Posts Tagged ‘Wall Street’

Wall Street’s Annual Frat Party

Wednesday, January 19th, 2011


Alan Breed – President, Edgewood Management

Peter Georgiopoulos – Chairman and CEO, General Maritime Corp.

Jane Gladstone – Senior Managing Director, Evercore Partners

Pam Goldman – Vice President, Invemed Associates

Joseph Goldsmith – Founder and Managing Partner, Goldsmith & Co.

Candace King-Weir – President, C.L. King & Associates

Steven Langman – Managing Director, Rhone Group

Robert Lindsay – Co-Managing Director, Lindsay Goldberg

Roberto Mingone – President, Bridger Capital

John Miller – Managing Director, Barclays Capital

Seth Novatt – Managing Director, Alliance Bernstein

Mitch Rubin – Managing Director, RiverPark

James Sampson – Senior Managing Director, Lebenthal & Co.

Peter Schulte – Managing Partner, CM Equity Partners

Michael Tennenbaum – Senior Managing Partner, Tennenbaum Capital Partners

Andy Walter – Managing Partner, Blue Orchid Capital

Meredith Whitney – CEO, Meredith Whitney Advisory Group

For members of Kappa Beta Phi, an exclusive, secretive Wall Street fraternity, plunging stock prices, the waves of layoffs and bank failures have yielded a dividend in punch lines.

“I feel like the mayor of New Orleans after Katrina,” quipped Alfred E. Smith IV, the group’s leader, or “Grand Swipe,” at the opening of its annual black-tie dinner last week. “Today, the FBI put out a warning that Al Qaeda was planning an attack to cripple the U.S. economy,” inductee Martin Gruss joked later in the evening. “I’ve got news for them, Congress has already done that.”

Though a number of the society’s luminaries — including former Bear Stearns Cos. Chief Executive James E. Cayne, Lehman Brothers Holdings Inc.’s Richard S. Fuld Jr. and ex-Merrill Lynch & Co. Chief Stanley O’Neal — have faced rebuke and were conspicuously absent, members still standing haven’t lost their sense of humor. This year’s attendees gave a rare standing ovation to a rendition of Don McLean’s “American Pie,” rewritten to read: “Bye, bye to my piece of the pie.”

Established before the stock-market crash in 1929, Kappa Beta Phi meets just once a year and always at the St. Regis, the more than a century-old Beaux Arts hotel on Fifth Avenue. The society, with its grandiose titles and playful rituals, dates back to a time before television when societies and clubs were big sources of entertainment. It also dates to when the term “Wall Street” referred to the warren of streets around the New York Stock Exchange and not to the complex, global network of hedge funds and structured derivatives it has become.

Kappa Beta Phi continued to meet through the depression — a 1932 Wall Street Journal story about the gathering carried the headline “Wall Street Chapter to Revive Ghosts of ‘Good Old Days’ Tonight” — but its annual dinner was suspended for a few years during World War II.

Kappa Beta Phi’s membership remains a roster of Wall Street power brokers past and present, including New York Mayor Michael Bloomberg and New Jersey Gov. Jon Corzine, two more no-shows at this year’s dinner. Mary Schapiro, President-elect Barack Obama’s nominee to head the Securities and Exchange Commission, is also a member, as is former Goldman Sachs & Co. Chairman John C. Whitehead. About 15 to 20 new members — eminent all — are inducted each year, having been nominated by members and approved by the group’s leaders.

But Kappa Beta Phi, whose name is a play on Phi Beta Kappa, the academic honor society, is more about cornball comedy than high finance. Its Latin motto “Dum vivamus edimus et biberimus” is freely translated as, “While we live, we eat and drink.” Like Phi Beta Kappa inductees, members of Kappa Beta Phi also receive a fob, or key. Phi Beta Kappa’s key includes a hand pointing at three stars that symbolize the society’s principles: morality, friendship and learning. Kappa Beta Phi’s key has images of a hand, a beer stein, champagne tumbler and five stars. The stars represent Hennessy cognac and the hand is there to hold a glass.

Under the painted clouds and gilt chandeliers of a room called the St. Regis Roof, this year’s attendees, including Alan Schwartz, the ex-Bear Stearns president and chief executive, and Sallie Krawcheck, the former head of Citigroup’s wealth-management arm, enjoyed an evening of ribald humor and old-fashioned hazing.

