Frontrunning: August 7
- Libor Settlements Said to Ease CFTC’s Path in Rate-Swaps Probe (BBG)
- Manhattan Homes Under $3 Million Never Harder to Buy (BBG)
- Just two years late: Abe Pledges Government Help to Stem Fukushima Water Leaks (BBG)
- Chesapeake drops energy leases in fracking-shy New York (Reuters)
- Hedge Fund Magnetar Won't Face Charges Tied to Mortgages (WSJ)
- U.S. envoy leaves Cairo after talks declared over (Reuters)
- Credit-Crisis Oracle Rajan to Head India’s Central Bank (BBG)
- Bank of England Changes Policy Tack (WSJ)
- China fines milk powder makers $110 million for price fixing (Reuters)
- Heathrow's Future Is Up in the Air (WSJ)
- New Crisis Lurks in Cure for Old as Danish Probe Shows Risks (BBG)
- Consumers Find Investors Eager to Make 'Peer-to-Peer' Loans (WSJ)
Overnight Media Digest
* Securities and Exchange Commission enforcement officials have decided not to recommend filing civil charges against hedge fund firm Magnetar Capital LLC, which teamed up with Wall Street firms to create mortgage securities that suffered billions of dollars in losses during the financial crisis, according to people familiar with the situation. ()
* The U.S. government charged on Tuesday that Bank of America Corp defrauded investors when it sold $850 million worth of mortgage-backed securities, a new hurdle in the bank's quest to persuade investors its legal troubles are in the past. ()
* Asian stocks were lower on Wednesday, with Japan leading regional declines, due to rising expectations that the U.S. Federal Reserve could start to taper its stimulus program, withdrawing its bond-buying program. ()
* President Obama outlined his vision for scaling back federal support of the nation's mortgage market, part of an opening bid to guide bipartisan Senate talks to replace mortgage giants Fannie Mae and Freddie Mac. He made clear he would only support a system offering middle-class consumers continued access to long-term, fixed-rate mortgages. ()
* The Justice Department has filed sealed criminal charges against a number of suspects in the attack on the U.S. consulate in Benghazi that killed the U.S. ambassador to Libya, Christopher Stevens, and three other Americans, according to people familiar with the matter. ()
* Walt Disney Co warned it could take a loss of up to $190 million for its "Lone Ranger" film. The entertainment giant said overall profit rose on gains in its theme parks and ESPN. ()
* Big-box retailer Target agreed to buy the online beauty products portal DermStore.com for an undisclosed amount. It's the second acquisition Target has made this year to build up its e-commerce presence. However, its e-commerce operations have yet to contribute meaningfully to sales. ()
* General Electric Co is abandoning plans to manufacture solar panels amid a market glut and sold the technology it has built up over the last half decade to First Solar Inc for 1.75 million shares of the solar company's stock. The shares, which would give GE a 2 percent stake in First Solar, were valued at $81.8 million at Tuesday's close but had already shed 9 percent of their value in after-hours trading. ()
* Global Tower Partners, the largest privately held operator of U.S. cellular towers, is being shopped to its larger rivals. The company, founded in 2002 by Chief Executive Marc Ganzi, could fetch more than $4 billion, according to industry observers. ()
* Blackstone Group LP, one of the biggest real-estate owners in the United States, is preparing to sell billions of dollars of property, the latest sign that commercial property values are back to levels not seen since the economic downturn. The private-equity firm has hired J.P. Morgan Chase & Co and Morgan Stanley to explore both a private sale and a possible public offering of its La Quinta hotel chain. ()
Asia-focused bank Standard Chartered took a $1 billion hit on its South
Korean business, hurt by government attempts to ease the country's heavy
household debt, which forced losses on banks.
difficulty of finding good deals in a post-recession market, private
equity company TPG has asked investors in its $19 billion flagship fund
if it can have an extra year to spend $3 billion of capital.
Sony Corp rejected a proposal by U.S. activist hedge fund manager
Daniel Loeb, to spin-off part of its entertainment business, sending
shares down 5 percent on Tuesday.
Media giant Walt Disney
forecast a writedown of up to $190 million over the poor performance of
its expensive summer flop 'The Lone Ranger', a Western starring Johnny
A report compiled by PwC shows that UK Coal rejected a bid
from Hargreaves Services to buy its surface mines and run its deep mines
under contract, choosing instead to undergo a reorganisation that may
cost companies millions in pension payments.
