Frontrunning: September 24


  • Iran Icebreaker Set at U.N.  (WSJ)

  • Chrysler Feud Triggers IPO Filing  (WSJ)

  • JPMorgan Chase, 12 More Banks Said to Be Sued Over Libor (BBG)

  • Regulator sues Morgan Stanley, eight others over faulty securities (Reuters)

  • Monte Paschi Seen Boosting Cost Goals to Meet EU Demands (BBG)

  • Here we go again - "not enough funds": CFTC chair Gary Gensler warns on fund cuts to police derivatives (FT)

  • Congress Fuels Private Jails Detaining 34,000 Immigrants (BBG)

  • KKR, Sycamore looking to buy Jones Group this week (NYPost) - take with lots of salt

  • Fiat rethinks alliance with Chrysler after IPO filing (Reuters)

  • Young Invincibles Caught in Crossfire Over Obamacare Cost (BBG)

  • Mayfair Office Squeeze Spawns New London Real Estate Hubs (BBG)

  • Tokyo Electron, Applied Materials Agree to Merge (WSJ)

  • Chinese Court Rejects Request to Move Cooper Case to Hong Kong (BBG)

  • Microsoft, BesTV to Invest up to $237 Mln in China Venture (WSJ)

  • Lennar Third-Quarter Profit Beats Estimates on House Price Gain (BBG)


 


Overnight Media Digest


WSJ


* BlackBerry struck a preliminary deal in which a group led by a former board member would take the company private for about $4.7 billion after an effort to stay competitive in the smartphone market failed.


* Chrysler Group filed for an initial public offering, a move forced by the failure of the auto maker's Italian majority owner and its main union to agree on the company's value.


* Two former traders at JPMorgan Chase accused of overstating the value of their group's positions are pointing the finger at Bruno Iksil, the so-called London whale, claiming that Iksil was the one responsible for valuing the group's positions, not the two men, according to people close to the matter.


* The end of the refinancing boom continues to shake up the U.S. banking sector, as Citigroup Inc said Monday it laid off 1,000 workers in its mortgage business. Citi is the latest bank to cut back on its mortgage workforce in the wake of rising interest rates, which have curbed consumer interest in purchasing new homes and refinancing mortgages.


* Five years after the financial crisis, 113 small to midsize U.S. banks still owe taxpayers about $2.7 billion, turning what was supposed to be a short-term government lifeline into a long-term source of capital.


* Lenders to LightSquared Inc on Monday questioned the selection of an independent director to help oversee a sale of the wireless telecom company. The lenders claim the director, Donna Alderman, isn't independent because she previously sparred with Dish Network Corp, which is offering $2.22 billion for LightSquared.


* Air France KLM's board discussed whether to increase the airline's stake in struggling Alitalia or to bail out but said it wanted more information from the Italian carrier.


* Activision Blizzard and parent Vivendi filed an emergency appeal of a ruling that blocked Vivendi's $8.2 billion sale of most of its controlling stake in the videogame maker.


* Microsoft unveiled the second generation of its Surface tablets in New York on Monday, tweaking them with faster speeds and better battery life.


 


FT


U.S. authorities are planning to file civil charges against JPMorgan Chase & Co as early as Tuesday alleging the bank misled investors in mortgage-backed securities sold in the lead-up to the financial crisis.


BlackBerry on Monday agreed to be acquired by a consortium of Canadian investment companies, led by its biggest shareholder, for $4.7 billion in cash, in a last-ditch move to ensure the survival of one of the pioneers of the global smartphone industry.


Citigroup Inc said it would eliminate about 1,000 jobs in its U.S. home mortgage business, as higher interest rates hurt refinancing volumes.


Apple Inc beat analysts' expectations as it sold 9 million new iPhones during their first three days in stores, prompting it to upgrade its fourth-quarter financial guidance and pushing shares up in early trading.


The International Air Transport Association, aviation industry's main representative body, cut its 2013 combined profit forecast for global airlines by 8 percent to $11.7 billion on Monday, citing a dip in demand for air travel due to slowing economic growth in emerging markets.


UK-listed African Barrick Gold's chief executive Brad Gordon said the struggling gold miner could be independent of Barrick Gold Corp within 12 to 18 months, if the 74 percent parent restarted attempts to divest the company.


 


NYT


* JPMorgan Chase & Co paid $1 billion to resolve an array of government investigations last week. But its biggest battles with federal authorities may still lie ahead. The nation's largest bank is bracing for a lawsuit from federal prosecutors in California who suspect that the bank sold shoddy mortgage securities to investors in the run-up to the financial crisis, according to people briefed on the matter.