The material was choice, since in the year since the group last met, all five of Wall Street’s major independent investment firms have been taken over, have failed or have been transformed into commercial banks.

Society members, some wearing the society’s key on a red ribbon around their necks, started with cocktails then moved on to dinner of beef tenderloin and cheap wine — $10 bottles of Chilean cabernet sauvignon. About 150 members showed up, fewer than usual. Some, including BlackRock Inc. Chief Executive Laurence Fink and Gregory Fleming, who resigned as Merrill Lynch’s No. 2 executive the day of the dinner, only stayed for a drink.

Part Friar’s Club roast, part “Gong Show,” Kappa Beta Phi’s annual dinner is held for the official purpose of inducting new members, who sit at a long table with a black tablecloth at the front of the room. The inductees, “Neophytes” in Kappa Beta Phi parlance, must perform a variety show for the old crowd. Mr. Smith, a Wall Street veteran and great-grandson of legendary New York Gov. Al Smith, served as the evening’s master of ceremonies.

Neophyte Mr. Gruss poked fun at a fellow investor. “There’s Wilbur Ross over there,” Mr. Gruss said at one point, referring to the member who recently became the society’s “Grand Loaf,” one of Kappa Beta Phi’s four offices. “Doesn’t he look like a visitor from another planet? That’s the reason brothers and sisters shouldn’t marry.”

“There’s a need for Wall Street to have a little bit of humor,” Mr. Ross said this week. “If anything, people needed a little more cheering up this year.”

The group’s humor is anything but politically correct. One crude joke took aim at Rep. Barney Frank’s treatment of the U.S. taxpayer, with a reference to Mr. Frank’s sexual orientation. Mr. Frank is the first openly gay member of Congress.

Together with professional coaches, the Neophytes stage Wall Street’s version of pledge night. This year, at the suggestion of last year’s class, the male Neophytes appeared in falsies and pigtail wigs, some in gold and bright pink. The men, some sporting a dab of blush, also wore cheerleader skirts and shirts bearing the society’s Greek letters.

This year’s crop of 17 Neophytes included Don Donahue, chairman and chief executive of the Depository Trust & Clearing Corp., J. Tomlison Hill, vice chairman of the Blackstone Group, Peter Scaturro, former chief executive of U.S. Trust and Goldman Sachs Group Inc.’s private-wealth arm, and James S. McDonald, chief executive of Rockefeller & Co., a wealth-management firm that advises the Rockefellers and other families.

The female members of the class, dressed as male cheerleaders, wore short-hair wigs and tights. The three female Neophytes were Sarah Cogan, a partner of Simpson Thacher & Bartlett, the Wall Street law firm, Sara Ayres, managing director at New Providence Asset Management, and Marianne Brown, chief executive of OMGEO LLC, a firm that handles the post-trade details of securities transactions.

Backed by a five-piece band, the Neophytes performed renditions of musical standards, from Bing Crosby’s “White Christmas” to the Beatles. There was at least one attempt at rap, by Mr. Hill, who was quickly jeered offstage. Rockefeller’s Mr. McDonald tried to sing a version of “Joshua Fought the Battle of Jericho,” renamed “Treasury Fought the Battle of Lehman Bro.” and met a similar fate.

In one ditty, a play on Dr. Seuss’s “You’re a mean one, Mr. Grinch,” the performers took aim at several of Wall Street’s fallen stars. One target was Kappa Beta Phi member and former Grand Swipe Mr. Cayne, absent though he was. The song’s lyrics included the line, “You’re an odd one, Mr. Cayne,” and made light of his reported use of “ganja.” He has said he didn’t engage “in inappropriate conduct.”

Treasury Secretary Henry Paulson, a former Goldman Sachs CEO who is not a member, also made it into the Grinch tune: “Where’s the TARP money, Mr. Hank? Did any of it fall through the cracks? You let Lehman go under but not your beloved Goldman Sachs.”

The hit of the evening, however, was this new take on “American Pie” performed by Mr. Scaturro:

A long, long time ago…

I can still remember

How the Dow Jones used to make me smile.

And I learned my trade and had my chance

The music played I did my dance

And I made seven figures for a while.

I can’t remember if I cried when they pulled the plug on Countrywide…

It sucks that Iceland is out of ice….Bye, Bye to my piece of the pie…Now I travel coach whenever I fly…Maybe this will be the day that I die.

Credit Suisse Junk Bonuses Turn Into $5B

Wednesday, February 24th, 2010

All of you probably remember last year how Credit Suisse did something “unthinkable” by giving bonuses in the form of CDOs and ABS.  Now it seems that CS bankers were some of the most highly compensated during the recession!

Credit Suisse sign

Bankers’ ‘junk’ bonuses turn into $5bn

By Alex Ritson
Business reporter, BBC World Service

Bonuses made up of so-called toxic debt and given to bankers at Credit Suisse as a punishment for poor investments, have soared in value.

Their bonus pool, made up financial products originally thought to be worthless, is now worth $5bn (£3.2bn).

The bank lost $7bn last year, in part due to the investment decisions of some of its best-paid staff.

The toxic debt bonuses had been described as a way of giving the bankers to taste of their own medicine.

But it has now emerged the value of the toxic bonus pool has climbed by 72% – far outperforming many safer investments.

Well-deserved?

The money had been put into complicated financial products linked to the risky commercial debt secured on among other things, a Japanese shopping centre, an American supermarket chain and other commercial property that had plunged in value.

At the height of the financial crisis, many people thought these investments were worthless. To Credit Suisse, it seemed right to share them out as annual bonuses among the people who had apparently got things so wrong.

But as confidence has returned to the market – it has become clear that the toxic asset pool wasn’t nearly as toxic it had been thought.

The toxic bonus fund has soared in value by 72%. That compares with a 60% rise in the value of Credit Suisse shares over the same period – or a mere 19% rise in the main US share index the Dow Jones.

The bankers may well feel they have earned the money though.

Credit Suisse is safely back in profit – and unlike its rivals at UBS, Credit Suisse did not take a bail-out from the Swiss Government.

~Sourced by I.S.

Michael Moore’s ‘Capitalism: A Love Story’

Thursday, February 18th, 2010

Another perspective on Wall Street excesses…Michael Moore portrays the bailout of AIG and large investment banks as a government conspiracy…

[youtube]http://www.youtube.com/watch?v=IhydyxRjujU[/youtube]

~I.S.

Wall Street 2: Money Never Sleeps

Tuesday, February 16th, 2010

Trailer Below…

[youtube]http://www.youtube.com/watch?v=oV5hEBqYfTE&feature=related[/youtube]

~I.S.

Credit Crisis Explanation Part II

Monday, February 15th, 2010

This is the second installation of the credit crisis explanation.

[youtube]http://www.youtube.com/watch?v=iYhDkZjKBEw[/youtube]

~I.S.

Credit Crisis Explanation Part I

Monday, February 15th, 2010

This is a great video that describe the credit crisis.  It is ideal for finance interview preparation.

[youtube]http://www.youtube.com/watch?v=Q0zEXdDO5JU[/youtube]

~I.S.

Yara to Purchase Terra for $4.1 Billion

Monday, February 15th, 2010

YARA_RGB

February 15, 2010: Iowa based Terra was just bought out by Yara International ASA, the world’s largest fertilizer maker.  The deal will take advantage of lower natural gas prices in the United States, and arbitrage between European and U.S. natty rates.  Let’s see more cross-border M&A!  I’m getting pumped! ~I.S.

Feb. 15 (Bloomberg) — Yara International ASA, the largest fertilizer maker, agreed to buy Terra Industries Inc. for $4.1 billion to benefit from lower U.S. fuel costs.

The company will pay $41.10 for each Terra share, raising the cash with a $2.5 billion rights offer, Oslo-based Yara said in a statement today. The price is 24 percent more than Terra’s Feb. 12 close of $33.25 in New York. Yara fell 6.9 percent today in Oslo, the most in almost eight months.

Buying Sioux City, Iowa-based Terra will give Yara six North American plants making nitrogen-based fertilizer. The price of natural-gas, used in production, has declined 64 percent in the past two years as the recession weakened demand and increasing shale production in the U.S. buoyed supply.


