Unstructured Finance

A Biblical view of the recession

There have been a lot of analogies to describe the financial pain of the current economic recession, but CCMP Capital Chairman Gregory Brenneman evoked a more holy view.

“A prolonged recession feels a little Biblical to me. It’s like the story of Joseph — seven years of feast, seven years of famine. It feels like we’re in year two to me,” Brenneman said.

He said he expects U.S. unemployment to hit 10-11 percent before the recession ends, and real GDP (gross domestic product) will be down 2 percent.

“Recovery won’t happen until the back half of 2010. That means nobody really knows, but it’s going to be a long time from now,” Brenneman told the Wharton Restructuring and Turnaround Conference in Philadelphia on Friday.

Despite his view that the U.S. was mired in economic famine, Brenneman said it was a great time for private equity firms to buy good assets for low valuations.

Haagen-Dazs (hearts) honeybees

haagen-dazs20loves20honey20beesIce cream seller Haagen-Dazs is investing a half-million dollars to save the honeybees – and to save us from a future of feeding on gruel. 

Honeybees, which 60 Minutes called the “unsung heroes of the food chain,” are threatened in many parts of the world, putting food supplies in danger.

Bees pollenate one-third of all of the natural foods we eat. Just imagine a world without nuts, fruits, vegetables, flowers and even meat and milk from cattle that eat bee-pollenated alfalfa.

Frustrating having a dim-witted stock – Blackstone

USA/Blackstone’s CEO Stephen Schwarzman, who didn’t take a bonus this year, sounds pretty frustrated with the public market’s attitude to Blackstone’s stock.

A discussion about the firm’s dividend — it is eliminating the fourth quarter but thinks 2009 will be OK — turned into an exercise in thinking aloud tinged with annoyance.

COO Tony James explained succintly on a conference call with analysts how Blackstone’s cashflow meant the dividend looked pretty secure.

In a spin

Financial public relations firms, who elevated the honing of corporate messages to a highly profitable art form, are having to adapt their businesses and in some cases cut staff as the economic gloom intensifies.

With far fewer deals to publicize and lucrative “retainer” contracts under pressure, companies are cutting costs and are increasingly focusing on work thrown up by the crisis, such as capital-raising, restructuring and repairing tarnished images.”

So what exactly are they up to?

Some recent pr industry blogs and other web postings shine a light on some of the spinmeisters’ latest tactics.

Sensex ends flat, GDP data disappoints

The benchmark index shed 0.7 pct on Friday as disappointing growth data for the third quarter dampened investor sentiments.

Data released today showed the economy grew 5.3 percent in the December quarter from a year earlier, its slowest annual pace in almost six years, as the global economic crisis cut demand and exports. MARKETS-SOUTHASIA-STOCKS

It was below forecast of 6.2 percent and the previous quarter’s 7.6 percent.

Check Out Line: Too Many Chickens

VENEZUELA/Check out more grim news on the jobs front, from the food sector.

Pilgrim’s Pride became the latest consumer-related company to cut jobs when it said on Friday that it plans to idle three U.S. plants because of an oversupply of chicken and weak consumer demand. The plants, in Georgia, Louisiana and Arkansas, employ about 3,000 people, or about 7 percent of the company’s U.S. workers.

The chicken producer, which is fighting to emerge from Chapter 11 bankruptcy protection, said the closings were needed to reduce production of low-value meat that is draining its finances. 

But it’s not just chicken producers feeling the crunch of the recession. 

A timely withdrawal?

Spanish bank BBVA’s move to close down its alternative investment arms including hedge funds shows just how much things have changed in the industry, even within the past year.

rtr22m3jBBVA said it had “decided to anticipate the possible effects of the current situation of markets and of the alternative investment industry”.

And judging by forecasts, the possible effects could be fairly bad for many hedge fund firms.

Tax saving with safety locked in

pixSome of the best advice often comes from the most unlikely of sources.

