U.S. regulators reportedly pressured Citigroup to oust CFO

This post is by Elizabeth Harrow from BloggingStocks

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A report today in Financial Times suggests that “U.S. regulators put direct pressure on Citigroup (NYSE: C) to replace its finance chief only weeks before his surprise departure.” As part of a June-dated agreement with regulatory officials, Citi reportedly agreed to consider replacing CFO Ned Kelly prior to October, says the newspaper. Upon learning of the pact, Kelly tendered his resignation. (He later accepted a new role as the bank’s vice chairman.)

Neither Citigroup nor regulatory officials have publicly confirmed or denied the reports of government meddling. However, it would hardly be the first time that the U.S. has clamped down on Citi, in which it now holds a 34% stake. Earlier this year, the banking issue opted not to accept delivery of a new corporate jet, following a rather strong suggestion from President Obama.

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U.S. regulators reportedly pressured Citigroup to oust CFO originally appeared on BloggingStocks on Wed, 19 Aug 2009 15:00:00 EST. Please see our terms for use of feeds.

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Kissing Cousins: Annex Funds And Top-Up Funds

This post is by WSJ.com: Private Equity Beat from WSJ.com: Private Equity Beat

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Over the past year, we’ve covered a number of firms marketing annex funds in an effort to drum up additional capital to support their portfolio companies through the downturn.

Now, get ready to meet the annex fund’s slightly better dressed cousin, the top-up fund.

At least two firms are in the market with top-up funds and there may be others in the wings. New York-based turnaround investor KPS Capital Partners LP is seeking $800 million to boost the buying power of its third fund, KPS Special Situations III LP, which wrapped up at $1.2 billion in 2007. Meanwhile, London-based buyout shop Graphite Capital Management LLP expects to collect a more modest GBP30 million (approximately $50 million) to augment a GBP555 million pool that it closed in 2007.

Unlike an annex fund, top-up funds invest in new transactions alongside the remaining unspent capital in an earlier fund, and firms have different reasons for wanting to raise them. KPS Capital Partners, for example, told investors that it wants the additional money to take advantage of the “unprecedented opportunities” coming out of the current market downturn.

Graphite tells investors that it needs more money to finance larger equity contributions in deals, now that the debt markets have all but shut down, according to several Graphite investors. The additional capital would also give the firm the flexibility to back deals at the larger end of its size range without exceeding limits, imposed by fund terms, on the amount of equity it can invest in a single transaction, these investors said.

Top-up funds aren’t quite a new concept. Back in late 2005, CVC Capital Partners raised EUR4 billion to top up CVC European Equity Partners IV LP, a EUR6.5 billion buyout fund that CVC had closed earlier that year.

However, it remains to be seen exactly what kind of reception these funds receive from investors, particularly in the current environment.

So far, KPS has rounded up the $800 million it sought, after receiving $1.3 billion worth of investor interest, according to people familar with the fund. The firm was also able to retain its premium 25% carry, one person said.

However, KPS may be more the exception than the rule in the current market.

“It’s case by case,” said one investor that is looking at the KPS fund. “There aren’t that many investors that have money to put into new funds these days, even for good managers.”

Rumor Revived: Should Disney Buy Electronic Arts?

This post is by Eric Savitz from BARRONS.com: Tech Trader Daily - Barron's Online

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goofyLast November, the Wall Street Journal ran a Heard on the Street column that proposed that Disney (DIS) ought to buy Electronic Arts (ERTS). The following month, they revisted the idea.

This morning, Janney Montgomery Scott analyst Tony Wible dusted off the concept in a report in which he launched coverage of Disney with a Buy rating. The logic isn’t that hard to figure out. Disney owns ESPN, the television, radio and Web sports programming juggernaut. Electronic Arts is a huge player in sports video games with its EA Sports line, including the Madden football franchise, Tiger Woods golf games and FIFA soccer games, among many others.

“As more consumers move to video games, we believe it makes strategic and financial sense for DIS to consider buying its way into the vertical to accelerate internal efforts – especially as DIS could cultivate sports league synergies with ESPN, cross licensing opportunities with publishers, and multi-platform advertising benefits while providing a unique competitive advantage that DIS could wield to build barriers around its sports franchise,” he writes.

