Alvarez & Marsal, the U.S. turnaround firm overseeing the Lehman Brothers bankruptcy, is in talks to help restructure firms humbled by the global financial crisis in Dubai, the Gulf’s trade and tourism hub, a top executive said on Monday.
Managing director Antonio Alvarez declined to identify the companies his firm was dealing with.
“The types of mandates we are seeking and discussing are the (likes) of Dubai World,” he said on the sidelines of a restructuring and refinance conference in Dubai.
Dubai World, a vast government holding company with $59 billion in liabilities, hired AlixPartners — the same firm advising on General Motors GM.UL bankruptcy — in June to help restructure the group.
Alvarez said the firm, which earlier this month signed on to advise clothing and accessories maker Liz Claiborne Inc, had been awarded “three mandates in (Middle East) region and we are negotiating some restructuring deals”.
Dubai has taken a hit in the wake of the global financial crisis and a severe property downturn. A debt implosion at a pair of Saudi firms has added to corporate woes and rising debt levels have boosted the risk of defaults.
“Non-performing debt is a big issue in the region, involving investment funds, investment banks, hospitality and real estate,” Alvarez said.
Dubai’s government and companies linked to it have refinanced about $9 billion of debt this year and have two major Islamic bonds maturing in the fourth quarter — developer Nakheel’s $3.52 billion sukuk on December 14 and a $1 billion Dubai Global sukuk on November 4.
Last week, Fitch Ratings said the rise in debt, as well as diminished financial resources, will make it harder for authorities in the United Arab Emirates to provide support for UAE banks.
The UAE government and central bank have already taken a number of steps to help the country’s banks weather the financial crisis, including pouring $6.8 billion into bank deposits last October. (Reporting by Nicolas Parasie)
Thailand’s economy won’t shrink as much as earlier forecast this year, the Finance Ministry said, as government spending and improving export orders spur a recovery from recession.
Gross domestic product may shrink 3 percent this year before expanding 2.5 percent to 4.1 percent in 2010, Somchai Sujjapongse, director-general of the ministry’s fiscal policy office, said in Bangkok today. The ministry had predicted a 2009 contraction of 2.5 percent to 3.5 percent in June.
Thailand’s exports fell the least in six months in August, and the contraction in manufacturing has eased as the slump in Southeast Asia’s second-largest economy abates. The economy will recover in the second half of this year and resume growth in the fourth quarter, Somchai said.
“The recovery will be obvious in the fourth quarter and the growth momentum will continue to next year, driven by government spending and a recovery in private spending,” Somchai said. “Exports will also improve in line with the recovering economies of our trading partners.”
The $261 billion economy shrank 4.9 percent last quarter from a year earlier, less than a 7.1 percent contraction the previous three months.
The government implemented a 116.7 billion-baht ($3.5 billion) stimulus package in the first half of 2009 and plans to spend 1.06 trillion baht on transportation, logistics, health and education projects over three years to help revive the economy.
Interest Rate
Thailand’s central bank kept its benchmark interest rate unchanged at 1.25 percent for a third straight meeting last month after four cuts from December to April. Bank of Thailand Governor Tarisa Watanagase said Sept. 25 the recovery from the nation’s first recession in a decade will be “gradual.”
The interest rate will stay at the current level until the end of this year as inflation isn’t a problem, said Ekniti Nitithanprapas from the finance ministry’s fiscal policy office. Borrowing costs may rise next year as consumer prices increase on higher oil costs, he said.
The finance ministry expects consumer prices to climb by 2 percent to 3 percent next year, after declining 0.8 percent in 2009, it said in a statement.
The ministry said it expects Thailand’s currency to range from 33.5 to 34.5 per dollar in 2010, from 34.5 this year. The benchmark interest rate will range from 1.25 percent to 1.75 percent in 2010, from 1.25 percent this year, it added.
The BlackBerry’s transformation from a device destined for corporate executives’ breast pockets into one with wide consumer appeal was bound to encounter a few bumps along the way.
That’s one interpretation of Research In Motion Ltd.’s plunging shares yesterday, closing down 16.77 per cent, or $15.12, at $75.04 on the Toronto Stock Exchange.
The sell-off was a next-day reaction to Waterloo-based RIM’s weaker-than-expected sales outlook for the busy back-to-school quarter, delivered after the markets closed Thursday alongside a slight dip in fiscal second-quarter earnings.