* The Justice Department sued Bank of America on Tuesday, accusing the bank of defrauding investors by vastly understating the risks of the mortgages backing some $850 million in securities. The lawsuit adds to the hefty legal burden of the bank, which has been badly battered by mortgage-related losses and litigation since the financial crisis.
* It would not be surprising to see Amazon Chief Executive Jeff Bezos worry little about turning a quick profit at his new acquisition, The Washington Post, and instead try to shake up the newspaper industry with innovation.
* President Obama endorsed efforts in the Senate to wind down mortgage finance giants Fannie Mae and Freddie Mac and end their longtime implicit guarantee of a federal government bailout.
* Walt Disney Co's net income fell 36 percent in its third quarter, in part because of marketing expenses for the flop "Lone Ranger", forcing it to take a write-down of up to $190 million in the current quarter. Operating income from ESPN and Disney's theme parks rose 8 percent and 9 percent respectively, driving Disney's financial performance.
* Federal Reserve regional presidents Charles Evans and Dennis Lockhart suggested on Tuesday that the central bank could ease its extraordinary efforts to stimulate the economy sooner rather than later, but stopped short of providing an exact time frame.
* Swiss bank UBS AG agreed on Tuesday to pay $50 million to settle federal accusations that it misled investors about a complex mortgage security, a transaction that loomed over the government's recent legal battle with a former Goldman Sachs trader blamed for his role in creating a similar security.
* Hedge fund tycoon Philip Falcone filed a lawsuit on Tuesday that accused the satellite television mogul Charles Ergen of colluding with another hedge fund in a "fraudulent scheme" that prevented his broadband wireless company, LightSquared, from emerging out of bankruptcy.
* Detroit's financial woes have brought renewed scrutiny to public pension plans. Senator Orrin Hatch, Republican of Utah, and others have suggested overhauling these plans to shift more responsibility to the private sector. Private insurance companies would assume responsibility for these defined benefit plans, offering annuities to beneficiaries in exchange for employer-paid premiums.
THE GLOBE AND MAIL
* Canadian companies are facing higher pension costs after the Canadian Institute of Actuaries published new research that suggests workers are living longer than previously thought. The numbers matter to business because most corporate pension plans use the institute's mortality tables as a starting point when calculating the future cost of pensions.
* The federal government's push to reduce the number of Roma refugees from Hungary appears to be working, with a drop of hundreds to only dozens of Hungarians filing for asylum since the crackdown late last year. The number of Hungarian asylum seekers declined to just 33 between January and March this year, compared with 724 for the same period last year.
Reports in the business section:
* Canada Mortgage and Housing Corp is limiting guarantees it offers banks and other lenders on mortgage backed securities. The measure comes amid the federal government's efforts to protect taxpayers from financial risks in the housing sector, further cool lending and add upward pressure to mortgage rates.
* The Alberta Energy Regulator has conditionally approved Athabasca Oil Corp's Dover oil sands project in northern Alberta, paving the way for the company's partner, PetroChina, to exercise an option to take full control of the venture for C$1.3 billion ($1.25 billion).
* HSBC Bank Canada, the country's seventh-largest bank, said in an earnings report this week that second-quarter pretax profit at its commercial banking unit tumbled 53 percent from the same period in 2012. The drop provides more evidence of the damage caused by lenders trying to undercut each other on pricing.
* Former Toronto MP Ken Dryden who lent himself $300,000 to take part in the 2006 Liberal leadership race, has no plans to raise money from individual contributors to pay off his outstanding campaign debt, says his lawyer. Although it's against the rules, Elections Canada can't do anything about it.
* The Opposition is crying cover-up in the latest canceled gas plant controversy, after their questions about Liberals pressuring the Speaker of the Ontario legislature to change a preliminary finding of contempt were ruled out of order.
* The federal government has spent C$70 million since 2005 to clean up leftover explosives from Canada's military past that litter hundreds of sites across the country, the Vancouver Sun has learned. Fifteen people have been killed and at least 20 others seriously injured at Canadian sites that are confirmed or under assessment for having unexploded ordnance.
* The latest tightening of mortgage rules might come down to a couple of thousand dollars for the average Canadian consumer but that still has many wondering why Ottawa is cracking down once again on housing. Canada Mortgage and Housing Corp has notified banks, credit unions and other mortgage lenders that they will each be restricted to a maximum of $350-million of new guarantees this month under its National Housing Act Mortgage-Backed Securities program.
