Opening Bell: 08.09.13

Author:
Dealbreaker
Updated:
Jan 14, 2019
Original:
Aug 9, 2013

Investor William Ackman Targets J.C. Penney's CEO (WSJ)
J.C. Penney Co.'s largest shareholder is pressing the board to quickly replace its chief executive, as the battered department-store chain struggles to turn around a deep slide in sales. The move to unseat interim CEO Myron "Mike" Ullman sets up a standoff between hedge fund manager William Ackman, who owns nearly 18% of the company's stock, and a board that was badly burned the last time it went along with his wishes. It was Mr. Ackman who, as a director, lobbied successfully to bring in former Apple Inc. executive Ron Johnson as chief executive in 2011, a choice that set off a disastrous year of plunging sales, diminishing cash reserves and deep job cuts.

SAC to Keep Managing Money While Facing Indictment (DealBook)
Federal prosecutors and the investment firm SAC Capital Advisors agreed on Thursday to a protective order that requires the firm to keep most of its money in its fund while operating under a criminal indictment, according to a person briefed on the case. The order serves a dual purpose, preserving the government’s interest in any money that it might seize from SAC in a forfeiture action, while also allowing the firm to continue running its money management business.

U.S. steps up probe of JPMorgan over Bear mortgage bonds (Reuters)
The U.S. Department of Justice has stepped up a probe in recent weeks into Bear Stearns & Co's mortgage dealings in the run-up to the financial crisis, according to two sources familiar with the situation, raising the possibility that JPMorgan Chase & Co may face yet another case over mortgage bonds. Justice Department lawyers in Washington have been interviewing people linked to Bear Stearns' mortgage securitization business, EMC Mortgage Corp, over sales of mortgage bonds going into the housing crisis, the sources said.

'London Whale' Unlikely to Face Charges (WSJ)
Bruno Iksil, the former trader known as the "London whale," is unlikely to face charges related to bets that backfired into losses of more than $6 billion for J.P. Morgan Chase & Co., according to people close to the matter. ... Mr. Iksil is no longer a focus of investigators, people familiar with the situation said. Investigators still could decide to reverse course and pursue charges against him, but that is seen as unlikely unless new evidence emerges.

What a pizza $#+! Preposterous poll ranks NY 4th (NYP)
New York pizza-lovers got a black eye from users of the travel megasite TripAdvisor, who rated the city’s slices a paltry fourth in the country behind outposts like San Diego and Las Vegas. Perhaps most offensive was the third-place choice of Boston, where reviewers gushed about pies with oddball toppings like shrimp scampi. “Get out of here, that’s crazy! Boston is No. 3?” said Jackson Heights resident Andrew Silverstein, 31, while enjoying lunch at famed Patsy Grimaldi’s new Brooklyn joint, Juliana’s. “I’ve had pizza in Boston, and it was a horrible experience.”

Carlos Slim Makes KPN Move (WSJ)
Mexican telecommunications firm America Movil SAB Friday increased its efforts to build up a long-term presence in Europe, announcing an offer for Royal KPN NV that values the Dutch company at about €10.25 billion ($13.72 billion). America Movil, controlled by Mexican billionaire Carlos Slim, said it aims to acquire a majority stake in KPN, after buying a 29.77% stake in the embattled firm last year. It also bought a minority stake in Telekom Austria AG. Having exhausted its possibilities for acquisitions in Latin America where it is the largest mobile phone operator, America Movil built up stakes in KPN and Telekom Austria to serve as a beachhead into Europe and take on long-time-rival Telefonica in its own backyard.

BlackBerry open to going private, sources say (Reuters)
Chief Executive Thorsten Heins and the company's board is increasingly coming around to the idea that taking BlackBerry private would give them breathing room to fix its problems out of the public eye, the sources said. "There is a change of tone on the board," one of the sources said on Thursday. No deal is imminent, however, and BlackBerry has not launched any kind of a sale process, the sources said.

Chinese bank takes early step towards IPO (FT)
One of China’s top investment banks has taken a step towards going public with China International Capital Corporation preparing the early ground work for an initial public offering to raise capital. Levin Zhu, chief executive of the brokerage, has commissioned an internal study to look into the possibility of listing, said people familiar with the matter. Mr Zhu, the ‘princeling’ son of a powerful former premier, had long rebuffed suggestions that it list, wary of the disclosure requirements. But with the brokerage struggling to keep up with its rivals over the past few years, some in the firm now believe it needs to raise capital to remain in China’s first tier.