Years back, while on a trip to Jaipur, I had run into a rather energetic man who insisted on jumping the queue at the post office. When requests failed, I asked him why he was in a hurry.

“I have a savings account here,” he said proudly in Hindi, clutching a dog-eared booklet with currency notes tucked in. Ram Prasad, the 42-year-old cycle rickshaw driver had his way and left flashing his stained teeth.

Outside, he offered me a discounted tour of the city, with unsolicited advice on why I should park my funds in the post office. The stock market was hot that year and I brushed aside his guidance.

Broad Support for Citi

CITIGROUP/Given Citigroup stock’s dizzying tumble toward nationalization (wipeout) levels, it would appear Uncle Sam’s conversion of Citi preferred shares into common broadly supported anyone shorting the stock. The government did a deal to convert $25 billion of its Citi preferred stock, giving it a stake of up to 36 percent in the bank.Other moves announced this morning also have a decidedly more managerial tone. The bank’s board is to be reconstituted. Other major shareholders, including the government of Singapore, said Uncle too, getting on board with the Treasury plan, which supporters will argue is better than no plan at all. Singapore was an early adopter of the failed investment strategy of bailing out the bank.Where we are in this latest wave of the financial tsunami is difficult to calculate. Globally, this week has seen tremendous activity between governments and banks. Lloyds Banking Group is prepared to tap a 500 billion pound ($715 billion) insurance scheme concocted by Britain to cleanse risky bank assets. And a deal struck yesterday could raise the British government’s holding in Royal Bank of Scotland to 95 percent. Global development banks have launched a two-year plan to lend up to 25 billion euros ($32 billion) to shore up banks and businesses in crisis-hit Eastern and Central Europe.The problem with lenders of last resort is that they are a monopoly and their doors can never close. Notice the queue of seemingly defunct businesses lining up for ever more cash, whether it be Fannie Mae looking for another $15 billion, or the $30 billion GM says it needs to forestall a meltdown of industrial proportions.Deals of the Day:* The chairman of China Huiyuan Juice Group, the country’s top juice maker, said he would meet with Coca-Cola Co executives next week to discuss their $2.5 billion bid for his company.* Beckman Coulter, a maker of medical test systems, said it agreed to acquire the diagnostic systems portion of Olympus Corp’s life sciences business for about $800 million to broaden its clinical chemistry offering.* Britain’s BG Group sweetened its offer for Australian coal seam gas firm Pure Energy, now valuing the company at A$1.03 billion ($671.9 million), in a bid to eliminate rival bidder Arrow Energy from the race.* Commodities trader Noble Group launched a takeover bid for Australia’s Gloucester Coal, valuing the miner at nearly A$400 million ($261 million), looking to thwart Gloucester’s planned merger with Whitehaven Coal.* Indonesian coal miner, PT Indika Energy Tbk said it agreed to buy an 81.95 percent stake in engineering firm PT Petrosea Tbk from Clough International Singapore Pte Ltd for $83.8 million.* China National Petroleum Corp launched a friendly C$443 million ($357 million) offer for Verenex Energy Inc to give the state-owned oil company a stake in a Libyan oil concession.* Coal miner Caledon Resources said it has received an indicative approach “significantly in excess” of its current market price.* UK-based NeutraHealth said it received an unsolicited offer from India’s Elder Pharmaceuticals, at an indicative partial offer price of 5.5 pence per share.(PHOTO: Workers are reflected in the window of a Citibank branch in London January 16, 2009. REUTERS/Toby Melville)

Markets end higher on expiry day

Well things looked shaky in the morning with the Sensex in negative territory, but it managed to recover in late trade to close 52 points up at 8954.86.

Buying was seen in index heavy weights such as Reliance Industries, Infosys and Bharti Airtel.MARKETS-SOUTHASIA-STOCKS/
Autos appeared to be the flavour of the day with the BSE Auto Index closing 2.7 pct higher.

Tata Motors led the rally as investors’ hopes were restored with a rather delayed launch of the people car “Nano”.

  •