* Alberta's Energy Regulator conditionally approved on late Tuesday the Dover oil sands project proposed by Athabasca Oil Corp. The project was opposed by the Fort McKay band, which was worried about its effect on traditional land use and requested a 20-kilometre environmental buffer between the project and its reserve near Fort McMurray.
* Three big-name bidders for Rio Tinto's majority stake in Canada's largest iron ore producer are now out of the running, sources familiar with the talks said on Tuesday, after offers came in well below the mining group's targets. The sources said private equity firm Apollo, which had been working with Canadian pension fund CPPIB, rival Blackstone and commodity trader and miner Glencore were no longer in the race after a second round of bids last month.
SHANGHAI SECURITIES NEWS
- The first batch of private banks that manage their own risk will open in the second half of this year, with one likely to be located in Beijing and the other possibly opening in the Zhejiang, according to sources.
- China's economy needs to open up in order to unlock the full potential of private investors but the pace of liberalization will continue to be slow if there are no efforts to implement market-orientated guidelines, according to an editorial.
- Assets held by 18 of China's banks hit 22.39 trillion yuan ($3.66 trillion) at the end of 2012, an increase of 58.25 percent from last year, according to a report released by the a banking association on Tuesday.
21ST CENTURY BUSINESS HERALD
- China Development Bank is introducing a pilot debt portfolio project that will allow local government financing platforms more authority over the loans they make, according to sources.
Fly On The Wall 7:00 PM Market Snapshot
Allot Communications (ALLT) upgraded to Outperform from Perform at Oppenheimer
CSG Systems (CSGS) upgraded to Overweight from Equal Weight at First Analysis
Corporate Office Properties (OFC) upgraded to Buy from Neutral at ISI Group
Digital Generation (DGIT) upgraded to Outperform from Market Perform at Northland
Finisar (FNSR) upgraded to Outperform from Market Perform at Raymond James
Marchex (MCHX) upgraded to Outperform from Sector Perform at RBC Capital
Mead Johnson (MJN) upgraded to Outperform from Neutral at Credit Suisse
Parker-Hannifin (PH) upgraded to Outperform from Market Perform at Wells Fargo
Plains All American (PAA) upgraded to Outperform from Neutral at Credit Suisse
SL Green Realty (SLG) upgraded to Neutral from Cautious at ISI Group
Tornier (TRNX) upgraded to Overweight from Neutral at JPMorgan
Yum! Brands (YUM) upgraded to Neutral from Underperform at BofA/Merrill
Allied Nevada Gold (ANV) downgraded to Underperform at RBC Capital
Allot Communications (ALLT) downgraded to Sector Perform at Pacific Crest
C.H. Robinson (CHRW) downgraded to Underperform from Market Perform at Wells Fargo
CVS Caremark (CVS) downgraded to Hold from Buy at Cantor
DaVita (DVA) downgraded to Sector Perform from Outperform at RBC Capital
Endeavour (END) downgraded to Hold from Buy at Canaccord
Endo Health (ENDP) downgraded to Sell from Neutral at Janney Capital
Fidelity Southern (LION) downgraded to Neutral from Outperform at RW Baird
FirstEnergy (FE) downgraded to Market Perform from Outperform at Wells Fargo
Five Oaks (OAKS) downgraded to Neutral from Outperform at Credit Suisse
Fossil (FOSL) downgraded to Neutral from Buy at Citigroup
Goldcorp (GG) downgraded to Neutral from Buy at Davenport
Houston Wire & Cable (HWCC) downgraded to Market Perform at Raymond James
KCAP Financial (KCAP) downgraded to Market Perform from Outperform at Keefe Bruyette
Marathon Oil (MRO) downgraded to Neutral from Buy at BofA/Merrill
Mindray Medical (MR) downgraded to Underperform from Neutral at Credit Suisse
Norilsk Nickel (NILSY) downgraded to Underweight from Neutral at JPMorgan
Oil States (OIS) downgraded to Market Perform from Outperform at William Blair
RDA Microelectronics (RDA) downgraded to Buy from Strong Buy at Needham
RTI Surgical (RTIX) downgraded to Hold from Buy at Canaccord
Regional Management (RM) downgraded to Hold from Buy at Jefferies
Ryman Hospitality (RHP) downgraded to Neutral from Overweight at JPMorgan
Solta Medical (SLTM) downgraded to Hold from Buy at Canaccord