Woes of Detroit Hurt Borrowing by Its Neighbors (DealBook)
Two weeks after Detroit declared bankruptcy, cities, counties and other local governments in Michigan are getting a cold shoulder in the municipal bond market. The judgment has been swift and brutal. Borrowing costs are up around the state, in some cases drastically. On Thursday, Saginaw County became the latest casualty when it said it was delaying a $60 million bond sale planned for Friday. It had hoped to put the proceeds into its pension fund. It was the third postponed bond sale in Michigan since Detroit dropped its bombshell on July 18.

German Regulators Said to Review Off-Balance-Sheet Loans (Bloomberg)
The inquiry, led by the Bundesbank and Bafin, will focus on whether banks properly applied accounting rules when making the loans, said one of the people, who asked not to be identified because the investigation hasn’t been made public. The review is likely to take several months, the person added. Regulators are scrutinizing the practice after Bloomberg News reported that Deutsche Bank AG, the country’s biggest financial firm, extended billions of dollars to banks since 2008 and made the loans disappear from its balance sheet even though it is still owed the money. Borrowers included Banca Monte dei Paschi di Siena SpA, which is being bailed out by the Italian government, and state-controlled Banco do Brasil SA.

Wall Street Banks Win Market Share as Europeans Struggle (Bloomberg)
Wall Street banks have gained market share in investment banking and trading from European lenders that are still grappling with a stagnant economy and pressure from regulators to bolster capital. Total revenue posted by the securities units of the top U.S. investment banks rose by 24 percent in the second quarter over the year-earlier period, more than twice the 11 percent gain logged by Europe’s biggest firms, among them Deutsche Bank AG and Barclays Plc, according to data compiled by Bloomberg.

Brazil calls for IMF eurozone rescue programmes revision (FT)
Brazil has called for the IMF-backed rescue programmes for Greece and other southern eurozone countries to be reviewed to make them more economically sustainable. The call from finance minister Guido Mantega came as he sought to explain Brazil’s stance on Greece’s rescue programme after its IMF representative, Paulo Nogueira Batista, abstained from a vote to approve the latest tranche of help for Athens.

Muscle man who couldn't open water bottle at Mets game says security guard asked him for help before cameras started rolling
After becoming the target of ridicule by Mets announcers for his inability to open a water bottle during last weekend’s game against the Kansas City Royals, the muscleman whose battle was captured on video has come forward to set the record straight. “First of all, it was not my water bottle,” Christopher, a 38-year-old lawyer in White Plains, NY, told the Daily News. “It was handed to me by a security guard in the dugout area who was having trouble with it. The guy was much bigger than me, by the way.” Chris, who did not want to share his last name out of privacy concerns expressed by his fiancée, said that neither he, nor the security guard, managed to make the cap so much as budge. ... “I tried as hard as I could,” Chris said. ... “I don’t blame anybody. It is pretty funny,” Chris said. “But a lot of things were presented incorrectly.”

