Quindell in talks over possible sale of division

Quindell is exploring the sale of parts of its business, as the UK insurance claim processor attempts to focus on generating cash.

The company has been a target for short sellers that have raised doubts about its business model and have pointed specifically to cash flow as an issue. Quindell said on Friday it had “entered into exclusivity arrangements with a third party in respect of the possible disposal of an operating division of the group”.

It declined to give details on what part of the company was up for sale, but its main operating divisions include professional services, which contains the main insurance claims business, and digital solutions, which develops products such as telematics for cars that report on vehicle performance.

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The new rules of M&A attraction

BRUCE WASSERSTEIN was probably the most famous mergers and acquisitions (M&A) banker on Wall Street in the 1980s and 1990s. Yet “Bid ‘em up Bruce”, who died in 2009, was ambivalent about his trade. The best rainmakers were capable men, he once wrote, but dealmaking also attracted “hustlers and swaggering mediocrities”. And whereas takeovers made the business world more dynamic, they also led to “pain, dislocations and blunders”.

Whether dealmaking is sensible is once more an important question, because M&A are back with a vengeance, after a lull following the financial crisis. Worldwide, $3.6 trillion of deals have been announced this year, reckons Bloomberg, an information provider, approaching the peak reached in 2007. In pharmaceuticals (see article) and among media firms the activity is frantic. Deals worth more than $10 billion are again common. America and Britain, with their open markets for corporate control, account for a disproportionate share of the action. So do cross-border deals, which have risen from a sixth of activity in the mid-1990s to 43% today.

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Cash management shift boosts M&A

A shift in corporate cash management is boosting mergers and acquisitions worldwide to levels that are close to deal activity just before the financial crisis, according to research by SunGard.

M&A deals totalled $2.49 trillion in value globally in the first three quarters of 2014. That didn’t quite reach the $2.93 trillion in deals done worldwide in the first three quarters of 2007, but it exceeded annual totals for each of the past six years, according to corporate financial analysis by Mergermarket.

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U.S. Stocks Extend Records on Fed Bets Amid Factory Data

According to Bloomberg,

U.S. stocks rose to records, with benchmark gauges capping a sixth week of gains, as investors assessed data on factory output amid growing speculation the Federal Reserve will maintain the pace of its monthly stimulus.

The New York Stock Exchange (Bloomberg)

Exxon Mobil Corp. rallied 2.2 percent to a record after Warren Buffett’s Berkshire Hathaway Inc. disclosed a stake. FedEx Corp. climbed 1.6 percent as billionaire investorsGeorge Soros andJohn Paulson took positions. Fannie Mae and Freddie Mac increased at least 6.2 percent as Bill Ackman’s hedge fund bought shares in the government-backed mortgage insurers. Western Union Co. dropped 4.3 percent after the company said its chief financial officer is leaving.

The Standard & Poor’s 500 Index rose 0.4 percent to 1,798.18 at 4 p.m. in New York. The gauge gained 1.6 percent in the past five days, capping its longest streak of weekly gains since February. The Dow Jones Industrial Average added 85.48 points, or 0.5 percent, to 15,961.70, a third straight record. About 6.1 billion shares changed hands on U.S. exchanges today, in line with the three-month average.

Janet Yellen’s remarks yesterday told investors that “interest rates are going to remain low for a while, which is a positive environment for equities,” John Fox, director of research at Fenimore Asset Management in Cobleskill, New York, said by phone. Fenimore oversees about $1.8 billion. “The combination of earnings growth and expanded PE due to investors feeling better about things just continues to move the market higher.”

Data Watch

The S&P 500 (SPX) and the Dow rallied as Yellen, nominated to succeed Ben S. Bernanke as chairman of the Federal Reserve, said yesterday the central bank should take care not to withdraw stimulus too early from an economy that is operating well below potential.

Data today showed manufacturing in the New York region unexpectedly contracted in November. A separate report showed total industrial production in the U.S. fell 0.1 percent in October as output at mines and utilities declined. Factory output rose more than forecast. Wholesale inventories widened by 0.4 percent in September, the Census Bureau said.

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Obama: Sorry Over Americans Losing Health Plans

Obama Says He’s Sorry Over Americans Losing Health-Care Plans (Bloomberg)

 

 

 

 

 

 

 

 

According to Bloomberg,President Barack Obama said he’s sorry that thousands of Americans are losing their medical insurance as a result of his health-care law, as his administration works to contain the political damage from the troubled rollout of his signature domestic achievement.

Hundreds of thousands of individual health insurance plans are being canceled, contradicting Obama’s repeated pledge that people who like their coverage would be able to keep it when the law took effect.

“I am sorry that they are finding themselves in this situation based on assurances they got from me,” Obama told NBC News in an interview at the White House yesterday. “We’ve got to work hard to make sure that they know we hear them and we are going to do everything we can to deal with folks who find themselves in a tough position as a consequence of this.”

Obama’s public approval ratings have been driven down by the flawed startup of the government website intended as the main gateway to federal health-care exchanges under the Patient Protection and Affordable Care Act and stories about canceled policies.