* Chrysler filed for a public stock offering on Monday, acting only under pressure from its second-largest shareholder, a trust set up to provide medical coverage for 115,000 retired autoworkers and their relatives. Ordinarily, Chrysler's plan would be cause to celebrate the automaker's comeback from its government bailout and bankruptcy in 2009.


* Detroit had a bit of rare good fortune as it hurtled toward bankruptcy last summer - a couple of banks were willing to let it out of some expensive financial contracts, called interest-rate swaps, without paying in full the usual steep termination fees. But since then, an insurance company, Syncora Guarantee, has been seeking to block the deal, lining up allies among Detroit's other creditors.


* While French fries are a staple of the fast-food burger business, they have long been vilified by nutrition experts as little more than vehicles for adding fat, salt and calories to diets. Now Burger King Worldwide Inc has come up with a fry that it says delivers about 40 percent less fat and 30 percent fewer calories than the fries sold by its archenemy McDonald's.


* Robert Cohen, the founder of the Hudson Media empire, whose last wishes are at the center of nasty legal battle, was either a gravely ill old man unable to speak in his final years, or an opinionated octogenarian who enjoyed attending family bar mitzvahs. Those were the clashing portraits presented in state court on Monday of the man, who died in 2012, leaving behind a fortune that is now the subject of a bitter fight that has drawn in some of the ultrawealthy of New York society.


* BlackBerry Ltd said on Monday that it had signed a letter of intent from a group led by Fairfax Financial Holdings Ltd, a Canadian insurance and investment company, to pay shareholders $9 a share in cash, pending a variety of conditions, taking the company private. The $4.7 billion offer from Fairfax, which already owns about 10 percent of BlackBerry, is a powerful symbol of the phone maker's decline.


* Weak reaction to important new Microsoft Corp products rarely discourages the company - instead, it usually tweaks the products over and over. So it goes with the Surface, Microsoft's poorly selling answer to the iPad. On Monday, Microsoft introduced a second generation of Surface tablets with only subtle adjustments from the originals, a sign that the company still believes in its vision of devices that blend the benefits of tablets and laptop computers.


 


Canada


THE GLOBE AND MAIL


* A new coalition in favor of Quebec's Charter of Values says it has gained the support of former Supreme Court justice Claire L'Heureux-Dubé, a figure who stands to offer high-profile legal heft to proponents of the ban on religious headgear in the public service.


* Two Toronto-born teenagers have been identified as the Canadians injured in an attack on a Nairobi mall, with a relative saying one of them remains in critical condition. The girls are Fardosa Abdi, 17, and Dheeman Abdi, 16, who were shopping Saturday when the attack on the mall began, their aunt told the Associated Press.


* Insurance companies have dished out about C$1.7 billion ($1.65 billion) worth of claims related to the floods in southern Alberta, and the high price tag will likely mean changes to the insurance business - with customers paying more for coverage.


Reports in the business section:


* Fairfax Financial Holdings Ltd's preliminary offer to buy BlackBerry Ltd for $4.7 billion sets out a potential rescue plan for a company that is losing the fight for smartphone customers. The $9-a-share bid puts at least a temporary halt to the deluge of bad news surrounding the Waterloo, Ontario-based company.


* The number of new condos that sold in the Greater Toronto Area during August dropped to 633, the lowest level for that month in a decade, according to RealNet Canada Inc. The figure is 18 percent lower than the 772 sales that occurred in August 2012. There were 1,923 sales in August 2011.


* Ottawa's failure to entice a large foreign wireless company to bid in an upcoming spectrum auction is threatening the government's effort to create a stable fourth player in Ontario, Alberta and British Columbia. No foreign carriers were included on a list of applicants for the auction of 700 megahertz frequency, despite a major push by Ottawa to relax foreign investment restrictions for small telecoms and provide incentives for new players to acquire wireless licences.


NATIONAL POST


* New Democrat MP Pat Martin accepted a personal loan from the New Democratic Party and numerous donations from labor unions to help pay down debt incurred in a defamation lawsuit over the robocalls case. Documents filed with the federal ethics commissioner by the Manitoba MP earlier this month show he accepted contributions to a legal defense fund from the Canadian Labour Congress, the United Steelworkers and the Canadian Union of Public Employees, and 14 other unions or locals.


* Canada's federal finance minister, Jim Flaherty, announced on Monday that his government will put up C$660 million to build a subway in Scarborough, in what Mayor Rob Ford called a "historic day" for Toronto.


FINANCIAL POST


* The health of the Canadian economy relies on the development and operation of a vigorous resources sector. As the country forges into the 21st century, eyes are increasingly turning to Canada's north as a storehouse of resources ranging from oil and gas, to gold, diamonds and other mineral deposits from the Yukon to Ontario's Ring of Fire and east to Newfoundland and Labrador.


 


Hong Kong


SOUTH CHINA MORNING POST


-- The experiment in full yuan convertibility through the new free-trade zone in Shanghai will boost transaction volumes in offshore foreign exchange centres like London and Hong Kong that have been accumulating yuan deposits, according to City of London Lord Mayor Roger Gifford. (link.reuters.com/hex33v)


THE STANDARD


-- Tsingtao Brewery Co Ltd plans to boost annual sales to 10 million kiloliters by 2014, said vice president and executive director Sun Yuguo, adding that it is seeking to outperform the industry by two percentage points in the coming three to five years. (link.reuters.com/jex33v)


HONG KONG ECONOMIC JOURNAL


-- Nexteer Automotive Group Ltd, a supplier of steering systems which shelved its listing plan due to a volatile market, reopens the retail book for its initial public offering, aiming to raise up to HK$2.57 billion ($331.47 million) to boost production.


SING TAO DAILY


-- Ai Baojun, deputy mayor of Shanghai, will head the management committee of Shanghai's free trade zone, which will officially open on Sept. 29, sources said.


APPLE DAILY


-- Hang Seng Bank Ltd Vice-Chairman and Chief Executive Rose Lee said the bank will fully support the development of Shanghai's pilot free trade zone and is preparing to set up a network in the zone.


ORIENTAL DAILY


-- Rosewood Hotel Group, the hotel management arm of New World Development Co Ltd, would focus on expanding in Asia and Europe in the next five years, said Chief Executive Officer Sonia Cheng. It is estimated the investment will be about $500 million.


TA KUNG PAO


-- Beijing-based LeTV Information Technology Co announced a strategic tie-up with Chinese internet giant Tencent Holdings Ltd hoping to increase sales of its smart televisions. This is the first time LeTV will sell smart TVs on a third-party online platform.


 


Fly On The Wall 7:00 AM Market Snapshot


ANALYST RESEARCH


Upgrades


Apple (AAPL) upgraded to Positive from Neutral at Susquehanna
BlackBerry (BBRY) upgraded to Hold from Sell at Canaccord
CIT Group (CIT) upgraded to Buy from Hold at Jefferies
Cbeyond (CBEY) upgraded to Outperform from Market Perform at Raymond James
Elizabeth Arden (RDEN) upgraded to Buy from Neutral at SunTrust
Facebook (FB) upgraded to Buy from Neutral at Citigroup
Hanover Insurance (THG) upgraded to Outperform from Market Perform at JMP Securities
Hologic (HOLX) upgraded to Strong Buy from Buy at ISI Group
Microchip (MCHP) upgraded to Buy from Neutral at Goldman
Rovi (ROVI) upgraded to Buy from Neutral at B. Riley
SandRidge Energy (SD) upgraded to Neutral from Sell at Goldman
Sotheby's (BID) upgraded to Buy from Neutral at Citigroup
Total (TOT) upgraded to Equal Weight from Underweight at Barclays
Webster Financial (WBS) upgraded to Buy from Neutral at Sterne Agee


Downgrades


ADP (ADP) downgraded to Sector Perform from Outperform at RBC Capital
Albemarle (ALB) downgraded to Neutral from Overweight at Piper Jaffray
athenahealth (ATHN) downgraded to Market Perform from Outperform at Leerink
Calumet Specialty (CLMT) downgraded to Underperform from Neutral at Credit Suisse
EMC (EMC) downgraded to Equal Weight from Overweight at Barclays
Envestnet (ENV) downgraded to Sector Perform from Outperform at RBC Capital
Equifax (EFX) downgraded to Sector Perform from Outperform at RBC Capital
F5 Networks (FFIV) downgraded to Neutral from Buy at Goldman
MetroCorp (MCBI) downgraded to Market Perform from Outperform at Raymond James
NetApp (NTAP) downgraded to Equal Weight from Overweight at Barclays
NeuStar (NSR) downgraded to Sector Perform from Outperform at RBC Capital
PHH Corp. (PHH) downgraded to Market Perform from Outperform at Keefe Bruyette
Prosensa (RNA) downgraded to Neutral from Overweight at JPMorgan
Red Hat (RHT) downgraded to Neutral from Overweight at Piper Jaffray


