Holiday Bell: 12.26.13

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Bond Downgrades Escalate With Leverage Highest Since 2007 (Bloomberg)
Credit quality for U.S. companies is showing signs of weakening as issuers from Verizon Communications Inc. (VZ) to Apple Inc. borrow unprecedented amounts of money to expand and reward shareholders. A total of 223 companies had their bond ratings cut by Moody’s Investors Service in the six months ended November, compared with 172 increases, the highest proportion of downgrades since April. Issuers took advantage of borrowing costs that averaged a record-low 3.83 percent this year to sell an unprecedented amount of bonds, with 15 percent of offerings funding shareholder payouts, the most in five years. As the U.S. economy enters its fifth year of expansion after the worst recession in seven decades, Moody’s predicts that companies will be emboldened to seek out acquisitions and increase spending to enrich their owners. That may prompt borrowers to boost leverage, which has risen to the highest level since 2007.

PE firms may pay more than $1B in collusion case (NYP)
It’s going to cost the world’s largest private-equity firms — including KKR and Blackstone — more than $1 billion to settle the bombshell collusion case slowly winding its way through a Boston federal court, The Post has learned. While no deal has been offered, shareholders in eight companies have indicated any future settlement would have to be north of $1 billion, a source close to the situation said. “I think there was a time the plaintiffs would have settled for $1 billion, but that time has passed,” a source said. The value of the eight buyouts is $170 billion. Defendants are not ready to settle, sources said. The shareholders in 2007 sued KKR, Bain Capital, Silver Lake Partners, Blackstone Group, Carlyle Group, TPG Capital and Goldman Sachs Capital Partners and accused them of defrauding shareholders out of billions of dollars by colluding to keep prices artificially low when buying their companies.

Economy Entering New Year on a Roll (WSJ)
A pickup in business investment and robust new-home sales point to an economy on stronger footing heading into the new year. "It's a holly, jolly data Christmas for the economy as all signs point to an accelerating economy," said Joel Naroff, chief economist at Naroff Economic Advisors. Orders for U.S. durable goods—big-ticket items such as cars and aircraft designed to last more than three years—rose 3.5% last month, reversing a decline in October, the Commerce Department said Tuesday. Excluding the volatile transportation category, manufactured-goods orders rose 1.2%, the strongest gain since May.

Jobless Claims in U.S. Fell More Than Forecast Last Week (Bloomberg)
Jobless claims declined by 42,000 to 338,000 in the week ended Dec. 21, a Labor Department report showed today in Washington. The median forecast of 42 economists surveyed by Bloomberg called for a drop to 345,000. Continuing claims rose.

Bug Bites Cut Florida Orange Crop to Lowest in 2 Decades (Bloomberg)
A gnat-sized insect, the Asian citrus psyllid, forced Dean Mixon to replace about 1,000 orange trees in the past two years on the 50-acre Florida farm his grandfather started in the 1930s. The bug spreads a disease called citrus greening, causing fruit to shrink and drop early. “This is the worst we ever had to deal with,” said Mixon, 62. “Young trees can’t develop strong roots, and the quality of the fruit is also affected. We have been able to slow the spread of the disease, but not eradicate it.”

Deputies: Elderly couple's argument over husband's use of dating website puts her in hospital, him in jail (Sentinel)
Edward Aronson, 76, was arrested on battery charges and booked into jail after the scuffle at the couple's Lake Worth home, according to a Palm Beach County Sheriff's Office arrest report. Aronson's 77-year-old wife caught him looking at an unidentified dating site on Saturday night. The two argued about it, and she became upset enough that she slapped him across the face, the report said. Aronson shoved her to the floor. He called 911 about 45 minutes later, and paramedics came to the house in the 8200 block of Abalone Point Boulevard. The woman was taken to Bethesda Hospital West, where a doctor confirmed her right hip was broken, according to the report. A nurse at the West Boynton hospital called the Sheriff's Office when she overheard Aronson on the phone talking about pushing his wife.

