October182011
* Credit rating agency Moody’s said it may slap a negative
outlook on France’s Aaa credit rating in the next three months
if the country fails to make progress on crucial fiscal and
economic reforms.* Meanwhile, risk assets languished in negative territory
for a second day after German officials on Monday cautioned
against expectations of a quick solution to the region’s
two-year-old debt crisis. Equity futures pointed to
a lower opening on Wall Street.* But traders said that with the United States in earnings
season, positive surprises could help equity markets rally and
in turn weigh on Treasuries later in the session. Goldman Sachs
and Coca Cola are among those reporting on
Tuesday, with Apple due after the market close.* “Analysts have ratcheted down their expectations, so the
potential is that they come to the upside and if we see a string
of those it could give a bid to the equity market and we’ll see
fixed income fade on the back of that,” a trader said.* Benchmark 10-year Treasury yields were 4 basis
points lower at 2.12 percent, with 30-year yields
down 2 basis points at 3.11 percent.* The 10-year note is now hovering close to support around
2.266 percent, the 38.2 percent retracement of a July to
September rally in the maturity. More support is clustered near
2.3 percent to 2.31 percent, an area containing a few daily
highs hit in late August.* The Federal Reserve will buy between $2.25 and $2.75
billion of Treasuries on Tuesday as part of “Operation Twist”,
the central bank’s latest easing programme.* Barclays Capital strategists said a flattening in the
10/30s portion of the U.S. Treasury curve on Monday may have
been exacerbated by the looming purchase operation and expected
the curve to resteepen coming out of it.* “The belly of the curve has cheapened significantly over
the past few weeks and has room to richen if risk aversion stays
high,” the bank’s strategists said.
2AM
PARIS Oct 18 (Reuters) - LVMH , the world’s
biggest luxury group, posted forecast-beating third-quarter
sales growth on Tuesday and said it was confident for the rest
of 2011, giving no signs of a slowdown in the luxury industry
despite the slowing economy.The maker of Louis Vuitton handbags, Mumm champagne and
Hennessy cognac said like-for-like sales rose 15 percent to 6.01
billion euros ($8.27 billion), beating the average estimate in a
Reuters poll of 10 analysts of 5.8 billion.”The third quarter showed a continuation of the trend
evident since the start of the year,” LVMH said in a statement.
“The momentum continued in Asia, Europe and the United States,
while Japan returned to growth over the period.”The group added that the first nine months of the year had
confirmed its confidence for the remainder of 2011.The comments by LVMH echo those of British luxury goods
group Burberry , which said last week it had seen
“consistent strong brand momentum and business growth” and that
there was no evidence of a slowdown so far.Consultancy Bain & Co said on Monday that the growth outlook
for the global luxury goods industry in 2011 was now stronger
than it was in spring, despite worries about economic
conditions.LVMH said it benefited from contributions from Italian
jeweller Bulgari, which it bought earlier this year and whose
results were consolidated for the first time during the third
quarter.Nine-month sales jumped 76 percent at the group’s watch and
jewellery division, with like-for-like growth of 26 percent,
LVMH said.The group posted like-for-like growth of at least 10 percent
at all its divisions in the first nine months of the year.Luxury stocks including LVMH have recovered since a sell-off
in late September and early October that was sparked by fears
the sector could be hit by a spending slump.Worries that the euro zone debt crisis could push the world
back into recession added to concerns that emerging markets such
as China, the engine of growth for the industry, could suffer an
economic slowdown.