Wible calculates that buying ERTS at a 30% premium with a combination of cash and debt could mean up to 25% accretion to 2010 DIS earnings, assuming a 5% lift to ERTS revenue and an 11% reduction in ERTS operating costs. For ERTS a 30% premium to yesterday’s close at $19.50 would be $25.35; the report uses a price of $21.20 for ERTS, which would lift the price to $27.56.

I see why the scenario works for Disney, but I have to wonder if the premium Wible theorizes would be high enough to get the deal done; ERTS has a 52-week high a bit north of $50.

Meanwhile, Wible starts Disney with a $30 price target; the stock closed yesterday at $25.06.

ERTS today is down 42 cents, or 2.2%, to $19.08.

Data Dump: IPOs Blazing In The Aftermarket

This post is by Dan Primack from PE Hub Blog: PE-Backed IPOs

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Before going on TV earlier today to discuss IPOs, I asked our data folks to run some aftermarket performance numbers. It was my sense that the typical 2009 IPO had performed well since pricing (and my certainty that most of them priced at the upper ends of their ranges), but I felt it best to be safe.

Through market close yesterday, the average IPO’d company was trading at 23.1% higher than its initial offering price. This includes all 18 offerings that priced on U.S. exchanges, including foreign issuers like Avago.

Venture-backed offerings did even better, trading at 38.1% above their initial offering price. This includes a negative figure for LogMeIn, which has quietly sunk since its first-day pop.

You can download the data run here. Company-by-company listings are on the second sheet.


August 19 2009

This post is by John Jansen from Across the Curve

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Prices of Treasury coupon securities are posting solid gains today but have retreated from the best levels attained earlier in the day. Plunging equities (particularly in Asia) gave the market an overnight bid. Another aspect of the strong opening was news from UK that several policy makers had fought for an even larger measure of QE than that which was announced by the bank of England.

Bonds retreated with the recovery and subsequent gains in the stock market. I am surprised that the strong rebound in equities did not prompt an even deeper sell off in the Treasury market. One participant suggested that many had missed the opportunity to buy 10 year notes in the 3.70s as well as the 3.80s and many of those portfolio managers are buyers on dips.

Another cited the weakness in retail sales last week as well as the decline in consumer confidence as motivating factors behind some of the buying. Others are looking ahead to a huge moth end index extension.

That seems a little specious as before the extension happens the dealer community will have a chance to risk its scarce capital on something in the neighbor hood of $ 110 billion 2 year notes, 5 year notes and 7 year notes.

The dollar took a drubbing versus the Euro and the yen. One trader noted that he had seen a chunky trade from a hedge fund n which the hedge fund sold yen in favor of the Euro.

The dollar has been the safety currency and an analyst in the FX world suggested that the Chinese stock market had fallen too far and too fast and was poised for at least a bounce. That would diminish the safe have appeal of the greenback.

The Euro, I am told, should encounter resistance at 1.4330 and then at the yearly high of 1.4450.

Here is another piece of anomalous behavior: TIPS breakevens are rallying again today. I noted that they closed in the 10 year sector at 177 basis points yesterday. This morning they had narrowed to 172 basis points. With the Treasury market this strong,TIPS should be lagging. They have not and yields on those instruments have declined faster than the yield on the nominal bond.

In the 10 year sector the breakeven is 179 basis points versus the 177 basis point close yesterday.

The yield on the 2 year note has slipped 3 basis points to 0.99 percent. The yield on the 3 year note has declined 4 basis points to 1.52 percent. Each of the remaining benchmark bonds has seen its yield slip 4 basis points,too. The yield on the 5 year note is 2.42 percent and the yield on the 7 year note is 3.08 percent. The yield on the 10 year note is 3.46 percent and the yield on the Long Bond is 4.30 percent.

The 2year/10 year spread is 247 basis points.

The 10 year/30 year spread is 84 basis points.

The 2year/5year/30 year spread is 45 basis points.

Wal-Mart stocks shelves with Hard Candy cosmetics

This post is by Beth Gaston Moon from BloggingStocks

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Hard Candy is coming to Wal-Mart Stores (NYSE: WMT), and I don’t mean Jolly Ranchers. The high-end name in trendy cosmetics, famous for bringing unusual colors to ladies’ palettes in the late 1990s, is now bringing a specially created line to the discount retailer.

Hard Candy products will hit shelves in 3,000 Wal-Mart stores next month, and will be available internationally by the spring. Products, from gold lipstick to bright green eyeliner, will range from $5 to $10 and target women between 18 and 35 (oooh! I’m just under the wire!).

