By Christine Harper
Sept. 26 (Bloomberg) -- Morgan Stanley Chief Executive Officer John Mack told employees the firm, whose stock fell as much as 13 percent in New York trading today, is ``moving ahead as anticipated'' with an agreement to raise capital from Mitsubishi UFJ Financial Group Inc.
The two companies on Sept. 22 announced a ``letter of intent'' to pursue an alliance in which Japan's biggest bank would invest about $8.5 billion for 10 percent to 20 percent of the Wall Street firm. The announcement came the day after New York-based Morgan Stanley said it would boost its deposit base as it transforms itself from the second-biggest U.S. securities firm into the fifth-biggest bank holding company.
Stock and bond investors have become anxious about companies that rely on markets for funding after Lehman Brothers Holdings Inc. filed for bankruptcy protection last week. Goldman Sachs Group Inc., Morgan Stanley's larger rival, moved to shore up market confidence this week by raising $10 billion from Berkshire Hathaway Inc. and a public stock offering. The U.S. Congress is debating a $700 billion financial rescue package proposed less than a week ago by Treasury Secretary Henry Paulson.
``It is critical that all of us stay close to our clients to help them navigate these challenging markets,'' Mack said in the memo today. ``I have no doubt that markets will remain volatile and stock prices -- including our own -- will continue to fluctuate.''
Leverage Ratio
With $8.5 billion of new equity from Tokyo-based Mitsubishi UFJ, Morgan Stanley's leverage ratio would drop to 22.3-to-1 from 27.6-to-1 at the end of August. The leverage ratio measures the amount of assets held with each $1 of shareholder equity, with higher numbers reflecting greater reliance on borrowing.
With its $10 billion of new capital raised this week, Goldman Sachs' leverage ratio dropped to 19.4-to-1 from 23.70- to-1 at the end of August.
Shares of Morgan Stanley dropped $2.35, or 8.7 percent, to $24.75 in New York Stock Exchange composite trading after falling as low as $23.52 earlier in the day. The stock is down 53 percent so far this year.
Financial stocks declined today after Washington Mutual Inc. became the biggest U.S. bank failure in history, with JPMorgan Chase & Co. agreeing to acquire the deposits and branches of the Seattle-based savings and loan.
Mitsubishi UFJ's stock has fallen 11 percent so far this year, giving the company a market value of 10.15 trillion yen ($95.8 billion). The bank has taken $1.6 billion of writedowns and credit losses since the U.S. subprime mortgage market collapsed last year, compared with $15.7 billion at Morgan Stanley.
Morgan Stanley, which yesterday said it hired former U.S. Comptroller of the Currency Eugene Ludwig as an adviser on its transformation into a bank holding company, has teams working ``to explore the most attractive opportunities offered by this new structure,'' Mack wrote in the memo today.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.
Read more...
Sunday, September 28, 2008
Payrolls Probably Fell, Factories Shrank: U.S. Economy Preview
By Shobhana Chandra
Sept. 28 (Bloomberg) -- The U.S. probably lost jobs in September for the ninth consecutive month and manufacturing shrank as the credit crisis intensified, economists said before reports this week.
Payrolls probably fell by 105,000, according to the median estimate in a Bloomberg News survey ahead of Labor Department figures on Oct. 3. A report from a private group may show factories stagnated this month as demand softened.
The worst financial-markets meltdown since the Great Depression is dealing another blow to an economy reeling from mounting job losses, a housing slump in its third year and a pullback in consumer spending. Weakening growth overseas will limit demand for U.S.-made goods, further hurting manufacturing.
``Things are definitely looking worse,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. The credit crisis ``will magnify the degree of the economic downturn. The labor market is weak, and manufacturing is going to slow as some of our trading partners are in a recession like the U.S.''
The employment report may show the jobless rate stayed at a five-year high of 6.1 percent this month, according to the Bloomberg survey. Factory payrolls probably fell by 50,000.
Factory Index
The Institute for Supply Management's factory index probably slid to 49.5, from 49.9 in August, the survey median shows. The Tempe, Arizona-based group's index for service industries, which make up almost 90 percent of the economy, declined to 50 from 50.6 the prior month, economists forecast.
An index reading of 50 is the dividing line between expansion and contraction for ISM's manufacturing report, due on Oct. 1, and for its services report, due two days later.
Companies will get less support from overseas demand in coming months. Europe's economy contracted in the second quarter for the first time since the introduction of the euro almost a decade ago, and Japan's economy shrank in the same period.
U.S. businesses also are limiting spending on new equipment. Factory orders fell in August for the first time in six months, economists in the Bloomberg survey predict ahead of Commerce Department figures due on Oct. 2.
Another Commerce report on Sept. 29 may show automakers' incentives helped to lift personal spending by 0.2 percent in August, according to the median forecast of economists. Still, Americans remain under pressure, and consumer spending may stagnate this quarter, the worst performance since 1991, according to a Bloomberg survey in early September.
Unemployment
The weakening labor market is holding down spending. The projected drop in September payrolls would follow 84,000 reductions in August that brought the total job cuts for the first eight months to 605,000. In 2007, the economy generated 91,000 jobs a month on average.
In the past week, Chrysler LLC said it will fire about 250 employees as part of a plan to eliminate 1,000 salaried positions by Sept. 30, and UAL Corp.'s United Airlines said 1,550 flight attendants volunteered for leaves, eliminating the need for forced layoffs.
The U.S. Postal Service, which has said it may lose $2 billion this year, on Sept. 23 announced it is imposing a hiring and promotions freeze, effective immediately.
Payroll declines in September may be bigger in part because Hurricanes Gustav and Ike threw thousands out of work, economists said. More layoffs may occur following a bankruptcy filing by New York-based Lehman Brothers Holdings Inc. and the government takeover of Fannie Mae and Freddie Mac.
The New York metropolitan area is forecast to lose 64,000 positions by the second quarter of 2010, according to West Chester, Pennsylvania-based Moody's Economy.com.
``I believe that if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover,'' Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee on Sept. 23.
The Bush administration is working with Congress on a rescue plan for troubled banks to prevent growth from stalling.
Bloomberg Survey
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- The U.S. probably lost jobs in September for the ninth consecutive month and manufacturing shrank as the credit crisis intensified, economists said before reports this week.
Payrolls probably fell by 105,000, according to the median estimate in a Bloomberg News survey ahead of Labor Department figures on Oct. 3. A report from a private group may show factories stagnated this month as demand softened.
The worst financial-markets meltdown since the Great Depression is dealing another blow to an economy reeling from mounting job losses, a housing slump in its third year and a pullback in consumer spending. Weakening growth overseas will limit demand for U.S.-made goods, further hurting manufacturing.
``Things are definitely looking worse,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. The credit crisis ``will magnify the degree of the economic downturn. The labor market is weak, and manufacturing is going to slow as some of our trading partners are in a recession like the U.S.''
The employment report may show the jobless rate stayed at a five-year high of 6.1 percent this month, according to the Bloomberg survey. Factory payrolls probably fell by 50,000.
Factory Index
The Institute for Supply Management's factory index probably slid to 49.5, from 49.9 in August, the survey median shows. The Tempe, Arizona-based group's index for service industries, which make up almost 90 percent of the economy, declined to 50 from 50.6 the prior month, economists forecast.
An index reading of 50 is the dividing line between expansion and contraction for ISM's manufacturing report, due on Oct. 1, and for its services report, due two days later.
Companies will get less support from overseas demand in coming months. Europe's economy contracted in the second quarter for the first time since the introduction of the euro almost a decade ago, and Japan's economy shrank in the same period.
U.S. businesses also are limiting spending on new equipment. Factory orders fell in August for the first time in six months, economists in the Bloomberg survey predict ahead of Commerce Department figures due on Oct. 2.
Another Commerce report on Sept. 29 may show automakers' incentives helped to lift personal spending by 0.2 percent in August, according to the median forecast of economists. Still, Americans remain under pressure, and consumer spending may stagnate this quarter, the worst performance since 1991, according to a Bloomberg survey in early September.
Unemployment
The weakening labor market is holding down spending. The projected drop in September payrolls would follow 84,000 reductions in August that brought the total job cuts for the first eight months to 605,000. In 2007, the economy generated 91,000 jobs a month on average.
In the past week, Chrysler LLC said it will fire about 250 employees as part of a plan to eliminate 1,000 salaried positions by Sept. 30, and UAL Corp.'s United Airlines said 1,550 flight attendants volunteered for leaves, eliminating the need for forced layoffs.
The U.S. Postal Service, which has said it may lose $2 billion this year, on Sept. 23 announced it is imposing a hiring and promotions freeze, effective immediately.
Payroll declines in September may be bigger in part because Hurricanes Gustav and Ike threw thousands out of work, economists said. More layoffs may occur following a bankruptcy filing by New York-based Lehman Brothers Holdings Inc. and the government takeover of Fannie Mae and Freddie Mac.
The New York metropolitan area is forecast to lose 64,000 positions by the second quarter of 2010, according to West Chester, Pennsylvania-based Moody's Economy.com.
``I believe that if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover,'' Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee on Sept. 23.
The Bush administration is working with Congress on a rescue plan for troubled banks to prevent growth from stalling.
Bloomberg Survey
================================================================
===============
Release Period Prior Median
Indicator Date Value Forecast
================================================================
===============
Pers Inc MOM% 9/29 Aug. -0.7% 0.2%
Pers Spend MOM% 9/29 Aug. 0.2% 0.2%
PCE Deflator YOY% 9/29 Aug. 4.5% 4.5%
Core PCE Prices MOM% 9/29 Aug. 0.3% 0.2%
Core PCE Prices YOY% 9/29 Aug. 2.4% 2.4%
Case Shiller Monthly YO 9/30 July -15.9% -16.0%
Case Shiller Monthly In 9/30 July 167.7 166.9
Chicago PM Index 9/30 Sept. 57.9 53.0
Consumer Conf Index 9/30 Sept. 56.9 55.0
NAPM Milwaukee Index 9/30 Sept. 43.0 44.0
ABC Conf Index 9/30 Sept. 29 -41 -43
ADP Payroll ,000's 10/1 Sept. -33 -53
ISM Manu Index 10/1 Sept. 49.9 49.5
ISM Prices Index 10/1 Sept. 77.0 73.0
Construct Spending MOM% 10/1 Aug. -0.6% -0.5%
Vehicle Sales Mlns 10/1 Sept. 13.7 13.5
Domestic Vehicles Mlns 10/1 Sept. 10.4 10.1
Initial Claims ,000's 10/2 Sept. 20 493 475
Cont. Claims ,000's 10/2 Sept. 13 3542 3550
Factory Orders MOM% 10/2 Jan. 1.3% -2.8%
Nonfarm Payrolls ,000's 10/3 Sept. -84 -105
Unemploy Rate % 10/3 Sept. 6.1% 6.1%
Manu Payrolls ,000's 10/3 Sept. -61 -50
Hourly Earnings MOM% 10/3 Sept. 0.4% 0.3%
Hourly Earnings YOY% 10/3 Sept. 3.6% 3.6%
Avg Weekly Hours 10/3 Sept. 33.7 33.7
ISM NonManu Index 10/3 Sept. 50.6 50.0
================================================================
===============
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Read more...
Lawmakers Say They Have Breakthrough on Rescue Plan
By James Rowley and Alison Vekshin
Sept. 28 (Bloomberg) -- U.S. lawmakers said they made a breakthrough in talks on a $700 billion plan to revive the credit markets and expect to announce an agreement on legislation later today.
Negotiators resolved ``our differences so we can go forward with a package to stabilize the market,'' House Speaker Nancy Pelosi told reporters when talks at the Capitol ended after midnight Washington time. Lawmakers will review a written version of the plan later today, she said. The House may vote tomorrow.
The plan would let the Treasury begin purchasing distressed debt securities from financial companies affected by the record number of home foreclosures.
After five years, if there was a net loss to taxpayers, the president would have to submit a plan to Congress to recoup the funds, according to an outline circulated by congressional aides.
The proposal also includes accountability provisions, limits on executive pay for participating companies, and foreclosure relief, said Senate Banking Committee Chairman Christopher Dodd, a lead negotiator.
Senate Majority Leader Harry Reid, a Nevada Democrat, sought an agreement to reassure investors before Asian financial markets open late today.
Effective in Marketplace
Treasury Secretary Henry Paulson said the proposed deal ``will work and be effective'' in the marketplace. More work needs to be done, ``but I think we're there,'' he said.
Paulson and Federal Reserve Chairman Ben S. Bernanke said the rescue plan was necessary to revive lending and restore the flow of credit to the U.S. economy. President George W. Bush warned yesterday that legislative action was needed to avoid a ``deep and painful recession.''
Bush spokesman Tony Fratto said early this morning that administration officials are ``pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.'' He said Bush had spoken last night with Pelosi on the negotiations.
Lawmakers had resisted giving Paulson unrestricted power to buy the debt and sought controls to assuage angry constituents who bombarded congressional offices with e-mails and phone calls.
`Don't Want' Bailout
Voters ``don't want a bailout of Wall Street and neither do we,'' Democratic Senator John Kerry of Massachusetts told reporters yesterday. ``What we are talking about is not losing 3 million jobs in a matter of weeks'' and helping ``small banks and small businesses literally keeping their doors open.''
Senator Kent Conrad, a North Dakota Democrat who chairs the Budget Committee, said $250 billion would be immediately available and another $100 billion could be used when requested by the president for debt purchases. Congress could bar the expenditure of the remaining $350 billion only by passing a resolution to block it from being spent.
The package includes a provision aimed at ``preventing golden parachutes'' for executives of companies who leave firms that have sold troubled assets to the government, Conrad said.
Stock Warrants
Companies that sell debt to the government will issue stock warrants to the government so that taxpayers ``can gain as companies recover'' from economic difficulties, Conrad said.
The plan also includes a proposal by House Republicans, whose objections scuttled an earlier agreement in principle, that provides for government insurance of mortgage-backed securities. Paulson has opposed the idea and has testified it wouldn't work.
The measure leaves it up to Treasury how to ``structure the program and they will assure that the premiums will be set at a level that fully protects the taxpayers of the country,'' Conrad said.
``We worked out everything,'' said Senator Judd Gregg, a New Hampshire Republican. He said lawmakers still want to see the text of the accord on paper before announcing a final deal.
``If there are no adjustments'' to that ``we'll be all set,'' he said.
Missouri Representative Roy Blunt, the lead negotiator for House Republicans, voiced satisfaction for his colleagues who were ``very concerned that we would be able to bring both free- market principles and taxpayer protections to the table.''
House Republicans ``will be looking at the final wording of this,'' he said. Still, ``I think we will be able to have an announcement'' later today, Blunt said.
At one point during the negotiations billionaire Warren Buffett spoke by telephone to a lawmaker involved in the talks to offer ``his best thinking about market reaction to various things,'' Conrad said. ``People are trying to reach out to the best minds that they know.''
`Foreclosure Mitigation'
A proposal that would allow judges to modify mortgage terms for struggling borrowers in bankruptcy proceedings wasn't included, said Dodd, a Connecticut Democrat. ``We pushed very hard'' for the bankruptcy provision, ``but we feel we got good foreclosure mitigation language in there,'' Dodd said.
Democratic presidential nominee Barack Obama said the plan ``appears to embrace'' his principles that the legislation include oversight by an independent board; protections for taxpayers to ensure they receive any profits; measures to help homeowners stay in their homes; and rules to make sure ``CEOs are not being rewarded at taxpayers' expense.''
Reid said an announcement would come later today after details are worked out.
Series of Breakthroughs
``There were a series of breakthroughs here in the end'' and the agreement on executive compensation ``was certainly the most important,'' Conrad said. He declined to give further details because the language being drafted by lawyers is ``quite complicated.''
``Get it written and get it voted,'' said Gregg. ``That's the game plan.''
Paulson and Bernanke sought the rescue package after the collapse and bankruptcy of Lehman Brothers Holding Inc. and the Federal Reserve's takeover of American International Group Inc. earlier this month.
Sticking Point
The House Republicans' demand to include insurance for mortgage-backed securities was a major sticking point.
``Nationalizing every bad mortgage in America is a profoundly bad idea,'' Indiana Republican Mike Pence said. He described the plan as ``transferring $700 billion from Main Street to Wall Street.''
Premiums on the insurance would be a way ``for those on Wall Street to help pay for the recovery'' so that the financial industry won't ``just turn to taxpayers'' for the rescue, said Virginia Republican Eric Cantor, a member of his party's leadership in the House.
Democrats blamed Republican presidential candidate John McCain for encouraging the House Republicans' rebellion by traveling to Washington last week to meet with them.
The trip also included a White House meeting on Sept. 25 with Bush and congressional leaders, where a bipartisan consensus on the outlines of a deal broke down.
McCain ``only hurt this process,'' Reid complained to reporters.
McCain's close ally, South Carolina Republican Lindsey Graham, said the Arizona senator was ``enormously helpful'' to the talks when he met with House Republicans who were about to be ``rolled'' by the Senate.