Zillow (Z) downgraded to Sector Perform from Outperform at RBC Capital
America Movil (AMX) initiated with a Neutral at Citigroup
Baxter (BAX) reinstated with a Conviction Buy at Goldman
Cooper Companies (COO) initiated with a Buy at Stifel
Endologix (ELGX) initiated with a Buy at Canaccord
IGI Laboratories (IG) initiated with a Buy at Roth Capital
NII Holdings (NIHD) initiated with a Sell at Citigroup
Vodafone (VOD) initiated with an Outperform at Raymond James
Amgen (AMGN) said to boost bid for Onyx (ONXX) to $130 per share, Bloomberg reports
GE (GE) received 1.75M First Solar (FSLR) shares in technology partnership
TransCanada (TRP) to proceed with C$1.5B North Montney extension
Wells Fargo (WFC), American Express (AXP) announced credit card partnership
Swift Transportation (SWFT) acquired Central Refrigerated Transportation for $225M
Mead Johnson (MJN) announced resolution of China probe
CSC (CSC), AT&T (T) signed agreement for global strategic alliance
Companies that beat consensus earnings expectations last night and today include:
Valeant (VRX), VimpelCom (VIP), Delek Logistics (DKL), Tesco (TESO), EOG Resources (EOG), JBT Corporation (JBT), Live Nation (LYV), Primerica (PRI), URS Corporation (URS), SandRidge Energy (SD)
Companies that missed consensus earnings expectations include:
DaVita (DVA), Marathon Oil (MRO), Quad/Graphics (QUAD), Zillow (Z), Bio-Rad (BIO), Systemax (SYX), C.H. Robinson (CHRW), VIVUS (VVUS), Jazz Pharmaceuticals (JAZZ), First Solar (FSLR), 21st Century Fox (FOXA), Sotheby's (BID)
Companies that matched consensus earnings expectations include:
Stellus Capital (SCM), Avis Budget (CAR), Medifast (MED), Synacor (SYNC)
- The SEC has decided not to recommend filing civil charges against hedge-fund firm Magnetar Capital LLC, which teamed up with Wall Street firms to create mortgage securities that suffered billions of dollars in losses during the financial crisis, sources say. The decision is a sign the SEC's investigations into whether companies or individuals broke the law with their conduct ahead of the crisis are running out of gas, the Wall Street Journal reports
- Pay-TV providers (DISH, DTV, CHTR, TWC) lost video customers in the latest quarter, and tempers are flaring in the industry over who is most to blame for the rising costs that are driving some subscribers to "cut the cord," the Wall Street Journal reports
- Wal-Mart Stores (WMT) is considering making a bid for the Hong Kong supermarket business ParknShop being sold by Hutchison Whampoa, a company controlled by Asia's richest man Li Ka-shing, sources say, Reuters reports
- Glencore Xstrata (GLNCY) and JPMorgan Chase (JPM) face a U.S. lawsuit, along with the London Metal Exchange, alleging they artificially inflated aluminum prices, in the second legal challenge related to metal warehousing in a week. The suit, also names Goldman Sachs (GS) and subsidiaries of Goldman and JP Morgan, accuses the firms of engaging in anti-trust and racketeering practices, Reuters reports
- Sony’s (SNE) rejection of billionaire Daniel Loeb’s push to sell part of its entertainment assets puts more pressure on CEO Kazuo Hirai to revive the company’s sagging film and electronics businesses, Bloomberg reports
- The FCC probably won’t heed Time Warner Cable’s (TWC) call for help in a dispute that has blocked CBS (CBS) television shows from more than 3M subscribers in cities such as New York and Los Angeles, Bloomberg reports
Allison Transmission (ALSN) 20.7M share Secondary priced at $22.00
Cedar Realty Trust (CDR) files to sell 10M shares of common stock 'at-the-market'
DCP Midstream (DPM) files to sell 8.5M common units representing limited partners
Hackett Group (HCKT) to repurchase up $5.5M of stock in Dutch auction tender
Lakeland Industries (LAKE) files to sell 1.07M shares of common stock for holders
ONEOK Partners (OKS) files to sell 10M common units representing limited partners
Quality Distribution (QLTY) files to sell 4.3M shares of common stock for holders
Spectrum (SPPI) files to sell 3M shares of common stock for holders
Triangle Petroleum (TPLM) files to sell 15M shares of common stock
Vanda Pharmaceuticals (VNDA) files to sell $10M of common stock
YuMe (YUME) 5.125M share IPO priced at $9.00