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Wal-Mart stocks shelves with Hard Candy cosmetics originally appeared on BloggingStocks on Wed, 19 Aug 2009 14:30:00 EST. Please see our terms for use of feeds.

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A defence of high frequency trading by NYSE Euronext

This post is by FT Alphaville from FT Alphaville

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This is certainly interesting. On Wednesday, NYSE Euronext’s vice president of corporate communications Ray Pellecchia posted a defence of high frequency trading – flash orders aside – on the exchange’s “Exchanges” blog.

The post was written by Steven Poser, a member of NYSE’s Strategic Market Analysis division….

FDIC To Vote on Private Equity Rules Next Week

This post is by editor from PE Hub News: All News

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WASHINGTON (Reuters) – The Federal Deposit Insurance Corp will meet next week to vote on its policy for private equity investments in failed banks, according to an agenda posted to its website.


The agency will meet Aug. 26 to vote on previously proposed capital requirements and other guidelines for private equity groups seeking to buy failed banks.


The FDIC will also consider whether to extend its transaction account guarantee program and will vote on a rule about the capital treatment of off-balance-sheet entities that will soon be brought back on banks’ books. (Reporting by Karey Wutkowski)


Bad News Bears: The Travails of Journalists Turned Financiers

This post is by Michael Corkery from WSJ.com: Deal Journal

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Sure, it’s tough being a journalist these days. But if you think the news business is in trouble, try being a journalist turned financier. Some of the reporters who have left their ink-stained professions for the high-paying world of finance haven’t had it easy either.


The latest is Rob Speyer, scion of the Tishman Speyer real-estate empire. As the WSJ reported on Wednesday, a former reporter at The New York Observer and New York Daily News, Speyer is being groomed to take over the New York real estate firm, which recently defaulted on debt tied to a big portfolio of office buildings it bought in Washington, D.C. The firm also is under stress from its top-of-the-market purchase of Archstone Smith, a high-end-apartment landlord, and the Manhattan apartment complexes of Peter Cooper Village and Stuyvesant Town. Speyer tells the WSJ that despite some problems, Tishman Speyer has a “good track record” and $2 billion in liquidity.

Here are three other knights of the keyboards who tried their hand at finance:

Steven Rattner, a former New York Times reporter and an editor of Brown University’s student newspaper, surprised a lot of people when he stepped down as President Obama’s car czar, only months after taking the job (and buying a $4.35 million house in Washington, D.C.) But his surprise resignation in July came as New York prosecutors stepped up their investigation of Rattner’s former private-equity firm, Quadrangle Group, about its involvement in the “pay to play” pension scandal. Rattner, who once worked as a Lazard banker, hasn’t been charged with any wrongdoing.

Neil Barsky is a former Wall Street Journal reporter-turned-Morgan Stanley analyst who started the hedge fund Alison Capital in 1998. In May, he closed the fund and returned about $800 million to investors. In 2008, the fund lost 20%, but he said it wasn’t the losses that caused him to shutter the business, but rather the stress of dealing with demanding investors. “When I was a journalist, I could get rewarded in 100 ways, including being on Page 1,’’ Barsky told the New York Times in May. “Wall Street is the other extreme. There is a singular focus on compensation that is simple, it is clean, but ultimately it is unhealthy.”

CNBC commentator and investment manager Ron Insana took a lot heat when he founded a hedge fund in 2006, for being late to the boom. He structured Insana Capital Partners Legends Fund as a fund of funds, meaning that Insana collected investors’ money and then seeded that money into still other funds, extracting a 1.5% management fee along the way. Insana’s fund had trouble out of the gate. In the first 14 months of being up and running, the Standard & Poor’s 500-stock index fell more than 15 percent. Insana closed the fund in the spring of 2008. After a brief stint at Steve Cohen’s S.A.C Capital, he returned to CNBC this year as a part-time analyst.

Time Warner To Provide Short Clips To YouTube

This post is by Eric Savitz from BARRONS.com: Tech Trader Daily - Barron's Online

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Time Warner (TWX) today announced a deal to provide “high quality short-form content” to Google’s (GOOG) YouTube unit, including clips from movies, TV shows and news programs. The deal will include content from cable networks like CNN and Cartoon Network, as well as broadcast programming like Gossip Girl and the Ellen DeGeneres Show. There’s already an HBO channel on YouTube.

The deal allows Time Warner to create separate channels for its participating brands, and to control and sell ad time on YouTube.