Opening Bell: 06.27.13

Author:
Publish date:
Updated on

EU reaches deal on failed banks (FT)
From 2018, the so-called “bail-in” regime can force shareholders, bondholders and some depositors to contribute to the costs of bank failure. Insured deposits under €100,000 are exempt and uninsured deposits of individuals and small companies are given preferential status in the bail-in pecking order. While a minimum bail-in amounting to 8 per cent of total liabilities is mandatory before resolution funds can be used, countries are given more leeway to shield certain creditors from losses in defined circumstances. Under the compromise, after the minimum bail-in is implemented, countries are additionally given an option to dip into resolution funds or state resources to recapitalise the bank and shield other creditors. The intervention is capped at 5 per cent of the bank’s total liabilities and is contingent on Brussels approval.

A.I.G.’s Former Chief Can Pursue Narrower Suit Against U.S. (DealBook)
Mr. Greenberg can continue with claims that shareholders of A.I.G. lost tens of billions of dollars when the government attached onerous terms to the $182 billion rescue, Judge Thomas C. Wheeler of the United States Court of Federal Claims ruled on Wednesday. But the judge threw out so-called derivative claims in which Mr. Greenberg sought to fight on behalf of his former company. In his ruling, Judge Wheeler said the board of A.I.G. had acted in good faith when it decided not to join the lawsuit earlier this year.

SEC Gets Set to Test Policy for Guilt Admissions (WSJ)
Securities and Exchange Commission enforcement chiefs have drawn up a hit list of impending cases where officials intend to test their new policy of requiring admissions of wrongdoing when settling civil charges, according to people close to the agency. The handful of likely target cases include a planned enforcement action against a company alleged to have made illicit profits by charging investors undisclosed markups on top of commissions, one of the people said.

Dirty Secret of French Restaurants Out as Law Seeks Food Origin (Bloomberg)
Daniel Fasquelle wants the world to know the dirty secret in the kitchens of many French restaurants: they don’t cook their own food. The French parliamentarian is pushing a law to restrict the use of the label “restaurant” to establishments that prepare their food from scratch. He reckons many of France’s eateries wouldn’t cut it because they reheat industrially prepared foods. ... Fasquelle says his model is a 1998 law limiting use of the word “boulangerie” to bakeries that make their own dough, which has been credited with an improvement in French bread.

Billionaire Stewart Rahr sends out porn video (NYP)
In the clip we’ve seen, the orange-faced pharmaceutical mogul can be heard murmuring appreciatively and urging the three brunettes to perform sex acts on each other. The short-skirt-wearing women comply with gusto, making out before moving onto more explicit acts, which Rahr, 67, closely films. The song “I Don’t Care, I Love It” can be heard in the background. He then sent out the sex tape to scores of outraged New Yorkers with the message, “What a trip, what a crew!”

Business Feels Pinch of Swift Rate Rise (WSJ)
"It causes me to be a bit more cautious," said Ron DeFeo, the chief executive of Terex Corp. The Westport, Conn.-based company makes cranes, paving equipment and other heavy building machines, a business sensitive to interest rate changes. "I am hesitant because I really don't believe the U.S. economy is in a strong growth mode."

French government warned on budget deficit (FT)
France has little chance of meeting its revised budget targets this year and will need to make a big effort to cut public spending if it is to meet a new deadline of 2015 set by Brussels for bringing the deficit below 3 per cent of output, the country’s national auditor has warned. In a report that underscored the scale of the fiscal task facing President François Hollande’s socialist government, the Cour des Comptes said: “France is hardly halfway towards budgetary consolidation begun in 2011 and the easing of the timetable, justified by economic slowdown, does not allow for any relaxation.”

Business lobby says Italy is hitting ‘rock bottom’ (FT)
Italy’s recession will be deeper than expected and a mild recovery forecast for next year will encounter many obstacles, according to the latest economic outlook by Confindustria. The business association revised down its 2013 GDP estimate for Italy to minus 1.9 per cent from the 1.1 per cent contraction it forecast last December. It cut its 2014 growth forecast to 0.5 per cent from 0.6 per cent.

US rate volatility sparks surge in junk-rated debt yields (FT)
The average yield for lower-quality rated company bonds was on the cusp of rising above 7 per cent on Wednesday for the first time in almost a year, after a jump from 4.95 per cent in early May, according to Barclays data. It leaves the asset class poised to erase its gains for the year after being up nearly 6 per cent just over a month ago. The stunning reversal in sentiment for high-yield US debt has accelerated since late May when Ben Bernanke, chairman of the Federal Reserve, indicated a willingness to consider reducing bond purchases under its policy of quantitative easing.

