Today's Top Stories Also Noted: NexJ News From the Fierce Network: Today's Top News1. Despite charges, Banks disavow dilapidated properties
One of the sad consequences of the real estate crisis is that so many foreclosed properties have been allowed to lapse into disrepair and blight, wholly unfit for human occupancy. Banks across the nation have faced accusations that they have become among the largest slumlords in big cities. The latest to face that charge is U.S. Bancorp. The City of Los Angeles has formally accused it of failing to maintain "thousands of residential properties" in L.A., which become urban blight, representing liability in the "hundreds of millions of dollars." U.S. Bancorp says they since they don't own the properties, they are not responsible for any maintenance. The bank's name may be on the deed, but the actual owners are the purchasers of those deeds, basically the trusts that packaged mortgages into securitized products. In the bank's view, the investors in these trusts bear responsibility for maintaining the real estate. This is not the first bank Los Angeles has sued, as Deutsche Bank was similarly charged with not maintaining properties. It's unclear how the argument that the banks are not responsible will play in court. They may have sold the deeds, but that might not make them immune from all responsibility. The trusts that packaged together the mortgages are in no position to do any sort of home maintenance. I doubt this will be resolved anytime soon. For more: Related articles:
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I'm not sure why more bank CEOs aren't doing this, but Bloomberg reports that JPMorgan CEO Jamie Dimon and his wife have purchased $17.1 million worth of JPMorgan stock. At the same time, Dimon-controlled entities sold $13.5 million on preferred shares. So what accounts for the move? Not knowing the executive's personal financial needs, it's impossible to know precisely. But the argument could be made that this amounts to a strong bet on the bank's common shares, a show of confidence to employees and investors. I've suggested in the past that other CEOs need to put their money where their mouths are. I know that they are all fairly well incented in terms of restricted stock grant and options. But there's an added oomph when they go out into the market and make a big purchase. This says more than "the bank board has aligned my compensation such that shareholders and I are on the same page." It says, "I think the stock is a great deal at these levels, and I am willing to invest massively, overweighting myself, because I think it has tremendous upside." These insider purchases do happen from time to time. Banks could make more of a big deal about them. For more: Read more about: CEOs, JPMorgan 3. Bank of America's confusion over Syncora
Bank of America's second-quarter earnings release offers a good lesson about the importance of solid IR work. Confusion broke out almost immediately over the terms of a settlement Bank of America reached with Syncora, a mortgage bond insurer. In response to a question, the CFO Bruce Thompson offered an explanation that was termed "utterly unhelpful" by TheStreet.com. The result was a lot of confusion that was ameliorated somewhat by IR representatives speaking with analysts after the conference call ended. Still, analysts' estimates of the costs to the bank to settle the Syncora litigation were all over the map, despite the post facto follow ups. To some, this amounts to another example of ineptness. "Bank of America management has repeatedly done a poor job of explaining itself. It has appeared, on several occasions, to put a box around its mortgage exposure, only to disclose a new unwelcome surprise. It unveiled a $5 debit card fee, but then reversed its decision a month later. It led investors to believe it would be able to increase its dividend, only to get turned down by regulators." Perhaps at this point the bank needs to rethink its IR efforts. One analyst was quoted saying, "The management team does a very poor job explaining its situation." Anytime analysts are voicing that sentiment publically, you know something is amiss. For more: Related articles: Read more about: Bank of America, Bond Insurer 4. Latest Nasdaq offer on Facebook not enough
The ultimate fallout for the Nasdaq after it botched the Facebook IPO is still unknown. At this point, it's pretty clear that the big market makers that lost money due to the deal will not easily be pleased. Nasdaq boosted the amount it intends to make available for restitution to $62 billion in cash from $40 billion in rebates and credits, but that's not going to appease many. Consider the fact that Knight Capital Group, as part of its earnings report last week, detailed its $35.4 million in losses associated with the Facebook IPO problems. Other market makers may have suffered even bigger losses. Some have suggested that UBS's losses have hit $350 million. At some point, this dispute may be handed over to a third party for some sort of arbitration. The Nasdaq may be in danger of creating a perception that it is in denial about the significance of the botched deal. The company will release earnings this week, and we may get more details. In time, the board will have to control of this situation, perhaps with a dramatic move aimed at a fresh start. The quagmire is only deepening for the exchange company. Market makers have a big decision to make in terms of litigation. This is far from settled. For more: Related articles: Read more about: Market Makers, Facebook IPO 5. New approach to attracting buyers
The Deal Professor weighs in with a look at the deal recently announced by Par Pharmaceutical, which has agreed to be purchased by private equity power TPG Group for about $1.9 billion. What set apart the deal was the company's interesting approach to attracting the right suitors. In the end, it did not opt strictly for one-on-one negotiations with TPG, nor did it stage an open auction. Instead, "Par invited five bidders — three strategic companies and two private equity firms — to a special V.I.P. round of bidding. The process was intended to prevent the market from learning that the company was for sale. It also had a second goal. Private equity bidders are sometimes loath to become involved with a bid because of the expense and time it takes. Private equity firms can sometimes spend millions of dollars on bids that go nowhere. By limiting the number of bidders, Par's goal was to provide incentives to the private equity bidders, in particular, to participate and bid. While we don't yet have the full details of the sale process, since Par has yet to file a proxy statement detailing it, the plan appeared to work." Will we see more of this? The column notes that this sort of activity is already underway in certain ways. Finding suitors remains a slightly messy process, which is an ideal situation for bankers, who definitely add value. For more:
Read more about: mergers, deals Also Noted
Company News: Industry News: And Finally…Tech companies offer unlimited vacation. Article
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Tuesday, July 24, 2012
| 07.24.12 | Bank of America's confusion over Syncora
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