Frank Marsala, an analyst at Gartner Research, said RIM’s estimate that it will ship between 9.2 million and 9.9 million devices was generally in line with expectations. The concern, however, was with RIM’s disclosure that the average price of each BlackBerry sold to carriers would be $320, lower than the $345 average in the second quarter and less than analysts had been expecting.
"When this happens we have to worry about the ultimate impact of competition," Marsala said.
There’s no question RIM is playing in a much more crowded space than just a few years ago.
Today, the BlackBerry portfolio faces threats from Apple Inc.’s iPhone, devices running on Google Inc.’s Android platform and the recent resurgence of Palm Inc. and its touchscreen Pre.
That translates into increased pressure to cut prices on high-end handsets in order to take advantage of rising interest in full-featured devices that combine traditional voice calling with email, mobile Internet and multimedia applications.
"The company’s (average selling prices) are moving lower as the smartphone market and RIM moves more mainstream," said Deepak Chopra, an analyst at Genuity Capital Markets, in a note to clients.
But others argue that the market’s concerns are overblown.
"I think there are number of things that are being missed in the view of this company in the last 24 hours," said Kevin Restivo, an analyst at IDC Canada fast payday loan no faxing. "RIM is entering its best two quarters of the fiscal year … and RIM usually saves it’s best for last."
Indeed, RIM’s product portfolio has looked a little thin in recent months in comparison to the hype surrounding Apple’s launch of the iPhone 3GS and the introduction of Palm’s Pre.
By contrast, many observers expect this fall to see RIM unveil an updated version of the touchscreen Storm, an iPhone rival, as well as another device some bloggers have described as a "mash-up" between the high-end BlackBerry Bold and the Curve 8900.
"I would expect price points to rise … because its premium products, its best products, are likely to be launched in the coming months," Restivo said.
In the meantime, the average selling price of existing BlackBerry models will be weighed down by efforts to clear out older inventory to make room for the new models.
Also contributing to the trend is RIM’s roll out of a new, low-cost version of the popular Curve model. The Curve 8520 is selling for less than $50 at Wal-Mart stores in the United States when customers agree to a two-year contract with T-Mobile. The device, which runs on slower, second-generation wireless networks, is also expected to be popular in developing countries.
From RIM’s perspective, much of the angst is unwarranted. That’s because demand for smartphones continues to balloon while overall sales of mobile devices are falling. And RIM sees itself as perfectly positioned to take advantage of an increasingly hot sector.
"We are positioning and investing for success here," co-CEO Jim Balsillie told analysts during a conference call Thursday.
"And that’s everything. Or else the world will (pass) you by."
President Barack Obama’s “pay czar” said on Friday he will not cap compensation for the top employees at bailed-out companies, and will not reveal names, when he releases the first wave of decisions within a few weeks.
“We don’t want specific names next to dollars,” said Kenneth Feinberg, who was appointed in June to decide compensation packages for the highest-paid personnel at companies that received U.S. government bailouts.
The rules do not call for capping pay, Feinberg told a conference here, adding he is faced with setting compensation that discourages excessive risk-taking and that relates pay to performance.
Feinberg said he has the “daunting task of actually determining the compensation,” adding, “avoiding excessive risk means different things to different people in different situations.”
Feinberg, a Washington lawyer, is reviewing companies bailed out in the U.S. Treasury’s Troubled Asset Relief Program (TARP) — a job he has acknowledged comes with enormous political pressures on the heels of the crippling financial and economic crisis that spread around the world.
For the past month, Feinberg and his team have been reviewing the appropriateness of pay packages proposed by seven companies that received extraordinary assistance from the U.S. Treasury: Citigroup Inc, Bank of America Corp, American International Group Inc, Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc.
Feinberg said there are 15 people on his team, and that he has hired outside consultants. The team is preparing to issue initial determinations, he said at the New York conference hosted by Labaton Sucharow LLP.
The government has laid out general principles that will guide Feinberg’s decisions, such as ensuring the contracts do not encourage excessive risk-taking, that they have an appropriate balance of short-term and long-term pay, and that pay is tied to performance.
The pay plans should also be generous enough that the companies can retain top people and become profitable enough to repay taxpayer investments, Treasury has said.