I.P.O.’s Face Road Blocks as Markets Turn Shaky (DealBook)
HD Supply priced its stock sale at $18 a share late Wednesday, well below its expected range. Tremor priced its offering at $10 a share, below an anticipated range of $11 to $13, according to a person briefed on the matter who spoke on the condition of anonymity because the discussions were private. The CDW Corporation, a technology products retailer, priced its stock at $17, the low end of an already-reduced range. ... [R]ecent jolts in the stock and bond markets have reintroduced some caution into Wall Street, with the Standard & Poor’s 500-stock index down nearly 3 percent over the last month. That has prompted some investors in I.P.O.’s, which are some of the riskiest equity deals around, to push for better terms from sellers and underwriters.

Accounting Change for Insurers Could Make Profit More Volatile (WSJ)
The proposal from the Financial Accounting Standards Board, which sets accounting rules for U.S. companies, is intended to standardize and streamline the way companies account for insurance contracts. ... But under the proposal, insurers would have to measure their income on insurance contracts using assumptions for how much net cash they expect to take in on a policy, balancing the premiums they collect against claims and other costs. Every time companies report earnings, they would have to re-evaluate and possibly change their assumptions. That could lead to greater earnings volatility from period to period.

Fiat chairman says no plan to list Ferrari (Reuters)
"There is absolutely nothing in our mind," Elkann told reporters when asked about a possible Ferrari IPO.

American exec held hostage in Beijing factory released by Chinese workers after agreement reached (AP)
An American boss detained nearly a week by his company's Chinese workers left the Beijing factory Thursday after he and a union representative said the two sides reached agreement in a pay dispute. Chip Starnes, who said he was “saddened" by the experience, told The Associated Press a deal was reached overnight to pay the scores of workers who had demanded severance packages similar to ones given to laid-off co-workers in a phased-out division, even though the company said the remaining workers weren't being laid off.

Yogurt Tastes Different Depending on the Spoon (ABC)
After sampling yogurt with several different spoons, the 35 participants in the Oxford University study voted the yogurt eaten from a lightweight plastic spoon as creamier and more expensive tasting compared to the same yogurt eaten from a heavier plastic spoon. In previous studies the Oxford team found that people prefer food eaten with a heavier silver spoon and in general prefer heavier plates, cups and even wine bottles. However, in this case, subjects were expecting the plastic spoons to feel light. “A spoon that looks light but is heavy as in our most recent study is bad, not because of the weight but likely because of the confounded expectation,” Charles Spence, one of the lead researchers explained.

25 bike cops catch pair having sex in park [Philly.com]
A pack of 25 police officers who were participating in an Upper Darby bicycle school for cops were shocked when they rode up on a man and woman having sex on a bench near the baseball diamond at Naylor's Run Park yesterday afternoon, said Upper Darby Police Superintendent Michael Chitwood. Imagine being arrested by 25 cops," Chitwood said."They were as shocked as the police were." ... Around 4 p.m. yesterday, the bicycle cops were finishing up their daily ride in Naylor's Run Park. They had passed by the kids on swings and the people on the tennis courts and then they rode up to the baseball diamond, where they were startled by a man and woman who were participating in a different kind of aerobic activity, Chitwood said. "There they are, on the first base line. There's a bench, she is bent over the bench and our friend is behind her with his pants down to his ankle," Chitwood said, "banging away." Mind you, it was 92 degrees and 4 o'clock in the afternoon when the cops rolled up on this. Chitwood said there was no one else around before police startled the couple, but as they were arresting them, a teenager did walk by, receiving lessons in both anatomy and criminal justice.

Related

Opening Bell: 3.31.15

Steve Cohen starts tech VC unit; Amish bank is killing it; PIMCO loses popularity contest; "Woman Stabbed Boyfriend In Groin For Eating All Her Salsa"; and more.