U.S. regulator fines Barclays over decade of records failures (WSJ)
Barclays Plc has been fined $3.75 million by a U.S. regulator over its alleged decade-long failure to properly keep electronic records, emails and instant messages. The Financial Industry Regulatory Authority on Thursday said that from 2002 to April 2012, Barclays failed to preserve order data, trade confirmations, account records and other information in a format that prevented their alteration or erasure, known as "Write-Once, Read-Many" or "WORM." It also said Barclays failed to properly retain attachments to some Bloomberg emails from May 2007 to May 2010, and failed to properly retain about 3.3 million Bloomberg instant messages from October 2008 to May 2010. FINRA said that once Barclays' system encountered an attachment to an instant message that it had processed earlier on a given day, it would stop accepting instant messages for that day.

Yahoo Looks Dressed for Excess (WSJ)
Yahoo is dressed like a high-growth company. But it may soon have to revert to humbler garb. Much of the Internet company's value rests on its 24% stake in Alibaba. Investors seeking exposure to the unlisted Chinese e-commerce juggernaut have flocked to Yahoo's shares. These now sport a tech-like multiple of 25.5 times 2014 earnings before interest, taxes, depreciation and amortization, about double that of Google. But when Alibaba completes its initial public offering, expected next year, investors must ask whether Yahoo still is worth owning without its glitzy wardrobe.

Mizuho to Restructure Amid Loan Scandal (Reuters)
The chairman of Mizuho Financial Group, one of the largest Japanese lenders, will step down in March to take responsibility for a scandal over loans to organized crime, and the bank will restructure its board to improve governance, the bank said Thursday. Earlier in the day, Japan’s banking regulator, the Financial Services Agency, issued a second business-improvement order to Mizuho, the country’s second-largest lender, because of its inaction and false reporting over loans it had extended to members of organized criminal groups.

Drunk Santa storms Ride the Ducks bus (Seattle)
An intoxicated Santa ripped down Christmas lights from a Ride the Ducks vessel on Saturday after being refused a free ride, according to Seattle police reports. Ride the Ducks passengers were unloading from the wheeled duck boat after a tour about 6:30 p.m. near Fourth Avenue and Pine Street when a man donning a Santa suit boarded. Employees, smelling booze, asked the man if he had a ticket, reports say. He said he didn’t, but wanted to ride the next trip. Santa refused to leave the boat-bus when employees asked him to leave. Eventually, he ran off the ride and began climbing up the side, tearing down a string of lights. He then ran away, but Westlake Mall security apprehended him. Santa said he didn’t mean to rip the Christmas lights.

Programming Note: We're on an abbreviated, vacation-esque schedule. Opening/closing wraps and brief sprinkles of moral support should we be struck with the urge to reach out and touch you (or one of the founders of KKR decides to pull a drunk Santa).