McCain told them ``I hear your message'' so ``let's make the bill better, but let's not go too far,'' Graham told reporters.
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.netAlison Vekshin in Washington at avekshin@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- U.S. lawmakers said they made a breakthrough in talks on a $700 billion plan to revive the credit markets and expect to announce an agreement on legislation later today.
Negotiators resolved ``our differences so we can go forward with a package to stabilize the market,'' House Speaker Nancy Pelosi told reporters when talks at the Capitol ended after midnight Washington time. Lawmakers will review a written version of the plan later today, she said. The House may vote tomorrow.
The plan would let the Treasury begin purchasing distressed debt securities from financial companies affected by the record number of home foreclosures.
After five years, if there was a net loss to taxpayers, the president would have to submit a plan to Congress to recoup the funds, according to an outline circulated by congressional aides.
The proposal also includes accountability provisions, limits on executive pay for participating companies, and foreclosure relief, said Senate Banking Committee Chairman Christopher Dodd, a lead negotiator.
Senate Majority Leader Harry Reid, a Nevada Democrat, sought an agreement to reassure investors before Asian financial markets open late today.
Effective in Marketplace
Treasury Secretary Henry Paulson said the proposed deal ``will work and be effective'' in the marketplace. More work needs to be done, ``but I think we're there,'' he said.
Paulson and Federal Reserve Chairman Ben S. Bernanke said the rescue plan was necessary to revive lending and restore the flow of credit to the U.S. economy. President George W. Bush warned yesterday that legislative action was needed to avoid a ``deep and painful recession.''
Bush spokesman Tony Fratto said early this morning that administration officials are ``pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.'' He said Bush had spoken last night with Pelosi on the negotiations.
Lawmakers had resisted giving Paulson unrestricted power to buy the debt and sought controls to assuage angry constituents who bombarded congressional offices with e-mails and phone calls.
`Don't Want' Bailout
Voters ``don't want a bailout of Wall Street and neither do we,'' Democratic Senator John Kerry of Massachusetts told reporters yesterday. ``What we are talking about is not losing 3 million jobs in a matter of weeks'' and helping ``small banks and small businesses literally keeping their doors open.''
Senator Kent Conrad, a North Dakota Democrat who chairs the Budget Committee, said $250 billion would be immediately available and another $100 billion could be used when requested by the president for debt purchases. Congress could bar the expenditure of the remaining $350 billion only by passing a resolution to block it from being spent.
The package includes a provision aimed at ``preventing golden parachutes'' for executives of companies who leave firms that have sold troubled assets to the government, Conrad said.
Stock Warrants
Companies that sell debt to the government will issue stock warrants to the government so that taxpayers ``can gain as companies recover'' from economic difficulties, Conrad said.
The plan also includes a proposal by House Republicans, whose objections scuttled an earlier agreement in principle, that provides for government insurance of mortgage-backed securities. Paulson has opposed the idea and has testified it wouldn't work.
The measure leaves it up to Treasury how to ``structure the program and they will assure that the premiums will be set at a level that fully protects the taxpayers of the country,'' Conrad said.
``We worked out everything,'' said Senator Judd Gregg, a New Hampshire Republican. He said lawmakers still want to see the text of the accord on paper before announcing a final deal.
``If there are no adjustments'' to that ``we'll be all set,'' he said.
Missouri Representative Roy Blunt, the lead negotiator for House Republicans, voiced satisfaction for his colleagues who were ``very concerned that we would be able to bring both free- market principles and taxpayer protections to the table.''
House Republicans ``will be looking at the final wording of this,'' he said. Still, ``I think we will be able to have an announcement'' later today, Blunt said.
At one point during the negotiations billionaire Warren Buffett spoke by telephone to a lawmaker involved in the talks to offer ``his best thinking about market reaction to various things,'' Conrad said. ``People are trying to reach out to the best minds that they know.''
`Foreclosure Mitigation'
A proposal that would allow judges to modify mortgage terms for struggling borrowers in bankruptcy proceedings wasn't included, said Dodd, a Connecticut Democrat. ``We pushed very hard'' for the bankruptcy provision, ``but we feel we got good foreclosure mitigation language in there,'' Dodd said.
Democratic presidential nominee Barack Obama said the plan ``appears to embrace'' his principles that the legislation include oversight by an independent board; protections for taxpayers to ensure they receive any profits; measures to help homeowners stay in their homes; and rules to make sure ``CEOs are not being rewarded at taxpayers' expense.''
Reid said an announcement would come later today after details are worked out.
Series of Breakthroughs
``There were a series of breakthroughs here in the end'' and the agreement on executive compensation ``was certainly the most important,'' Conrad said. He declined to give further details because the language being drafted by lawyers is ``quite complicated.''
``Get it written and get it voted,'' said Gregg. ``That's the game plan.''
Paulson and Bernanke sought the rescue package after the collapse and bankruptcy of Lehman Brothers Holding Inc. and the Federal Reserve's takeover of American International Group Inc. earlier this month.
Sticking Point
The House Republicans' demand to include insurance for mortgage-backed securities was a major sticking point.
``Nationalizing every bad mortgage in America is a profoundly bad idea,'' Indiana Republican Mike Pence said. He described the plan as ``transferring $700 billion from Main Street to Wall Street.''
Premiums on the insurance would be a way ``for those on Wall Street to help pay for the recovery'' so that the financial industry won't ``just turn to taxpayers'' for the rescue, said Virginia Republican Eric Cantor, a member of his party's leadership in the House.
Democrats blamed Republican presidential candidate John McCain for encouraging the House Republicans' rebellion by traveling to Washington last week to meet with them.
The trip also included a White House meeting on Sept. 25 with Bush and congressional leaders, where a bipartisan consensus on the outlines of a deal broke down.
McCain ``only hurt this process,'' Reid complained to reporters.
McCain's close ally, South Carolina Republican Lindsey Graham, said the Arizona senator was ``enormously helpful'' to the talks when he met with House Republicans who were about to be ``rolled'' by the Senate.
McCain told them ``I hear your message'' so ``let's make the bill better, but let's not go too far,'' Graham told reporters.
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.netAlison Vekshin in Washington at avekshin@bloomberg.net
Read more...
Taqa Completes $174 Million Power-Plant Stake Sale to Sumitomo
By Ayesha Daya
Sept. 28 (Bloomberg) -- Abu Dhabi National Energy Co., the state-controlled investor known as Taqa, sold stakes in the Shuweihat power and water project to Sumitomo Corp., Japan's third-largest trading group, for $174 million.
Taqa completed all contractual procedures for the sale of 20 percent of the Shuweihat S1 power plant and 50 percent of the venture that operates and maintains the plant, the company said today in a statement on the Abu Dhabi bourse Web site.
Taqa and Abu Dhabi Water & Electricity Authority will keep majority control of the project owning 60 percent, and Sumitomo and U.K.'s International Power Plc will hold 20 percent each, Sumitomo said Sept. 4.
Sumitomo will operate the Shuweihat S1 facility that generates 1,500 megawatts of electricity and processes 460,000 metric tons of water a day, together with the International Power.
To contact the reporter on this story:
Read more...
Sept. 28 (Bloomberg) -- Abu Dhabi National Energy Co., the state-controlled investor known as Taqa, sold stakes in the Shuweihat power and water project to Sumitomo Corp., Japan's third-largest trading group, for $174 million.
Taqa completed all contractual procedures for the sale of 20 percent of the Shuweihat S1 power plant and 50 percent of the venture that operates and maintains the plant, the company said today in a statement on the Abu Dhabi bourse Web site.
Taqa and Abu Dhabi Water & Electricity Authority will keep majority control of the project owning 60 percent, and Sumitomo and U.K.'s International Power Plc will hold 20 percent each, Sumitomo said Sept. 4.
Sumitomo will operate the Shuweihat S1 facility that generates 1,500 megawatts of electricity and processes 460,000 metric tons of water a day, together with the International Power.
To contact the reporter on this story:
Read more...
Lawmakers Say They Have Breakthrough on Rescue Plan
By James Rowley and Alison Vekshin
Sept. 28 (Bloomberg) -- U.S. lawmakers said they made a breakthrough in talks on a $700 billion plan to revive the credit markets and expect to announce an agreement on legislation later today.
Negotiators resolved ``our differences so we can go forward with a package to stabilize the market,'' House Speaker Nancy Pelosi told reporters when talks at the Capitol ended after midnight Washington time. Lawmakers will review a written version of the plan later today, she said. The House may vote tomorrow.
The plan would let the Treasury begin purchasing distressed debt securities from financial companies affected by the record number of home foreclosures.
After five years, if there was a net loss to taxpayers, the president would have to submit a plan to Congress to recoup the funds, according to an outline circulated by congressional aides.
The proposal also includes accountability provisions, limits on executive pay for participating companies, and foreclosure relief, said Senate Banking Committee Chairman Christopher Dodd, a lead negotiator.
Senate Majority Leader Harry Reid, a Nevada Democrat, sought an agreement to reassure investors before Asian financial markets open late today.
Effective in Marketplace
Treasury Secretary Henry Paulson said the proposed deal ``will work and be effective'' in the marketplace. More work needs to be done, ``but I think we're there,'' he said.
Paulson and Federal Reserve Chairman Ben S. Bernanke said the rescue plan was necessary to revive lending and restore the flow of credit to the U.S. economy. President George W. Bush warned yesterday that legislative action was needed to avoid a ``deep and painful recession.''
Bush spokesman Tony Fratto said early this morning that administration officials are ``pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.'' He said Bush had spoken last night with Pelosi on the negotiations.
Lawmakers had resisted giving Paulson unrestricted power to buy the debt and sought controls to assuage angry constituents who bombarded congressional offices with e-mails and phone calls.
`Don't Want' Bailout
Voters ``don't want a bailout of Wall Street and neither do we,'' Democratic Senator John Kerry of Massachusetts told reporters yesterday. ``What we are talking about is not losing 3 million jobs in a matter of weeks'' and helping ``small banks and small businesses literally keeping their doors open.''
Senator Kent Conrad, a North Dakota Democrat who chairs the Budget Committee, said $250 billion would be immediately available and another $100 billion could be used when requested by the president for debt purchases. Congress could bar the expenditure of the remaining $350 billion only by passing a resolution to block it from being spent.
The package includes a provision aimed at ``preventing golden parachutes'' for executives of companies who leave firms that have sold troubled assets to the government, Conrad said.
Stock Warrants
Companies that sell debt to the government will issue stock warrants to the government so that taxpayers ``can gain as companies recover'' from economic difficulties, Conrad said.
The plan also includes a proposal by House Republicans, whose objections scuttled an earlier agreement in principle, that provides for government insurance of mortgage-backed securities. Paulson has opposed the idea and has testified it wouldn't work.
The measure leaves it up to Treasury how to ``structure the program and they will assure that the premiums will be set at a level that fully protects the taxpayers of the country,'' Conrad said.
``We worked out everything,'' said Senator Judd Gregg, a New Hampshire Republican. He said lawmakers still want to see the text of the accord on paper before announcing a final deal.
``If there are no adjustments'' to that ``we'll be all set,'' he said.
Missouri Representative Roy Blunt, the lead negotiator for House Republicans, voiced satisfaction for his colleagues who were ``very concerned that we would be able to bring both free- market principles and taxpayer protections to the table.''
House Republicans ``will be looking at the final wording of this,'' he said. Still, ``I think we will be able to have an announcement'' later today, Blunt said.
At one point during the negotiations billionaire Warren Buffett spoke by telephone to a lawmaker involved in the talks to offer ``his best thinking about market reaction to various things,'' Conrad said. ``People are trying to reach out to the best minds that they know.''
`Foreclosure Mitigation'
A proposal that would allow judges to modify mortgage terms for struggling borrowers in bankruptcy proceedings wasn't included, said Dodd, a Connecticut Democrat. ``We pushed very hard'' for the bankruptcy provision, ``but we feel we got good foreclosure mitigation language in there,'' Dodd said.
Democratic presidential nominee Barack Obama said the plan ``appears to embrace'' his principles that the legislation include oversight by an independent board; protections for taxpayers to ensure they receive any profits; measures to help homeowners stay in their homes; and rules to make sure ``CEOs are not being rewarded at taxpayers' expense.''
Reid said an announcement would come later today after details are worked out.
Series of Breakthroughs
``There were a series of breakthroughs here in the end'' and the agreement on executive compensation ``was certainly the most important,'' Conrad said. He declined to give further details because the language being drafted by lawyers is ``quite complicated.''
``Get it written and get it voted,'' said Gregg. ``That's the game plan.''
Paulson and Bernanke sought the rescue package after the collapse and bankruptcy of Lehman Brothers Holding Inc. and the Federal Reserve's takeover of American International Group Inc. earlier this month.
Sticking Point
The House Republicans' demand to include insurance for mortgage-backed securities was a major sticking point.
``Nationalizing every bad mortgage in America is a profoundly bad idea,'' Indiana Republican Mike Pence said. He described the plan as ``transferring $700 billion from Main Street to Wall Street.''
Premiums on the insurance would be a way ``for those on Wall Street to help pay for the recovery'' so that the financial industry won't ``just turn to taxpayers'' for the rescue, said Virginia Republican Eric Cantor, a member of his party's leadership in the House.
Democrats blamed Republican presidential candidate John McCain for encouraging the House Republicans' rebellion by traveling to Washington last week to meet with them.
The trip also included a White House meeting on Sept. 25 with Bush and congressional leaders, where a bipartisan consensus on the outlines of a deal broke down.
McCain ``only hurt this process,'' Reid complained to reporters.
McCain's close ally, South Carolina Republican Lindsey Graham, said the Arizona senator was ``enormously helpful'' to the talks when he met with House Republicans who were about to be ``rolled'' by the Senate.
McCain told them ``I hear your message'' so ``let's make the bill better, but let's not go too far,'' Graham told reporters.
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.netAlison Vekshin in Washington at avekshin@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- U.S. lawmakers said they made a breakthrough in talks on a $700 billion plan to revive the credit markets and expect to announce an agreement on legislation later today.
Negotiators resolved ``our differences so we can go forward with a package to stabilize the market,'' House Speaker Nancy Pelosi told reporters when talks at the Capitol ended after midnight Washington time. Lawmakers will review a written version of the plan later today, she said. The House may vote tomorrow.
The plan would let the Treasury begin purchasing distressed debt securities from financial companies affected by the record number of home foreclosures.
After five years, if there was a net loss to taxpayers, the president would have to submit a plan to Congress to recoup the funds, according to an outline circulated by congressional aides.
The proposal also includes accountability provisions, limits on executive pay for participating companies, and foreclosure relief, said Senate Banking Committee Chairman Christopher Dodd, a lead negotiator.
Senate Majority Leader Harry Reid, a Nevada Democrat, sought an agreement to reassure investors before Asian financial markets open late today.
Effective in Marketplace
Treasury Secretary Henry Paulson said the proposed deal ``will work and be effective'' in the marketplace. More work needs to be done, ``but I think we're there,'' he said.
Paulson and Federal Reserve Chairman Ben S. Bernanke said the rescue plan was necessary to revive lending and restore the flow of credit to the U.S. economy. President George W. Bush warned yesterday that legislative action was needed to avoid a ``deep and painful recession.''
Bush spokesman Tony Fratto said early this morning that administration officials are ``pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.'' He said Bush had spoken last night with Pelosi on the negotiations.
Lawmakers had resisted giving Paulson unrestricted power to buy the debt and sought controls to assuage angry constituents who bombarded congressional offices with e-mails and phone calls.
`Don't Want' Bailout
Voters ``don't want a bailout of Wall Street and neither do we,'' Democratic Senator John Kerry of Massachusetts told reporters yesterday. ``What we are talking about is not losing 3 million jobs in a matter of weeks'' and helping ``small banks and small businesses literally keeping their doors open.''
Senator Kent Conrad, a North Dakota Democrat who chairs the Budget Committee, said $250 billion would be immediately available and another $100 billion could be used when requested by the president for debt purchases. Congress could bar the expenditure of the remaining $350 billion only by passing a resolution to block it from being spent.
The package includes a provision aimed at ``preventing golden parachutes'' for executives of companies who leave firms that have sold troubled assets to the government, Conrad said.
Stock Warrants
Companies that sell debt to the government will issue stock warrants to the government so that taxpayers ``can gain as companies recover'' from economic difficulties, Conrad said.
The plan also includes a proposal by House Republicans, whose objections scuttled an earlier agreement in principle, that provides for government insurance of mortgage-backed securities. Paulson has opposed the idea and has testified it wouldn't work.
The measure leaves it up to Treasury how to ``structure the program and they will assure that the premiums will be set at a level that fully protects the taxpayers of the country,'' Conrad said.
``We worked out everything,'' said Senator Judd Gregg, a New Hampshire Republican. He said lawmakers still want to see the text of the accord on paper before announcing a final deal.
``If there are no adjustments'' to that ``we'll be all set,'' he said.
Missouri Representative Roy Blunt, the lead negotiator for House Republicans, voiced satisfaction for his colleagues who were ``very concerned that we would be able to bring both free- market principles and taxpayer protections to the table.''
House Republicans ``will be looking at the final wording of this,'' he said. Still, ``I think we will be able to have an announcement'' later today, Blunt said.
At one point during the negotiations billionaire Warren Buffett spoke by telephone to a lawmaker involved in the talks to offer ``his best thinking about market reaction to various things,'' Conrad said. ``People are trying to reach out to the best minds that they know.''
`Foreclosure Mitigation'
A proposal that would allow judges to modify mortgage terms for struggling borrowers in bankruptcy proceedings wasn't included, said Dodd, a Connecticut Democrat. ``We pushed very hard'' for the bankruptcy provision, ``but we feel we got good foreclosure mitigation language in there,'' Dodd said.
Democratic presidential nominee Barack Obama said the plan ``appears to embrace'' his principles that the legislation include oversight by an independent board; protections for taxpayers to ensure they receive any profits; measures to help homeowners stay in their homes; and rules to make sure ``CEOs are not being rewarded at taxpayers' expense.''
Reid said an announcement would come later today after details are worked out.
Series of Breakthroughs
``There were a series of breakthroughs here in the end'' and the agreement on executive compensation ``was certainly the most important,'' Conrad said. He declined to give further details because the language being drafted by lawyers is ``quite complicated.''
``Get it written and get it voted,'' said Gregg. ``That's the game plan.''
Paulson and Bernanke sought the rescue package after the collapse and bankruptcy of Lehman Brothers Holding Inc. and the Federal Reserve's takeover of American International Group Inc. earlier this month.
Sticking Point
The House Republicans' demand to include insurance for mortgage-backed securities was a major sticking point.
``Nationalizing every bad mortgage in America is a profoundly bad idea,'' Indiana Republican Mike Pence said. He described the plan as ``transferring $700 billion from Main Street to Wall Street.''
Premiums on the insurance would be a way ``for those on Wall Street to help pay for the recovery'' so that the financial industry won't ``just turn to taxpayers'' for the rescue, said Virginia Republican Eric Cantor, a member of his party's leadership in the House.
Democrats blamed Republican presidential candidate John McCain for encouraging the House Republicans' rebellion by traveling to Washington last week to meet with them.
The trip also included a White House meeting on Sept. 25 with Bush and congressional leaders, where a bipartisan consensus on the outlines of a deal broke down.
McCain ``only hurt this process,'' Reid complained to reporters.
McCain's close ally, South Carolina Republican Lindsey Graham, said the Arizona senator was ``enormously helpful'' to the talks when he met with House Republicans who were about to be ``rolled'' by the Senate.
McCain told them ``I hear your message'' so ``let's make the bill better, but let's not go too far,'' Graham told reporters.
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.netAlison Vekshin in Washington at avekshin@bloomberg.net
Read more...
Gulf Shares Gain on U.S. Bank Rescue Plan; Emirates NBD Rises
By Zainab Fattah
Sept. 28 (Bloomberg) -- Persian Gulf shares advanced after U.S. lawmakers said they made a breakthrough in talks on a $700 billion plan to revive the credit markets and as the United Arab Emirates' central bank allowed lenders to withdraw 100 percent of their reserve requirements to ease liquidity constraints.
Emirates NBD PJSC, the U.A.E.'s biggest bank by assets, led financial stocks higher. Abu Dhabi Commercial Bank PJSC had its biggest gain since Sept. 21, while Emirates Telecommunications Corp. rose for the first time in four days. Industries Qatar also climbed.
``What happens in the U.S. is very important because the more institutions go bust there, the higher is our companies' risk of exposure,'' Mohammed Ali Yasin, the managing director of Shuaa Securities in Dubai, said in a telephone interview today. ``We've also seen liquidity returning through government institutions as more people understand the central bank's plan.''
The Dubai Financial Market General Index rose 2.5 percent to 4,060.38, bringing the two-day gain to 4.4 percent. The Abu Dhabi Securities Exchange General Index increased 2.7 percent and Qatar's Doha Securities Market 20 Index added 2 percent.
Negotiators resolved ``our differences so we can go forward with a package to stabilize the market,'' U.S. House Speaker Nancy Pelosi told reporters when negotiations ended after midnight Washington time. Lawmakers will review a written version of the plan later today, she said. The House may vote tomorrow.
Kuwait's Central Bank
U.A.E. banks are no longer required to square up their positions with the central bank at the end of the week, the central bank said Sept. 25. The monetary authority announced a 50 billion-dirham ($14 billion) fund on Sept. 22 to ease liquidity constraints caused by the seizure of global credit markets following the collapse of Lehman Brothers Holdings Inc.
Kuwait's central bank said it was ready to provide liquidity to the country's banking system if required. The Kuwait Stock Exchange Index ended a four-day drop, rising 2 percent.
The Dubai Financial Market Financial Banks Index climbed 3.5 percent, its biggest jump since Sept. 21 when the U.S. government first announced the $700 billion rescue plan.
`Most to Gain'
Emirates NBD added 4.8 percent to 8.75 dirhams. Dubai Islamic Bank PJSC, the U.A.E.'s biggest bank complying with Muslim banking rules, advanced 5.6 percent to 5.82 dirhams. Abu Dhabi Commercial Bank PJSC, the U.A.E.'s third-biggest bank by assets, gained 6.9 percent to 3.3 dirhams.
``ADCB, which is rumored to be among the most highly exposed among local banks to U.S. subprime assets, has the most to gain if a U.S. bailout is confirmed,'' Ali Khan, head of equity trading at Dubai's Arqaam Capital Ltd., said in a phone interview today.
Saudi Arabia's Tadawul All Share Index climbed 6.7 percent, the biggest one-day gain since November 2006. The measure still dropped 20 percent this quarter. The Saudi market will be closed from tomorrow for the Eid Al-Fitr holiday and will reopen on Oct. 6.
``Investors are optimistic that the international markets will rally over the holiday as an agreement on the U.S. rescue plan has been reached,'' Abdulla al-Aqil, a trader at Samba Financial Group in Riyadh, said in a telephone interview.
January 12
Saudi Basic Industries Corp. added 5.3 percent to 105.25 riyals. Al-Rajhi Bank, the kingdom's largest bank by market value, surged 9.3 percent to 79.5 riyals, its biggest jump since Jan. 5 and Saudi Telecom Co. soared 9.4 percent to 64.25 riyals, its biggest gain since Jan. 12.
Saudi Basic, the region's biggest company by market value, Al-Rajhi Bank and Saudi Telecom, the Arab world's biggest phone company, may report an increase in nine-month profit Asharq al- Awsat reported, citing forecasts by Kasab Financial Group.
Oman's Muscat Securities Market 30 Index increased 0.3 percent, while the Bahrain All Share Index fell 0.2 percent
Emirates Telecommunications, known as Etisalat, added 3.1 percent to 16.6 dirhams. Sorouh Real Estate Co., Abu Dhabi's second-biggest property company, surged 6.9 percent to 6.81 dirhams.
Industries Qatar, the largest publicly traded company in the Persian Gulf emirate, gained 3.1 percent to 137.7 riyals.
``Funds are buying the shares because they are quite cheap, especially considering its expected profit,'' Amro Motasim, head broker at Al-Ahli Bank of Qatar, wrote about Industries Qatar in an e-mail today. The shares trades at 10.1 estimated earnings, according to data compiled by Bloomberg. That compares with an average of 12.1 for stocks listed in the DSM 20 Index.
Taqa Advances
Agility rose 2.5 percent to 830 fils. The Middle East's biggest storage and logistics company said it will pay $50.5 million to buy all of Baisui United Logistics (Shanghai) Co., a Chinese logistics provider.
Abu Dhabi National Energy Co. climbed 2.1 percent to 2.42 dirhams. The state-controlled investor known as Taqa sold stakes in the Shuweihat power and water project to Sumitomo Corp., Japan's third-largest trading group, for $174 million.
Islamic Arab Insurance Co. added 2.2 percent to 1.89 dirhams. The world's biggest Islamic insurer plans to offer Islamic funds from a unit of Deutsche Bank AG.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
Read more...
Sept. 28 (Bloomberg) -- Persian Gulf shares advanced after U.S. lawmakers said they made a breakthrough in talks on a $700 billion plan to revive the credit markets and as the United Arab Emirates' central bank allowed lenders to withdraw 100 percent of their reserve requirements to ease liquidity constraints.
Emirates NBD PJSC, the U.A.E.'s biggest bank by assets, led financial stocks higher. Abu Dhabi Commercial Bank PJSC had its biggest gain since Sept. 21, while Emirates Telecommunications Corp. rose for the first time in four days. Industries Qatar also climbed.
``What happens in the U.S. is very important because the more institutions go bust there, the higher is our companies' risk of exposure,'' Mohammed Ali Yasin, the managing director of Shuaa Securities in Dubai, said in a telephone interview today. ``We've also seen liquidity returning through government institutions as more people understand the central bank's plan.''
The Dubai Financial Market General Index rose 2.5 percent to 4,060.38, bringing the two-day gain to 4.4 percent. The Abu Dhabi Securities Exchange General Index increased 2.7 percent and Qatar's Doha Securities Market 20 Index added 2 percent.
Negotiators resolved ``our differences so we can go forward with a package to stabilize the market,'' U.S. House Speaker Nancy Pelosi told reporters when negotiations ended after midnight Washington time. Lawmakers will review a written version of the plan later today, she said. The House may vote tomorrow.
Kuwait's Central Bank
U.A.E. banks are no longer required to square up their positions with the central bank at the end of the week, the central bank said Sept. 25. The monetary authority announced a 50 billion-dirham ($14 billion) fund on Sept. 22 to ease liquidity constraints caused by the seizure of global credit markets following the collapse of Lehman Brothers Holdings Inc.
Kuwait's central bank said it was ready to provide liquidity to the country's banking system if required. The Kuwait Stock Exchange Index ended a four-day drop, rising 2 percent.
The Dubai Financial Market Financial Banks Index climbed 3.5 percent, its biggest jump since Sept. 21 when the U.S. government first announced the $700 billion rescue plan.
`Most to Gain'
Emirates NBD added 4.8 percent to 8.75 dirhams. Dubai Islamic Bank PJSC, the U.A.E.'s biggest bank complying with Muslim banking rules, advanced 5.6 percent to 5.82 dirhams. Abu Dhabi Commercial Bank PJSC, the U.A.E.'s third-biggest bank by assets, gained 6.9 percent to 3.3 dirhams.
``ADCB, which is rumored to be among the most highly exposed among local banks to U.S. subprime assets, has the most to gain if a U.S. bailout is confirmed,'' Ali Khan, head of equity trading at Dubai's Arqaam Capital Ltd., said in a phone interview today.
Saudi Arabia's Tadawul All Share Index climbed 6.7 percent, the biggest one-day gain since November 2006. The measure still dropped 20 percent this quarter. The Saudi market will be closed from tomorrow for the Eid Al-Fitr holiday and will reopen on Oct. 6.
``Investors are optimistic that the international markets will rally over the holiday as an agreement on the U.S. rescue plan has been reached,'' Abdulla al-Aqil, a trader at Samba Financial Group in Riyadh, said in a telephone interview.
January 12
Saudi Basic Industries Corp. added 5.3 percent to 105.25 riyals. Al-Rajhi Bank, the kingdom's largest bank by market value, surged 9.3 percent to 79.5 riyals, its biggest jump since Jan. 5 and Saudi Telecom Co. soared 9.4 percent to 64.25 riyals, its biggest gain since Jan. 12.
Saudi Basic, the region's biggest company by market value, Al-Rajhi Bank and Saudi Telecom, the Arab world's biggest phone company, may report an increase in nine-month profit Asharq al- Awsat reported, citing forecasts by Kasab Financial Group.
Oman's Muscat Securities Market 30 Index increased 0.3 percent, while the Bahrain All Share Index fell 0.2 percent
Emirates Telecommunications, known as Etisalat, added 3.1 percent to 16.6 dirhams. Sorouh Real Estate Co., Abu Dhabi's second-biggest property company, surged 6.9 percent to 6.81 dirhams.
Industries Qatar, the largest publicly traded company in the Persian Gulf emirate, gained 3.1 percent to 137.7 riyals.
``Funds are buying the shares because they are quite cheap, especially considering its expected profit,'' Amro Motasim, head broker at Al-Ahli Bank of Qatar, wrote about Industries Qatar in an e-mail today. The shares trades at 10.1 estimated earnings, according to data compiled by Bloomberg. That compares with an average of 12.1 for stocks listed in the DSM 20 Index.
Taqa Advances
Agility rose 2.5 percent to 830 fils. The Middle East's biggest storage and logistics company said it will pay $50.5 million to buy all of Baisui United Logistics (Shanghai) Co., a Chinese logistics provider.
Abu Dhabi National Energy Co. climbed 2.1 percent to 2.42 dirhams. The state-controlled investor known as Taqa sold stakes in the Shuweihat power and water project to Sumitomo Corp., Japan's third-largest trading group, for $174 million.
Islamic Arab Insurance Co. added 2.2 percent to 1.89 dirhams. The world's biggest Islamic insurer plans to offer Islamic funds from a unit of Deutsche Bank AG.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
Read more...
Japan Air to Cut Cargo Flights to U.S. Next Year, Nikkei Says
By Makiko Kitamura
Sept. 28 (Bloomberg) -- Japan Airlines Corp., Asia's most- indebted carrier, will reduce cargo flights to the U.S. as a slowdown in the economy cuts demand, the Nikkei newspaper reported.
The airline will end cargo flights between Narita and New York and cut flights to Los Angeles to 10 a week from 19, Nikkei said, without saying where it obtained the information.
The reductions will start in January, Nikkei said. The airline cut cargo routes to Atlanta and San Francisco this past January, the newspaper reported.
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
Read more...
Sept. 28 (Bloomberg) -- Japan Airlines Corp., Asia's most- indebted carrier, will reduce cargo flights to the U.S. as a slowdown in the economy cuts demand, the Nikkei newspaper reported.
The airline will end cargo flights between Narita and New York and cut flights to Los Angeles to 10 a week from 19, Nikkei said, without saying where it obtained the information.
The reductions will start in January, Nikkei said. The airline cut cargo routes to Atlanta and San Francisco this past January, the newspaper reported.
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
Read more...
Correa May Tighten Grip on Banks, Oil With Ecuador Charter Vote
By Stephan Kueffner
Sept. 28 (Bloomberg) -- Ecuadoreans head to polls today to vote on a new Constitution that would strengthen the president's grip over the energy, telecommunications, and banking industries, and strip the central bank of its independence.
President Rafael Correa says the new charter, which opinion polls indicate is likely to pass, is needed to help alleviate poverty and put an end to the country's cycle of collapsing governments. It would also enable Correa to extend his time in office by allowing a second consecutive four-year term.
The 45-year-old economist, an ally of Venezuela's President Hugo Chavez, says the proposed Constitution will more fairly distribute oil revenue to the 40 percent of the population that lives in poverty, and smooth the workings of government by allowing him to dissolve the legislature once per term. Correa has vowed to quit office if voters reject what he calls his ``citizens' revolution.''
``It consolidates Correa's political power,'' said Riordan Roett, director of Western Hemisphere Studies at Johns Hopkins School of Advanced International Studies. ``It's the end of the traditional oligarchy as we've known it for decades in Ecuador.''
The new Constitution, the country's 20th, requires immediate new elections if a president is impeached or the legislature is dissolved and allows recall referendums. Correa says the change would prevent the chaos that came after street protests forced all three elected presidents since 1996 to resign because the provisions puts the jobs of all politicians on the line.
Free Trade
Correa has denounced free trade and globalization, along the same lines as Chavez and Bolivia's Evo Morales. He speaks the indigenous Quichua language, and draws much of his support from the poor. The opposition is concentrated in oil-producing regions and in Guayaquil, the country's biggest city and its business center.
The charter, by giving Correa control of the central bank, will allow him to set interest rates. It also guarantees all citizens access to water and universal health care, pensions, and free state-run education through university.
Patricio Donoso, president of Ecuador's umbrella Council of Chambers and Associations of Industry, said the increased spending required by those broadened rights may force Ecuador to abandon the dollar as its currency if prices for crude oil, its biggest export, fall. Ecuador produces about 500,000 barrels a day, which accounts for 61 percent of the country's exports.
`Low Growth'
``It could create conditions for de-dollarization -- lack of liquidity from a fall in exports and remittances, a low growth rate, high inflation and an enormous budget deficit,'' Donoso said.
Ecuador, the smallest member of the Organization of Petroleum Exporting Countries, had the slowest economic growth in the Western Hemisphere last year, 2.52 percent, even as oil prices rose to a record. Meanwhile, annual inflation has accelerated to 10 percent in August, driven by higher food prices.