The model, report, and formulas Feinberg is using will be made public, he said on Friday, adding the rules could be a model for other regulators or institutions.
Feinberg, who previously oversaw payouts to families of victims of the September 11 attacks, has a great deal of latitude in making his determinations and can even claw back pay that employees have received if he finds that it was paid out unfairly.
After Feinberg makes his initial determination about whether to approve or disapprove pay contracts, the companies have 30 days to ask him to reconsider, after which Feinberg has 30 days to make a final determination.
The final determinations are binding, Treasury has said. Feinberg has been verifying the submissions since they were due in to Treasury on August 14.
Andrew Hall, a Citigroup energy trader on track to make about $100 million this year, has recently become a target for accusations of excessive pay at bailed-out companies.
After Feinberg finishes his review of pay packages for the companies’ top 25 employees, he will have to approve broader compensation structures for the 75 next-highest-paid employees.
(Additional writing by Jonathan Spicer; Editing by Steve Orlofsky, Dave Zimmerman)
Chinese housing prices have surged since March, but they will soon lose momentum and even start to fall around the end of the year, boding well for a more sustained contribution to overall economic growth.
A burst of lending in the first six months helped fuel a wave of pent-up end-user buying and speculative purchases, driving up prices for some projects in major cities by 20-30 percent and creating concerns about dangerous bubbles.
Speculative transactions are subsiding now; at the same time, a fresh round of property investments will increase supply.
The resulting moderation in prices, far from signaling the next phase of a boom-bust cycle, will probably pave the way for steadier demand from owner-occupiers, providing a valuable prop for an economy adjusting to a slump in exports, analysts say.
“First we see transactions fall, then prices will decline,” said Ge Haifeng, deputy head of data research at the Beijing-based China Real Estate Index System, which is affiliated with SouFun.com, China’s biggest property website.
Transaction volumes in Beijing, for instance, fell 5.6 percent in August compared with July, the second straight fall after a four-month streak of gains, according to the city’s housing management bureau. In the eastern port city of Ningbo, they were down 37 percent.
That has not been by chance.
Worried by the spike in house prices, authorities in Beijing, Shanghai and other major cities attempted to curb speculation by introducing measures in July to make it harder for people to apply for second mortgages.
Such moves will increase the cost of buying a home and push down prices, said Fan Jianjun, a senior researcher at the Development Research Center, a government think tank.
TWEAKS, NOT WHOLESALE CLAMPDOWN
The drop in new bank lending — to an average of 383 billion yuan ($56 billion) in July and August compared with a monthly average of over 1.2 trillion yuan in the first half — will also pull down transactions in the coming months, said Gao Shanwen, chief economist at Essence Securities.
Policy tweaks and slower lending will probably be enough for now, analysts say, allowing Beijing to stop short of declaring a full-fledged campaign to stamp out property speculation similar to one in 2007.
Ge projected that housing prices would drop toward the end of 2009 or early next year, by about 10 percent, much less than a 20-30 percent fall witnessed last year.
Song Li, a senior analyst at Centaline Property Research Center in Shanghai, gave an even bolder forecast: “We expect prices to peak in September.”
Andy Rothman with brokerage CLSA in Shanghai disagreed that the recent burst of buying and price increases made the sector vulnerable to a setback. He said the market was growing at a healthy, sustainable pace, driven by fundamental demand.
Health insurer WellPoint Inc is weighing more job cuts as it grapples with enrollment declines stemming from the weak U.S. economy, and looks to operate more efficiently next year.
WellPoint Chief Executive Officer Angela Braly said enrollment is not expected to increase in 2010, following significant declines this year, according to an internal company memo obtained by Reuters.
WellPoint, the largest U.S. health insurer by membership, has seen its enrollment pressured as its employer customers lay off workers. It previously said it would struggle to increase profits next year.
In the memo to WellPoint managers, Braly said the company periodically needs to adjust its size to align with membership and that it planned “to make these reductions thoughtfully and respectfully, but with appropriate speed.
“Discretionary spending, of course, will get special scrutiny, but staffing levels also must decline if we are to succeed in these tough economic times.”
A company spokeswoman, Kristin Binns, told Reuters the company reviews the size and skills of its workforce as the economic environment changes.