“It makes sense for them to secure more U.S. gas, which may be structurally cheaper than European gas,” said Samir Bendriss, a research chief at Pareto Securities ASA in Oslo who has a “hold” recommendation on Yara shares. “It makes sense strategically, but the price is too high.”

Yara is paying 12.8 times Terra’s net income, according to data Bloomberg compiled. Acquisitions in the agricultural chemicals industry were done at 10 times net income, according to the median multiple of 37 deals in the past 12 months.

“Yara is committed to the U.S. market, and this transaction presents an attractive opportunity for both companies to strengthen their positions in the U.S.,” Yara’s Chief Executive Officer Joergen Ole Haslestad said in the statement. “Both companies are strong in ammonia and nitrates, and have complementary geographical footprints.”

Ammonia, Nitrates

The combination will have an 8 percent share of the world ammonia market, Haslestad said in Oslo. The deal will “almost immediately” add to Yara’s earnings, he said in an interview.

Yara fell 16.8 kroner to 225.7 kroner at the close of trading in Oslo, the steepest drop since June 22. The decline extended the loss this year to 14 percent, giving the company a market value of 66 billion kroner ($11 billion).

“It will require a relatively big rights issue, so it’s fair that the shares should fall,” Henrik Sinding, an analyst at Carnegie ASA in Oslo who has an “outperform” rating on the stock, said by phone. “Given that the price is OK and the rationale behind it makes sense, we don’t expect to make any changes to our recommendation on the back of this.”

Yara’s bid comes a month after Deerfield, Illinois-based CF Industries Holdings Inc. dropped an offer for Terra. CF had sought to buy Terra since January 2009, while fending off a hostile offer from Agrium Inc. At stake was whether Agrium or CF would be the world’s second-largest publicly traded maker of nitrogen-based fertilizers after Yara.

Cost Savings

Yara expects pretax cost savings of $60 million within a year of closing the deal, expected in about June. Merger costs won’t be significant as Terra’s plants are in a good condition and need only maintenance spending, Chief Financial Officer Hallgeir Storvik said in Oslo. The companies haven’t decided on how many employees will be laid off, he said.

“Terra assets are located in close proximity to the U.S. corn belt and key ammonia transit pipelines,” Joe Dewhurst, an analyst at UBS Warburg Ltd. with a “neutral” rating, wrote in a note. “This should provide Yara with logistics synergies and a low cost platform for further North American operations expansion. Terra gas feedstock costs are likely to remain competitive versus liquid natural gas.”

Terra, which had 2008 sales of $2.9 billion and already runs a 50-50 joint venture in the U.K. with Yara, will be renamed Yara North America. CEO Michael Bennett will become president. The deal has a $123 million break fee for both companies should the deal fail to go through, Yara said.

Rights Offer Timing

The rights offer may happen in May. Norway’s government, Yara’s largest shareholder with 36 percent, and the National Insurance Fund with 6.6 percent will subscribe, Yara said.

The rest of the offer will be underwritten by Citigroup Inc., Deutsche Bank AG and Nordea Bank AB. While the company hasn’t immediate plans to sell debt, “down the road we are assuming we’ll go to the bond market,” Storvik said. Credit Suisse Group AG served as Terra’s financial adviser.

Yara reported fourth-quarter net income of 1.42 billion kroner, after a 2.11 billion kroner loss a year earlier.

To contact the reporter on this story: Vibeke Laroi in Oslo at vlaroi@bloomberg.net

For more information, please visit Bloomberg…

~I.S.

Bharti Telecom Purchases Zain’s African Assets for $10.7 Billion

Monday, February 15th, 2010

bharti

Zain, one of the largest telecom giants in the middle east, just agreed to offload its African assets to India’s Bharti Airtel, in one of the largest Indian mergers in history.  The deal is valued at $10.7 billion U.S.  Zain spent more than $12 billion to enter Africa over the past decade.  Bharti also agreed to buy 70 percent of Bangladesh’s Warid Telecom for an initial investment of $300 million.  The deal was reached because Zain was tired of underperforming telecom assets in Nigeria and Kenya.  It presents the opportunity for Bharti to turn things around.  ~I.S.