``I'm voting `no' because everything has gotten so expensive,'' said Marco Tage, 42, a villager from the Huaroani ethnic group that lives in Ecuador's Amazon region. Ecuador law compels him to cast a vote because he can read and write. Going to the polling station is a three-hour trip by canoe and bus.
A poll by Cedatos Gallup found 60 percent of voters who had made up their mind backed the charter, with 27 percent against and the rest saying they would leave the ballot blank or void, following advice from opposition parties that urged citizens to make a protest vote if they favor neither the current charter nor the one proposed by Correa. The poll of 2,180 people, taken Sept. 13 to 16, had a margin of error of 3 percentage points.
Poll Results
A survey by researcher Santiago Perez from Sept. 18 to 21 put support at 57 percent, ``no'' at 24 percent, and the rest null or blank. It tallied the opinions of 1,800 people, and also had a margin of error of 3 percentage points.
``If we say `no' to the Constitution, we're saying no to our own rights,'' said Artidoro Cabrera, 48, a painter and farmer in San Vicente del Rio, a dusty Andean village near the border with Peru. On the front door of his house are posters of Correa with members of the assembly that wrote the new Constitution.
The new Constitution focuses on redistributing wealth rather than growth, and allows too much state interference in the economy, said Jaime Carrera, an economist at the Quito-based Fiscal Policy Observatory. ``It will set Ecuador back 30 years,'' he said.
`Strategic Sectors'
Correa's proposed charter ``reserves the right'' for the government to manage ``strategic sectors'' through state-owned companies, including energy, refining, telecommunications, and refining, allowing the government to privatize them only under ``exceptional circumstances.''
The president has already expanded his control of the economy. He secured financial concessions from America Movil SA, which holds the biggest share of Ecuador's mobile phone market.
Correa forced foreign oil companies to give the government a bigger share of oil revenue by imposing a 99 percent windfall tax, which was later reduced to 70 percent. He revoked more than 1,500 mining concessions and halted most mine operations in April.
``If the Constitution is adopted, it won't encourage much foreign investment,'' said Michael Shifter, vice president of Inter-American Dialogue, a policy research group in Washington. As for the enhanced role of the state in the economy, ``for the time being, this is very popular,'' Shifter said.
To contact the reporter on this story: Stephan Kueffner in Quito at skueffner@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Ecuadoreans head to polls today to vote on a new Constitution that would strengthen the president's grip over the energy, telecommunications, and banking industries, and strip the central bank of its independence.
President Rafael Correa says the new charter, which opinion polls indicate is likely to pass, is needed to help alleviate poverty and put an end to the country's cycle of collapsing governments. It would also enable Correa to extend his time in office by allowing a second consecutive four-year term.
The 45-year-old economist, an ally of Venezuela's President Hugo Chavez, says the proposed Constitution will more fairly distribute oil revenue to the 40 percent of the population that lives in poverty, and smooth the workings of government by allowing him to dissolve the legislature once per term. Correa has vowed to quit office if voters reject what he calls his ``citizens' revolution.''
``It consolidates Correa's political power,'' said Riordan Roett, director of Western Hemisphere Studies at Johns Hopkins School of Advanced International Studies. ``It's the end of the traditional oligarchy as we've known it for decades in Ecuador.''
The new Constitution, the country's 20th, requires immediate new elections if a president is impeached or the legislature is dissolved and allows recall referendums. Correa says the change would prevent the chaos that came after street protests forced all three elected presidents since 1996 to resign because the provisions puts the jobs of all politicians on the line.
Free Trade
Correa has denounced free trade and globalization, along the same lines as Chavez and Bolivia's Evo Morales. He speaks the indigenous Quichua language, and draws much of his support from the poor. The opposition is concentrated in oil-producing regions and in Guayaquil, the country's biggest city and its business center.
The charter, by giving Correa control of the central bank, will allow him to set interest rates. It also guarantees all citizens access to water and universal health care, pensions, and free state-run education through university.
Patricio Donoso, president of Ecuador's umbrella Council of Chambers and Associations of Industry, said the increased spending required by those broadened rights may force Ecuador to abandon the dollar as its currency if prices for crude oil, its biggest export, fall. Ecuador produces about 500,000 barrels a day, which accounts for 61 percent of the country's exports.
`Low Growth'
``It could create conditions for de-dollarization -- lack of liquidity from a fall in exports and remittances, a low growth rate, high inflation and an enormous budget deficit,'' Donoso said.
Ecuador, the smallest member of the Organization of Petroleum Exporting Countries, had the slowest economic growth in the Western Hemisphere last year, 2.52 percent, even as oil prices rose to a record. Meanwhile, annual inflation has accelerated to 10 percent in August, driven by higher food prices.
``I'm voting `no' because everything has gotten so expensive,'' said Marco Tage, 42, a villager from the Huaroani ethnic group that lives in Ecuador's Amazon region. Ecuador law compels him to cast a vote because he can read and write. Going to the polling station is a three-hour trip by canoe and bus.
A poll by Cedatos Gallup found 60 percent of voters who had made up their mind backed the charter, with 27 percent against and the rest saying they would leave the ballot blank or void, following advice from opposition parties that urged citizens to make a protest vote if they favor neither the current charter nor the one proposed by Correa. The poll of 2,180 people, taken Sept. 13 to 16, had a margin of error of 3 percentage points.
Poll Results
A survey by researcher Santiago Perez from Sept. 18 to 21 put support at 57 percent, ``no'' at 24 percent, and the rest null or blank. It tallied the opinions of 1,800 people, and also had a margin of error of 3 percentage points.
``If we say `no' to the Constitution, we're saying no to our own rights,'' said Artidoro Cabrera, 48, a painter and farmer in San Vicente del Rio, a dusty Andean village near the border with Peru. On the front door of his house are posters of Correa with members of the assembly that wrote the new Constitution.
The new Constitution focuses on redistributing wealth rather than growth, and allows too much state interference in the economy, said Jaime Carrera, an economist at the Quito-based Fiscal Policy Observatory. ``It will set Ecuador back 30 years,'' he said.
`Strategic Sectors'
Correa's proposed charter ``reserves the right'' for the government to manage ``strategic sectors'' through state-owned companies, including energy, refining, telecommunications, and refining, allowing the government to privatize them only under ``exceptional circumstances.''
The president has already expanded his control of the economy. He secured financial concessions from America Movil SA, which holds the biggest share of Ecuador's mobile phone market.
Correa forced foreign oil companies to give the government a bigger share of oil revenue by imposing a 99 percent windfall tax, which was later reduced to 70 percent. He revoked more than 1,500 mining concessions and halted most mine operations in April.
``If the Constitution is adopted, it won't encourage much foreign investment,'' said Michael Shifter, vice president of Inter-American Dialogue, a policy research group in Washington. As for the enhanced role of the state in the economy, ``for the time being, this is very popular,'' Shifter said.
To contact the reporter on this story: Stephan Kueffner in Quito at skueffner@bloomberg.net
Read more...
Olmert, Now Israeli Caretaker, Will Travel to Moscow
By Jonathan Ferziger
Sept. 28 (Bloomberg) -- Israeli Prime Minister Ehud Olmert, who resigned and now serves as government caretaker, will travel to Russia to meet President Dmitry Medvedev.
Olmert will leave Israel Oct. 6 for a two-day visit to Moscow, his office said today in an e-mailed statement.
``The prime minister will meet with the Russian government's top leadership,'' Olmert's office said, without identifying topics of discussion.
Olmert last traveled to Moscow a year ago when he met with Vladimir Putin, the former president and present prime minister, and asked him to support stronger sanctions to stop Iran's development of nuclear capabilities.
Olmert resigned Sept. 21 in the face of police recommendations that he be indicted for bribery and money laundering. He says he is innocent.
Foreign Minister Tzipi Livni replaced Olmert as Kadima Party leader after winning a Sept. 17 primary and is trying to assemble a governing coalition so she can take the prime minister position.
Attorney General Menachem Mazuz today asked Olmert and his Cabinet ministers to ``act with restraint'' during the time that they constitute a caretaker government. Olmert should refrain from acting on ``issues that are not so urgent that they require being addressed during this transitional period,'' Mazuz said, according to the e-mailed text of a letter he sent to Olmert.
To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Israeli Prime Minister Ehud Olmert, who resigned and now serves as government caretaker, will travel to Russia to meet President Dmitry Medvedev.
Olmert will leave Israel Oct. 6 for a two-day visit to Moscow, his office said today in an e-mailed statement.
``The prime minister will meet with the Russian government's top leadership,'' Olmert's office said, without identifying topics of discussion.
Olmert last traveled to Moscow a year ago when he met with Vladimir Putin, the former president and present prime minister, and asked him to support stronger sanctions to stop Iran's development of nuclear capabilities.
Olmert resigned Sept. 21 in the face of police recommendations that he be indicted for bribery and money laundering. He says he is innocent.
Foreign Minister Tzipi Livni replaced Olmert as Kadima Party leader after winning a Sept. 17 primary and is trying to assemble a governing coalition so she can take the prime minister position.
Attorney General Menachem Mazuz today asked Olmert and his Cabinet ministers to ``act with restraint'' during the time that they constitute a caretaker government. Olmert should refrain from acting on ``issues that are not so urgent that they require being addressed during this transitional period,'' Mazuz said, according to the e-mailed text of a letter he sent to Olmert.
To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net
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Japan Cabinet's Casualty Injures Aso's Election Hopes
By Makiko Kitamura
Sept. 28 (Bloomberg) -- Taro Aso's transport minister quit after four days on the job, threatening to undermine the Japanese leader's ability to gain support ahead of elections that may come as early as next month.
Nariaki Nakayama stepped down today after a series of remarks widely viewed as political gaffes, the latest in a long line of Liberal Democratic Party cabinet ministers who aroused opposition and public ire that cost them their posts.
The resignation is a blow to Aso, who took office last week seeking to raise his party's public approval record before going to the voters against an opposition that enjoys an edge in some opinion polls. The Democratic Party of Japan, led by Ichiro Ozawa, had support from 31 percent of voters in an Asahi newspaper poll published on Sept. 2, compared with 27 percent for the LDP.
``This gives Ozawa an opportunity to use this to show that Aso is incompetent,'' said Robert Dujarric, director of the Institute of Contemporary Japanese Studies at Temple University's Japan Campus. ``It gives him ammunition to attack the LDP.''
Aso will likely name Kazuyoshi Kaneko, 65, who led administrative reform efforts in the administration of former Prime Minister Junichiro Koizumi, to replace Nakayama, Chief Cabinet Secretary Takeo Kawamura told reporters today.
Aso last week replaced Yasuo Fukuda, the second premier in a year to quit the post citing an inability to overcome political gridlock. Aso and his Cabinet received an initial approval rating of 49.5 percent in a Yomiuri newspaper poll published Sept. 26, less than the 57.5 percent Fukuda had after taking office in September last year.
Union `Cancer'
Nakayama, a former education minister, called the nation's biggest teachers' union ``a cancer on Japanese education'' and said it should be disbanded, Kyodo News reported.
He also called opponents of expanding Tokyo's Narita airport ``more or less squeaky wheels,'' Kyodo reported. ``I believe they are (the product) of bad postwar education,'' the report said.
The remarks may further erode public favor for an LDP facing a tough fight to extend its more than half-century-long rule. LDP officials have predicted Aso will call a lower-house election as early as next month to capitalize on any honeymoon period his administration enjoys.
``If we said there was no damage from this, it would be a lie,'' said Hiroyuki Hosoda, secretary-general of the LDP, on NHK television today.
Scandals and Gaffes
Including Nakayama, six ministers have resigned in the past two years over scandals and gaffes.
Last year, former Defense Minister Fumio Kyuma quit the Cabinet of then-Prime Minister Shinzo Abe after a public outcry over comments suggesting the U.S. atomic bombings of Hiroshima and Nagasaki were justified because they helped end World War II.
As education minister, Nakayama made repeated gaffes, such as supporting a reduction in references to so-called comfort women in textbooks, Communist Party member Keiji Kokuta said on Sept. 26.
The European Parliament and U.S. House of Representatives have called on Japan to apologize for forcing women to serve as sex slaves during World War II.
``Prime Minister Aso's responsibility in making the appointment is exceedingly large,'' DPJ Secretary General Yukio Hatoyama said at a press conference on Sept. 26, calling Nakayama ``a terrible minister.''
Aso has made some controversial remarks himself, including a suggestion last December that Japan should debate whether to develop nuclear weapons. In 2006, he provoked a protest from South Korea by saying he wanted the emperor to visit Yasukuni, a shrine that counts war criminals among the honored war dead.
Nakayama confirmed his resignation at a press conference in Tokyo today, broadcast by NHK television.
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
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Sept. 28 (Bloomberg) -- Taro Aso's transport minister quit after four days on the job, threatening to undermine the Japanese leader's ability to gain support ahead of elections that may come as early as next month.
Nariaki Nakayama stepped down today after a series of remarks widely viewed as political gaffes, the latest in a long line of Liberal Democratic Party cabinet ministers who aroused opposition and public ire that cost them their posts.
The resignation is a blow to Aso, who took office last week seeking to raise his party's public approval record before going to the voters against an opposition that enjoys an edge in some opinion polls. The Democratic Party of Japan, led by Ichiro Ozawa, had support from 31 percent of voters in an Asahi newspaper poll published on Sept. 2, compared with 27 percent for the LDP.
``This gives Ozawa an opportunity to use this to show that Aso is incompetent,'' said Robert Dujarric, director of the Institute of Contemporary Japanese Studies at Temple University's Japan Campus. ``It gives him ammunition to attack the LDP.''
Aso will likely name Kazuyoshi Kaneko, 65, who led administrative reform efforts in the administration of former Prime Minister Junichiro Koizumi, to replace Nakayama, Chief Cabinet Secretary Takeo Kawamura told reporters today.
Aso last week replaced Yasuo Fukuda, the second premier in a year to quit the post citing an inability to overcome political gridlock. Aso and his Cabinet received an initial approval rating of 49.5 percent in a Yomiuri newspaper poll published Sept. 26, less than the 57.5 percent Fukuda had after taking office in September last year.
Union `Cancer'
Nakayama, a former education minister, called the nation's biggest teachers' union ``a cancer on Japanese education'' and said it should be disbanded, Kyodo News reported.
He also called opponents of expanding Tokyo's Narita airport ``more or less squeaky wheels,'' Kyodo reported. ``I believe they are (the product) of bad postwar education,'' the report said.
The remarks may further erode public favor for an LDP facing a tough fight to extend its more than half-century-long rule. LDP officials have predicted Aso will call a lower-house election as early as next month to capitalize on any honeymoon period his administration enjoys.
``If we said there was no damage from this, it would be a lie,'' said Hiroyuki Hosoda, secretary-general of the LDP, on NHK television today.
Scandals and Gaffes
Including Nakayama, six ministers have resigned in the past two years over scandals and gaffes.
Last year, former Defense Minister Fumio Kyuma quit the Cabinet of then-Prime Minister Shinzo Abe after a public outcry over comments suggesting the U.S. atomic bombings of Hiroshima and Nagasaki were justified because they helped end World War II.
As education minister, Nakayama made repeated gaffes, such as supporting a reduction in references to so-called comfort women in textbooks, Communist Party member Keiji Kokuta said on Sept. 26.
The European Parliament and U.S. House of Representatives have called on Japan to apologize for forcing women to serve as sex slaves during World War II.
``Prime Minister Aso's responsibility in making the appointment is exceedingly large,'' DPJ Secretary General Yukio Hatoyama said at a press conference on Sept. 26, calling Nakayama ``a terrible minister.''
Aso has made some controversial remarks himself, including a suggestion last December that Japan should debate whether to develop nuclear weapons. In 2006, he provoked a protest from South Korea by saying he wanted the emperor to visit Yasukuni, a shrine that counts war criminals among the honored war dead.
Nakayama confirmed his resignation at a press conference in Tokyo today, broadcast by NHK television.
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
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Kuwaiti Inflation Accelerates to 11.35% in June on Food Costs
By Fiona MacDonald
Sept. 28 (Bloomberg) -- Kuwait's inflation rate accelerated to 11.35 percent in June from 11.1 percent in May on increases in the cost of housing and food.
The inflation rate on food rose to 14.2 percent in June from 10.8 percent a month earlier, a government official said in a telephone interview from Kuwait today, speaking on condition of anonymity. Housing costs gained an annual 13.1 percent, compared to 14.9 percent in May. The costs of tobacco and soft drinks surged an annual 24.4 percent.
Inflation in Kuwait, the only Gulf Arab state to have dropped its currency's peg to the dollar, accelerated to a record 11.4 percent in April.
To contact the reporter on this story: Fiona MacDonald in Kuwait FmacDonald4@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Kuwait's inflation rate accelerated to 11.35 percent in June from 11.1 percent in May on increases in the cost of housing and food.
