Editor's Corner: Great Rotation out of bonds on the horizon Also Noted: Spotlight On... Loan growth declines in first quarter News From the Fierce Network:
Today's Top News1. Dell special committee recommends original deal
As Carl Icahn and Southeastern Asset Management agitated for a better deal for Dell, it seemed for a moment that Michael Dell and Silver Lake would have to sweeten their bid. But then came more indications that the computer market was in disarray, and Michael Dell's offer started to look better. At this point, it's hardly surprising that the Dell board's special committee, set up to grapple with buyout offers, has recommended that shareholders vote for the $13.65 a share deal as originally proposed by the founder of the company. The price represents a premium of approximately 37 percent over the average closing share price during the 90 calendar days ending January 11, 2013, the day prior to when rumors regarding the transaction entered the marketplace, the company notes. The special committee issued an open letter to shareholders recommending that shareholders vote to approve the transaction at a vote set for July 18. "Our analysis led us to conclude unanimously that a sale to the Michael Dell/Silver Lake group for $13.65 per share is the best alternative available – in a challenging business environment it offers certainty and a very material premium over pre-announcement trading prices. It also shifts very substantial risks to the buying group – risks that in any leveraged recapitalization would be retained by the stockholders and considerably magnified by leverage and the public nature of the resulting stub." The public stub, of course, was the centerpiece of an alternative proposal from Icahn and Southeastern Asset Management, as a way for long-invested owners to avoid locking in massive capital losses. They will no doubt mount a vigorous campaign to goad shareholders into voting against the deal. We may also see some legal action. The sorry state of the computer market, however, means they have an uphill battle. For more: Related Articles:
Read more about: Carl Icahn, Leveraged Buyout
2. Is a credit bubble about to pop?
Perhaps the biggest question in the industry right now is the extent to which we are in the final days of a credit bubble, one that will inevitably pop, ushering in great portfolio pain. The debate has been raging, and you'll find plenty of rhetoric on both sides of the issue. Breakingviews has weighed in with a bubble-meter that looks at five issues: low yields, too much debt, terms and conditions, financial engineering and investor complacency. On each issue, it assigns a score of 1 through 10, with 10 being the strongest indicator of a bubble. The average score is a 7. The highest score -- a 9 -- came in the terms and conditions category. "In hot markets, issuers can get away with higher leverage ratios and looser lending terms. Currently, they are doing both," the author writes. He continues, writing that, "The average debt-to-EBITDA multiples on U.S.-sponsored LBO deals has averaged 5.5 times this year and last, up from 4.2 times in 2009, according to LPC. Yet it's still below the 6.5 average in the 2007 LBO peak year. Meanwhile, issuance of so-called covenant-lite loans, which give lenders weak or no enforcement rights when borrowers' profits fall, has soared to all-time highs. And issuance of particularly lender-unfriendly Payment in Kind (PIK) loans was up around 13-fold last year from 2010, according to Morgan Stanley." It's a sellers' market right now. In some ways, it feels like the pre-crisis days when issuers had their way. The power pendulum swung hard in the other direction for years, only to swing back in favor of issuers. My sense is that enough people think that some sort of rotation out of debt is inevitable, and they are adjusting accordingly. We're already seeing indications of a looming migration into other asset classes, which bodes well for a graceful transition. The last think we want is a pin-pop burst that spreads pain like toxic confetti. Fortunately, a much gentler transition is more likely. For more: Read more about: Credit Bubble, Great Rotation 3. Lloyd Blankfein is top paid CEO
Goldman Sachs CEO Lloyd Blankfein has returned to familiar terrain. Once again, he is the top paid CEO in the banking industry. In fact, 2012 was his best year since he set the world on fire with his 2007 compensation, which hit nearly $70 million. As calculated by Bloomberg Markets, Blankfein was awarded $26 million for work rendered in 2012. By some metrics, the pay was richly deserved. Goldman Sachs generated its first revenue gain in three years, which is no small feat. It should be noted that the say-on-pay vote and an executive compensation vote at the recent annual shareholder meeting went fairly decisively in favor of management. Still, the magazine ponders whether he deserved $26 million. Blankfein's compensation amounts to 73.3 percent pay hike, the biggest increase among the big-bank CEOs. The article notes that, "His bank, the fourth largest by assets, posted a 43.4 percent stock return, also the fourth highest, and a 10.7 percent ROE, placing 11th. The average of these three rankings -- 6.3 -- was Goldman's average score" on the magazine's methodology. "When Blankfein's No. 1 pay ranking was subtracted from 6.3, the difference -- 5.3 -- was the second biggest on the list, making him the second-most-overpaid chief," it said. Ouch. But at least he wasn't the number one most overpaid CEO in the industry. That dubious distinction fell to Richard Fairbank, CEO of Capital One, who made $17.5 million. Capital One's stock return of 37.5 percent was fifth, and its return on equity was 14th. "Fairbank was the most overcompensated leader even after taking an 8.9 percent pay cut for 2012. Capital One spokeswoman Julie Rakes says that…Fairbank received no salary and his compensation was based on stock and tied to the company's performance." For more: Read more about: Goldman Sachs, banks 4. Goldman Sachs' jobs still coveted
In the aftermath of the financial crisis, protests against big banks spread quickly across U.S. university campuses, especially in the Ivy League, that traditional feeding ground for top Wall Street banks. As more students decried the ill effects of recruiting on campus and the legitimacy of big banking in general, you might have gotten the idea that working on Wall Street was seen as a retrograde career path. You would have been sorely mistaken. A job at a top Wall Street firm, specifically at Goldman Sachs, is as coveted as it always was, judging from the number aspiring Goldman Sachs employees 2013. Goldman Sachs president Gary Cohn said recently that the bank received 17,000 applicants for its summer internship program, according to media reports. The bank hired just 350. A summer internship at the gilded bank may be seen as a first step toward landing an analyst position at the bank upon graduation. And an analyst position would of course mark a stepping stone to greater glory, either at the bank or at another firm, most of which are eager to hire from Goldman Sachs. Indeed, fresh-faced analysts are recruited aggressively almost from the moment they walk in the door, which has prompted the bank to act. For example, it recently got rid of the two-year program in favor of permanent employment, to keep talented fresh employees from decamping to hedge funds and private equity funds too soon. You have to wonder if interns will become the target of aggressive recruiting efforts. It wouldn't surprise anyone. For more:
Read more about: jobs, Graduates, career 5. CME censures Ex-Goldman Sachs exec
Morgan Stanley hired Glenn Hadden to run its interest rates swaps desk in 2011, knowing that he left Goldman Sachs after a string of controversies. Once a high-flyer at Goldman Sachs, the bank put Hadden on paid leave in 2009. It came after the bank received complaints from the New York Federal Reserve Bank concerning various practices related to a Fed stimulus program. That might seem like a career setback, but Hadden soon quit and was hired by Morgan Stanley. According to media reports, Morgan Stanley executives at the time were satisfied he did nothing wrong. Another shocker emerged last year, however, when the media reported that the CME was investigating Goldman Sachs and Hadden for various abuses in the futures market that allegedly occurred in 2008. The CME has now announced the results of that investigation. Goldman has been ordered to pay an $875,000 fine and was cited for failure to supervise Hadden, who has been ordered to pay $80,000. He also faces a 10-day suspension, starting July 15, from "directly accessing all CME Group Inc. trading floors, and indirect and direct access to all electronic trading and clearing platforms owned or controlled by CME Group Inc," as reported by DealBook. "The sanction is likely to increase speculation about Mr. Hadden's future at Morgan Stanley. Last week Mr. Hadden's boss, Kenneth deRegt, the executive in charge of Morgan Stanley's fixed income department, announced he was retiring. That set off speculation inside Morgan Stanley that Mr. Hadden might also leave, or see his responsibilities diminished," Dealbook reports. This is a tricky situation for Morgan Stanley, which certainly doesn't want to admit that it hired an executive with a "past" only to get burned. It may choose to maintain the status quo and hope the controversy dies down. In the end, there may be no further career consequences. For more: Read more about: Enforcement Action, Morgan Stalney, Glenn Hadden Also NotedSPOTLIGHT ON... Loan growth declines in first quarter Many banks and credit unions have a lot of room to hike loans, but that doesn't mean it will happen. As noted by SNL, lending declined at most of the nation's largest banks, despite ample capacity and claims from smaller competitors that the mega-banks are engaging in pricing wars. At Bank of America, annualized quarter-to-quarter loan growth declined 3.75 percent. Citigroup saw a 4.75 percent decline. Capital One Financial reported a 15.7 percent decline, though seasonal factors may be at work. Article Company news: Industry news:
©2013 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | |||||||||||||||||||||||||||||||||||||||
Monday, June 3, 2013
| 06.03.13 | Dell special committee recommends original deal
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment