Opening Bell: 09.15.14 - Dealbreaker

Opening Bell: 09.15.14

Author:
Updated:
Original:

Bank adviser pay catching up with traders (FT)
Senior advisory bankers’ pay in London has risen almost on to a par with traditionally higher-earning traders, underlining the shifting fortunes of these distinct businesses within investment banks. UK-based managing directors working on deals and capital raisings have seen total pay rise by a fifth to an average of £586,000 last year, according to data compiled for the Financial Times by Emolument, a pay comparison group. By contrast, senior traders have suffered an average 13 per cent cut to £602,000 after a sharp drop in bonuses, the self-reported numbers from hundreds of staff at 10 European and US investment banks show. It puts a spotlight on the resurgent clout of advisory bankers, after a dearth of dealmaking in the wake of the financial crisis placed them squarely in the shadows of profit-churning bond traders. A sharp increase in takeovers as well as debt and equity issuance by companies and other clients since last year has reversed the fortunes of corporate financiers. At the same time, their colleagues on trading floors have seen profit opportunities squeezed by tighter regulation, lower trading volatility, a ban on proprietary trading, the move towards electronic trading and several manipulation scandals.

As Investors Salivate, Alibaba May Raise Price of I.P.O. (Dealbook)
Only five days into the company’s global journey to promote itself to prospective buyers, its underwriters have told their sales staffs that they plan to close orders for the stock sale by Wednesday, people briefed on the matter said on Friday. And with that intense interest — shown by the huge lines of investors who waited to spend even an hour with Alibaba’s senior management — comes the possibility that the company’s bankers may eventually raise the price range for the offering, pushing it past a fund-raising goal of $21.1 billion. That could make Alibaba the biggest initial offering in history, surpassing the $22.1 billion that the Agricultural Bank of China raised four years ago. But the people briefed on the matter, who spoke on the condition of anonymity, cautioned that no plans had been set and that the price range might remain within the already disclosed $60 to $66 a share, which values the company at roughly $163 billion at the high end. A final decision will be made Thursday, when underwriters are expected to price the offering after examining its order book. Alibaba would then begin trading the next day on the New York Stock Exchange.

Samsung accuses rival LG exec of vandalizing washing machines (Reuters)
Samsung Electronics Co Ltd has accused the head of rival LG Electronics Inc's home appliances business of damaging Samsung washing machines at retail stores in Germany and asked Seoul prosecutors to investigate. Samsung, in a statement on Sunday, said it asked the Seoul Central District Prosecutors' Office to investigate LG employees who the company says were seen deliberately destroying several of its premium washing machines on display at two stores earlier this month ahead of the IFA electronics show in Berlin. "It is very unfortunate that Samsung had to request that a high-ranking executive be investigated by the nation's legal authorities, but this was inevitable, as we concluded that we had to get to the bottom of this incident," Samsung said.

Brazil's Batista Faces Criminal Charges (WSJ)
When Brazil's best-known businessman was hit with criminal charges over the weekend involving billions of dollars in soured deals, he didn't appear to miss a beat. Instead, Eike Batista was roaming the world scouting for business opportunities. "Yesterday he was in Qatar," said one of Mr. Batista's lawyers, Sergio Bermudes, in a telephone interview Sunday. "It was a business trip." The attorney said Mr. Batista had also planned to go to South Korea and would return to Brazil probably by Friday. When the entrepreneur lands, he will be facing one of the biggest challenges of his life. Prosecutors in Rio de Janeiro last week charged Mr. Batista with financial crimes and requested the freezing of 1.5 billion Brazilian reais ($641 million) in assets belonging to the businessman and people close to him, according to documents posted on the public prosecutor's website on Saturday. Federal officials accuse Mr. Batista of manipulating financial markets and taking advantage of privileged information when selling shares of his distressed oil company, formerly known as OGX Petróleo e Gás Participações SA.

Austrian billionaire Richard Lugner, 81, marries 24-year-old Playboy model (NYDN)
Richard Lugner, 81, tied the knot with fiancee Cathy Schmitz at a palace on Saturday, claiming "hopefully, this time it's the right thing.” The pair have been dating since February. Prior to the pair getting hitched, Lugner said "apart from the age difference, everything fits," reported The Local.

