Category Archives: Financial Crisis

Alpha Natural Resources Announces Completed Sale of Amfire Mining Assets to Rosebud Mining

 According to Yahoo Finance, Alpha Natural Resources, Inc. (ANR) announced that its subsidiary AMFIRE Mining Company, LLC has completed the previously announced divestiture of substantially all of its assets to Rosebud Mining Company.  The transaction included total consideration of approximately $86 million, including $75 million in cash and the assumption of certain liabilities.  The assets, which include ten mines and four preparation plants and loadouts, are located in Cambria, Centre, Clearfield, Elk, Greene, Indiana and Somerset counties, Pennsylvania.

Alpha Natural Resources affiliates continue to operate two mines in southwestern Pennsylvania that are not connected with the transaction, the Emerald and Cumberland mines near Waynesburg.  More than 1,100 workers are employed by these Greene County operations.

Read More

The New York Times: As Hewlett-Packard and Compaq Show, Mergers and Acquisitions Cycle All About Buy, Divide and Conquer

In the fall of 2001, Hewlett-Packard announced a momentous $25 billion merger with Compaq, as commented by The New York Times.

“This is a decisive move that accelerates our strategy and positions us to win by offering even greater value to our customers and partners,” declared Carly Fiorina, HP’s chairwoman and chief executive at the time, describing how the deal would “create substantial share owner value.”

Thirteen years later, just this fall, Meg Whitman, HP’s current chairwoman and

Mergers and Acquisitions Conference 2015 New York City

Mergers and Acquisitions Conference 2015 New York City

chief executive, undid that deal, splitting the company in two. “It will provide each new company with the independence, focus, financial resources and flexibility they need to adapt quickly to market and customer dynamics.”

Eerily mirroring Ms. Fiorina’s words, she said the divorced companies “will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders.”

So which was the right decision? The merger or the spinoff?

Read more

World Led by U.S. Poised for Fastest Growth Since 2010

According to Bloomberg,

The world economy is primed for its fastest expansion in four years, with the U.S. propelling the improvement in output.

Global growth will accelerate at least 3.4 percent in 2014 from less than 3 percent this year as the euro area recovers from recession and China and other emerging markets stabilize, according to economists at Goldman Sachs Group Inc., Deutsche Bank AG and Morgan Stanley. The U.K. will be a standout, while Japan risks damping the mood by suffering a mid-year slowdown after an April increase in sales taxes.

“So far it’s been a very bumpy, below-par and brittle expansion,” said Joachim Fels, co-chief global economist at Morgan Stanley in London. “Next year could bring a very important transition: a transition to a sounder, safer and more sustainable recovery.”

The upturn should prove bullish for equities and bearish for bonds. If it boosts corporate confidence in the durability of growth, it could further fuel demand, raising the odds that 2014 will break the pattern of recent years and come in better, rather than worse, than projected.

“An improving global-growth picture is widely forecast but, in our view, also still doubted in the investor community,” said Dominic Wilson, chief markets economist at Goldman Sachs in New York. “We therefore see room for markets to price in a better cyclical story.”

Read More…

Jobless Reports Fuel Fed Bets, U.S. Stocks Drop After GDP Jobless Reports Fuel Fed Bets

According to Bloomberg,

(Corrects Dollar General stock price in 17th paragraph.)

U.S. stock-index futures fell, signaling equities will extend a four-day slide, after data showing faster-than-forecast economic growth fueled speculation the Federal Reserve will curb stimulus spending.

Aeropostale Inc. lost 3.8 percent as the retailer’s fourth-quarter loss forecast was wider than estimated. Apple Inc. rose 1.4 percent as China Mobile Ltd. moved closer to offering its 759 million subscribers iPhones. General Growth Properties Inc. added 4.5 percent as Standard & Poor’s said it will add the mall owner to its benchmark index this month.