Opening Bell: 04.19.12

Morgan Stanley Beats Estimates as Trading Gain Tops Peers (Bloomberg) The net loss of $94 million, or 6 cents a share, compared with profit of $968 million, or 50 cents, a year earlier, the New York-based company said today in a statement. Excluding accounting charges tied to the firm’s own credit spreads, profit was 71 cents a share, topping the 44-cent average estimate of 17 analysts surveyed by Bloomberg. Fixed-income trading revenue surged 34 percent, surpassing the 19 percent gain at Citigroup Inc. and Goldman Sachs Group Inc.’s drop of more than 15 percent, excluding accounting adjustments. Morgan Stanley Chief Executive Officer James Gorman, 53, has set a goal of 15 percent return on equity after lingering pressures from the financial crisis held that measure below 10 percent for five straight years. First-quarter return on equity was 9.2 percent. BofA Profit Falls But Beats Estimates (WSJ) The bank reported a profit of $653 million, compared with a year-earlier profit of $2.05 billion. Per-share earnings, which reflect the payment of preferred dividends, fell to three cents from 17 cents a year ago. The latest quarter included, among other items, a $4.8 billion pretax hit tied to changes in the value of the bank's debt. Excluding accounting changes related to the bank's debt, BofA reported profits of 31 cents per share, compared with the 12 cents estimated by analysts polled by Thomson Reuters. Blackstone First-Quarter Profit Falls on Performance Fees (Bloomberg) Economic net income, a measure of earnings excluding some costs tied to the firm’s 2007 initial public offering, dropped to $432.3 million, or 39 cents a share, from $571 million, or 51 cents, a year earlier, New York-based Blackstone said today in a statement. Analysts had expected earnings of 40 cents a share, according to the average of nine estimates in a Bloomberg survey. Fitch Analyst Reportedly Warns on Dutch Rating (Reuters) "The Dutch are on the edge of a negative rating action," the Telegraph quoted Fitch analyst Chris Pryce, the rating agency's expert on the Netherlands, as saying. Ackman Plans 2013 listing for $4bn fund (FT) Pershing Square is planning a $4bn public flotation for a new fund in January 2013. Bill Ackman intends to float the vehicle, which has already been set up in Guernsey and is known as Pershing Square Holdings, on a "major exchange." PSH will be a shell company and invest all its assets in Pershing Square’s offshore hedge funds. As such, after flotation, it would offer Mr Ackman a source of permanent capital. Man accuses Blackhawks, Cubs of 'stealing his ideas' (Chicago Tribune) Emanuel Kuvakos, 56, was arrested Tuesday night and charged with three counts of misdemeanor harassment by electronic means, police said. Kuvakos sent “a number’’ of emails to Blackhawks CEO John McDonough and to Jim Hendry, the former general manager of the Chicago Cubs, that accused them of “stealing his ideas to win championships,’’ according to a police report. On Saturday, he sent them another email stating that he would keep the Blackhawks from winning the Stanley Cup, police said. While being interviewed by authorities, he claimed he also sent a message to Rocky Wirtz, the Blackhawks owner, saying that if he ever saw Wirtz, he would beat him, according to the police report. Kuvakos, whose nickname is “Mike,” said during a telephone interview with the Chicago Tribune that he has been a freelance sportswriter for 30 years, and claimed he is a sports psychologist and “savant” who works for the Blackhawks, White Sox and the Cubs. Talks With Instagram Suggest a $104 Billion Valuation for Facebook (Dealbook) Facebook bought the photo-sharing service for $1 billion in early April, agreeing to pay roughly 30 percent in cash and 70 percent in stock, according to people briefed on the negotiations who did not want to be identified because the discussions were private. At that level, Facebook is pegging its own stock price at roughly $30 a share. Based on those numbers, the giant social network is valued at north of $75 billion. But Facebook could actually be worth more. During the negotiations with Instagram, the parties framed the deal around a logical assumption: Facebook could soon trade publicly at a much higher market value. As part of the talks, the companies discussed a potential value of about $104 billion for Facebook, these people said. One of Instagram’s founders, Kevin Systrom, first broached the number, one of the people said. At $104 billion, the value is roughly in line with where Facebook has at times traded on the secondary market: shares of the privately held company have been selling for as high as $40. More Americans Than Forecast Filed Weekly Jobless Claims (Bloomberg) Jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period that was higher than initially estimated, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for a drop to 370,000. KKR's Real-Estate Arm Makes Its First Investment (WSJ) The Yorktown Center mall has 1.5 million square feet of retail space and more than 150 stores including a J.C. Penney and a Victoria's Secret. KKR's co-investor in the deal is YTC Pacific, which will manage the property, these people said. As is typical in a private-equity real-estate investment, KKR plans to improve the look of the mall and increase the occupancy rate with an eye toward reselling the property. Facebook Photo Sinks Man Who Stole Police Gas (TSG) A Kentucky man is facing a misdemeanor rap after he siphoned gasoline from a police car, a theft that came to the attention of cops after the perp posted a Facebook photo memorializing the crime. As Michael Baker, 20, was swiping the gas last month from a Jenkins Police Department squad car, he made sure to flip the bird as his girlfriend snapped a picture. While the siphoning photo has been removed from his Facebook page, Baker yesterday updated his 380 friends on his legal problems. “just got out of jail,” he wrote in one post, adding later that “yea lol i went too jail over facebook.” Responding to a friend who had not seen the image before it was yanked, Baker assured, “yea lol u would just have to seen it it was funny as hell tho.”