Unstructured Finance

A pimple worth pampering

While you might hate pimples, apparently they’re kind of a beautiful little thing over at Procter & Gamble.
 
Wella hair care is one of those businesses that fits into a broad portfolio of everything from Pampers diapers to Tide detergent.  Right?  Still, it’s just a little bit different enough to make some wonder why P&G has held onto it.  It’s not like Wella brand products are filling up shelves at Wal-Mart like Clairol products are.

On Thursday, CEO A.G. Lafley was asked about Wella and Braun (the appliance business which, again, isn’t a clear match with some other P&G products). 
 
MANUFACTURIING PROCTER OUTLOOKLafley admitted that P&G put some Wella restructuring “on the back burner” while it was busy digesting Gillette.
 
“We’re going to get it restructured this year and next,” Lafley said during the company’s quarterly earnings call.
 
He said he likes Wella, especially because innovation at the high-end salon business trickles down.
 
“Is it worth investing for two or three years? Heck, yes because a lot of innovation and a lot of ideas come out of salons and then go into retail and we want to be on the cutting edge of that.”
 
Still, it’s not the brand that’s going to drive major growth.
 
“Will Wella make the difference in the company’s financial results?  It’s a pimple.  Now, I hope it will become more, but right now it’s not going to make a big difference,” Lafley added. 

(with reporting by Ben Klayman)
(Reuters photo of A.G. Lafley)

Customer to Venture Capitalists: Please, go out of business

rebecca-s-connollyEven in the depths of a recession, venture capitalists are relentlessly upbeat, but one of their big customers poured cold water on that Thursday, asking some members gathered in Boston for the annual meeting of the National Venture Capital Association to go out of business.

“I hope some of you go out of business. I hope that does happen,” Rebecca Connolly, a partner in Fairview Capital, said on a panel. Her West Hartford, Connecticut, firm has about $3 billion under management, 70 percent of it in venture capital funds and the rest with private equity.  Fairview, a fund of funds, manages money for pension funds and endowments

Connolly said that until 2000, venture capital provided good returns but since the dotcom bubble burst in 2001 returns have been very disappointing, hardly justifying the investment. Venture capitalists are supposed to find small companies with big potential and help them grow into big companies, like Microsoft, Starbucks or Intel.

Rising Estimates of U.S. Shale Reserves May Cap Natural Gas Prices

shale1
Locations of shale basins not geographically precise. E.g. Haynesville basin is located on the north Louisiana/east Texas border. Figures in trillion cubic feet. Source: The Federal Energy Regulatory Commission website, derived from the American Clean Skies Foundation.

Rising estimates of U.S. recoverable natural gas reserves from shale deposits could keep natural gas prices low over the next few years. The above map shows the sharp increase in recoverabe reserves from select shale basin in trillion cubic feet from 2006 to 2008.

Recent advances in horizonal drilling and rock fracturing techniques have made shale gas — traditionally quite costly to develop — more viable and help boost reserve estimates. — Joe Silha

Berkshire shake up augurs well for hedgies

windsorBerkshire is best known as the leafy home of Windsor Castle but its council pension fund is refusing to conform to the county’s conservative image, unveiling an investments shake up which includes a hefty allocation to one of the most widely hyped investment products going, a hedge fund managed accounts platform.

 

The billion pound fund on Thursday revealed that it will slash its equity weighting to 22.5 percent from 65 and invest 17.5 percent of its portfolio in alternative assets including a 7.5 percent into a hedge fund managed accounts platform run by France’s Lyxor.

 

It will also invest in commodities and infrastructure for the first time.

 

The size of Berkshire’s allocation, at 7.5 percent of the fund’s total assets, is some way larger than the average hedge fund allocation among UK pension funds and bodes well for an industry still reeling from its worst year ever.

Check Out Line: Company profits surprise despite weak sales

Check out consumer-related companies Procter & Gamble, Colgate-Palmolive, OfficeMax, Domino’s Pizza and Sally Beauty Holdings all posting better-than-expected quarterly profits despite weak consumer demand.