Kuwaiti telecom group Zain has agreed to offload its African assets to India’s Bharti Airtel, Kuwait’s state news agency said on Sunday, in a deal valued at $10.7 billion.

Deals

The deal marks one of the biggest cross-border transactions in the Middle East in years and a turning point in the long-running saga around the third-biggest telecoms operator in the region.

“If the transaction values the African operations at $10.7 billion, it would be a nice premium,” said analyst Simon Simonian at investment bank Shuaa Capital. “We expect Zain to pay a special dividend to shareholders from the proceeds.”

The Kuwaiti bourse suspended trading in Zain shares before the open but optimism that the deal would be approved sparked a rally in Kuwaiti shares, pusing the benchmark index up 1.8 percent, in its biggest gain in 6 months.

The sale of Zain’s African positions would mark a strategic reversal that saw the local player rise to international status and then revert to that of a regional player. Zain has spent more than $12 billion alone to expand in Africa since 2005.

Zain’s expansion from Burkina Faso to Zambia and its ubiquitous logo has transformed it into a symbol of national pride synonymous with Kuwait’s faltering aspirations to diversify its economy beyond the oil sector.

“Zain grew a little bit too fast and was facing some growing pains in the past two years,” Simonian said.

Confirmation that India’s Bharti was the bidder showed the telecom operator was back in the hunt for emerging market acquisitions after its planned $24 billion merger with South Africa’s MTN failed in September.

In October, Akhil Gupta, deputy group CEO at the Indian mobile operator’s parent, said Bharti would look at buying a stake in Zain if there was an opportunity.

Last month, Bharti agreed to buy 70 percent of Bangladesh’s Warid Telecom for an initial investment of $300 million. It also set up a new unit to drive its foreign expansion, focused on opportunities in emerging markets where it can replicate its low-price, high-volume model.

Bharti’s home mobile market is facing margin pressures from intense competition and price wars, resulting in lower tariffs and shrinking profits.

TRANSFORMATION

Analysts have pointed to Zain’s underperforming assets in Nigeria and Kenya as a burden on the group but said its large presence in sub-Saharan Africa harbored valuable growth.

The group pulled back from an expansion spree in 2009 and rejected an offer from France’s Vivendi for its African assets. It then halted talks to sell the assets to appease potential buyers of a 46-percent stake in the parent company.

A consortium of Asian investors has been trying to buy the 46 percent stake from Kuwaiti family conglomerate Kharafi Group for 2 dinars per share, or about $13.7 billion, although selling the African operations would likely end that initiative.

In one indication of an imminent deal, Zain last week appointed Nabil bin Salama as the firm’s chief executive, replacing Saad al-Barrak, seen as the driving force behind the growth into 23 countries across Africa and the Middle East.

Barrak resigned earlier this month amid uncertainty about the fate of the sale of the parent company stake.

Last May, Zain announced a rare cut of 2,000 jobs of its 15,500 workforce, signaling that the heyday of expansion might be over.

Africa represents about 62 percent of Zain’s 64.7 million customers but only 15 percent of the groups’s net profit. Zain operates in 24 countries including Saudi Arabia and Nigeria.

Shares in Zain have risen 23 percent since February 4.

(Article by Thomas Atkins, Editing by Mike Nesbit)

For more information, please visit Reuters…

~I.S.

Babcock International Rejects Purchase of VT

Monday, February 15th, 2010

babcock

Although this bid was rejected, shipping and submarine M&A is certainly heating up.  VT group was offered 634 pence to be bought out.  As much as thirty percent of Babcock’s business overlaps with VT.  Talk about synergy potential…~I.S.

Babcock International Group Plc, which maintains Britain’s submarine fleet, offered 1.14 billion pounds ($1.7 billion) for VT Group Plc, a move that may prevent the smaller defense company combining with a rival.

VT Group rose the most since at least 1991 after Babcock disclosed its approach for the company, rising as much as 92 pence, or 18 percent, to 600 pence. Babcock bid the equivalent of 633.9 pence in cash and stock for each share of VT Group, or 25 percent more than VT’s closing price yesterday, it said.

Babcock and VT Group both work in technical engineering in markets that include defense and nuclear power. Babock’s bid for VT Group, the third approach since last year, coincided with VT’s proposal to buy Mouchel Group Plc, the U.K. maintenance company, which had rejected two previous VT overtures as “wholly inadequate.”