Initiations


ADP (ADP) initiated with a Neutral at UBS
Approach Resources (AREX) initiated with a Buy at Goldman
Athlon Energy (ATHL) initiated with a Neutral at Goldman
Bonanza Creek (BCEI) initiated with a Buy at Goldman
Charles River Labs (CRL) initiated with a Neutral at Credit Suisse
Church & Dwight (CHD) initiated with a Buy at Jefferies
Continental Resources (CLR) initiated with a Buy at Goldman
Covance (CVD) initiated with an Outperform at Credit Suisse
Denbury Resources (DNR) initiated with a Neutral at Goldman
EchoStar (SATS) initiated with an Outperform at Wells Fargo
Energizer (ENR) initiated with a Hold at Jefferies
Goodrich Petroleum (GDP) initiated with a Neutral at Goldman
Gulfport Energy (GPOR) initiated with a Buy at Goldman
Infinity Pharmaceuticals (INFI) initiated with a Market Perform at William Blair
Intelsat (I) initiated with a Market Perform at Wells Fargo
Jarden (JAH) initiated with a Buy at Jefferies
Kodiak Oil & Gas (KOG) initiated with a Neutral at Goldman
Magnum Hunter (MHR) initiated with a Neutral at Goldman
New Residential (NRZ) initiated with an Outperform at FBR Capital
Oasis Petroleum (OAS) initiated with a Conviction Buy at Goldman
PAREXEL (PRXL) initiated with an Outperform at Credit Suisse
Pharmacyclics (PCYC) initiated with an Outperform at William Blair
Prestige Brands (PBH) initiated with a Hold at Jefferies
Quintiles (Q) initiated with an Outperform at Credit Suisse
Rosetta Resources (ROSE) initiated with a Neutral at Goldman
Suncor (SU) initiated with a Neutral at Citigroup
T-Mobile (TMUS) initiated with an Outperform at Cowen
ViaSat (VSAT) initiated with a Market Perform at Wells Fargo
WPX Energy (WPX) initiated with a Sell at Goldman
Whiting Petroleum (WLL) initiated with a Neutral at Goldman


HOT STOCKS


Telefonica (TEF) reached deal to boost stake in Telecom Italia (TI), Bloomberg reports
Applied Materials (AMAT), Tokyo Electron announced merger, $3B share repurchase
Fiat (FIATY) reiterated desire to acquire Chrysler in filing, Bloomberg reports
DISH (DISH): United States District Court, Central District of California denied preliminary injunction motion filed by Fox Broadcasting (NWSA)
AT&T (T), Fon signed strategic global Wi-Fi agreement
BNY Mellon (BK) won tax case over interest deductions, Bloomberg reports
KKR (KKR), CDH Modern Dairy partner to build farms in Shandong Province


EARNINGS


Companies that beat consensus earnings expectations last night and today include:
Lennar (LEN), Red Hat (RHT)


Companies that matched consensus earnings expectations include:
S&W Seed (SANW)


NEWSPAPERS/WEBSITES



  • KKR (KKR), Sycamore look to buy Jones Group (JNY), New York Post reports

  • Health insurers (HUM, AET) are pushing to hold onto their policyholders ahead of new government-run exchanges expected to roll out next week, but state regulators have accused some of misleading those customers in the process, the Wall Street Journal reports

  • Microsoft (MSFT) and Chinese Internet TV company BesTV New Media plan to invest up to $237M in a joint venture in China to develop "family games and related services" as the videogame industry continues to wait for a loosening of restrictions blocking the sale of videogame consoles in the country, the Wall Street Journal reports

  • Chrysler Group LLC was forced to file paperwork for an IPO by its second-biggest shareholder yesterday, escalating a fight with main owner Fiat SpA (FIATY) which said it could scale back its commitment to the U.S. automaker, Reuters reports

  • Facebook (FB), Twitter and other websites deemed sensitive and blocked by the Chinese government will be accessible in a planned free-trade zone in Shanghai, according to the South China Morning Post, Reuters reports

  • South Korea failed to choose a supplier for an $7.7B fighter-jet order, a setback for Boeing Co. (BA). The Defense Ministry and the arms procurement office decided against Boeing’s F-15SE fighter, signaling that the jet wasn’t advanced enough, Bloomberg reports


SYNDICATE


Adecogro (AGRO) files shelf for sale of up to 55.82M shares by holders
Altisource Residential (RESI) files to sell 10M shares of common stock
Arbor Realty (ABR) files to sell 6M shares of common stock
Chrysler Group files for IPO
Emerald Oil (EOX) files to sell 15M shares of common stock
Synageva (GEVA) files to sell 2.75M shares of common stock
Westar Energy (WR) files to sell 8M shares of common stock


ACTIVIST/PASSIVE FILINGS


Carlson Capital reports stake in Boise (BZ), sees value above merger price

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