JDfn Daily Digest - September 15, 2008
Lehman Brothers (LEH), burdened by $60 billion in soured real-estate holdings, filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm failed. Meanwhile, Bank of America Corp. (BAC) said it is snapping up Merrill Lynch & Co. Inc. (MER) in a $50 billion all-stock transaction.
The Federal Reserve, acting as Lehman Brothers was heading toward a bankruptcy filing, expanded its loan programs and said it would accept a broader range of collateral for its loans. Fed Chairman Ben S. Bernanke said the initiatives, with commitments from the private sector as well, are designed "to mitigate the potential risks and disruptions to markets."
Washington Mutual Inc. (WM), the biggest U.S. savings and loan, fell 27 percent in early New York trading on concern it won't be able to find new capital or a buyer to keep the lender in business. The bank’s 75 percent slide in market value to $4.7 billion since March leaves the lender valued at just above what JPMorgan Chase & Co. was willing to pay at the time to buy the struggling lender.
American International Group Inc. (AIG) is seeking a $40 billion bridge loan from the Federal Reserve. The company is scrambling to avoid a threatened downgrade from credit-rating agencies. There are reports that AIG may survive only 48 to 72 hours after such a downgrade.
A group of global banks and securities firms announced a $70 billion loan program that financial companies can tap to help ease a credit shortage that threatens global financial markets. The pool of money will act as a signal to the marketplace that banks, brokerages, and other financial companies can lean on the fund to take care of borrowing needs.
Wilbur Ross, founder of private equity firm WL Ross & Co LLC, expects as many as 1,000 U.S. bank closures in the coming months. The billionaire investor, who made his fortune making investments on distressed industries, said the closures will create opportunities for investors, adding that he is looking at picking up smaller distressed institutions.
December-dated Fed fund futures rose sharply, pricing in a quarter-point rate after the Lehman Brothers bankruptcy. The September contracts shows a greater chance of a rate cut than they had previously at tomorrow’s meeting but odds are still in favor of no change from 2% levels.
According to the AAA, gasoline prices rose nearly 5 cents a gallon, bringing the total increase in the three days since Hurricane Ike slammed into Texas to almost 17 cents. Eleven states have gas prices above $4 a gallon in the AAA survey, led by Alaska at $4.371.
Manufacturing activity declined in the New York state in early September. The Empire State index dropped to negative 7.4 in September from 2.8 in August, indicating more firms said business was worsening than said it was improving. The new orders index rose to 4.4, while the shipments index rose to 0.6. The inventories index dropped to negative 2.8.
Led by a big drop in auto production, industrial output plunged 1.1% in August. The decline was much worse than the 0.3% decline expected by economists. Industrial production has now fallen 1.5% in the past year and 2% since the peak in January. Falling motor vehicle production accounted for about half the drop in output in August.
Walgreen Co. (WAG) has made an offer to buy Longs Drug Stores Corp. (LDG) for $2.8 billion, hoping to unravel an offer from CVS Caremark Corp. (CVS) that Longs had already accepted.
Electronic Arts Inc. (ERTS) announced that it ended talks to buy smaller rival Take-Two Interactive Software Inc. (TTWO), best known for the "Grand Theft Auto" series of games. EA, the publisher of games such as "Madden NFL 09" and "Spore," said it decided not to make an offer to buy Take-Two.
BASF SE said it would buy Swiss specialty chemicals maker Ciba Holding for 6.1 billion Swiss francs, or $5.35 billion, in cash -- a move that augments the German company's presence worldwide.
Scheduled U.S. Economic Reports (Tuesday)
Retail Chain Index (Week of Sep 13th), Consumer Price Index (Aug), Home Builders Index (Aug), FOMC Announcement (2:15 pm, Eastern Time)
In Earnings News
Panera Bread Co. (PNRA), which operates bakery-cafes, reaffirmed third-quarter guidance. The company continues to expect earnings of 42 cents to 44 cents per share, while analysts, on average, expect a profit of 43 cents per share
Titan Machinery Inc. (TITN) reported quarterly revenue increased to $134.9 million from revenue of $85.8 million for the second quarter of the prior year. Income from operations for the fiscal second quarter increased to $6.0 million compared to $3.9 million in the same period a year ago.
SteelCloud, Inc. (SCLD) reported third quarter revenues were $2.6 million in fiscal 2008 compared to approximately $4.0 million in the third quarter in 2007. Revenues for period increased 27% to approximately $16.8 million.
Mass Financial Corp. (MFCAF) reported total revenues of $305.9 million with net income of $25.6 million or $1.12 per diluted share, compared to total revenues of $265.9 million with net income of $34.0 million or $1.46 per diluted share for the first six months of 2007.
Scheduled Earnings Reports (Tuesday)
Best Buy, Darden Restaurants, Adobe Systems, Goldman Sachs
Stocks in the News
Biolase (BLTI) filed a countersuit in the U.S. District Court for the Southern District of Indiana, charging National Laser Technology of Indianapolis with violating Food and Drug Administration regulations, infringing on corporate trademarks.
General Motors Corp (GM) will increase its support for Delphi Corp. (DPHIQ) to about $10.6 billion from $6 billion following a revised settlement and restructuring agreement.
Superior Well Services (SWSI) agreed to pay $270 million cash for the pressure pumping, fluid logistics and completion, production and rental tools lines of closely held Diamondback Holdings LLC.