“We are examining ways we can operate more efficiently in 2010, which we believe is essential to allow us to invest for the longer term and to innovate for the benefit of our customers and members,” Binns said.
The memo did not specify how many job cuts WellPoint was considering and Binns did not elaborate. WellPoint employs about 42,000 workers.
In addition to possible job cuts, Braly in the memo said she asked her executive leadership team to examine the company’s structure.
Braly also said internal initiatives designed to improve efficiency, such as how the company processes claims and operates call centers, would produce “measurable results” as soon as 2010. WellPoint is also planning a broader push to use technology to improve its business, the memo said.
The Indianapolis-based company had said in January that it would eliminate about 1,500 positions, following large rivals that also had cut jobs in the face of the weakening economy.
In July, WellPoint projected it would end 2009 with about 33.6 million members, which would be a decline of about 1.4 million, or 4 percent, from the end of 2008.
Second-quarter results topped analysts’ estimates, but the company did not raise its 2009 profit forecast.
Chief Financial Officer Wayne DeVeydt told analysts on the company’s second-quarter conference call in July that he “would not expect operating earnings growth next year in this environment.”
High unemployment along with slimmer margins with Medicare Advantage plans for the elderly are likely to weigh on earnings, the company said then.
Wealthy U.S. individuals with hidden offshore bank accounts will get an extra three weeks to participate in an amnesty program that could help them avoid criminal prosecution, U.S. tax officials said on Monday.
The Internal Revenue Service extended the program to October 15, citing pleas from tax professionals who say they could not handle the numbers rushing to take part.
The IRS began the offer in March, soon after giant Swiss bank UBS AG turned over the names of some account holders as part of a $780 million criminal settlement with the U.S. government. It is part of a broader crackdown on tax evaders as countries hunt for revenue in the global recession.
IRS officials and lawyers have been saying for months that the response to the voluntary disclosure program has been unprecedented. More than 3,000 taxpayers have come forward, compared with fewer than 100 for all of last year.
“By extending the deadline for a short period of time, the IRS is providing relief for those who had intended to come forward prior to the deadline, but face logistical and administrative challenges in meeting it,” the agency said.
The IRS said there would be no further extensions. The prior deadline was September 23.
In exchange for coming clean by the deadline, individuals would pay back taxes and a reduced fine, while generally avoiding criminal prosecution.
After months of tortuous negotiations that involved the Swiss government and challenged that country’s tradition of banking secrecy, UBS agreed in August to disclose the names of 4,450 American holders of secret accounts at the bank, ending a civil lawsuit allstate insurance company.
The first batch of UBS account holders began to get letters from the bank last week, warning them that their names could be turned over to U.S. tax authorities.
“There is a hazard that when you do this, you are bending to the interests of people who are trying to find out if their names will be disclosed,” said Washington-based lawyer George Clarke of Miller Chevalier, who said his clients were pleased.
The UBS warning letter said that both direct numbered accounts and accounts set up though offshore entities would be targeted by the IRS as part of the UBS settlement.
That surprised some, as the first group would include people who inherited accounts long ago, including some whose relatives perished in the Holocaust.
Although the IRS said tax professionals had been overwhelmed, many believe the agency itself could use more time to process the applications and might also be making a bet that it could reel in bigger fish.
“Those with more sophisticated means will continue to conceal their assets, and in theory, be the last holdouts,” said William Sharp, an attorney with Sharp Kemm in Tampa who is counseling clients taking part in the amnesty program.
After the August civil settlement between UBS and the U.S. government, for example, clients with bigger portfolios starting walking in his door, Sharp said.
(Additional reporting by Pascal Fletcher in Miami and Jonathan Stempel in New York; Editing by Lisa Von Ahn and Gerald E. McCormick)
This holds true since most gold miners tie their fortunes to the price of gold, as opposed to hedging their bets by locking in prices for sales of future production.
The newest convert to going with the market flow is mining giant Barrick Gold Corp. In the belief that gold will rise well past $1,000 (U.S.) an ounce, Barrick is spending $5.6 billion to unwind its hedging programs.
The cost of producing gold – $484 an ounce recently in the case of Barrick – fluctuates much less than the price of gold. When bullion prices rise sharply, mining stocks tend to go up even faster, as profitability soars.