USA/P&G and Colgate surprised Wall Street on Thursday, as their efforts to hike prices and cut costs helped offset weaker demand in the recession.  Both companies, which are rolling out new products to entice thrifty consumers back to stores, forecast sales growth for the year, excluding the impact of currency fluctuations, acquisitions and divestitures.

Domino’s Pizza reported a better-than-expected profit, boosted by the performance of its domestic franchisees.
                                                                                                                                                             “Our domestic franchisees outperformed our Team USA stores in same store sales for the first time in many quarters. This is a … a strong indication that our domestic franchise system is starting to regain some positive sales momentum,” Domino’s Chief Executive David Brandon said.
                                                                                                                                                          Domino’s was not the only company to see bright spots.

GM bondholders haggle

GM/RESTRUCTURINGUnder the bondholders’ deal, they would swap a 51-percent stake in a restructured company for $27 billion in debt, a person with knowledge of the plan tells Reuters Detroit Bureau Chief Kevin Krolicki. The deal would give the United Auto Workers union 41-percent in a new General Motors while the U.S. government would not receive an equity stake, according to the person who asked not to be named because the offer had not yet been submitted.

A committee representing GM bondholders will present the alternative plan to the White House task force overseeing the restructuring of GM and Chrysler later today, the person said. GM said this week it was moving ahead with a plan to offer existing bondholders a 10-percent ownership of the restructured automaker. Under the GM plan, the US government would own a combined 89-percent of the new company.

GM Chief Executive Fritz Henderson said on Monday the automaker would file for bankruptcy if bondholders did not swap out of 90-percent of the $27 billion they are owed.

Nasdaq powers Iraqi stock exchange’s electronic trading

iraqiflagTalk about trying to get a piece of an emerging market.

Nasdaq OMX said on Tuesday that its trading and clearing system was used in the launch last week of electronic trading on the Iraq Stock Exchange, or ISX, as it is known.

It is not the first time U.S. exchanges have partnered with counterparts in the Middle East. Nasdaq operates Nasdaq Dubai, and last year, the New York Stock Exchange bought a 25 percent stake in Doha Securities Market. But it may well be the first time an exchange struck a deal in a war torn country, another sign that Iraq may slowly be returning to a semblance of normalcy.

With 3,800 listed stocks, Nasdaq is well positioned to help out ISX, an embryonic exchange started in 2004 that lists only 91 stocks. About half of those are finance-related companies, such as Bank of Baghdad and Babylon Bank, while others include hotels and agricultural companies. Please click here to see the list.

Sensex gains over 400 points, ICICI jumps

INDIA-STOCKS/The stock market bounced back smartly today, gaining over 400 points to recover all of yesterday’s losses.

Short covering ahead of the derivatives expiry today helped the benchmark’s rise as it closed at 11,403.

ICICI Bank, India’s top private lender, gained nearly 9 percent and ended as the top Sensex gainer. It was followed by JP Associates (up 6.8 percent) and Sterlite Industries (up 6.7 percent).

Draft chills hedgies

The horse-trading is over (for now) and the EU has published its draft directive on regulation for the hedge fund and private equity industries. EU commissioner Charlie McCreevy must be doing something right as his plans have angered parties on both sides of the fence.

EU FlagThe Alternative Investment Management Association is furious after claiming political manouevering has riddden roughshod over its own efforts to drive a “proportionate”  industry-led solution which promised increased transparency. The Party of European Socialists (PES), meanwhile, appears equally frustrated.

PES president Poul Nyrup Rasmussen said: “Just when you thought the greed and excessive risk-taking of the speculators had finally discredited light touch regulation of financial markets, the European Commission has come forward with super-light touch regulation. It’s so light it’s fly-weight.”

Check Out Line: Jones Apparel tries on strong profits for size

jeans1Check out the strong profits Jones Apparel Group tried on in its latest quarter.

The owner of the Jones New York, Nine West and Anne Klein brands easily outperformed analysts’ expectations in the first quarter thanks to cost cutting and rising demand in its wholesale jeans business.

Lazard Capital Markets analyst Todd Slater called it a “high-quality beat.”

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