The inflation rate on food rose to 14.2 percent in June from 10.8 percent a month earlier, a government official said in a telephone interview from Kuwait today, speaking on condition of anonymity. Housing costs gained an annual 13.1 percent, compared to 14.9 percent in May. The costs of tobacco and soft drinks surged an annual 24.4 percent.
Inflation in Kuwait, the only Gulf Arab state to have dropped its currency's peg to the dollar, accelerated to a record 11.4 percent in April.
To contact the reporter on this story: Fiona MacDonald in Kuwait FmacDonald4@bloomberg.net
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India Condemns New Delhi Bomb Blasts as Second Person Dies
By Jay Shankar
Sept. 28 (Bloomberg) -- Indian Home Minister Shivraj Patil condemned yesterday's bomb attack in the capital New Delhi, as a 60-year-old man died from injuries, taking the death toll to two.
The government has taken a series of measures to beef up security in New Delhi and ``whatever more is required to be done will be done expeditiously,'' Patil said today in an e-mailed statement.
The explosion, which also injured 17 people, occurred at about 2:15 p.m. local time in a Mehrauli flower market near Qutub Minar, the world's tallest brick-and-stone minaret, built in the 12th century. No one has claimed responsibility for the blast.
``I appeal to the people of Delhi to remain calm,'' Patil said. Security in New Delhi has been tightened in the run-up to the Muslim and Hindu festivities of Eid-ul-Fitr and Dussehra, police spokesman Rajan Bhagat said yesterday.
Two unidentified people on a motorcycle left the bomb in the market, Madhukar Gupta, home secretary, said in an e-mailed statement. A child who picked up the bomb was killed, he said.
On Sept. 13, a series of bomb blasts rocked New Delhi, killing 21 people. The bombings were the worst terrorist attack in India since 50 people died in an explosion in the western city of Ahmedabad on July 26.
Recent terrorist attacks in India have been carried out by a group called the Indian Mujahideen, which claimed responsibility for the earlier explosions in Ahmedabad and New Delhi.
Five men suspected of being behind the Ahmedabad blasts were arrested on Sept. 24 in the western city of Mumbai.
Two suspects in the Sept. 13 New Delhi attacks were killed in a gun battle with police on Sept. 19.
To contact the reporter on this story: Jay Shankar in Bangalore at jshankar1@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Indian Home Minister Shivraj Patil condemned yesterday's bomb attack in the capital New Delhi, as a 60-year-old man died from injuries, taking the death toll to two.
The government has taken a series of measures to beef up security in New Delhi and ``whatever more is required to be done will be done expeditiously,'' Patil said today in an e-mailed statement.
The explosion, which also injured 17 people, occurred at about 2:15 p.m. local time in a Mehrauli flower market near Qutub Minar, the world's tallest brick-and-stone minaret, built in the 12th century. No one has claimed responsibility for the blast.
``I appeal to the people of Delhi to remain calm,'' Patil said. Security in New Delhi has been tightened in the run-up to the Muslim and Hindu festivities of Eid-ul-Fitr and Dussehra, police spokesman Rajan Bhagat said yesterday.
Two unidentified people on a motorcycle left the bomb in the market, Madhukar Gupta, home secretary, said in an e-mailed statement. A child who picked up the bomb was killed, he said.
On Sept. 13, a series of bomb blasts rocked New Delhi, killing 21 people. The bombings were the worst terrorist attack in India since 50 people died in an explosion in the western city of Ahmedabad on July 26.
Recent terrorist attacks in India have been carried out by a group called the Indian Mujahideen, which claimed responsibility for the earlier explosions in Ahmedabad and New Delhi.
Five men suspected of being behind the Ahmedabad blasts were arrested on Sept. 24 in the western city of Mumbai.
Two suspects in the Sept. 13 New Delhi attacks were killed in a gun battle with police on Sept. 19.
To contact the reporter on this story: Jay Shankar in Bangalore at jshankar1@bloomberg.net
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Regulators Seek to Increase Confidence in Fortis
By Jurjen van de Pol and Martijn van der Starre
Sept. 28 (Bloomberg) -- Belgian and Dutch central banks and regulators were discussing measures to restore confidence in Fortis, the financial-services company whose stock plunged 35 percent in Brussels trading last week.
``We are working on enhancing the confidence in the market of the Fortis share,'' Hein Lannoy, a spokesman for the Belgian financial regulator CBFA, said today by telephone. He declined to be more specific. The parties will hold a conference call and ``if necessary there will be a physical meeting,'' Lannoy said.
Brussels and Amsterdam-based Fortis needs more capital after spending 24 billion euros ($35 billion) on ABN Amro Holding NV assets last year just as the U.S. subprime-mortgage market started to collapse. Fortis tumbled a record 20 percent two days ago, when the company picked Filip Dierckx to replace Herman Verwilst as chief executive officer. The move was aimed at reassuring investors concerned that a plan to raise 8.3 billion euros would force Fortis to sell assets at knock-down prices.
``Fortis failed to restore confidence on its own and that can only be done now with the help of the regulatory institutions or rivals,'' said Corne van Zeijl, a senior portfolio manager at SNS Asset Management in Den Bosch, the Netherlands, who oversees about 750 million euros and owns Fortis shares.
The Dutch central bank governing board met late yesterday with Finance Minister Wouter Bos, Het Financieele Dagblad and news service ANP reported.
Takeover Talks Stall
``Bos is being informed meticulously by the Dutch central bank,'' ministry spokesman Jilles Heringa said. Heringa and Herman Lutke Schipholt, a spokesman for the Dutch central bank, declined to confirm the meeting.
Talks about a takeover of Fortis by ING Groep NV and BNP Paribas SA stalled late yesterday amid demands for state guarantees, De Standaard reported on its Web site, without saying where it got the information. The Sunday Times reported the Belgian central bank and regulator are preparing to bail out Fortis. The newspaper didn't say where it got the information.
Peter Jong, a spokesman for Amsterdam-based ING, and Jonathan Mullen, a spokesman for BNP Paribas in Paris, declined to comment. Wilfried Remans, a spokesman for Fortis, also declined to comment and referred to the company's statements on Sept. 26.
Fortis last week said it had earmarked for sale banking and insurance businesses that may be valued as high as 10 billion euros. The Belgian company said it won't sell assets at fire-sale prices and doesn't have an urgent need for funds.
Asset Sales
The financial-services company said on June 26 it would sell so-called non-core assets, notes and asset-backed debt to raise money. Fortis planned to part with 2 billion euros of assets this year and next. The lender also scrapped a 1.4 billion-euro dividend and sold 1.5 billion euros of shares to investors, including Ping An Insurance (Group) Co.
Verwilst and Dierckx appeared together at an impromptu press conference in Brussels on Sept. 26 to reassure investors about the capital-raising plan.
While the company may sell more assets than it earlier expected as it becomes harder to raise money by other means, the bank's financial position is ``solid,'' Verwilst said. Customer moves at its Benelux banking unit have remained limited to less than 3 percent of assets since the start of the year, Fortis said.
Funding Base
Fortis has about 3 billion euros of bonds maturing this year and needs to refinance an additional 7 billion euros next year, said Ivan Lathouders, an analyst at Banque Degroof SA in Brussels, in a report last week.
Fortis, formed in the 1990 merger of the Dutch insurance company NV Amev, Belgian insurer AG Group and the Dutch bank VSB, said last week it had a funding base of more than 300 billion euros from sources including retail and private deposits and institutional investors.
Fortis has about 5.2 million retail customers. It employs about 85,000 people and operates 2,500 retail branches including ABN Amro.
The company reported a 49 percent decline in second-quarter profit on credit-related writedowns on Aug. 4.
The banking business's core Tier I ratio, which measures a bank's ability to absorb losses, was 7.4 percent at the end of June compared with Fortis's own target of 6 percent.
The company's structured credit portfolio, which includes collateralized debt obligations and U.S. mortgage-backed securities, amounted to 41.7 billion euros at the end of June. Fortis said Aug. 4 the pretax impact of the credit market turmoil on its earnings was 918 million euros in the first half.
Belgian and Dutch regulators restricted short-selling in the shares and derivatives of financial companies for three months last week to curtail a market rout. The rules require investors betting on a decline in stock prices to arrange to borrow the shares before selling them. The Belgian and Dutch regulators also requested investors to refrain from lending the securities.
To contact the reporters on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.netMartijn van der Starre in Amsterdam at vanderstarre@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Belgian and Dutch central banks and regulators were discussing measures to restore confidence in Fortis, the financial-services company whose stock plunged 35 percent in Brussels trading last week.
``We are working on enhancing the confidence in the market of the Fortis share,'' Hein Lannoy, a spokesman for the Belgian financial regulator CBFA, said today by telephone. He declined to be more specific. The parties will hold a conference call and ``if necessary there will be a physical meeting,'' Lannoy said.
Brussels and Amsterdam-based Fortis needs more capital after spending 24 billion euros ($35 billion) on ABN Amro Holding NV assets last year just as the U.S. subprime-mortgage market started to collapse. Fortis tumbled a record 20 percent two days ago, when the company picked Filip Dierckx to replace Herman Verwilst as chief executive officer. The move was aimed at reassuring investors concerned that a plan to raise 8.3 billion euros would force Fortis to sell assets at knock-down prices.
``Fortis failed to restore confidence on its own and that can only be done now with the help of the regulatory institutions or rivals,'' said Corne van Zeijl, a senior portfolio manager at SNS Asset Management in Den Bosch, the Netherlands, who oversees about 750 million euros and owns Fortis shares.
The Dutch central bank governing board met late yesterday with Finance Minister Wouter Bos, Het Financieele Dagblad and news service ANP reported.
Takeover Talks Stall
``Bos is being informed meticulously by the Dutch central bank,'' ministry spokesman Jilles Heringa said. Heringa and Herman Lutke Schipholt, a spokesman for the Dutch central bank, declined to confirm the meeting.
Talks about a takeover of Fortis by ING Groep NV and BNP Paribas SA stalled late yesterday amid demands for state guarantees, De Standaard reported on its Web site, without saying where it got the information. The Sunday Times reported the Belgian central bank and regulator are preparing to bail out Fortis. The newspaper didn't say where it got the information.
Peter Jong, a spokesman for Amsterdam-based ING, and Jonathan Mullen, a spokesman for BNP Paribas in Paris, declined to comment. Wilfried Remans, a spokesman for Fortis, also declined to comment and referred to the company's statements on Sept. 26.
Fortis last week said it had earmarked for sale banking and insurance businesses that may be valued as high as 10 billion euros. The Belgian company said it won't sell assets at fire-sale prices and doesn't have an urgent need for funds.
Asset Sales
The financial-services company said on June 26 it would sell so-called non-core assets, notes and asset-backed debt to raise money. Fortis planned to part with 2 billion euros of assets this year and next. The lender also scrapped a 1.4 billion-euro dividend and sold 1.5 billion euros of shares to investors, including Ping An Insurance (Group) Co.
Verwilst and Dierckx appeared together at an impromptu press conference in Brussels on Sept. 26 to reassure investors about the capital-raising plan.
While the company may sell more assets than it earlier expected as it becomes harder to raise money by other means, the bank's financial position is ``solid,'' Verwilst said. Customer moves at its Benelux banking unit have remained limited to less than 3 percent of assets since the start of the year, Fortis said.
Funding Base
Fortis has about 3 billion euros of bonds maturing this year and needs to refinance an additional 7 billion euros next year, said Ivan Lathouders, an analyst at Banque Degroof SA in Brussels, in a report last week.
Fortis, formed in the 1990 merger of the Dutch insurance company NV Amev, Belgian insurer AG Group and the Dutch bank VSB, said last week it had a funding base of more than 300 billion euros from sources including retail and private deposits and institutional investors.
Fortis has about 5.2 million retail customers. It employs about 85,000 people and operates 2,500 retail branches including ABN Amro.
The company reported a 49 percent decline in second-quarter profit on credit-related writedowns on Aug. 4.
The banking business's core Tier I ratio, which measures a bank's ability to absorb losses, was 7.4 percent at the end of June compared with Fortis's own target of 6 percent.
The company's structured credit portfolio, which includes collateralized debt obligations and U.S. mortgage-backed securities, amounted to 41.7 billion euros at the end of June. Fortis said Aug. 4 the pretax impact of the credit market turmoil on its earnings was 918 million euros in the first half.
Belgian and Dutch regulators restricted short-selling in the shares and derivatives of financial companies for three months last week to curtail a market rout. The rules require investors betting on a decline in stock prices to arrange to borrow the shares before selling them. The Belgian and Dutch regulators also requested investors to refrain from lending the securities.
To contact the reporters on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.netMartijn van der Starre in Amsterdam at vanderstarre@bloomberg.net
Read more...
U.K. Treasury to Protect Bradford & Bingley Deposits
By Poppy Trowbridge and Jon Menon
Sept. 28 (Bloomberg) -- The U.K. government will step in to protect Bradford & Bingley Plc depositors, stopping short of confirming reports that the bank will be nationalized, Treasury minister Yvette Cooper said.
``Financial stability has got to be protected, but so have ordinary savers,'' Cooper said on British Broadcasting Corp. television today. ``There are limits to what I can say, but there is a full range of work that has been under way.''
Chancellor of the Exchequer Alistair Darling will make a statement before 8 a.m. tomorrow outlining the government's plan, which the BBC said would include some form of nationalization. Ministers are working on other options including a partial government takeover, acquisition by a rival bank or a break up and purchase of assets by several buyers.
Bradford & Bingley, the nation's biggest lender to landlords, is the third major British bank to run into trouble since credit markets seized up around the globe last year. Northern Rock Plc was nationalized in February and HBOS Plc sold itself to Lloyds TSB Bank Plc last week.
Talk of another government-led bank bailout reopened a rift between U.K. political parties, with the Conservatives charging that Prime Minister Gordon Brown has held up regulatory reform and Labour ministers saying the opposition is playing politics.
Conservative View
``We've got a regulatory system set up by our prime minister that seems to have completely failed to spot that something was wrong, to get something done about it, and we've got a bunch of politicians running the country who've had a year to pass this legislation, which we've said repeatedly we will support,'' Conservative leader David Cameron told the BBC.
U.S. lawmakers today said they made a breakthrough in talks on a $700 billion plan to buy assets from financial companies affected by a record number of home foreclosures, in an effort to revive credit markets.
After talks with President George W. Bush last week, Brown and Darling ``have worked right through this weekend to sort out the problems we're facing,'' Geoffrey Hoon, a Cabinet minister, told Sky News. ``We will act to ensure that the interests of depositors are properly protected.''
The government will take control of Bradford & Bingley, whose shares have tumbled 93 percent this year, the BBC reported on its Web site, without saying where it got the information. The Treasury and Financial Services Authority will negotiate with banks interested in buying parts of the Bingley, England- based bank, the BBC said. Possible buyers include Banco Santander SA, HSBC Holdings Plc and Barclays Plc.
`Inevitable' Move
``It was inevitable that nationalization has been decided as the risk has been too great,'' said Howard Wheeldon, a senior strategist at BGC Partners in London. ``It's a very sensible solution.''
A spokesman for the U.K. Treasury said discussions about Bradford & Bingley are ``ongoing.'' He declined to be identified by name, in accordance with departmental policy.
A voicemail message left on the cellphone of Bradford & Bingley spokesman Tony McGarahan today wasn't immediately answered. Late yesterday, he said the company was working with regulators ``to clarify the bank's future.''
Nationalization is ``a necessary move to maintain stability,'' said Mamoun Tazi, an analyst at MF Global Securities Ltd. in London. ``Bradford & Bingley is unable to fund itself in the current environment because there's not enough money being lent between banks.''
Landlords
Almost half of Bradford & Bingley's 42 billion pounds ($77 billion) of loans in the first half were to landlords, bringing its share of the U.K. buy-to-let market to 19 percent. About 17 percent of the bank's loans go to customers who certify their own income on application and typically have a higher level of default than standard borrowers. Bad debts in the first half jumped to 74.6 million pounds from 5.3 million pounds last year.
Bradford & Bingley's fell as the credit crunch made it impossible to find funds for new loans and day-to-day operation.
Deposits at the bank amount to only slightly more than half of loans outstanding, which means it depends on capital markets for about half of its financing. Bradford & Bingley was forced to curtail new business when those markets dried up and the cost of inter-bank borrowing soared causing banks to hoard cash following the collapse of the U.S. subprime mortgage-market.
Political Rift
Cameron, interviewed on the BBC's Andrew Marr television show today, refused to be drawn on whether his party would oppose nationalization, as it did earlier this year in the case of Northern Rock. ``We will look at it like a responsible opposition,'' he said. ``What matters most of all is safeguarding the depositors.''
Later, his finance spokesman suggested the opposition was resisting the idea of nationalization.
``People will wonder why on earth the British taxpayer is being asked by Gordon Brown to bear the full risk,'' George Osborne, the Conservative lawmaker who speaks on finance, told Sky News.
Vince Cable, treasury spokesman for the Liberal Democrats, told Sky that nationalization was the ``least worst option.''