S&P 500 Index (SPX) futures expiring this month fell 0.3 percent to 1,787.20 at 9:12 a.m. in New York. Dow Jones Industrial Average contracts lost 39 points, or 0.3 percent, to 15,847 today.

“The numbers today pave the way for the Fed” to cut stimulus, Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said by phone. His firm oversees $363.8 billion. “There’s angst in the short run, but I think it’s only positive in the long run that the Fed begin to taper and extricate itself from being the ultimate market maker.”

The S&P 500 has surged 26 percent this year, challenging 2003 for the biggest annual gain in the last 15 years, as the Fed refrained from reducing its monthly bond purchases and corporate earnings surpassed estimates.

Stimulus Bets

The central bank has said it will start slowing the pace of stimulus if the economy improves in line with its forecasts. Policy makers, who next meet Dec. 17-18, will probably wait until the March 18-19 Federal Open Market Committee session before reducing monthly bond purchases to $70 billion from $85 billion, according to the median estimate in Bloomberg’s latest survey of economists conducted on Nov. 8.

The U.S. economy expanded in the third quarter at a faster pace than initially reported, led by the biggest increase in inventories since early 1998. Consumer spending slowed. Gross domestic product climbed at a 3.6 percent annualized rate, up from an initial estimate of 2.8 percent and the strongest since the first quarter of 2012.

Separate data showed applications for U.S. employment benefits unexpectedly fell last week to the lowest level in more than two months. Jobless claims decreased 23,000 to 298,000 in the week ended Nov. 30, the Labor Department said.

Data tomorrow may show the unemployment rate fell to 7.2 percent, matching the lowest level since 2008.

Fed Bank of Atlanta President Dennis Lockhart, a backer of record stimulus, said today the central bank when considering tapering should announce a total limit on purchases or a timetable for dialing down the program.

‘Transition Process’

“If and when the FOMC arrives at a decision to wind down asset purchases, it’s my view that it will be helpful to the transition process to provide as much certainty as possible about how this will be done,” Lockhart said in a speech in Florida.

The S&P 500 has retreated 0.8 percent in the past four sessions, dropping to a two-week low after closing at a record on Nov. 27. The index fluctuated yesterday before closing lower by 0.1 percent, as optimism that lawmakers in Washington were close to a budget deal offset better-than-forecast jobs data that fueled stimulus-tapering concerns.

The gauge’s rally this year has pushed valuations higher, with the equity benchmark trading for about 16.1 times its constituents’ projected earnings, up 23 percent from the beginning of 2013 when it traded at 13.1 times projected profit.

Read More…

Administration Says Obamacare Website Repair Goals Reached

According to Bloomberg,

President Barack Obama raised the stakes on his three-year-old health-care overhaul yesterday, declaring that fixes to his administration’s troubled insurance exchange website make it ready to sign up 800,000 people a day.

The site, healthcare.gov, is sure to be tested immediately today — “Cyber Monday” — when deals from online retailers draw more Americans to their computers and the Internet.

The site’s stated new capacity of 50,000 simultaneous users hasn’t been proven in the real world, and U.S. officials aren’t certain the site will hold up, according to a person familiar with the repairs who asked not to be identified because the information isn’t public. At the same time, the reduced error rate of 0.75 percent per page, down from 6 percent in October, still means many users will encounter a glitch in clicking through multiple pages to enroll in a health plan.

If consumers find continuing problems with the site “it is going to help drive this to a huge advantage for the Republican party, for a broader agenda which will not be just fixing the website; it’ll be scaling back the law,” said Robert Blendon, a professor of health policy and political analysis at the Harvard School of Public, in a telephone interview.

The effect of the repairs may not be known until the middle of January, when the administration reports on enrollment in December. About 100,000 people signed up for coverage through the federal system last month, a roughly four-fold increase from October even as healthcare.gov was undergoing repairs, said a person familiar with program’s progress.