Palin's Camp Weighs In: We Brawled, But Someone Else Started It (TPM)
The website Real Clear Politics spoke to what it described as a "source close to the Palin family" who offered the Palins' side of the physical, bloody altercation that took place on Sept. 6 at a house in Anchorage. The article said the source's description "diverge[d] significantly" from what had been reported elsewhere, but the anonymous portrayal essentially confirmed the broad outlines of the fight, including that Sarah Palin herself was present and was shouting as it all went down. On Friday, TPM published a detailed account of the brawl based on reports from several news outlets as well as our own reporting. Two named eyewitnesses reported seeing the former Alaska governor at the party, including one who said he saw Palin's husband Todd, son Track, and daughter Bristol were involved in multiple melees with other party guests that night. One anonymous source said Sarah Palin was "nearly crawling on top of people" while screaming and shouting profanities. The source who spoke to Real Clear Politics for its article on Saturday said, however, there were a few details the Palin family saw differently, including how the fighting began. The RCP source confirmed that Sarah Palin's son, Track Palin, was the first family member involved in the fight, and Todd Palin, Sarah's husband, was the next member to intervene. But the source said Track Palin was not the one who picked a fight with his sister Willow Palin's ex-boyfriend. The former boyfriend allegedly "tried to get in" the Palin's stretch Hummer limousine after some "questionable behavior," leading Track to get involved, according to the source. The source said four men then began fighting with Track, after which Todd Palin intervened and ended up bleeding from the fight. The source also said Track Palin ended up with four cracked ribs. While RCP's account was vague on some details, previous reports said there were at least two separate fights at the party that involved the Palins. One of the altercations, according to eyewitness Eric Thompson, who spoke to multiple news outlets, involved Sarah Palin's daughter, Bristol Palin, who was seen punching the host of the party multiple times.

Most Americans Are Single, and They're Changing the Economy (BusinessWeek)
According to a new report from economist Edward Yardeni, more than half of Americans aren’t married, up from 37 percent in 1976. He reckons a nation of singletons will change the structure of the economy because it means fewer parents and homeowners. Whether this is good or bad depends: Single people can be more flexible, which means fewer economic distortions and a more dynamic labor market, but it might make the economy as a whole riskier...There are economic benefits to having more singles in the workforce. Singles are less likely to own a home or have kids, and without those tethers, singles can be more mobile when it comes to their career, able to move or change jobs as the demand for labor shifts. Without a family to support, they may be more inclined to try entrepreneurship; without children, there are fewer fixed expenses and it’s easier to cut back if need be. Single households also face more downside risks, or at least different ones. With a single source of income (and health insurance), single households are more sensitive to job loss, injury, or illness. Their ability to cut spending, while good for the personal balance sheet, could make the economy more sensitive on the whole. And fewer children means both fewer future taxpayers able to fund entitlement spending and potentially less of a safety net for singles as they age.

Investors Bet on Japanese Stocks Even as Economy Struggles (WSJ)
Even as Japan's economy struggles to gain traction, investors are betting that the country's stocks will jump higher as the market attracts more cash and company profits grow. The benchmark Nikkei Stock Average has rallied more than 14% from this year's low in April to near an eight-month high, and is within 2.1% of entering positive territory for the year. The most recent leg of the rally has been fueled partly by speculation that Japan's $1.2 trillion public pension fund may invest more money in stocks after a staunch advocate of such a move was appointed this month to the cabinet. A slide in the yen to a six-year low, after trading in a narrow range for most of the year, is also working in favor of Japanese exporters who dominate the benchmark stock index. Most investors, though, point to Japanese corporate profits, which have reached the highest level since the global financial crisis as global demand for the country's products grows. Also, Prime Minister Shinzo Abe has been pushing companies to step up oversight of their management to improve how they allocate resources, a further boon for stock prices.

Hertz and Carl Icahn Make Peace (BusinessWeek)
The rental car chain agreed on Thursday to give Icahn—who has amassed an 8.5 percent stake in the company—three board seats and to let two of those new independent directors help select its new chief executive officer. Hertz CEO Mark Frissora resigned on Sept. 8, citing personal reasons; Icahn and another large Hertz investor, Fir Tree Partners, had called for Hertz directors to replace its chief executive. Fir Tree, a New York hedge fund that owns about 3 percent of the company, had called for Frissora’s ouster due to “serious missteps” during his eight years in charge. The company named Brian MacDonald, the head of its equipment rental business, to be interim CEO pending a search for Frissora’s successor.