The Tories' lead over Labour has been halved during the past month, according to an opinion poll published today. The BPIX Ltd. survey for the London-based Sunday Telegraph newspaper gives the Conservatives a 12-point lead over Labour, down from a 23 percent advantage in August.
Housing Slump
Bradford & Bingley has been hurt by the worst British housing slump in 30 years, with house prices falling for a 10th month in August. U.K. mortgage approvals fell to the lowest level in at least a decade last month, according to the British Bankers' Association.
The sliding housing market has pushed up Bradford & Bingley's late mortgage payments to more than 2 percent of all loans. That compares with the U.K. average of 0.5 percent, according to the Council of Mortgage Lenders.
The lender was formed in 1964 as a result of the merger of the Bradford Equitable Building Society and the Bingley Building Society, both of which were established in 1851. It first sold shares on the London Stock Exchange in December 2000.
Bradford & Bingley, worth 3.2 billion pounds in March 2006, closed at 20 pence on Sept. 26 in London trading, valuing the bank at 256 million pounds. That's less than half the price it asked shareholder to pay for the 828 million shares it sold at 55 pence apiece in an August rights offering that was snubbed by almost three quarters of its investors.
The U.K. government took control of Newcastle-based lender Northern Rock after it was bailed out by the central bank last September. HBOS agreed to be bought by Lloyds TSB Group Plc for 11 billion pounds on Sept. 17, assisted by a government waiver of competition rules.
In the U.S., officials seized Washington Mutual Inc., the country's biggest failed bank, and sold its assets and branches on Sept. 26 to New York-based JPMorgan Chase & Co.
To contact the reporters on this story: Jon Menon in London at jmenon1@bloomberg.net; Poppy Trowbridge in London at ptrowbridge@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- The U.K. government will step in to protect Bradford & Bingley Plc depositors, stopping short of confirming reports that the bank will be nationalized, Treasury minister Yvette Cooper said.
``Financial stability has got to be protected, but so have ordinary savers,'' Cooper said on British Broadcasting Corp. television today. ``There are limits to what I can say, but there is a full range of work that has been under way.''
Chancellor of the Exchequer Alistair Darling will make a statement before 8 a.m. tomorrow outlining the government's plan, which the BBC said would include some form of nationalization. Ministers are working on other options including a partial government takeover, acquisition by a rival bank or a break up and purchase of assets by several buyers.
Bradford & Bingley, the nation's biggest lender to landlords, is the third major British bank to run into trouble since credit markets seized up around the globe last year. Northern Rock Plc was nationalized in February and HBOS Plc sold itself to Lloyds TSB Bank Plc last week.
Talk of another government-led bank bailout reopened a rift between U.K. political parties, with the Conservatives charging that Prime Minister Gordon Brown has held up regulatory reform and Labour ministers saying the opposition is playing politics.
Conservative View
``We've got a regulatory system set up by our prime minister that seems to have completely failed to spot that something was wrong, to get something done about it, and we've got a bunch of politicians running the country who've had a year to pass this legislation, which we've said repeatedly we will support,'' Conservative leader David Cameron told the BBC.
U.S. lawmakers today said they made a breakthrough in talks on a $700 billion plan to buy assets from financial companies affected by a record number of home foreclosures, in an effort to revive credit markets.
After talks with President George W. Bush last week, Brown and Darling ``have worked right through this weekend to sort out the problems we're facing,'' Geoffrey Hoon, a Cabinet minister, told Sky News. ``We will act to ensure that the interests of depositors are properly protected.''
The government will take control of Bradford & Bingley, whose shares have tumbled 93 percent this year, the BBC reported on its Web site, without saying where it got the information. The Treasury and Financial Services Authority will negotiate with banks interested in buying parts of the Bingley, England- based bank, the BBC said. Possible buyers include Banco Santander SA, HSBC Holdings Plc and Barclays Plc.
`Inevitable' Move
``It was inevitable that nationalization has been decided as the risk has been too great,'' said Howard Wheeldon, a senior strategist at BGC Partners in London. ``It's a very sensible solution.''
A spokesman for the U.K. Treasury said discussions about Bradford & Bingley are ``ongoing.'' He declined to be identified by name, in accordance with departmental policy.
A voicemail message left on the cellphone of Bradford & Bingley spokesman Tony McGarahan today wasn't immediately answered. Late yesterday, he said the company was working with regulators ``to clarify the bank's future.''
Nationalization is ``a necessary move to maintain stability,'' said Mamoun Tazi, an analyst at MF Global Securities Ltd. in London. ``Bradford & Bingley is unable to fund itself in the current environment because there's not enough money being lent between banks.''
Landlords
Almost half of Bradford & Bingley's 42 billion pounds ($77 billion) of loans in the first half were to landlords, bringing its share of the U.K. buy-to-let market to 19 percent. About 17 percent of the bank's loans go to customers who certify their own income on application and typically have a higher level of default than standard borrowers. Bad debts in the first half jumped to 74.6 million pounds from 5.3 million pounds last year.
Bradford & Bingley's fell as the credit crunch made it impossible to find funds for new loans and day-to-day operation.
Deposits at the bank amount to only slightly more than half of loans outstanding, which means it depends on capital markets for about half of its financing. Bradford & Bingley was forced to curtail new business when those markets dried up and the cost of inter-bank borrowing soared causing banks to hoard cash following the collapse of the U.S. subprime mortgage-market.
Political Rift
Cameron, interviewed on the BBC's Andrew Marr television show today, refused to be drawn on whether his party would oppose nationalization, as it did earlier this year in the case of Northern Rock. ``We will look at it like a responsible opposition,'' he said. ``What matters most of all is safeguarding the depositors.''
Later, his finance spokesman suggested the opposition was resisting the idea of nationalization.
``People will wonder why on earth the British taxpayer is being asked by Gordon Brown to bear the full risk,'' George Osborne, the Conservative lawmaker who speaks on finance, told Sky News.
Vince Cable, treasury spokesman for the Liberal Democrats, told Sky that nationalization was the ``least worst option.''
The Tories' lead over Labour has been halved during the past month, according to an opinion poll published today. The BPIX Ltd. survey for the London-based Sunday Telegraph newspaper gives the Conservatives a 12-point lead over Labour, down from a 23 percent advantage in August.
Housing Slump
Bradford & Bingley has been hurt by the worst British housing slump in 30 years, with house prices falling for a 10th month in August. U.K. mortgage approvals fell to the lowest level in at least a decade last month, according to the British Bankers' Association.
The sliding housing market has pushed up Bradford & Bingley's late mortgage payments to more than 2 percent of all loans. That compares with the U.K. average of 0.5 percent, according to the Council of Mortgage Lenders.
The lender was formed in 1964 as a result of the merger of the Bradford Equitable Building Society and the Bingley Building Society, both of which were established in 1851. It first sold shares on the London Stock Exchange in December 2000.
Bradford & Bingley, worth 3.2 billion pounds in March 2006, closed at 20 pence on Sept. 26 in London trading, valuing the bank at 256 million pounds. That's less than half the price it asked shareholder to pay for the 828 million shares it sold at 55 pence apiece in an August rights offering that was snubbed by almost three quarters of its investors.
The U.K. government took control of Newcastle-based lender Northern Rock after it was bailed out by the central bank last September. HBOS agreed to be bought by Lloyds TSB Group Plc for 11 billion pounds on Sept. 17, assisted by a government waiver of competition rules.
In the U.S., officials seized Washington Mutual Inc., the country's biggest failed bank, and sold its assets and branches on Sept. 26 to New York-based JPMorgan Chase & Co.
To contact the reporters on this story: Jon Menon in London at jmenon1@bloomberg.net; Poppy Trowbridge in London at ptrowbridge@bloomberg.net
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Toyota Reduces Vehicle Production in China on Slowing Demand
By Tetsuya Komatsu and Makiko Kitamura
Sept. 28 (Bloomberg) -- Toyota Motor Corp., Japan's biggest carmaker, is cutting production in China as sales slow.
The carmaker is reducing daily output in China, Toyota spokesman Hideaki Homma said today by phone, declining to detail the scale of the reduction or name the models affected.
The carmaker will reduce output of passenger cars by about 10 percent at its factory in Guangdong province, the Nikkei newspaper reported earlier today, without saying where it obtained the information. Toyota will slow the pace of production for at least a few months, the newspaper said.
China's passenger car sales fell 6.2 percent in August, the first decline in more than three years.
Sales may fall short of a forecast 10 million this year as slowing economic growth and a slumping stock market undermine consumers' purchasing power, according to the China Association of Automobile Manufacturers.
Toyota has a sales target of 700,000 units in China in 2008, which hasn't been revised, Homma said.
To contact the reporter on this story: Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net;
Read more...
Sept. 28 (Bloomberg) -- Toyota Motor Corp., Japan's biggest carmaker, is cutting production in China as sales slow.
The carmaker is reducing daily output in China, Toyota spokesman Hideaki Homma said today by phone, declining to detail the scale of the reduction or name the models affected.
The carmaker will reduce output of passenger cars by about 10 percent at its factory in Guangdong province, the Nikkei newspaper reported earlier today, without saying where it obtained the information. Toyota will slow the pace of production for at least a few months, the newspaper said.
China's passenger car sales fell 6.2 percent in August, the first decline in more than three years.
Sales may fall short of a forecast 10 million this year as slowing economic growth and a slumping stock market undermine consumers' purchasing power, according to the China Association of Automobile Manufacturers.
Toyota has a sales target of 700,000 units in China in 2008, which hasn't been revised, Homma said.
To contact the reporter on this story: Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net;
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China May Struggle to Trim Trade Surplus, Regulator Hu Says
By Wing-Gar Cheng
Sept. 28 (Bloomberg) -- China may struggle to rein in its record trade surplus because of international economic turmoil, the nation's top currency regulator said.
``There are unprecedented difficulties and challenges in promoting an international balance of payments,'' Hu Xiaolian, director of the State Administration of Foreign Exchange, said in a statement on the regulator's Web site today. China will continue to pursue foreign-exchange reforms as well as further opening its economy, she added.
China's trade surplus climbed to $28.7 billion in August as import growth weakened to 23.1 percent, the slowest pace in almost a year, on falling commodity prices. The nation wants to trim the surplus to cool gains by the yuan. A stronger currency makes Chinese goods more expensive overseas, harming exporters also facing slowing demand because of the U.S. housing market collapse.
``The current international and domestic economic situation is very complicated,'' Hu said.
To contact the reporter on this story: Wing-Gar Cheng in Beijing at wgcheng@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- China may struggle to rein in its record trade surplus because of international economic turmoil, the nation's top currency regulator said.
``There are unprecedented difficulties and challenges in promoting an international balance of payments,'' Hu Xiaolian, director of the State Administration of Foreign Exchange, said in a statement on the regulator's Web site today. China will continue to pursue foreign-exchange reforms as well as further opening its economy, she added.
China's trade surplus climbed to $28.7 billion in August as import growth weakened to 23.1 percent, the slowest pace in almost a year, on falling commodity prices. The nation wants to trim the surplus to cool gains by the yuan. A stronger currency makes Chinese goods more expensive overseas, harming exporters also facing slowing demand because of the U.S. housing market collapse.
``The current international and domestic economic situation is very complicated,'' Hu said.
To contact the reporter on this story: Wing-Gar Cheng in Beijing at wgcheng@bloomberg.net
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Sinosteel Says Murchison Purchase to Depend on Market Prices
By Xiao Yu
Sept. 28 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trading company, said its decision to buy a stake in Australia's Murchison Metals Ltd. depends on ``market conditions,'' according to president Huang Tianwen.
Sinosteel this month won Australia's government approval to buy up to 49.9 percent of Perth-based Murchison. Whether to proceed to plan depends on price and the terms of the contract, Huang said today at the World Economic Forum in Tianjin.
Sinosteel controls Midwest Corp., a neighboring iron ore producer to Murchison in Western Australia state's mid-west region. Murchison is seeking to develop a A$3.5 billion port, rail and mine project with Japan's Mitsubishi Corp. at Oakajee in the state.
The Chinese company will consolidate Midwest first before buying other assets, Huang said today. The Beijing-based company is also seeking to buy nickel and chrome assets, Huang said, without elaborating the location.
The Chinese company had previously sought approval to buy all of Murchison. That application was withdrawn.
``We are not disappointed'' about 49.9 percent stake, Huang said. The Australian government encourages Chinese investment because the two countries complement each other in many ways, Huang said.
The company has delayed a plan to sell yuan-denominated shares because of stock market slumps, Huang said. It hasn't given up the plan, he added.
Delaying IPO
The company plans to raise between 10 billion yuan and 20 billion yuan ($2.9 billion) from the A-share market in China and complete the deal by July, the Shanghai Securities News reported on Feb. 26, citing an unidentified company official. It hired BOC International (Holdings) Ltd. and JPMorgan Chase & Co. to help manage the share sale, the report said.
China's stock market, the world's fourth-worst performer this year, has shrunk 58 percent in market value, crimping companies' ability to raise funds.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, slumped on concern global demand for Chinese products will slow and as the government tightened lending to cool inflation.
To contact the reporter on this story: Xiao Yu in Tianjin on yxiao@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Sinosteel Corp., China's second- biggest iron-ore trading company, said its decision to buy a stake in Australia's Murchison Metals Ltd. depends on ``market conditions,'' according to president Huang Tianwen.
Sinosteel this month won Australia's government approval to buy up to 49.9 percent of Perth-based Murchison. Whether to proceed to plan depends on price and the terms of the contract, Huang said today at the World Economic Forum in Tianjin.
Sinosteel controls Midwest Corp., a neighboring iron ore producer to Murchison in Western Australia state's mid-west region. Murchison is seeking to develop a A$3.5 billion port, rail and mine project with Japan's Mitsubishi Corp. at Oakajee in the state.
The Chinese company will consolidate Midwest first before buying other assets, Huang said today. The Beijing-based company is also seeking to buy nickel and chrome assets, Huang said, without elaborating the location.
The Chinese company had previously sought approval to buy all of Murchison. That application was withdrawn.
``We are not disappointed'' about 49.9 percent stake, Huang said. The Australian government encourages Chinese investment because the two countries complement each other in many ways, Huang said.
The company has delayed a plan to sell yuan-denominated shares because of stock market slumps, Huang said. It hasn't given up the plan, he added.
Delaying IPO
The company plans to raise between 10 billion yuan and 20 billion yuan ($2.9 billion) from the A-share market in China and complete the deal by July, the Shanghai Securities News reported on Feb. 26, citing an unidentified company official. It hired BOC International (Holdings) Ltd. and JPMorgan Chase & Co. to help manage the share sale, the report said.
China's stock market, the world's fourth-worst performer this year, has shrunk 58 percent in market value, crimping companies' ability to raise funds.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, slumped on concern global demand for Chinese products will slow and as the government tightened lending to cool inflation.
To contact the reporter on this story: Xiao Yu in Tianjin on yxiao@bloomberg.net
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Canada's Harper Joins G-7 Chorus, Pins Crisis on U.S. Policies
By Theophilos Argitis
Sept. 28 (Bloomberg) -- Canadian Prime Minister Stephen Harper said U.S. policies helped create the crisis in financial markets, adding to criticism from other Group of Seven leaders and saying there's little his government can do to help.
Poor oversight, cheap credit and a tax structure that may encourage housing bubbles are among the causes of the turmoil roiling U.S. markets, Harper said in an interview with Bloomberg News. Harper, vying for re-election on Oct. 14, has framed his campaign around the notion he's the best party leader to steer Canada through economic turbulence.
``A lot of things have gone wrong here and, by the way, there were a lot of warning signs. This should not be a huge surprise,'' Harper, 49, said aboard his campaign plane. ``I certainly had expressed my concerns about some of these things to my American counterparts in the time leading up to this.''
Harper joined a growing chorus of criticism within the Group of Seven industrialized nations over the way the financial system has been managed in the world's biggest economy, highlighting the U.S.'s isolation as it seeks to stop the rout. Canada is the biggest U.S. trading partner and one of its closest G-7 allies.
French President Nicolas Sarkozy, speaking at the United Nations on Sept. 23, urged a November summit of the world's major economies to deal with the ``mad system'' that he says produced the meltdown. German Finance Minister Peer Steinbrueck used a speech this week to say the ``Anglo-Saxon'' model of banking has ``an exaggerated fixation on returns.''
New `Principles'
Sarkozy told reporters his proposed meeting should establish ``principles and new rules'' to regulate financial markets and punish those who ``jeopardize people's savings.'' Leaders should focus on excessive executive salaries that reward success without penalizing failure, he said.
U.S. allies also have refused to back Treasury Secretary Henry Paulson's $700 billion rescue plan. Earlier, Paulson had said he was confident that several nations would take steps comparable to his measure, under which the government would buy up mortgage-related securities to stem the financial crisis.
Asked whether there was anything more that Canada might be able to do to help restore stability in global markets, Harper said: ``Not that comes to mind.''