Opening Bell

Chinese Premier Blasts Banks (WSJ) In an evening broadcast on state-run China National Radio, Mr. Wen told an audience of business leaders that China's tightly controlled banking system needs to change. "Let me be frank. Our banks earn profit too easily. Why? Because a small number of large banks have a monopoly," said Mr. Wen, according to the transcript of the program on the broadcaster's website. "To break the monopoly, we must allow private capital to flow into the finance sector." Regulators Expected to Penalize JPMorgan Over Lehman Collapse (NYT) The Commodity Futures Trading Commission is expected this week to file a civil case against JPMorgan. The bank is expected to settle the Lehman matter and pay a fine of approximately $20 million...The Lehman action stems from the questionable treatment of customer money — an issue that has been at the forefront of the recent outcry over MF Global. JPMorgan was also intimately involved in the final days of that brokerage firm. The trading commission is expected to accuse JPMorgan of overextending credit to Lehman for two years leading up to its bankruptcy in 2008, the people briefed on the matter said. Fitch Ditched in Bond Dispute (WSJ) Fitch Group's new chief executive said Credit Suisse Group AG CSGN.VX -1.61% dropped the firm's rating from a mortgage-backed security because Fitch took a harsher view than two rivals that assigned triple-A ratings to the deal. "It was an 11th-hour thing when they decided which agency it would be to publicly rate it," said Paul Taylor, who took over this week as chief executive of Fitch Group, in an interview. "We had a materially different take." Mr. Taylor said Fitch Group, which includes credit-rating firm Fitch Ratings, had been compensated for its rating on the mortgage-backed deal. Fitch shared its differing view with investors after the deal closed Friday, publishing a report critical of Standard & Poor's Ratings Services and DBRS Ltd. for issuing triple-A ratings on the residential-mortgage-backed security issued by Credit Suisse. Fed Signals No Need for More Easing Unless Growth Falters (Bloomberg) “A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below” 2 percent, according to minutes of their March 13 meeting released today in Washington. That contrasts with the assessment at the FOMC’s January meeting in which some Fed officials saw current conditions warranting additional action “before long.” Spanish Bond Sale Fizzles (WSJ) Spain sold a total of €2.589 billion ($3.43 billion) of the 4.4% January 2015, 4.25% October 2016 and 4.85% October 2020 bonds, against its €2.5 billion to €3.5 billion target. Wednesday's sale, brought forward by one day due to a national holiday on Thursday, brought Spain's 2012 bond issuance completion to almost 46% of the €86 billion gross bond issuance target. ‘Apple Fever’ Prompts Predictions of $1 Trillion Value (Bloomberg) “Apple fever is spreading like a wildfire around the world,” Brian White, the Topeka analyst, said in a report that initiated coverage of the company with a buy recommendation. White’s new 12-month target of $1,001 is the highest among the 45 analysts tracked by Bloomberg and represents a 59 percent increase over today’s closing price. He said Apple’s market value will eventually top $1 trillion. £200,000 bar bill trader, arrested in FSA probe (CityAM) Alex Hope, the 23 year-old trader who hit the headlines after spending £125,000 on a single bottle of champagne, has been arrested on suspicion of being involved in an unauthorised foreign exchange trading scheme. Hope, who claims to be a self made foreign exchange trader, became infamous when he ran up a £125,000 bar bill in one evening at a Liverpool nightclub. Most of this was spent on a single 99lb bottle of champagne...Hope's publicist last night confirmed that he had been arrested but said that he denies all allegations. His personal website describes him as “a name to watch out for in the city” and “an expert in the UK economy” who regularly "trades millions." It calls him a “talented, charismatic and thoroughly likeable man." SEC Puts Exchanges on Notice Over Computer-Driven Trades (Bloomberg) “The consequences of a big failure are so severe that the SEC should be paying close attention to these issues,” James Angel, a finance professor at Georgetown University’s business school in Washington, said in an e-mail. “No human system is perfect and eventually something will happen, so they also want policies and procedures in place for catching problems quickly and cleaning up the mess afterwards.” Ready for a rumble: Falcone vs. Icahn (NYP) Falcone, who has funneled a whopping $2.9 billion into LightSquared, is desperate to salvage his shaky investment amid a battle with federal regulators over building out the wireless network. Falcone has said both publicly and privately that bankruptcy is not an option. However, some LightSquared creditors, including Icahn, would rather put the company into bankruptcy as part of a plan that would give them equity stakes in the company and greater control over its future, sources said. The deadline for creditors to decide is fast approaching. Icahn and other owners of LightSquared’s $1.6 billion loan due 2014 have given the company until the end of April before they decide whether to put LightSquared into default for breaching some loan covenants tied to its customer contracts. ADP: 209,000 Jobs Added (WSJ) Private businesses hired at a modest rate in March close to what economists expected, according to a report released Wednesday. Private-sector jobs in the U.S. increased 209,000 last month, according to a national employment report published by payroll processor Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. The gain was just above economists' median expectation of 200,000 contained in a survey done by Dow Jones Newswires. Occupy London Hinders Burrito Sales More Than Banker Bonuses (Bloomberg) The protesters were evicted from St. Paul’s on Feb. 28 and at least one restaurant found its bookings jump back to pre- occupied levels. Sales were down 40 percent to 50 percent while the camp was at St. Paul’s, resulting in two or three staff members losing their jobs, said Pollie Hall, events manager at the Paternoster Chop House. “This isn’t the corporate fat cats they were affecting, it was average working Joes,” said Hall, who said her customers were verbally abused by protesters and she was called a “devil- worshipping mason.” A wedding scheduled at the restaurant on the first day of the protest had to be moved. Mega ‘winner’: $105M tix stashed in this McDonald's (NYP) The Baltimore woman who claims to have one of three winning Mega Millions tickets now says it’s hidden somewhere in the McDonald’s restaurant where she works. Marlinde Wilson, 37, coyly wouldn’t reveal whether she had stashed the slip of paper behind the McFlurry machine or under the all-beef patties. “I’m waiting for things to calm down so I can go back to McDonald’s and get it. The people [at McDonald’s] are too excited. I want their heads to cool down before I go back,” she said.

Opening Bell