Slow-Jammin the News: California Economy Edition
Happy Hump Day. Let's ease into it with some slow jams, courtesy of Jimmy Fallon and The Roots. Last night was the first time in about a year I caught a network late-night show, and, as much as this pains me to say, this wasn't that bad (considering Jimmy Fallon's involvement). Of course, he's not saying anything new: even the Yahoo! Finance crowd knows California's economy is in the toilet.
Scramble to Hedge Commodity Exposure (FT)
Because so many of firms have shown themselves adept at hedging in the past. Oh well, at least this'll juice profits at all the ibank derivatives desks (now, and when they have to prematurely unwind/cover when their "hedges" inevitably come back to haunt them). This is to say nothing of the lessons learned in Hedging 101, but who am I to throw a wrench in the gears of commerce?
Companies are hedging a growing proportion of their commodities exposure as they grapple with soaring levels of volatility and risk, just as their profits suffer amid the economic crisis, according to a report published on Tuesday. Greenwich Associates, the US financial consultancy, said that 55 per cent of the companies it polled in North America, Europe and Asia hedged their commodities exposure last year, up from 45 per cent in 2007. At the same time, more companies are elevating their final decisions about hedging to their chief executive or board of directors, in a sign of the growing importance of the activity.
Commodities bankers said the trend of increased hedging had continued this year as raw materials prices bounced from their lows and users, such as airlines and shipping companies, rushed to buy protection against further price increases. Craig Smyth, Citigroup's vice-president of commodities in Asia, on Monday said that the bank's commodities hedging business had risen sharply during this quarter compared with January-March, as oil and other commodities prices surged. "We have seen more of our customers coming to hedge this quarter than the previous one ... we have seen a 200-300 per cent increase in hedging," he said
Appeals Court to Hear Challenge to Chrysler-Fiat Deal (WSJ)
Over/under on how many weeks (er, days) this delays the inevitable?
The U.S. federal court late on Tuesday agreed to hear an appeal related to the bankruptcy of Chrysler LLC, potentially extending the auto maker's stay in Chapter 11 reorganization by at least several days. The U.S. Court of Appeals for the Second Circuit said it would hear an appeal by a group of Indiana pension funds challenging the sale of most of Chrysler's assets to the company's proposed partner, Fiat SpA of Italy.
The pension funds hold about $42 million of Chrysler's $6.9 billion in secured debt. Secured debt is backed by the borrowers assets and normally puts the lender at the front of the line for repayment.
The pension funds are arguing that the sale to Fiat is unconstitutional. They say are entitled to full repayment of the money they are owed before Chrysler's assets can be sold. The Indiana funds bought the Chrysler debt at 43 cents on the dollar in July 2008. Most other secured lenders have agreed to the restructuring plan Chrysler has proposed in bankruptcy court that will pay them 29 cents on the dollar for their debt.
Oral arguments in the appeal will begin Friday, according to the court's order.
JPMorgan Said to Break Up Hedge Fund, Buyout Unit (Bloomberg)
After closing down its prop group last year, now this. I wonder if this is not just basically a reorganization with little actual effect on business, or if they're really scaling back their prop business for real. Anyone?
JPMorgan Chase & Co. is disbanding an investment-banking unit that wagers the company's money on hedge funds, leveraged buyouts and real estate, two people familiar with the plan said.
The second-largest U.S. bank by assets will shut down the principal investment management group's hedge-fund business and its private-equity division, except for a team that focuses on Asia, said the people, who asked not to be identified because the decision hasn't been publicly disclosed. Most of the group's 150 employees will move to other parts of the firm.
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