Trial Over AIG Bailout Carries Risk for Insurer (WSJ)
While American International Group has fully repaid taxpayers for the government bailout it received six years ago this week, a $40 billion question mark—and the shadow of a former boss—still hang over the company. The problem lies in the fine print of the bailout agreement: AIG indemnified the Federal Reserve Bank of New York for any payouts from litigation tied to the emergency loans. That detail hasn't gotten much attention amid AIG's lengthy rehabilitation, but it looms larger by the day. Later this month, an investment and charitable firm run by former AIG boss Maurice "Hank" Greenberg goes to court seeking more than $40 billion for losses that he says his firm and other shareholders suffered in the bailout. The firm, Starr International Co., alleges in the lawsuit that the government took the shareholders' property in violation of the U.S. constitution.

HSBC to Pay $550 Million to End Mortgage-Related Suit (NYT)
HSBC agreed on Friday to pay $550 million to settle a lawsuit filed in 2011 by the Federal Housing Finance Agency, the federal regulator that oversees the government’s two mortgage finance companies, over troubled mortgage-backed securities sold in the lead-up to the financial crisis. The housing finance agency has been pursuing litigation against a series of financial firms seeking relief for some of the big losses suffered by Fannie Mae and Freddie Mac after the housing market collapsed in 2008. HSBC North America Holdings, the American unit of the London-based lender, sold mortgage-backed securities to Fannie Mae and Freddie Mac from 2005 to 2007. Those securities declined in value after homeowners defaulted on their loans.

Officials beg strip club owner, preacher to end feud (AP)
Officials are pleading for a pastor and an Ohio strip club owner to stop weekly protesting of each other’s establishments over a years-long feud...Pastor Bill Dunfee and men from the Warsaw church have protested outside the Foxhole North strip club in New Castle. The business has responded with Sunday morning protests outside the church, including a recent one by topless dancers. The letter [to Dunfee and strip club owner Thomas George, signed by the city law director, the county prosecutor and the sheriff] says the feud is straining local law enforcement and hurting the community but acknowledges they can’t legally be stopped from protesting.

Related

Opening Bell: 8.3.15

Greek financial markets reopen; Alexis Tsipras could use a hand here; Puerto Rico; Ichan; Batista; "Ohio man must spend two days in jail for petting zoo cougars"; and more.

Opening Bell: 11.17.15

China mulls super-regulator; Soros dumps Herbalife; Critics slam plan for new stock exchange; "Shooting Suspect Snorts Heroin Pulled From Butt While in Custody"; and more.

