waited until after U.S. markets closed Tuesday to reveal it would announce fourth-quarter results Wednesday. That translates to roughly 16 hours notice for analysts, investors and reporters who follow the activities of this expanding merger advisor.

Not that anybody is breaking the rules here, but it makes you wonder why a company held by small and big investors alike waited so long.  Certainly famed Lazard chief Bruce Wasserstein wants his efforts to get plenty of attention, right?

Holiday promos still abound well into the New Year

macy.jpgAnd you thought the beginning of the New Year would mean the end of holiday-type promotions.

Silly, silly you.

With 2008 retail sales expected to rise at their lowest level in six years, retailers are still rolling out many of the same type of promotions and discounts they used during the holiday season – even though it is nearly February.

Sears continues to offer limited-time sales, like sending an email on Jan. 27 promoting an extra 10 percent off game room, home appliance clearance and gemstone jewelry purchases made on its Web site for 12 hours, starting at 6 pm that night.

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