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SAC Capital Advisors Trader Charged With Fraud (WSJ) Early Friday morning, Federal Bureau of Investigation agents arrested a longtime SAC Capital portfolio manager on insider-trading charges, making him the most senior employee of one of the nation's most prominent hedge funds to be snared in the government's sprawling probe. Michael Steinberg, 40 years old, was led out of his building on New York's Park Avenue in handcuffs around 6 a.m. Mr. Steinberg has worked at Stamford, Conn.-based SAC since 1997 and at its Sigma Capital Management unit in New York since 2003, dealing closely with SAC's billionaire founder Steven A. Cohen. "Michael Steinberg did absolutely nothing wrong," his lawyer, Barry H. Berke, said in a statement Friday. "His trading decisions were based on detailed analysis" and information "he understood had been properly obtained through the types of channels that institutional investors rely upon on a daily basis." Mr. Steinberg was charged Friday with conspiracy to commit securities fraud and four counts of securities fraud, alleging that he made illegal trades in Dell and Nvidia Corp. based on information relayed to him by a Sigma Capital analyst. He faces as much as 20 years in prison on each fraud charge. He is expected to appear in Manhattan federal court later Friday. The Securities and Exchange Commission also separately filed a civil lawsuit against him in Manhattan federal court on Friday. "Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity," a SAC spokesman said Friday. SAC’s Steinberg Arrested as Probe Gets Closer to Cohen (Bloomberg) Jon Horvath, who worked for Steinberg, pleaded guilty in September, admitting that he provided illegal tips to his portfolio manager, who then traded on them...Two days before Dell was set to report second-quarter 2008 earnings, Horvath e-mailed Steinberg and another portfolio manager to warn that the computer maker would miss earnings estimates. “I have a 2nd hand read from someone at the company,” Horvath said in the Aug. 26 e-mail, which provided details on gross margins, expenditures and revenue. “Please keep to yourself as obviously not well known.” Steinberg replied, “Yes normally we would never divulge data like this, so please be discreet. Thanks.” Judge Sullivan concluded in December that e-mail and instant messages he reviewed showed that Steinberg could have known information he used for trades came from insiders. “The e-mails that were relayed to Steinberg do indicate to me that he understands the source of the information that he’s getting and he’s trading on it,” Sullivan wrote. “All of that indicates this is inside information from the company that’s not available anywhere else.” Cypriots Cast Blame As Banks Open (WSJ) President Nicos Anastasiades on Thursday ordered the creation of a three-member committee to investigate the roots of the economic malaise engulfing the island. The committee will be chaired by three former judges from Cyprus's supreme court, including Georgios Pikis, the court's former president and a former member of the International Criminal Court in The Hague. Cyprus Says Threat Contained, No Plan to Leave Euro (Reuters) FYI. BofA Tops Financial-Complaint List (WSJ) Bank of America accounted for the largest share of consumer complaints lodged with the Consumer Financial Protection Bureau over the past 16 months, highlighting the challenges the nation's second-largest bank faces as it tries to simplify its sprawling operations. Illinois Man Charged In 21-Ton Cheese Heist (ABC) Veniamin Balika, 34, of Plainfield, Ill., was accused of stealing 42,000 pounds of Muenster cheese from a Wisconsin cheese company. He was arrested at a Bergen County rest area on the New Jersey Turnpike on Monday, the result of a joint investigation with the Saddle Brook New Jersey Police Department and the New Jersey State Police. “He was charged with receiving stolen property and fencing,” New Jersey State Police Sergeant Adam Grossman told ABCNews.com. Balika allegedly attempted to sell the load of 1,135 cases of cheese at the rest area. Morgan Stanley's Porat Passes On Treasury Post (NYP) Morgan Stanley’s chief financial officer has taken herself out of the running for the No. 2 job at the Treasury Department after months of speculation that she was all but certain to join the Obama administration. The 56-year-old high-profile Wall Streeter, who had been the top candidate to work alongside Treasury Secretary Jack Lew, called the White House late Wednesday to remove her name after fretting about possibly being raked over the coals during a Senate confirmation hearing, sources told The Post. Putin May Cap Golden Parachutes After $100 Million Payout (Bloomberg) President Vladimir Putin proposed limiting severance payments to Russian executives, after a former KGB colleague was granted about $100 million when he stepped down as the head of OAO GMK Norilsk Nickel. While so-called golden parachutes should “stimulate top- class managers” to work efficiently, “sensible limits” are needed, Putin said at a meeting of his People’s Front movement in Rostov-on-Don today. Capping such payments would comply with global standards, Putin said. France's Hollande Hits Companies With 75% Wealth Tax (Reuters) French President Francois Hollande declared on Thursday that companies would have to pay a 75 percent tax on salaries over a million euros after his plan for a "super-tax" on individuals was knocked down by the constitutional court. Deutsche Bank probe finds incomplete data given to prosecutors (Reuters) An internal investigation at Deutsche Bank has found that incomplete data related to a carbon tax fraud probe were handed over to prosecutors, German magazine Der Spiegel said on Friday. The probe is one of several legal headaches with which Germany's biggest lender is grappling. For CEOs, Buyout Game Can Be Second Act (WSJ) Less than two months after agreeing to leave Chesapeake under pressure from shareholders over his free-spending ways, Aubrey McClendon is meeting with private-equity investors and others to discuss potentially teaming up for new ventures, according to several people familiar with the discussions. Mitt Romney Thinks His Grandkids’ Names Are Ridiculous (Daily Intel) "A few months ago we had twins come in, and you can't believe what they're named: Winston and Eleanor. [Laughs.] I mean, it's going back to the glorious days of the thirties and forties, I guess. But these are just darling little infants, and to have such big names on them is really something, although they call them Ellie and Win ... When I heard Winston and Eleanor, I thought, It sounds like two English bulldogs, but they're adorable children."