Continental Airlines’ (CAL) board named President Jeff Smisek to the additional post of chief operating officer.
Health Management Associates (HMA) named Gary D. Newsome president and chief executive officer and a director.
The Federal Reserve, acting as Lehman Brothers was heading toward a bankruptcy filing, expanded its loan programs and said it would accept a broader range of collateral for its loans. Fed Chairman Ben S. Bernanke said the initiatives, with commitments from the private sector as well, are designed "to mitigate the potential risks and disruptions to markets."
Washington Mutual Inc. (WM), the biggest U.S. savings and loan, fell 27 percent in early New York trading on concern it won't be able to find new capital or a buyer to keep the lender in business. The bank’s 75 percent slide in market value to $4.7 billion since March leaves the lender valued at just above what JPMorgan Chase & Co. was willing to pay at the time to buy the struggling lender.
American International Group Inc. (AIG) is seeking a $40 billion bridge loan from the Federal Reserve. The company is scrambling to avoid a threatened downgrade from credit-rating agencies. There are reports that AIG may survive only 48 to 72 hours after such a downgrade.
A group of global banks and securities firms announced a $70 billion loan program that financial companies can tap to help ease a credit shortage that threatens global financial markets. The pool of money will act as a signal to the marketplace that banks, brokerages, and other financial companies can lean on the fund to take care of borrowing needs.
Wilbur Ross, founder of private equity firm WL Ross & Co LLC, expects as many as 1,000 U.S. bank closures in the coming months. The billionaire investor, who made his fortune making investments on distressed industries, said the closures will create opportunities for investors, adding that he is looking at picking up smaller distressed institutions.
December-dated Fed fund futures rose sharply, pricing in a quarter-point rate after the Lehman Brothers bankruptcy. The September contracts shows a greater chance of a rate cut than they had previously at tomorrow’s meeting but odds are still in favor of no change from 2% levels.
According to the AAA, gasoline prices rose nearly 5 cents a gallon, bringing the total increase in the three days since Hurricane Ike slammed into Texas to almost 17 cents. Eleven states have gas prices above $4 a gallon in the AAA survey, led by Alaska at $4.371.
Manufacturing activity declined in the New York state in early September. The Empire State index dropped to negative 7.4 in September from 2.8 in August, indicating more firms said business was worsening than said it was improving. The new orders index rose to 4.4, while the shipments index rose to 0.6. The inventories index dropped to negative 2.8.
Led by a big drop in auto production, industrial output plunged 1.1% in August. The decline was much worse than the 0.3% decline expected by economists. Industrial production has now fallen 1.5% in the past year and 2% since the peak in January. Falling motor vehicle production accounted for about half the drop in output in August.
Walgreen Co. (WAG) has made an offer to buy Longs Drug Stores Corp. (LDG) for $2.8 billion, hoping to unravel an offer from CVS Caremark Corp. (CVS) that Longs had already accepted.
Electronic Arts Inc. (ERTS) announced that it ended talks to buy smaller rival Take-Two Interactive Software Inc. (TTWO), best known for the "Grand Theft Auto" series of games. EA, the publisher of games such as "Madden NFL 09" and "Spore," said it decided not to make an offer to buy Take-Two.
BASF SE said it would buy Swiss specialty chemicals maker Ciba Holding for 6.1 billion Swiss francs, or $5.35 billion, in cash -- a move that augments the German company's presence worldwide.
Scheduled U.S. Economic Reports (Tuesday)
Retail Chain Index (Week of Sep 13th), Consumer Price Index (Aug), Home Builders Index (Aug), FOMC Announcement (2:15 pm, Eastern Time)
In Earnings News
Panera Bread Co. (PNRA), which operates bakery-cafes, reaffirmed third-quarter guidance. The company continues to expect earnings of 42 cents to 44 cents per share, while analysts, on average, expect a profit of 43 cents per share
Titan Machinery Inc. (TITN) reported quarterly revenue increased to $134.9 million from revenue of $85.8 million for the second quarter of the prior year. Income from operations for the fiscal second quarter increased to $6.0 million compared to $3.9 million in the same period a year ago.
SteelCloud, Inc. (SCLD) reported third quarter revenues were $2.6 million in fiscal 2008 compared to approximately $4.0 million in the third quarter in 2007. Revenues for period increased 27% to approximately $16.8 million.
Mass Financial Corp. (MFCAF) reported total revenues of $305.9 million with net income of $25.6 million or $1.12 per diluted share, compared to total revenues of $265.9 million with net income of $34.0 million or $1.46 per diluted share for the first six months of 2007.
Scheduled Earnings Reports (Tuesday)
Best Buy, Darden Restaurants, Adobe Systems, Goldman Sachs
Stocks in the News
Biolase (BLTI) filed a countersuit in the U.S. District Court for the Southern District of Indiana, charging National Laser Technology of Indianapolis with violating Food and Drug Administration regulations, infringing on corporate trademarks.
General Motors Corp (GM) will increase its support for Delphi Corp. (DPHIQ) to about $10.6 billion from $6 billion following a revised settlement and restructuring agreement.
Superior Well Services (SWSI) agreed to pay $270 million cash for the pressure pumping, fluid logistics and completion, production and rental tools lines of closely held Diamondback Holdings LLC.
Continental Airlines’ (CAL) board named President Jeff Smisek to the additional post of chief operating officer.
Health Management Associates (HMA) named Gary D. Newsome president and chief executive officer and a director.
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