His oft-repeated pledge that individuals would be able to keep their coverage and their doctors was a central selling point of his health-care overhaul, aimed at calming consumers concerned that they would be forced to give up policies and doctors they liked as the program expanded coverage to many of the nation’s 48 million uninsured.

‘Half-Hearted’

Republicans pounced on the president’s remarks, attacking Obama for not supporting legislation they have pushed that would allow Americans to keep their current plans.

“If the president is truly sorry for breaking his promises to the American people, he’ll do more than just issue a half-hearted apology on TV,” Senate Leader Mitch McConnell, a Kentucky Republican, said in a statement yesterday.

House Speaker John Boehner, an Ohio Republican, echoed McConnell, saying in a statement that “an apology is certainly in order, but what Americans want to hear is that the president is going to keep his promise.”

The House plans next week to take up a measure that would allow individuals to keep their plans even if the coverage failed to meet the health-law’s standards.

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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 Mac. FMCC +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.”

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Why U.S. Cities Grapple With Finances?

Which U.S. cities are lagging behind according to selected 2012 measures of fiscal health. (The Wall Street Journal)

According to The Wall Street Journal, American cities’ fiscal health is lagging behind other sectors of the economy as the recovery slowly takes hold.

Buffeted by steep drops in state aid, rising pension and health-care costs and sluggish property-tax revenue, many urban centers are struggling even several years after the financial crisis.

“We think we saw the bottom, knock on wood,” said Robert Chisel, director of finance and administration for Reno, Nev. But, he said, “We’re not going back to the old days. We all know that.”

Local officials hasten to distinguish their cities from Detroit, which this summer became the largest-ever U.S. municipal bankruptcy case. Most won’t get to that point: just 63 cities, towns and villages, including Detroit, have filed for municipal bankruptcy protection since 1954, said Chicago lawyer James Spiotto, who tracks the sector.

But an analysis by The Wall Street Journal of financial data from the nation’s largest cities shows that many of them are wrestling with the same types of issues that sank Detroit. The data were provided by Merritt Research Services LLC, an Iowa research firm that mines cities’ financial filings. Merritt examined 2012 filings from the 250 largest U.S. cities by population. A handful, including Baltimore, Milwaukee and Dayton, Ohio, weren’t available by August 2013, when Merritt collected the information.

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How could JPMorgan settlement will cost bank closer to $9 billion?

Source: Ruters

According to Reuters, JPMorgan Chase & Co’s preliminary $13 billion mortgage settlement with the U.S. government could end up costing the bank closer to $9 billion after taxes, because the majority of the deal is expected to be tax deductible, two sources familiar with the matter said.

The deduction also means the government is getting less than it appears in this deal. Banks can often deduct legal settlements from their taxes, but cannot get tax benefits from penalties for violating laws.

JPMorgan and the U.S. government have been negotiating the tax treatment of the settlement. The outcome could have a dramatic impact on exactly what the deal ends up costing the bank, how it is perceived by the public and whether it becomes a model for resolving government investigations of mortgage deals at other banks.

JPMorgan is negotiating the settlement with a group of government agencies led by the Justice Department, and the deal is expected to include a $2 billion penalty, one source said.

But another $4 billion of the deal, which will go toward aid for struggling mortgage borrowers, is tax deductible, another person familiar with the negotiations said.

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Recent Political and Market Events will likely Drive Wall Street Profitability and Compensation Lower

Source: The Wall Street Journal

According to The Wall Street Journal, a strong first half had initially signaled a good year for Wall Street, but recent political and market events will likely drive profitability and compensation lower, according to a report released by New York state Comptroller Thomas DiNapoli.

Profits could total about $5 billion in the second half after generating an estimated $10 billion in the first half, the report said.

Mr. DiNapoli said profits could wane due to rising interest rates, litigation costs associated with settlements with the federal government and the recent political turmoil in Washington over the budget and debt ceiling, according to the report.

“Washington’s inability to resolve budget and fiscal issues is bad for business,” Mr. DiNapoli said in a statement. “Failure to resolve the federal budget and debt ceiling impasse could disrupt the economy and hurt New York City and New York state.”

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According to The Wall Street Journal, J.P. Morgan Discussions Nearly Ended in a Lawsuit

J.P. Morgan Chase (Getty Images)

According to The Wall Street Journal, in the end, it was J.P. Morgan Chase & Co. that blinked.

A day before J.P. Morgan Chief Executive James Dimon and Attorney General Eric Holder tentatively agreed to a record $13 billion settlement Friday, the Justice Department notified the bank it would file a civil lawsuit in six days and seek a large amount of damages from the largest U.S. lender by assets, according to people close to the talks.

The warning helped spur the bank closer to an agreement, even though the pact didn’t provide the bank what it wanted—protection against a continuing criminal probe of past mortgage-bond sales.

The historic agreement, which is being watched from Wall Street to Washington, isn’t finalized. The parties are still negotiating final terms.

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