“About 30 percent of Babcock’s business overlaps with VT,” said Mike Allen, an analyst at Panmure Gordon U.K. Ltd., who recommends investors buy Babcock shares.

Babcock said it could save about 27 million pounds each year through a combination with VT Group. Babcock approached VT’s board on Feb. 3 with a letter laying out its purchase plans, after two unsuccessful attempts last year.

Industrial Logic

“Babcock considers that a combination with VT has significant industrial and commercial logic and would bring together two highly complementary businesses to create a large and focused international engineering support services company,” the company said in the release.

VT Group increased its offer for Mouchel earlier today. The latest offer is worth 294 pence for each share, based on VT’s Feb. 12 closing price of 508 pence, Mouchel said today. The company’s board is considering the new offer and will consult with shareholders, it said.

The Babcock offer “is totally unacceptable both in its constitution or value and the rationale behind it,” VT Group spokesman Philip Rood said in a statement. “We believe that Babcock is strategically challenged because they are heavily exposed to the future expense budget that will be clearly be cut under the new administration.”

For more information, please visit Bloomberg…

~I.S.

Skillsoft LBO

Sunday, February 14th, 2010

skilsoft-logo

According to NewsCenter, “E-learning software maker SkillSoft Plc based in Ireland said it agreed to be acquired by a consortium of private-equity firms for about USD 1.1 billion, an offer that investors think undervalues the company.

The cash offer of USD 10.80 per share, made by funds owned by Berkshire Partners, Advent International and Bain Capital, was 11% more than SkillSoft’s closing price on Thursday. However, American depositary shares of the company edged past the offer to as high as USD 11.21, or up 15%, indicating that investors might be expecting a better offer.  As of Thursday’s close, the stock had dropped about 11% since touching a 52-week high of USD 10.99 in December, higher than the investor group’s offer.

‘We think we got the best price we could negotiate balancing a lot of the things that our board knows in terms of their understanding of the market,’ Chief Executive Chuck Moran said on a call with analysts.

The merger agreement has a ‘go-shop’ period, ending on March 6, that allows SkillSoft to scout for better offers.
However, the company said the board intends to recommend that shareholders vote in favour of the acquisition.

‘We would have hoped for a modestly higher price but business was challenging through this renewal period that they just completed,’ Craig-Hallum Capital analyst George Sutton told Reuters by phone.

‘The higher price would most likely come if there is a strategic buyer who can integrate the cost structure more effectively than a private equity firm.’

Signal Hill analyst Trace Urdan said possible strategic acquirers could include IBM and Accenture Plc.

Investment firm Columbia Wanger Asset Management is the largest stakeholder in SkillSoft with a 22% interest. The firm was not immediately available for comment.

Wedbush Securities analyst Ariel Sokol said in a note, ‘We wonder whether parties involved might have to increase the price of the company to mollify investors concerned that the company could potentially be sold a year too early.’

As of Thursday’s close, the company traded at a forward earnings multiple of 13 times and according to analysts the multiple could push to 16.5 times earnings. The offer values the company at 14.6 times 2010 earnings.

MARKET WOES

‘Characteristics of the training market have certainly shifted during this economic time. The growth rates have been reduced,’ CEO Moran said, adding that fiscal 2010 bookings were down from the prior year.

The company, which had revenue of USD 328 million for the year ended January 2009, provides Internet-based training courses and software to businesses and governments.

It competes with companies such as India’s NIIT, Kenexa and Blackboard Inc in the increasingly competitive e-learning software and services market.

The e-learning market accounts for a small part of the overall training market, and its growth has slowed in recent years due to the general economic slowdown and pricing pressures.

SkillSoft, whose customers include IBM, Merck, Toyota and Hilton, however, posted a higher-than-expected profit for the third quarter and raised its outlook for the year.

The company will continue to be headquartered in Dublin, Ireland, and led by the current management team, including Moran as CEO, it said.

The buyout will be financed with a USD 605 million financing package from Morgan Stanley and Barclays Capital, who are advising the investor group.”

~Sourced by I.S.

For more information, please visit NewsCenter…