October172011
By Thomas FerraroWASHINGTON, Oct 17 (Reuters) - U.S. President Barack
Obama’s fellow Democrats in the Senate proposed a bill on
Monday to enact into law a portion of his popular $447 billion
jobs program that Republicans blocked last week.The Democrats’ bill would create or save, at a cost of $35
billion, 300,000 education jobs and another 100,000 jobs for
firefighters, police officers and other first-responders, said
Senate Majority Leader Harry Reid, a Democrat.Reid said he wants to get a Senate vote on the bill as
early as this week to underscore the battle over the weak U.S.
economy that features a stubbornly high 9.1 percent
unemployment rate.But aides said Republicans, who accuse Obama of political
gimmicks, may prevent a vote until at least the first week in
November when the Senate is set to return from an upcoming
seven-day recess.Reid threatened to delay the Senate recess if he senses
that Republicans are dragging their feet.”I am happy to keep the Senate in session as long as needed
to make sure we get a vote on this jobs bill,” Reid said in a
conference call with reporters.Regardless when it is held, Democrats are expected to fall
short of the 60 votes needed in the 100-member chamber to clear
a procedural hurdle. Democrats control the chamber 53-47.Republican Senator John McCain took the floor of his
chamber to promote the jobs bill he and fellow Senate
Republicans offered last week.”The difference between our plan and theirs is that we want
to create jobs through growth and they want to create jobs
through government spending,” McCain said.The Senate Republicans’ bill features a fresh call for tax
reform and cuts as well as a number of components previously
proposed, but has stalled in the Democratic-led Senate.They include steps to: require a balanced budget; repeal
Obama’s overhaul of the U.S. healthcare system; and lift
prohibitions on offshore energy exploration.Obama and Senate Democrats agreed to break the president’s
plan into pieces last week after Republicans blocked the
overall bill.Democrats want to build pressure on Republicans to back at
least portions of the bill or explain to voters in advance of
next year’s elections why they oppose it. On Monday Obama began
a bus tour of North Carolina and Virginia to promote his jobs
plan.A Wall Street Journal-NBC poll last week showed that
Americans support the president’s jobs bill by a 2-1 ratio.Obama’s overall proposal was designed to create an
estimated 2 million jobs with a mixture of stimulus spending
and tax cuts for the middle class and small businesses. The
plan would be financed by a 5.7 percent surtax on
millionaires.Republicans opposed the bill, saying a tax increase would
hurt rather than spur economic growth. Two Senate Democrats
facing tough re-elections in largely conservative states also
opposed the bill in a procedural vote last week.Obama’s Democrats have painted Republicans as
obstructionists who care more about defeating the president
than boosting the economy. But Republicans say the president
would rather campaign on the issue of jobs than find a
comprehensive bipartisan solution.
3PM
* Mezz investors ramp up presence in EuropeBy Claire RuckinLONDON, Oct 17 (Reuters) - Banks arranging the 13.2 billion
Swedish crown ($2.0 billion)financing backing BC Partners’
buyout of Swedish cable company Com Hem are in talks to sell
around $200 million of a bridge loan to an unsecured high-yield
bond to investors, bankers close to the deal said on Monday.Arranging banks Goldman Sachs, Nordea, UBS, Deutsche Bank,
Bank of America Merrill Lynch and Morgan Stanley underwrote the
financing in July but have been unable to issue the bond after
August’s market disruption.The banks are close to selling just under half of the 2.65
billion crown bridge loan to a planned eight-year unsecured
bond, the bankers said.The overall deal financing package also includes a 3.5
billion crown senior secured bridge to high yield bond, which
has not been changed, along with a 7.1 billion leveraged loan in
general syndication.Potential buyers of the unsecured high-yield bridge loan are
subordinated funds which specialize in junior debt, including
mezzanine loans and high-yield bonds, bankers said.The sale will ease pressure on the arranging banks’ balance
sheets. The banks have been finding it difficult to keep bridge
loan risk on their books in volatile markets, which makes it
more challenging and expensive to issue high-yield bonds.The news will be welcomed by subordinated lenders which have
been raising funds to invest in non-standard loans which offer
good yield and also the potential to convert into other types
of debt including mezzanine loans if the high-yield bond
refinancing route remains shut, as seen in the case of Swedish
alarm maker Securitas Direct.The bridge loan selldown follows several other changes made
by arranging banks to boost sales. Arrangers cut the size of the
subordinated bridge loan in September to 2.65 billion crowns
from 3.185 billion and agreed to increase the payment-in-kind
tranche to 1.37 billion.The inclusion of a PIK note reduced Com Hem’s total
cash-paying interest to 5.6 times EBITDA from 5.9 times, as the
notes only pay interest at maturity. Total leverage on the deal
is 6.2 times debt to EBITDA including the PIK note.BC Partners said on July 22 it will buy Com Hem from Carlyle
Group and Providence Equity Partners. The firm paid about 17.5
billion crowns ($2.6 billion) for Com Hem, banking sources said.
