Unstructured Finance

Bankruptcy better than merger?

northwest.jpgBankruptcy is better than a merger. Or that’s what U.S. airlines seem to think.

Almost every U.S. legacy carrier has been through a bankruptcy at some point; many have been through Chapter 11 twice.

And things, once again, are turbulent.

After racking up $35 billion in losses and finally emerging from a five-year slump in 2006, you would think the major carriers, suffering partly due to the threat of low-cost competition, would see the sense in consolidating.

Two of them did. Delta and Northwest said in April they would merge to create the world’s largest airline.

You would think more talks would follow. They did. You would think more mergers would follow. They didn’t.

Loading up on dry powder

cash.jpgThe days of the eye-popping LBO may be over, but buyout shops are still raising eye-popping amounts of cash.

So far in 2008, private equity firms have raised nearly $100 billion, according to Thomson Reuters data. Buyout-focused funds have raised $65.1 billion, while others that are not focused on buyouts, such as real estate and energy funds, have raised $34 billion. In all $99.2 billion has been raised from 134 funds, Thomson Reuters data shows.

But overall acquisitions by financial sponsors are down 78 percent and global issuance of leveraged syndicated loans is down 68 percent, compared with the same period last year.

Room for home improvement retail

acesmall.gifHome improvement consumers have spoken, and their choice of top retailer might surprise you.

Ace Hardware, the hardware cooperative with 4,600 stores, ranked highest in home improvement customer satisfaction for the second straight year, according to a J.D. Power and Associates study.

The 2008 study, conducted in March and April, tracked satisfaction with merchandise, price, sales staff, sales/promotions and store facility. Findings are based on responses from 9,770 consumers who bought a home improvement product or service within the past year.

Thank you… come again

tiffany1.jpgNo, really. That is what Tiffany executives must think, looking at the sea of tourists at its fabled flagship store on 5th Avenue in Manhattan.

Eclipsing a 4-percent drop in same-store sales in its other stores, the New York store posted a 16-percent rise.

Thanks to those tourists, U.S. same-store sales in the quarter for Tiffany didn’t slip into the red.

Check Out Line: Tiffany still sparkles overseas

tiffany.jpgCheck out how Tiffany sparkles overseas.
Forget the United States (where Tiffany does not expect sales to improve until later this year). They are still buying baubles in Europe.
Sales in Europe rose 30 percent in the first quarter. And that was on a CONSTANT CURRENCY basis. No help from the weak dollar in that number. The company added four more stores, which helped, as did the 12 percent increase in same store sales.
Asia also saw a 10 percent increase in sales on a constant currency basis.
The U.S. consumer may be under pressure. But apparently there are still sales and profits to be mined overseas.
Also in the basket:
April personal spending up, flat after inflation 
J Crew cuts year earnings outlook, shares drop 15 pct

NexCen cuts 25 pct of New York workforce, mulls options 

Coach’s gateway to growth in China (WWD)

(Photo: Reuters)

Waiver waivered

kerkorian.jpgFord got a boost from billionaire investor Kerk Kerkorian’s Tracinda, which waived a condition requiring it to bail on its tender offer for Ford shares at $8.50 if the stock fell by 10 percent or more from the close of trade on May 8th, when the stock was at $8.20 per share. It closed at $6.71 on Thursday, but was up about 2 and a half percent before the market opened Friday. Tracinda said it “continues to believe in Ford’s management and turnaround efforts and remains committed to its offer,” which expires at on June 9. Tracinda already has 100 million shares of Ford, and if it shied away from the tender offer, the value of its existing investment would suffer. That’s not to say it doesn’t believe in management, but the ring of the endorsement is perhaps a little less pure.

BHP Billiton‘s $180 billion bid for Rio Tinto appears to be yet another firmly inconclusive step closer to reality. The world’s biggest miner, in hot pursuit of unwilling Rio since last fall, has formally filed with the European Commission for takeover clearance. The European Union’s executive arm and antitrust regulator has set a deadline for consideration of July 4. By then, it must approve, extend (briefly) or launch an investigation into the merger bid. Rio spurned BHP’s all-share offer shortly after BHP was required to put up or shut up by British regulators on Feb. 6. The filing was delayed for months during pre-filing talks with the European Commission. Analysts say the most contentious area is likely to be iron ore, since the combined firm would control around a third of seaborne trade in the raw material for making steel.

Casino and racetrack operator Penn National said it was unlikely to receive necessary regulatory approvals before an upcoming merger deadline for its acquisition by a group led by Fortress Investment. Fortress and Centerbridge Partners agreed in June 2007 to buy Penn National for $67 a share, or $6.1 billion. In March, the company said the per share amount will be increased by $0.0149 per day if the buyout is not completed by June 15. Penn said approvals for the merger remain pending before a number of state regulatory authorities. Gambling and racing activities are individually controlled by states, so the company needs the green light from each state it operates in.

Lenny Dykstra likes his options

baseballbat.jpgLenny Dykstra, the New York Mets and Philadelphia Phillies legend who got 1,298 base hits during his career, loves options.

Speaking at a feel-good event in New York featuring a group of former sports pros to discuss how sports informed their approach to business, Dykstra, who counts television stock picker Jim Cramer among his admirers for his investing prowess, likens pursuing a buy and hold strategy for stocks to “being hit with an idiot stick.” Options, on the other hand, spare you from margin calls, he explained before launching into the finer points of calls, puts, and straddles.

Dykstra’s advice didn’t end there. When a star-struck member of the audience at the Thomson Reuters newsmaker event asked about the value of financial advisors, Dykstra animatedly dismissed them as “Wally Wall Streets.”

The history of the NYSE, in dance

If writing about music is like dancing about architecture, to what can we compare the difficult task of dancing about a stock exchange?

The Buglisi Dance Theatre took on the challenge this week, performing “Under the Buttonwood Tree.com (A Frenzy on the Floor)” on a stage in front of the New York Stock Exchange’s American flag-covered facade.

It began with a gold-bedecked woman, who rang a gong (a la the opening bell) while flanked by a squad of men carrying green flags. The dance company then performed a 35 minute history of the NYSE, from the Buttonwood Agreement of 1792 to the end of World War II. That’s right: no mention of the Dick Grasso years, or haunting pas de deux to represent disappearing floor traders.

Analyst puzzles over Sears’ higher EBITDA plans

sears.jpgSears Holdings Corp reported a quarterly loss this morning. But the thing that left analysts like Credit Suisse’s Gary Balter scratching their heads was the company’s expectations for higher earnings before interest, taxes, depreciation and amortization (EBITDA) for the full year.

“We are struggling with what we are missing in the context of Q1 being down over $385 million in EBITDA and other comments in the release that talk about the expected difficult sales and gross margin environment,” Balter said in his research note.

Sears said sales fell about 6 percent to $11.1 billion in the quarter. Total U.S. same-store sales were down 8.6 percent as the appliance, lawn, garden and apparel segments languished.

Product cost inflation is real, it’s very real

cashregister.jpgDuring Big Lots’ conference call, the closeout retailer was asked what it is seeing in terms of product cost inflation, especially when it comes to merchandise that is sourced in Asia.

CEO Steve Fishman was unambiguous in his answer: “That’s real. That’s very real”

Fishman said factors like the devaluation of the dollar and rising salaries overseas are making sourcing products from Asia more expensive.