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In Case You Missed It: News Round-up

martin.jpgContributed by Martin Mitchell of the Corporate Training Group

In case you were too busy to have kept up with all the news, contributor Martin Mitchell has gathered some important market events from last week to help you start this week well informed:

Mergers and Acquisitions

  • The aircraft leasing unit of troubled insurer AIG is about to be sold. Three bids have been submitted for International Lease Finance Corp for just short of $5bn. Two of the consortia are thought to be Thomas H Lee and the Carlyle Group, and Onex and the Greenbriar Equity Group.

  • Private equity firm Kohlberg Kravis Roberts (KKR) is the clear favourite to acquire Oriental Brewery from Anheuser-Busch InBev for around $1.9bn. The Korean beermaker is being sold to help Anheuser-Busch InBev pay down debt.

  • The US Depository Trust and Clearing Corporation (DTCC) has abandoned its attempt to take over Europe’s largest independent clearer LCH.Clearnet. The two boards were unable to agree a basis for consummating the deal. The abandonment will provide a boost to the consortium of 11 banks and interdealer broker Icap that are working towards a bid.

Financial Institutions

  • Bank of America (B of A) retired the business name Countrywide Financial. B of A bought Countrywide in January 2008 for around $4bn, but the name is seen as being synonymous with aggressive mortgage lending. Countrywide will become part of Bank of America Home Loans.

  • Bank of America also faced a shareholder rebellion that saw its current chief executive and chairman, Ken Lewis, lose his chairmanship. Mr Lewis survived a separate ‘no confidence’ vote and will stay on as chief executive.

  • Bank of America and Citigroup need to raise more funds according to the preliminary findings of the US government’s stress tests. Citigroup is planning to sell large businesses, including Japanese brokerage Nikko Cordial, and ask more preferred shareholders to convert into common stock. Bank of America is also investigating the possibility of converting the government’s preferred stock into common stock.

  • Sumitomo Mitsui Financial Group (SMFG) will boost its Japanese retail brokerage activities by buying Nikko Cordial from Citigroup. SMFG has won exclusive negotiating rights after submitting the highest bid in an auction, thought to be around Y500bn ($5.2bn).

  • Goldman Sachs sold $2bn of five-year bonds carrying a 6% interest rate. The bonds were priced to yield 410 basis points over similar Treasuries. Goldman was criticised for selling the bonds after receiving the preliminary results of the US government’s stress tests, but before the test results are made public.

  • Switzerland and the US are discussing a new tax treaty that may result in the US tax authorities dropping its investigations into UBS. The US Internal Revenue Service is currently demanding that UBS provide information about an alleged 52,000 accounts held by Americans, and UBS is arguing any access has to be conducted via a treaty between the two countries.

  • UK private equity group 3i is discussing plans to raise £500m to £700m in a rights issue. Around £400m of the cash raised will be used to pay down some of the group’s £2.1bn of net debt and the remainder will be used to finance new investment.

  • Information provider Bloomberg is planning sustained investment in technology and news operations to gain market share as the financial markets contract.

  • As the lock in period ends, German insurer Allianz and US financial group American Express are expected to cash in on their stakes in Industrial and Commercial Bank of China. Allianz holds nearly 2% and American Express 0.4%, with the combined stakes worth around $2.1bn.

  • A shareholder vote to approve the sale of Fortis Bank to BNP Paribas was approved by 73% of the votes. The sale of 75% of Fortis to BNP will make the French bank the largest in Europe by deposits and give the Belgian government an 11.6% stake in the enlarged entity.

  • Deutsche Bank reported first quarter net income of €1.2bn, beating market expectations. The announcement also included the news that current CEO Josef Ackermann will stay on another 3 years to 2013.

  • Daniel Bouton, the chairman of Societe Generale, finally resigned some 15 months after the ‘rogue trader’ scandal where Jerome Kerviel lost some €4.9bn under Mr Bouton’s watch.

Credit

  • UK sports retailer JJB Sports is about to propose a voluntary arrangement with its creditors, in particular the landlords of its 250 rented stores. The deal is thought to involve paying rent monthly rather than quarterly.

  • French media company Thomson has won a reprieve from its bankers and bondholders. Thomson was about to breach its banking covenants and is to continue discussions on a restructuring of its €2.9bn debt until mid June.

  • The US government will take a majority shareholding in General Motors in its latest restructuring plan. The plan will see GM’s debt lowered by $44bn to $23bn, and the US government and the United Auto Workers union with 89% of the equity. Almost half of the remaining 21% will be in the hands of the holders of $27bn of unsecured bonds, with existing shareholders left with a miniscule stake.

  • Chrysler is undergoing similar surgery. Four lenders (JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup) holding about 70% of the troubled carmaker’s $6.9bn debt agreed in principle to swap all the debt for $2bn in cash. However, other debtholders, including hedge funds, were unwilling to accept 29c in the dollar and Chrysler filed for Chapter 11 bankruptcy protection. The plan will see Chrysler re-emerge from bankruptcy with the United Auto Workers union holding 55%, Fiat holding 20% and the governments of the US and Canada holding the remainder.

Other

  • UK regulator the Financial Services Authority (FSA) fined a hedge fund manager £35,000 and banned him for at least 2 years for mismarking the value of his holdings to cover up losses. The portfolio manager had managed $60m of money for BlueCrest Capital Management and deliberately overvalued his fund by $8.6m. NYSE Euronext’s net income fell by more than 50% in the first quarter. The exchange group and its rival Nasdaq OMX are both battling smaller rivals and giving substantial ‘rebates’ to lure market makers to provide liquidity.

Note : The details contained in this article have been drawn from a daily review of the Financial Times.

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