($1 = 6.639 Swedish crowns)
2PM
On Tuesday Editor-in-Chief of Reuters News Stephen J. Adler interviewed Jack Welch, CEO of Jack Welch, LLC at the 92nd Street Y. The topic of their conversation was “The Global Century.” To hear what they had to say please watch the video below.
Welch was named CEO of General Electric in 1981 and held the position for more than 20 years. During his tenure there the company’s market capitalization rose from $13 billion to $400 billion. In 2000, he was named “Manager of the Century” by Fortune magazine. In 2001, he wrote his number one New York Times and international best-selling autobiography, Jack: Straight from the Gut. Recently, he launched the Jack Welch Management Institute, a unique online MBA program.
October142011
* 700 companies looking to raise $40 bln in U.S. pipelineBy Clare BaldwinNEW YORK, Oct 14 (Reuters) - The U.S. IPO market may be
recovering, but with small deals rather than big, well-known
companies such as Zynga.This week’s initial public offering of wireless equipment
maker Ubiquiti Networks Inc broke a 2-month drought in
the U.S. IPO market, suggesting that investors are again
willing to risk their money on new issues.The IPO raised just over $100 million — on the smaller
side for U.S. IPOs — at $15 a share, or $6 less than the
midpoint of the estimated price range.The cautious approach appears to have worked: Ubiquiti
shares rose 16.7 percent on their first day of trading on
Nasdaq.Whether this deal will pave the way for others is yet to be
seen. Another small IPO, Zeltiq Aesthetics, is scheduled to
price next week. It is expected to raise about $105 million.”Bankers are testing the water,” said Jack Ablin, chief
investment officer for Harris Private Bank with $60 billion
under management.Ablin said he, along with the rest of the market, would be
watching to see how the deals do.Morningnotes.com founder and IPO analyst Ben Holmes agreed:
“What we want to see is that the equity capital markets can
function in this market and turn out product that people will
buy,” he said. “This is a smoke signal for the market.”Europe’s debt crisis and a weak U.S. economic recovery have
made it difficult to price new issues. Most companies have
opted to delay going public until there is less volatility.Markets have been yo-yo-ing since a major sell-off in July,
but have risen in recent days. The Standard & Poor’s 500 index closed at 1,224.58 on Friday, up 13.9 percent from
an intraday low on Oct. 4.A market turnaround and lower levels of volatility will be
key to restarting the IPO market, experts said.Companies, their bankers, and investors are anxiously
waiting for that to happen. Since the beginning of 2009, more
than 700 companies looking to raise more than $40 billion have
filed for U.S. IPOs, according to Thomson Reuters data.
Included in that backlog are large offerings from companies
such as game developer Zynga and daily deals site Groupon.But for now, at least, the deals remain small.Next Tuesday, Zeltiq Aesthetics and its owners are
scheduled to sell 7 million shares at $14 to $16 each. The IPO
would raise $105 million at the midpoint of the estimated price
range.The company has developed a proprietary cooling technology
that eliminates body fat by cooling it. The company says the
technique, “CoolSculpting,” is a good option for people who
can’t get rid of the fat by dieting or exercising.The company has never been profitable but received
clearance from the U.S. Food and Drug Administration in
September 2010. The shares are expected to trade on Nasdaq
under the symbol “ZLTQ”.
