Tuesday, February 17, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Automakers report on progress. General Motors (GM) and Chrysler must submit preliminary reports today about their progress in cutting costs and their recovery plans, with final plans due March 31. Along with its report, sources say GM, due to receive another $4B from the government today, may seek aid beyond the initial $18B requested because of worsening economic conditions. GM may also shut or sell up to four European plants as it looks to save around $1.5B, while angling for €3B ($3.8B) in loan guarantees from European governments. The reports will be reviewed by a government task force led by Treasury's Geithner and White House economic adviser Lawrence Summers, rather than by an individual 'car czar.'
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  • Sirius-ly close to a deal. Liberty Media (LINTA) is close to finalizing a deal to take a major stake in Sirius XM (SIRI), saving Sirius from bankruptcy. The details are unclear, but sources say Liberty's investment would be "enough to cover a significant chunk of debt owed [by Sirius] this year" in return for just under half the company. Creditors are threatening to oust Mel Karmazin, Sirius' CEO, if the company chooses bankruptcy over a deal with an investor that would allow it to stay solvent. The companies hope to announce an agreement before markets open today.
  • Santander sweetens payoffs. Banco Santander (STD) is sweetening its offer to select private-banking clients who lost money with Madoff. Last month, Santander became the first (and thus far only) bank to offer to return some of the money clients lost in Madoff's scam, offering to repay the original value of investments in the form of preferred stock paying 2% annually. Several clients balked at the terms and Santander is now trying to woo its best clients to sign up for the deal by offering a series of incentives. Among the sweeteners: clients no longer have to maintain a Santander account to be eligible for the preferred-stock swap, and some clients can use the preferred shares as collateral for a loan charging 3% annually.
  • Trump slumps to bankruptcy. Court documents show Trump Entertainment Resorts (TRMP) filed for bankruptcy protection this morning, with assets of around $2.1B and debts of around $1.74B as of December 31. Nine affiliates of the casino operator, including Trump Plaza Associates, Trump Plaza Associates, Trump Marina Associates and Trump Taj Mahal Associates, simultaneously sought protection. Donald Trump and daughter Ivanka both resigned from Trump Entertainment's board late last week. This is Trump Entertainment's third appearance in bankruptcy court.
  • Rio tries to charm angry investors. Rio Tinto (RTP) is stepping up its efforts to win shareholder approval for its $19.5B deal with Chinalco (ACH). Many shareholders are angry at Rio for opting for a cash injection that will dilute shareholder holdings and say a rights issue would be a better way to solve the company's financial problems. Sources say several investors have even invited BHP Billiton (BHP) to suggest "an alternative proposal to buy some of Rio’s assets."
  • Nokia, Qualcomm get friendly. Nokia (NOK) announced it will work with Qualcomm (QCOM) to develop handsets in a move that marks a further warming of ties between the two former rivals. The phones will initially be for the North American market and will work on third generation networks. The companies didn't say when phones for other markets might be developed. Premarket: NOK -5.1% (7:00 ET).
  • Tough times for Japan. The Bank of Japan's policy board will meet this week to discuss creative answers to the country's worsening economic crisis. Recent data showed the country suffered its biggest quarterly contraction since 1974, shrinking 12.7% in Q4 on an annualized basis and 3.3% from the previous quarter, and economists expect further deterioration. Unfortunately for the central bank, it has few options available and "effectively all the Bank of Japan can do is accelerate measures that have already been announced." In a further blow, Japan's finance minister, Shoichi Nakagawa, resigned today following sharp criticism over his apparently drunken state at this weekend's G-7 conference. Nakagawa denies being drunk, but said he is resigning to "take responsibility for the trouble I caused."

Earnings: Tuesday Before Open

  • Daimler (DAI) posts Q4 loss of €1.53B, reversing last year's gain of €1.7B and worse than the €227M loss analysts predicted. Earnings were burdened by a €1.67B writedown related to the sale of Chrysler. Shares -6.8% premarket. (PR)
  • Holly Corp. (HOC): Q4 EPS of $1.01 beats by $0.41. Revenue of $924M (-35.8%) vs. $1.1B. Shares (PR)
  • Teva Pharmaceutical Industries (TEVA): Q4 EPS of $0.76 beats by $0.03. Revenue of $2.85B (+10.6%) vs. $2.9B. Shares -1.8% premarket. (PR)

Today's Markets

  • Asia markets closed broadly down. Nikkei -1.35% to 7,646. Hang Seng -3.8% to 12,945. Shanghai -2.9% to 2,319. BSE -2.9% to 9,035.
  • In Europe at midday, London -2.3%. Paris -2.8%. Frankfurt -2.7%.
  • U.S. futures: Dow -2.0%. S&P -2.3%. Nasdaq -2.6%. Crude -1.1% to $37.08. Gold +2.1% to $962.20.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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