While there may be ``legislative steps'' in the future to bolster regulation, Harper said Canada already has stronger rules than the U.S. and the country's financial institutions are well-capitalized compared with their international peers.
Stronger Oversight
``Far more preferable to properly regulate and manage the system then to have to step in later,'' Harper said. Stronger oversight in Canada means ``right now, we're avoiding having to go in and be the underwriter of private financial industries.''
Harper said one factor behind the U.S. crisis is ``over- deregulation'' and regulators that often are grasping to play ``catch-up'' with increasingly complex financial instruments. There is also an ``inherent bias'' in the U.S. tax code that gives homeowners incentive to take on too much debt, he said.
``Some of it may be regulation, some of it may be, and this would be something not popular to say if I were an American politician, mortgage interest deductibility,'' Harper said. ``There is an inherent bias in the tax code for people over-leveraging.''
He also cited ``mismanagement'' of housing lenders Freddie Mac and Fannie Mae, which were taken over by the government earlier this month, and indications the Federal Reserve may have kept borrowing costs too low.
``Interest rates had gone down too far'' in the U.S., Harper said.
Bank of Canada
The Bank of Canada's reluctance to tame the country's currency by cutting interest rates may have helped Canada avoid being in a similar position, Harper said. The gap between Canadian and U.S. benchmark interest rates widened to the most since June 2004 earlier this year, keeping Canada's currency close to parity with the U.S. dollar which hurt exports.
``I think the Bank of Canada deserves to be complimented,'' Harper said. ``Some of us were skeptical at the time about, you know, that we were allowing the differential to widen and seeing the dollar going up.''
The U.S. now has few options but to bail out investors, Harper said, adding he's optimistic Paulson's plan will help.
``The first objective right now is stability of the financial system, Harper said. ``In that sense, their options are limited.''
To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.
Read more...
Sept. 28 (Bloomberg) -- Canadian Prime Minister Stephen Harper said U.S. policies helped create the crisis in financial markets, adding to criticism from other Group of Seven leaders and saying there's little his government can do to help.
Poor oversight, cheap credit and a tax structure that may encourage housing bubbles are among the causes of the turmoil roiling U.S. markets, Harper said in an interview with Bloomberg News. Harper, vying for re-election on Oct. 14, has framed his campaign around the notion he's the best party leader to steer Canada through economic turbulence.
``A lot of things have gone wrong here and, by the way, there were a lot of warning signs. This should not be a huge surprise,'' Harper, 49, said aboard his campaign plane. ``I certainly had expressed my concerns about some of these things to my American counterparts in the time leading up to this.''
Harper joined a growing chorus of criticism within the Group of Seven industrialized nations over the way the financial system has been managed in the world's biggest economy, highlighting the U.S.'s isolation as it seeks to stop the rout. Canada is the biggest U.S. trading partner and one of its closest G-7 allies.
French President Nicolas Sarkozy, speaking at the United Nations on Sept. 23, urged a November summit of the world's major economies to deal with the ``mad system'' that he says produced the meltdown. German Finance Minister Peer Steinbrueck used a speech this week to say the ``Anglo-Saxon'' model of banking has ``an exaggerated fixation on returns.''
New `Principles'
Sarkozy told reporters his proposed meeting should establish ``principles and new rules'' to regulate financial markets and punish those who ``jeopardize people's savings.'' Leaders should focus on excessive executive salaries that reward success without penalizing failure, he said.
U.S. allies also have refused to back Treasury Secretary Henry Paulson's $700 billion rescue plan. Earlier, Paulson had said he was confident that several nations would take steps comparable to his measure, under which the government would buy up mortgage-related securities to stem the financial crisis.
Asked whether there was anything more that Canada might be able to do to help restore stability in global markets, Harper said: ``Not that comes to mind.''
While there may be ``legislative steps'' in the future to bolster regulation, Harper said Canada already has stronger rules than the U.S. and the country's financial institutions are well-capitalized compared with their international peers.
Stronger Oversight
``Far more preferable to properly regulate and manage the system then to have to step in later,'' Harper said. Stronger oversight in Canada means ``right now, we're avoiding having to go in and be the underwriter of private financial industries.''
Harper said one factor behind the U.S. crisis is ``over- deregulation'' and regulators that often are grasping to play ``catch-up'' with increasingly complex financial instruments. There is also an ``inherent bias'' in the U.S. tax code that gives homeowners incentive to take on too much debt, he said.
``Some of it may be regulation, some of it may be, and this would be something not popular to say if I were an American politician, mortgage interest deductibility,'' Harper said. ``There is an inherent bias in the tax code for people over-leveraging.''
He also cited ``mismanagement'' of housing lenders Freddie Mac and Fannie Mae, which were taken over by the government earlier this month, and indications the Federal Reserve may have kept borrowing costs too low.
``Interest rates had gone down too far'' in the U.S., Harper said.
Bank of Canada
The Bank of Canada's reluctance to tame the country's currency by cutting interest rates may have helped Canada avoid being in a similar position, Harper said. The gap between Canadian and U.S. benchmark interest rates widened to the most since June 2004 earlier this year, keeping Canada's currency close to parity with the U.S. dollar which hurt exports.
``I think the Bank of Canada deserves to be complimented,'' Harper said. ``Some of us were skeptical at the time about, you know, that we were allowing the differential to widen and seeing the dollar going up.''
The U.S. now has few options but to bail out investors, Harper said, adding he's optimistic Paulson's plan will help.
``The first objective right now is stability of the financial system, Harper said. ``In that sense, their options are limited.''
To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.
Read more...
Bank of China Says It's 'Open' to Buying Wall Street's Banks
By Zhang Dingmin
Sept. 28 (Bloomberg) -- Bank of China, the country's oldest financial institution, said it's opened to the possibility of investing in Wall Street firms, as the U.S. financial crisis takes hold and banks seek buyers and protection from bankruptcy .
``We are looking for all possible deals everywhere,'' Bank of China's Executive Vice President Zhu Min told a plenary session today at the World Economic Forum in eastern China's Tianjin, without elaborating.
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Bank of China, the country's oldest financial institution, said it's opened to the possibility of investing in Wall Street firms, as the U.S. financial crisis takes hold and banks seek buyers and protection from bankruptcy .
``We are looking for all possible deals everywhere,'' Bank of China's Executive Vice President Zhu Min told a plenary session today at the World Economic Forum in eastern China's Tianjin, without elaborating.
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
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China May Slow Pace of Currency's Gains, Hale Says
By Zhang Dingmin and Zhao Yidi
Sept. 28 (Bloomberg) -- China's central bank has indicated that it may slow the pace at which the Chinese currency is gaining against the U.S. dollar, according to David Hale, chairman of Hale Advisors.
``I had lunch with the People's Bank of China on Friday, where they told me they are going to slow down the appreciation of the currency here,'' Hale told a plenary session today at the World Economic Forum in eastern China's Tianjin city, without disclosing the identity of the official he spoke with.
The yuan has gained 17.3 percent against the U.S. dollar since the Chinese government abandoned the currency's fixed peg in 2005, and traded at 6.8485 per dollar on Sept. 26. It's risen 6.7 percent this year, the best performer of 10 Asian currencies.
Weakening export demand because of the U.S. housing slump and an international credit squeeze has stoked concern that China's GDP growth may slump, costing jobs and leading to bad loans and sinking profits. Government options to stimulate the economy and protect exporters include loosening bank lending quotas and restraining gains by the yuan.
The Chinese government ``should have slowed the yuan's appreciation from the start of 2008, because of the slower economic and export growth, and the difficulties small companies face,'' said Peng Xingyun, an economist with the Chinese Academy of Social Sciences in Beijing. ``The yuan's appreciation in the first half was too fast. It slowed down since July and that pace will likely stay through the end of the year.''
A People's Bank of China's spokesman could not be reached today to verify Hale's comment. Two telephone calls to the State Administration of Foreign Exchanges in Beijing were not answered.
What to Do?
``The global economic situation is so uncertain that they're not so sure what they should do,'' Hale said today. ``They haven't got a real decision, they're just thinking about slowing the pace down.''
China's economy grew 10.1 percent in the second quarter, the slowest pace since 2005.
China wants to maintain ``steady and relatively fast'' economic growth, the China Central Television reported on July 25, citing a meeting of the Communist Party's political bureau. That goal has been made more difficult because of challenges including global uncertainties and instabilities, it said.
China's yuan may some day become a reserve currency, a medium of exchange that other countries are willing to keep as their foreign reserves, Hale said.
``There's a clear perception that the yuan will become a reserve currency some day because of the sheer size of China's economy,'' Hale said today. ``Given the fact that China's capital account isn't convertible, we're talking about something that may happen in 20 years, not tomorrow.''
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- China's central bank has indicated that it may slow the pace at which the Chinese currency is gaining against the U.S. dollar, according to David Hale, chairman of Hale Advisors.
``I had lunch with the People's Bank of China on Friday, where they told me they are going to slow down the appreciation of the currency here,'' Hale told a plenary session today at the World Economic Forum in eastern China's Tianjin city, without disclosing the identity of the official he spoke with.
The yuan has gained 17.3 percent against the U.S. dollar since the Chinese government abandoned the currency's fixed peg in 2005, and traded at 6.8485 per dollar on Sept. 26. It's risen 6.7 percent this year, the best performer of 10 Asian currencies.
Weakening export demand because of the U.S. housing slump and an international credit squeeze has stoked concern that China's GDP growth may slump, costing jobs and leading to bad loans and sinking profits. Government options to stimulate the economy and protect exporters include loosening bank lending quotas and restraining gains by the yuan.
The Chinese government ``should have slowed the yuan's appreciation from the start of 2008, because of the slower economic and export growth, and the difficulties small companies face,'' said Peng Xingyun, an economist with the Chinese Academy of Social Sciences in Beijing. ``The yuan's appreciation in the first half was too fast. It slowed down since July and that pace will likely stay through the end of the year.''
A People's Bank of China's spokesman could not be reached today to verify Hale's comment. Two telephone calls to the State Administration of Foreign Exchanges in Beijing were not answered.
What to Do?
``The global economic situation is so uncertain that they're not so sure what they should do,'' Hale said today. ``They haven't got a real decision, they're just thinking about slowing the pace down.''
China's economy grew 10.1 percent in the second quarter, the slowest pace since 2005.
China wants to maintain ``steady and relatively fast'' economic growth, the China Central Television reported on July 25, citing a meeting of the Communist Party's political bureau. That goal has been made more difficult because of challenges including global uncertainties and instabilities, it said.
China's yuan may some day become a reserve currency, a medium of exchange that other countries are willing to keep as their foreign reserves, Hale said.
``There's a clear perception that the yuan will become a reserve currency some day because of the sheer size of China's economy,'' Hale said today. ``Given the fact that China's capital account isn't convertible, we're talking about something that may happen in 20 years, not tomorrow.''
To contact the reporter for this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net
Read more...
Intralot to Buy 21% of Melco LottVentures on Chinese Gambling
By Aaron Pan
Sept. 28 (Bloomberg) -- Intralot SA, the world's second- biggest gambling services provider, agreed to buy 21 percent of Lawrence Ho's Melco LottVentures Ltd. for HK$305 million ($39 million) because of rising lottery-ticket sales in China.
Melco LottVentures will issue new shares and convertible bonds to Athens-based Intralot, it said in a Hong Kong stock exchange statement today. The company controls a venture that runs over 500 venues for the official China Sports Lottery Administration Centre and also makes lottery-vending terminals.
The deal teams Intralot with Ho, the son of Macau gaming magnate Stanley Ho, as it looks to expand in China and the rest of Asia. Intralot will become the second-largest shareholder in Melco LottVentures, after Ho's Melco International Development Ltd., once the transaction is fully completed.
``We are confident that through this partnership, we will be more successful in the highly promising Chinese market,'' Constantinos Antonopoulos, Intralot's chief executive officer, said in an e-mailed statement.
To contact the reporter for this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net.
Read more...
Sept. 28 (Bloomberg) -- Intralot SA, the world's second- biggest gambling services provider, agreed to buy 21 percent of Lawrence Ho's Melco LottVentures Ltd. for HK$305 million ($39 million) because of rising lottery-ticket sales in China.
Melco LottVentures will issue new shares and convertible bonds to Athens-based Intralot, it said in a Hong Kong stock exchange statement today. The company controls a venture that runs over 500 venues for the official China Sports Lottery Administration Centre and also makes lottery-vending terminals.
The deal teams Intralot with Ho, the son of Macau gaming magnate Stanley Ho, as it looks to expand in China and the rest of Asia. Intralot will become the second-largest shareholder in Melco LottVentures, after Ho's Melco International Development Ltd., once the transaction is fully completed.
``We are confident that through this partnership, we will be more successful in the highly promising Chinese market,'' Constantinos Antonopoulos, Intralot's chief executive officer, said in an e-mailed statement.
To contact the reporter for this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net.
Read more...
Airbus May Buy $1 Billion of Parts From China by 2020
By Irene Shen and Stephen Engle
Sept. 28 (Bloomberg) -- Airbus SAS, starting its first aircraft assembly today outside Europe, said it may buy up to $1 billion of components from China by 2020, as the world's most populous nation may need 3,000 planes in the next 20 years.
The world's largest aircraft maker will be able to assemble four A320s a month by 2011 in eastern China's Tianjin city. That will bolster Airbus' procurement from the country from last year's $70 million, said chief executive officer Tom Enders.
``We're already in a steep first year to increase our sourcing,'' Enders said in a television interview before opening its Tianjin A320 assembly. ``In two years, we'll triple it, double it again in three, four or five years later.''
Toulouse, France-based Airbus is making China as important as the U.S., Enders said, seeking to add sales in the world's second-largest aviation market. China may need 3,000 planes in the next 20 years as a growing economy and easier traveling rules spur airlines to expand, according to Airbus estimate.
``The daily passenger volume has increased to about 200,000 yesterday at Beijing's airport,'' said the Chinese civil aviation regulator Li Jiaxiang. ``Air travel has recovered'' after visa restrictions and excessive security checks crimped demand during last month's Beijing Olympics, he said.
Approximately one of every five orders for new plane this year may be by a Chinese airline, said Airbus Chief Commercial Officer John Leahy. Airbus is poised to sign a 280-aircraft order with Chinese airlines before the Lunar New Year in January 2009, Leahy said.
Splitting Orders
The order, comprising A320, A330 and A350 models, is pending approval by the Chinese government, and may be split into two parts, he said.
``There's a lot of continuing demand for planes in China,'' Leahy said today in Tianjin. ``I don't expect the government to approve 280 at once,'' so the first 150 planes may be announced first, he said.
Leahy declined to elaborate on the breakdown of the plane models or provide their contract value. An A320 plane, which carries up to 150 passengers, costs up to $66.5 million each according to Airbus catalogues. The A330 model, which seats between 253 and 335 passengers, costs up to $180 million each, while the A350 model, which can carry up to 300 people, has a list price of $180 million.
About 96 percent of Airbus's employment and 75 percent of its procurement is in Europe, while the company is selling the planes all over the world.
``We have to share it,'' Enders said. ``We can't keep it all in Europe or the U.S.''
Mulling A321 Assembly
Airbus in June started shipping segments to be assembled to the Tianjin plant, its first assembly line outside Europe. Delivery at the factory, about 60 miles (97 kilometers) southeast of Beijing, due to start in mid-2009, with the first delivery to Sichuan Airlines.
The assembly line is a $600 million venture between Airbus and a Chinese consortium comprising Tianjin Free Trade Zone and China Aviation Industry Corp. The venture, which has agreed to assemble A319 and A320 models, is considering a plan to also make A321 models, which may require $12 million in additional investments, Airbus said.
Airbus's profitability is under pressure from the euro's strength against the U.S. dollar, which squeezes the margins between revenue from planes sold in the U.S. currency and euro- denominated production costs.
European Aeronautic, Defence & Space Co., parent of Airbus, will shift work to non-European countries as it seeks 1 billion euros ($1.46 billion) in cost-savings through 2012, two-thirds from its plane-making unit, Airbus.
Under the extended cost-saving plan, Airbus is required to save 650 million euros and other EADS units about 350 million euros, partly by moving engineering and manufacturing outside Europe.
EADS's existing Power8 program is designed to save 2.1 billion euros by 2010.
Airbus has forecast a 50 percent increase in plane output between 2007 and 2011. The company is already boosting A320 production to 40 a month by 2010 from about 37 now.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- Airbus SAS, starting its first aircraft assembly today outside Europe, said it may buy up to $1 billion of components from China by 2020, as the world's most populous nation may need 3,000 planes in the next 20 years.
The world's largest aircraft maker will be able to assemble four A320s a month by 2011 in eastern China's Tianjin city. That will bolster Airbus' procurement from the country from last year's $70 million, said chief executive officer Tom Enders.
``We're already in a steep first year to increase our sourcing,'' Enders said in a television interview before opening its Tianjin A320 assembly. ``In two years, we'll triple it, double it again in three, four or five years later.''