Opening Bell: 10.04.12

France’s LBO Firms See ‘Death’ From Hollande’s 75% Carry Tax (Bloomberg) Hollande, who released his first annual budget on Sept. 28, plans to tax fund managers’ share of the profit from their investments, known as carried interest, at a rate of as much as 75 percent, part of a wider effort to increase taxes on the wealthy and narrow the country’s deficit. France also plans to as much as double taxes on capital gains and restrict the amount of debt interest payments a company can deduct from its taxable income, a measure that will reduce returns on leveraged buyouts. Facebook Test Turns Users Into Advertisers (FT) Facebook is testing a new product in the US that allows ordinary users to pay to promote their own status updates, marking a shift in the social network’s willingness to charge its users for a core service. The product has potential to generate revenues, analysts said, but could also threaten the organic feel of the site as people pay to market their own social lives. Mark Zuckerberg Confirms: 'I wear the same thing everyday' (DL) "I mean, I wear the same thing every day, right? I mean, it's literally, if you could see my closet," Zuckerberg starts to explain, as Lauer asks if he owns 12 of the same gray t-shirt. "Maybe about 20," Zuckerberg admits, somewhere between discussing the future of Facebook, his daily routine, the iPhone 5, and his wedding to college sweetheart Priscilla Chan last May. The Facebook CEO says that he doesn't really have much in his closet — it's mainly used by his wife, who graduated from medical school at the University of California at San Francisco shortly before their marriage. Instead, Zuckerberg's identical t-shirt collection lives in the one drawer he's allotted. Tiger Global Up 22.4 Percent (Reuters) Tiger Global, one of the world's best-performing hedge funds, ended the third quarter with strong gains, leaving the fund up 22.4 percent for the year, two people familiar with the numbers said on Wednesday. The roughly $6 billion fund, run by Chase Coleman and Feroz Dewan, has been the darling of the investment community for its string of strong returns at a time when the average hedge fund is delivering only low single-digit returns. In 2011, when most funds nursed losses, Tiger Global captured headlines with a 45 percent gain for the year after having made a good chunk of money on the short side, people familiar with the portfolio said. 'Dark Pool' And SEC Settle (WSJ) The Securities and Exchange Commission alleged in its order that Boston-based broker-dealer eBX LLC allowed the third-party operator of its trading platform, called LeveL ATS, to use details on client orders, including the stocks involved and whether they were buy or sell orders, to its own advantage. That operator is Lava Trading, an electronic-trading unit of Citigroup, according to eBX. eBX agreed to pay $800,000 to settle the SEC's allegations. It did so without admitting or denying wrongdoing. Mohamed El-Erian: No corner offices at PIMCO (Fortune) "It doesn't matter whether you're CEO or whether you're an associate, you have the same size office. No corner offices. Just a conference room. And then I knew that I had made the right decision when my very first outing with PIMCO, I had come from the IMF, 15 years working on emerging markets. I had a swagger, I thought I knew what I was talking about. I put forward my view, and this summer intern felt safe enough to get up and say, "You know what? Mohamed is wrong and this is why he's wrong." The fact that PIMCO had created this safe zone where a summer intern could get up and question someone who was supposed to be an expert confirmed to me that I was in the right place." Bank-Friendly U.S. Regulator Shifts Focus to Revamp Reputation (Bloomberg) In a stately hearing room stuffed with senators and bankers, Thomas Curry began his apologies. His agency should have stopped a major bank from helping drug cartels launder cash. The violations went on for years while his agency was overly passive. “I deeply regret we did not act sooner,” he said. Curry had been on the job for just over three months on that day in July, so the mistakes hadn’t been made on his watch. His apologies were less a confession than a signal the new Comptroller of the Currency -- long seen as the most bank- friendly of U.S. regulators -- was changing course. “I’m not interested in what people thought about in the past,” Curry said in an interview. “My focus is going forward.” Since he took over in March, at least two key staff members closely associated with the agency’s pro-industry stance have departed, notably chief counsel Julie Williams. Williams, a 19- year OCC veteran, was known for helping nationally chartered banks resist state regulation by arguing they were preempted by often less-stringent federal rules. Curry has also raised the profile of consumer protection and shifted focus toward “operational risk” -- the idea that bank practices and management can pose as much of a threat to safety and soundness as external forces. Argentine Navy Ship Seized In Asset Fight (FT) An Argentine naval vessel crewed by more than 200 sailors has been seized in Ghana as part of an attempt by the US hedge fund Elliott Capital Management to collect on bonds on which Buenos Aires defaulted in 2001. A Ghanaian court ordered an injunction and interim preservation order against the ARA Libertad, a 100-metre long tall ship, following an application by Elliott subsidiary NML Capital on Tuesday. The hedge fund, run by the US billionaire Paul Singer, has been closely monitoring the course of the Libertad, according to sources familiar with the firm. Elliott had been waiting for the ship to stop in a port where it would have a chance to enforce legal judgments previously awarded by UK and US courts. The hedge fund declined to comment. Argentina slammed the interception of the Libertad as a “trick which these unscrupulous financiers” had pulled, adding that it “violates the Vienna Convention on diplomatic immunity”. Morgan Stanley commodities talks with Qatar hit snag (Reuters) Morgan Stanley's talks with Qatar's sovereign wealth fund over the sale of its commodities business have run into difficulty, and the deal may need to be reworked if it is to go ahead, banking sources said. One of the top banks in commodity trading over the past 30 years, Morgan Stanley has been in discussion for more than a year with Qatar over the sale of at least a majority stake in the energy-focused trading business, the bankers said. "There have been some differences, and Qatar is a bit lukewarm about it," one said. "It's not dead yet but definitely not imminent." Maple syrup stolen in Quebec seized by police in New Brunswick (The Star) Quebec police have seized between 700 and 800 barrels of maple syrup from a New Brunswick exporter, linking the drums to August’s massive heist of the sweet stuff. Étienne St-Pierre, owner of S.K. Exports in Kedgwick, N.B., told the Star that police executed a search warrant Sept. 26 and hauled away the barrels. “They said they were searching to find some stolen drums from Quebec,” he said. “It was a surprise. That was the first news I received.” St-Pierre said each barrel weighs about 270 kilograms and holds 170 litres of syrup, meaning police seized at least 119,000 litres of gooey Quebec gold. A spokesperson for the Sûreté du Québec, Sgt. Bruno Beaulieu, confirmed a search warrant had been executed in Kedgwick but said he could not comment on the investigation. The Federation of Quebec Maple Syrup Producers has never revealed the amount of syrup stolen from its secure St-Louis-de-Blandford, Que. warehouse in August. The facility held about 3.75 million litres of syrup, enough to fill one and a half Olympic swimming pools. St-Pierre said he obtained the barrels from a regular Quebec supplier, who he refused to identify.