The potential gains for gold producers can be seen by comparing historical trends in bullion prices to the returns of precious metals equity mutual funds. During the past 15 years ended Aug. 31, the price of gold bullion rose by a compound annual 4.8 per cent. For mutual funds in the precious metals equity category, the median return over that same period was 8.8 per cent or, on average, four full percentage points higher each year.
The largest gold-stock fund in Canada is iShares CDN Gold Sector Index, a low-fee exchange-traded fund (ETF) that holds mostly large-cap stocks. One of the most impressive track records belongs to RBC Global Precious Metals, whose returns rank in the top quartile of its peer group over one, three, five and 10 years.
Precious metals equity funds are highly volatile, so they may be outside your comfort zone. If so, and you still like the idea of investing in gold, check out funds that hold bullion rather than stocks.
Bullion funds are generally cheaper than precious metals equity funds, for which the median management expense ratio (MER) is 2 payday loans.47 per cent. That’s more than double what you would have to pay for a bullion-only fund.
Bullion-fund investors have new choices this year, including Sprott Gold Bullion. Unlike other funds offered by Sprott Asset Management Inc., the bullion fund is passively managed and has no performance fee. The fund’s MER is roughly 1 per cent.
The year’s biggest bullion play to attract new money from Canadian investors is Claymore Gold Bullion Trust, a closed-end fund that began trading in May on the Toronto Stock Exchange after raising $400 million. Its management fee of 0.5 per cent covers nearly all costs other than taxes.
Though gold is priced in U.S. dollars, the Claymore fund will hedge this currency exposure back to the Canadian dollar. The fund will convert to an open-end mutual fund (which trades at net asset value) if it trades at a discount of more than 2 per cent of net asset value for 10 consecutive trading days after Nov. 28.
The Claymore and Sprott funds join other bullion-based funds in Canada, though not all funds invest exclusively in gold. For example, BMG BullionFund holds a combination of gold, silver and platinum. Its MER is a steep 3.31 per cent.
A hybrid fund that holds both bullion and stocks is the recently launched Dynamic Strategic Gold Class. Portfolio manager Robert Cohen, of Goodman & Co., Investment Counsel Ltd., may hold anywhere from 30 to 70 per cent of the portfolio in gold bullion, with the rest in stocks. The fund’s goal, according to Dynamic Funds, is to outperform the price of gold over the long term, but with less volatility than a pure equity play. Given the fund’s asset mix, that’s pretty much what investors can expect.
rudy.luukko@morningstar.com
WASHINGTON — Regulators on Thursday proposed rules designed to stem conflicts of interest and provide more transparency for credit rating companies. They also proposed banning "flash orders," which give some traders a split-second edge in buying or selling stocks.
The credit rating industry was widely faulted for its role in the subprime mortgage debacle and the financial crisis. The five members of the Securities and Exchange Commission voted at a public meeting to propose rules that could reshape an industry dominated by three firms: Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. Their practices would be opened wider to public view and subject to some restraints.
One SEC proposal discussed Thursday is intended to bar companies from "shopping" for favorable ratings of their securities. In addition, the agencies would have to publicly disclose every entity that paid for a credit rating. They also would have to provide more information about income earned from companies they rate.
The credit rating agencies have been criticized for failing to identify risks in securities backed by subprime mortgages. They had to downgrade thousands of the securities last year as home-loan delinquencies soared and the value of those investments plummeted. The downgrades contributed to hundreds of billions in losses and writedowns at big banks and investment firms.
A more recent controversy has grown around flash orders amid questions about transparency and fairness on Wall Street.
In a flash order, a firm wishing to buy or sell stock can elect to freeze the order on an exchange for as long as half a second. Critics say flash orders give a select group of high-speed traders a window into the direction of the market, giving them the ability to trade at lightning speeds ahead of less fleet-footed investors.
Nasdaq OMX Group Inc., which operates the Nasdaq Stock Market, and the BATS exchange have voluntarily stopped using flash orders, which made up an estimated 3 percent of stock trading. The New York Stock Exchange has never used them.
NO. 1 IN THE MEAT MARKET Brazilian beef producer JBS SA is set to become the world’s largest meat processor with an $800 million deal that takes struggling chicken producer Pilgrim’s Pride Corp guaranteed high risk personal loans. out of bankruptcy protection.
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