Monday, March 23, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Public-private partnership debuts. Geithner will unveil the Public Private Investment Program today, detailing how private investors will play a role in removing toxic assets from banks' balance sheets. According to White House officials, the Treasury will initially provide $75B-100B to launch the partnerships, taking the money from the $700B financial rescue package Congress approved in October. To encourage investor participation, the government will shoulder much of the risk while offering investors subsidies. The Treasury, Federal Reserve and FDIC will play a role alongside private investors, with the goal of buying between $500B-$1T of troubled assets. In an op-ed today, Geithner stressed the need for action, warning that "simply hoping for banks to work these assets off over time risks prolonging the crisis in a repeat of the Japanese experience." Geithner will brief on the plan's details at 8:45 ET. (Read Geithner's op-ed in today's WSJ)
  • Sunny deal for Petro-Canada. Suncor Energy (SU) will acquire Petro-Canada (PCZ) for around C$17B ($14B) in stock, bringing together two of Canada's largest oil companies. The deal represents roughly a 25% premium for Petro-Canada and, as an all-stock deal, allows the companies to merge while conserving cash. Sources say the Canadian government, which could veto the deal, has signaled its support. The deal nets Suncor assets in the North Sea, North Africa and Latin America.
  • Daimler get Abu Dhabi investment. Daimler (DAI) will sell €1.95B ($2.7B) of shares to Abu Dhabi's Aabar Investments to raise cash, a marked turnaround from Daimler's announcement last June that it was going to buy back €6B of its own stock. The deal marks a 5% discount to Friday's closing price of €21.34/share. "It’s a win-win situation for both companies," said one analyst, as "it’s an attractive price for Abu Dhabi, and it’s good for Daimler to raise cash and get a long-term investor, because the next two years will be very hard.” The deal will give Aabar a 9.1% stake in Daimler, edging out Kuwait's 6.9% stake to become the largest shareholder.
  • Public, rivals still angry at AIG. Connecticut's attorney general said documents provided by AIG (AIG) show the beleaguered insurance outfit paid out $218M in bonuses, not the $165M it previously disclosed. The news will likely trigger another wave of public outcry over bonuses which AIG 'showered like confetti' on employees. Competitors are getting in on the action too. A group of AIG rivals met with Bernanke, complaining that AIG's federal lifeline has unfairly tilted the commercial-insurance playing field. The rivals want the government to ensure AIG doesn't use its multiple rescue packages to win an advantage, particularly by cutting prices.
  • ING wants bonuses back. ING Group (ING) is asking its top 1,200 managers to give back their 2008 bonuses in what CEO Jan Hommen called 'a moral appeal.' Hommen also said the firm would not pay any employee bonuses in 2009.
  • Two credit unions seized..., Two corporate credit unions were seized Friday by the National Credit Union Administration - U.S. Central Corporate Federal Credit Union, in Lenexa, Kansas, and Western Corporate Federal Credit Union in San Dimas, California. Both were put into conservatorship after failing stress tests that found an “unacceptably high concentration of risk” from mortgage-backed securities. The two had combined assets of $57B. The newly-installed CEO of U.S. Central Corporate Federal Credit Union said he is considering a variety of options, including the creation of a 'bad bank,' to deal with troubled mortgage assets. (Read the NCUA statement)
  • ...and three more bank failures. Colorado National Bank of Colorado Springs was closed Friday night, and Herring Bank of Texas will assume its deposits. The failure will cost the FDIC around $9M. Teambank of Paola, Kansas also failed. Its deposits will be taken over by Great Southern Bank, of Missouri. Teambank had over $1B in assets and deposits, and its failure will cost the FDIC about $98M. FirstCity Bank, based in Stockbridge, Georgia, was closed by regulators, who said they will mail checks to insured depositors this morning. The failure will cost the FDIC around $100M. The number of bank failures this year has reached 20.
  • Skype goes corporate. Looking for new sources of revenue, Skype (EBAY) is pushing into the corporate market. Skype plans to announce today 'Skype for SIP,' a version of its internet telephony software that connects to corporate phone systems, and will begin testing the program with a limited number of companies. Skype will initially charge around 2.1 cents per minute for calls to cellphones and fixed lines, while calls from computers to phone systems will remain free.

Earnings: Monday Before Open

  • Tiffany & Co. (TIF): Q4 EPS of $0.85 beats by $0.05. Revenue of $841.2M (-20.1%) vs. $838.0M. (PR)

Today's Markets

  • Broad gains in Asia Monday. Nikkei +3.39% to 8,216. Hang Seng +4.78% to 13,447. Shanghai +1.95% to 2,325. BSE +5.1% to 9,424.
  • Europe shares gapped up after Asia's strong showing and are carrying gains into midday. London +1.7%. Paris +1.4%. Frankfurt +2%.
  • In a reversal of Friday's weakness, U.S. stock futures are significantly higher overnight, tracking overseas gains. Dow +2.8% to 7420. S&P +3% to 787. Nasdaq +2.6%. Crude +1.1% to $52.62. Gold -0.3% to $953.

Monday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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