Open Mind

Healthcare.gov

Healthcare.gov

The enrollment jump may be an encouraging trend for the administration, signaling that consumers are keeping an open mind about the U.S.-run exchange even as it suffered software glitches and breakdowns. Americans face a mid-December deadline to sign up for coverage beginning Jan 1.

In a report released yesterday by the Health and Human Services Department, the administration said it has fixed or improved more than 400 software issues and made the site between two and five times faster through a series of hardware upgrades, including new servers. The site’s average response time has fallen from eight seconds in October to less than one second over the past three weeks, the report said.

Read More…

EU’s Highest-Paid Bankers in U.K. as Bonus Awards Exceed Cap

According to Bloomberg,

Top U.K. investment bankers were paid an average of 1.95 million euros ($2.65 million) in 2012, as bonuses continued to exceed caps set to take effect next year, according to the European Union banking regulator.

The highest-paid bankers in the U.K. had an average bonus-to-salary ratio of 370 percent, according to the European Banking Authority survey of EU finance workers who earn more than 1 million euros a year. In France, the ratio was 495 percent.

The EU brokered a deal in February to outlaw banker bonuses that are more than twice fixed pay, a move lawmakers said would prevent excessive payouts and curb irresponsible risk-taking. The U.K. government challenged the caps at the EU’s highest court in September, saying they were illegal.

“Self-regulation does not work and the report illustrates why the European Parliament took the unprecedented step of inserting a hard bonus cap in the absence of action by the industry,” Arlene McCarthy, a U.K. lawmaker in the European Parliament’s Socialist group, and lead legislator on a previous round of EU bonus rules, said in an e-mail.

Britain was home to 2,188 investment bankers earning more than 1 million euros in 2012, the highest amount in the EU, while Spain had 37, the London-based EBA, set up in 2011 to harmonize banking rules in the EU, said in the survey. France and Germany had 117 and 100.

Capping Bonuses

Workers Pass Clocks in the Canary Wharf Business District (Bloomberg)

Workers Pass Clocks in the Canary Wharf Business District (Bloomberg)

The EBA said in May that any banker paid more than 500,000 euros should be covered by the new rules capping bonuses. The watchdog also targeted the best-paid 0.3 percent of staff in a bank, and some bankers with bonuses higher than 75,000 euros.

The boost to fixed pay means “less alignment between performance and pay,” Syed Kamall, a U.K. Conservative party lawmaker who represents London in the European Parliament, said in an interview.

Senior retail bankers in Spain were better paid than their investment banking colleagues, and were the highest-earning in Europe in 2012, making an average of 2.2 million euros a year, according to the report. That’s compared to 1.7 million euros for investment bankers there.

Read More…

J.P. Morgan’s Mortgage Deep Troubles

J.P. Morgan bundled 4,209 loans from New Century Financial. (Reuters)

According to The Wall Street Journal, a 1,625-square-foot bungalow at 51 Perthshire Lane in Palm Coast, Fla., is among the thousands of homes at the heart of J.P. Morgan Chase JPM +0.34% & Co.’s $5.1 billion settlement with a federal housing regulator on Friday.

In 2006, J.P. Morgan bought one of two mortgage loans on the home made by subprime lender New Century Financial Corp. J.P. Morgan then bundled the loan with 4,208 others from New Century into a mortgage-backed security it sold to investors including housing-finance giantFreddie MacFMCC +7.73%

By the end of 2007, the borrower had stopped paying back the loan, setting off yearslong delinquency and foreclosure proceedings that halted income to the investors, according to BlackBox Logic LLC, a mortgage-data company.

The Palm Coast loan wasn’t the only troubled one in the New Century deal: Within a year, 15% of the borrowers were delinquent—more than 60 days late on a payment, in some stage of foreclosure or in bankruptcy—according to BlackBox. By 2010, that number exceeded 50%.

“That’s much worse than anyone’s expectations when the deal was put together,” said Cory Lambert, an analyst at BlackBox and former mortgage-bond trader. “It’s all pretty bad.”

Read more