Toulouse, France-based Airbus is making China as important as the U.S., Enders said, seeking to add sales in the world's second-largest aviation market. China may need 3,000 planes in the next 20 years as a growing economy and easier traveling rules spur airlines to expand, according to Airbus estimate.
``The daily passenger volume has increased to about 200,000 yesterday at Beijing's airport,'' said the Chinese civil aviation regulator Li Jiaxiang. ``Air travel has recovered'' after visa restrictions and excessive security checks crimped demand during last month's Beijing Olympics, he said.
Approximately one of every five orders for new plane this year may be by a Chinese airline, said Airbus Chief Commercial Officer John Leahy. Airbus is poised to sign a 280-aircraft order with Chinese airlines before the Lunar New Year in January 2009, Leahy said.
Splitting Orders
The order, comprising A320, A330 and A350 models, is pending approval by the Chinese government, and may be split into two parts, he said.
``There's a lot of continuing demand for planes in China,'' Leahy said today in Tianjin. ``I don't expect the government to approve 280 at once,'' so the first 150 planes may be announced first, he said.
Leahy declined to elaborate on the breakdown of the plane models or provide their contract value. An A320 plane, which carries up to 150 passengers, costs up to $66.5 million each according to Airbus catalogues. The A330 model, which seats between 253 and 335 passengers, costs up to $180 million each, while the A350 model, which can carry up to 300 people, has a list price of $180 million.
About 96 percent of Airbus's employment and 75 percent of its procurement is in Europe, while the company is selling the planes all over the world.
``We have to share it,'' Enders said. ``We can't keep it all in Europe or the U.S.''
Mulling A321 Assembly
Airbus in June started shipping segments to be assembled to the Tianjin plant, its first assembly line outside Europe. Delivery at the factory, about 60 miles (97 kilometers) southeast of Beijing, due to start in mid-2009, with the first delivery to Sichuan Airlines.
The assembly line is a $600 million venture between Airbus and a Chinese consortium comprising Tianjin Free Trade Zone and China Aviation Industry Corp. The venture, which has agreed to assemble A319 and A320 models, is considering a plan to also make A321 models, which may require $12 million in additional investments, Airbus said.
Airbus's profitability is under pressure from the euro's strength against the U.S. dollar, which squeezes the margins between revenue from planes sold in the U.S. currency and euro- denominated production costs.
European Aeronautic, Defence & Space Co., parent of Airbus, will shift work to non-European countries as it seeks 1 billion euros ($1.46 billion) in cost-savings through 2012, two-thirds from its plane-making unit, Airbus.
Under the extended cost-saving plan, Airbus is required to save 650 million euros and other EADS units about 350 million euros, partly by moving engineering and manufacturing outside Europe.
EADS's existing Power8 program is designed to save 2.1 billion euros by 2010.
Airbus has forecast a 50 percent increase in plane output between 2007 and 2011. The company is already boosting A320 production to 40 a month by 2010 from about 37 now.
To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net
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India's Soybean Output May Reach Record as Rains Spur Planting
By Pratik Parija
Sept. 28 (Bloomberg) -- India, Asia's biggest supplier of soybean meal, may harvest a record crop for a second year after higher prices and early rains boosted planting.
Soybean production in the year to June 30, 2009, may reach as much as 11.5 million metric tons, compared with 9.5 million tons a year earlier, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., the nation's biggest processor of the oilseed, said in an interview in Mumbai yesterday.
That compares with 9.94 million tons forecast by the government on Sept. 25 and a range of 10.5 million tons to 11.5 million ton estimated by four company executives, including Sudhakar Desai of Bunge Ltd., at a vegetable oil conference in Mumbai yesterday.
Higher output may increase exports of meal, used as an animal feed, to as much as 6 million tons in the year starting October, from 5 million tons this year, said Shahra.
Increased exports of animal feed made from soybeans to countries including Vietnam, Japan and South Korea may pose competition to suppliers from the U.S., Brazil and Argentina.
Soybean meal futures for December delivery fell 2.4 percent to $320.7 a ton on the Chicago Board of Trade on Sept. 26. The futures have dropped 28 percent from the July 3 peak of $445.70.
Farmers in the central state of Madhya Pradesh, which accounts for more than half of the nation's soybean production, planted the crop 15 to 20 days earlier than normal, the Soybean Processors Association of India, a trade body, said.
Monsoon Rains
Soybeans, which makes up about half of the nation's monsoon- sown oilseeds production, were planted in 9.56 million hectares, 9.4 percent more than a year ago, according to the farm ministry. The oilseed is planted in June and harvested starting this month.
Monsoon rains, which account for four-fifths of the nation's annual showers, were 11 percent above average in the week ended Sept. 17, according to the India Meteorological Department.
Soybeans in India may decline and trade in the range of 1,650 and 1900 rupees ($40.8) per 100 kilograms (220 pounds) by the end of this year on higher output compared with 2,150 rupees now, according to 10 company officials, including Shailesh Singh of Cargill India Pvt., surveyed at the vegetable oil conference yesterday in Mumbai.
Soybean oil in India may trade in the range of 460 and 500 rupees per 10 kilograms by Dec. 31, compared with 550 rupees now, said the company officials, including Atul Chaturvedi of Adani Enterprises.
India, which grows non-genetically modified soybeans, sells more than 70 percent of its animal feed output abroad. The meal is fed to animals as a protein booster to aid growth.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net
Read more...
Sept. 28 (Bloomberg) -- India, Asia's biggest supplier of soybean meal, may harvest a record crop for a second year after higher prices and early rains boosted planting.
Soybean production in the year to June 30, 2009, may reach as much as 11.5 million metric tons, compared with 9.5 million tons a year earlier, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., the nation's biggest processor of the oilseed, said in an interview in Mumbai yesterday.
That compares with 9.94 million tons forecast by the government on Sept. 25 and a range of 10.5 million tons to 11.5 million ton estimated by four company executives, including Sudhakar Desai of Bunge Ltd., at a vegetable oil conference in Mumbai yesterday.
Higher output may increase exports of meal, used as an animal feed, to as much as 6 million tons in the year starting October, from 5 million tons this year, said Shahra.
Increased exports of animal feed made from soybeans to countries including Vietnam, Japan and South Korea may pose competition to suppliers from the U.S., Brazil and Argentina.
Soybean meal futures for December delivery fell 2.4 percent to $320.7 a ton on the Chicago Board of Trade on Sept. 26. The futures have dropped 28 percent from the July 3 peak of $445.70.
Farmers in the central state of Madhya Pradesh, which accounts for more than half of the nation's soybean production, planted the crop 15 to 20 days earlier than normal, the Soybean Processors Association of India, a trade body, said.
Monsoon Rains
Soybeans, which makes up about half of the nation's monsoon- sown oilseeds production, were planted in 9.56 million hectares, 9.4 percent more than a year ago, according to the farm ministry. The oilseed is planted in June and harvested starting this month.
Monsoon rains, which account for four-fifths of the nation's annual showers, were 11 percent above average in the week ended Sept. 17, according to the India Meteorological Department.
Soybeans in India may decline and trade in the range of 1,650 and 1900 rupees ($40.8) per 100 kilograms (220 pounds) by the end of this year on higher output compared with 2,150 rupees now, according to 10 company officials, including Shailesh Singh of Cargill India Pvt., surveyed at the vegetable oil conference yesterday in Mumbai.
Soybean oil in India may trade in the range of 460 and 500 rupees per 10 kilograms by Dec. 31, compared with 550 rupees now, said the company officials, including Atul Chaturvedi of Adani Enterprises.
India, which grows non-genetically modified soybeans, sells more than 70 percent of its animal feed output abroad. The meal is fed to animals as a protein booster to aid growth.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net
Read more...
European Stocks Fall in Week as U.S. Stalls Bailout; Banks Drop
By Sarah Jones
Sept. 27 (Bloomberg) -- European stocks retreated for a second week as negotiations on the U.S. government's $700 billion bank rescue plan stalled, adding to the turmoil that has roiled financial markets this month.
Bradford and Bingley Plc and Natixis SA led a gauge of bank shares to its biggest drop in three months as Republicans said they wouldn't support the proposed bailout plan and as Washington Mutual Inc. was seized in the largest U.S. bank failure. Fortis plunged 35 percent on speculation the Belgian bank will struggle to raise 8.3 billion euros ($12.2 billion) to bolster capital.
``This rescue package is extremely important,'' said Stephen Thornber, who oversees about $1 billion as a London-based money manager at Threadneedle Asset Management. ``The politicians are picking at the details, but both sides recognize that something has to be done. Markets will be volatile while we wait for something to be put in place.''
The Dow Jones Stoxx 600 Index lost 4.4 percent to 265.92 this week, as 17 of 19 industry groups declined. The measure has fallen 27 percent this year as banks racked up more than $556 billion in credit losses and writedowns. WaMu is the latest casualty of the crisis that drove Lehman Brothers Holdings Inc. out of business and led to the emergency takeovers of Merrill Lynch & Co. and Bear Stearns Cos.
Federal Reserve Chairman Ben S. Bernanke warned of ``grave threats'' facing the world's largest economy unless the bailout is approved. President George W. Bush warned the U.S. will face a ``long and painful'' recession without it.
`Sharp Slowdown'
National benchmark indexes declined in 17 of the 18 western European markets. Only Iceland advanced. France's CAC 40 slipped 3.7 percent. The U.K.'s FTSE 100 retreated 4.2 percent, while Germany's DAX fell 2 percent.
``It is unavoidable that we are going into a sharp slowdown,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``I don't think this package was ever able to change what was going on in the economy. What it did do was stop us from going into financial Armageddon.''
The Dow Jones Europe Stoxx Banks Index fell 5.1 percent, the steepest weekly retreat since June.
Bradford & Bingley sank 28 percent after the U.K.'s biggest lender to landlords announced cost cuts that failed to relieve concerns about the bank's funding. Spokesman Tony McGarahan said the company is a ``strongly capitalized bank.''
Natixis, France's fourth-biggest bank, declined 17 percent as the lender sold the remaining stock issued as part of its 3.7 billion-euro ($5.4 billion) rights offer.
Vedanta Resources
Fortis slumped 35 percent this week amid speculation the company will struggle to raise the cash and may even need more funds as financial markets deteriorate. Chief Executive Officer Herman Verwilst, seeking to stem the sell-off, told reporters he was ``flabbergasted'' by the share decline.
Anglo Irish Bank Corp. Plc lost 24 percent and Bank of Ireland Plc sank 21 percent.
Vedanta Resources Plc led a slump in mining shares on concern slowing economic growth will hurt demand for metals.
India's largest copper producer dropped 22 percent as shareholders forced the company to dump reorganization plans unveiled earlier in the month. The company said ``feedback'' and market conditions prompted the U-turn.
Xstrata Plc, the world's fourth-largest diversified mining company, tumbled 18 percent as base metals declined in London. Anglo American Plc, the world's second-biggest mining company, slid 17 percent.
Arcandor
Copper fell 3.9 percent in London on speculation manufacturers and investors are pulling away from markets because of reduced lending.
Pub company Punch Taverns Plc tumbled 31 percent and rival Enterprise Inns Plc lost 23 percent as competitor Mitchells & Butlers Plc said it faces ``substantial'' cost growth, which sent the shares down 19 percent this week.
Arcandor AG, Germany's biggest department-store owner, plunged 44 percent after Boersen-Zeitung reported that regulators are probing the company and investors demanded Chief Executive Officer Thomas Middelhoff resign.
The company's travel unit, Thomas Cook Group Plc, lost 24 percent after Arcandor said it may sell stock in the tourism division as part of a loan agreement.
Holcim Ltd., the world's second-biggest cement maker, declined 24 percent as hopes of a takeover by Russian investor Eurocement Group faded.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net;
Read more...
Sept. 27 (Bloomberg) -- European stocks retreated for a second week as negotiations on the U.S. government's $700 billion bank rescue plan stalled, adding to the turmoil that has roiled financial markets this month.
Bradford and Bingley Plc and Natixis SA led a gauge of bank shares to its biggest drop in three months as Republicans said they wouldn't support the proposed bailout plan and as Washington Mutual Inc. was seized in the largest U.S. bank failure. Fortis plunged 35 percent on speculation the Belgian bank will struggle to raise 8.3 billion euros ($12.2 billion) to bolster capital.
``This rescue package is extremely important,'' said Stephen Thornber, who oversees about $1 billion as a London-based money manager at Threadneedle Asset Management. ``The politicians are picking at the details, but both sides recognize that something has to be done. Markets will be volatile while we wait for something to be put in place.''
The Dow Jones Stoxx 600 Index lost 4.4 percent to 265.92 this week, as 17 of 19 industry groups declined. The measure has fallen 27 percent this year as banks racked up more than $556 billion in credit losses and writedowns. WaMu is the latest casualty of the crisis that drove Lehman Brothers Holdings Inc. out of business and led to the emergency takeovers of Merrill Lynch & Co. and Bear Stearns Cos.
Federal Reserve Chairman Ben S. Bernanke warned of ``grave threats'' facing the world's largest economy unless the bailout is approved. President George W. Bush warned the U.S. will face a ``long and painful'' recession without it.
`Sharp Slowdown'
National benchmark indexes declined in 17 of the 18 western European markets. Only Iceland advanced. France's CAC 40 slipped 3.7 percent. The U.K.'s FTSE 100 retreated 4.2 percent, while Germany's DAX fell 2 percent.
``It is unavoidable that we are going into a sharp slowdown,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``I don't think this package was ever able to change what was going on in the economy. What it did do was stop us from going into financial Armageddon.''
The Dow Jones Europe Stoxx Banks Index fell 5.1 percent, the steepest weekly retreat since June.
Bradford & Bingley sank 28 percent after the U.K.'s biggest lender to landlords announced cost cuts that failed to relieve concerns about the bank's funding. Spokesman Tony McGarahan said the company is a ``strongly capitalized bank.''
Natixis, France's fourth-biggest bank, declined 17 percent as the lender sold the remaining stock issued as part of its 3.7 billion-euro ($5.4 billion) rights offer.
Vedanta Resources
Fortis slumped 35 percent this week amid speculation the company will struggle to raise the cash and may even need more funds as financial markets deteriorate. Chief Executive Officer Herman Verwilst, seeking to stem the sell-off, told reporters he was ``flabbergasted'' by the share decline.
Anglo Irish Bank Corp. Plc lost 24 percent and Bank of Ireland Plc sank 21 percent.
Vedanta Resources Plc led a slump in mining shares on concern slowing economic growth will hurt demand for metals.
India's largest copper producer dropped 22 percent as shareholders forced the company to dump reorganization plans unveiled earlier in the month. The company said ``feedback'' and market conditions prompted the U-turn.
Xstrata Plc, the world's fourth-largest diversified mining company, tumbled 18 percent as base metals declined in London. Anglo American Plc, the world's second-biggest mining company, slid 17 percent.
Arcandor
Copper fell 3.9 percent in London on speculation manufacturers and investors are pulling away from markets because of reduced lending.
Pub company Punch Taverns Plc tumbled 31 percent and rival Enterprise Inns Plc lost 23 percent as competitor Mitchells & Butlers Plc said it faces ``substantial'' cost growth, which sent the shares down 19 percent this week.
Arcandor AG, Germany's biggest department-store owner, plunged 44 percent after Boersen-Zeitung reported that regulators are probing the company and investors demanded Chief Executive Officer Thomas Middelhoff resign.
The company's travel unit, Thomas Cook Group Plc, lost 24 percent after Arcandor said it may sell stock in the tourism division as part of a loan agreement.
Holcim Ltd., the world's second-biggest cement maker, declined 24 percent as hopes of a takeover by Russian investor Eurocement Group faded.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net;
Read more...
Alitalia Pilots Agree to Government-Backed CAI Bid
By [bn:PRSN=1] Marco Bertacche [] and Steve Scherer
Sept. 27 (Bloomberg) -- Alitalia SpA, Italy's national airline, moved a step closer to averting collapse after pilots agreed to a government-backed takeover by a group of business executives.
Unions representing most of Alitalia's 2,500 pilots reached an accord with the CAI group led by Roberto Colaninno early today. The Rome-based carrier's ground staff had already approved the plan to eliminate about 3,000 jobs and impose longer hours for the same pay. Flight attendants unions said they are ``making some progress'' and will meet with CAI again on Sept. 29.
``The agreement with pilots allows us to look at coming days with great serenity,'' Transport Minister Altero Matteoli told Sky TG24 television in an interview broadcast today. ``Now we can let planes take off.''
Colaninno, chairman of scooter maker Piaggio & C. SpA, assembled a group of investors who want to merge Alitalia's flight business with domestic competitor Air One SpA to create an airline that controls more than half of the Italian market. Alitalia was losing $3 million a day when it declared insolvency on Aug. 29 to allow the state-backed rescue plan to begin.
Alitalia's bankruptcy administrator warned this week that the carrier didn't have enough cash to survive beyond this month. The airline, which flew 25 million travelers last year, risked becoming the first major European flagship carrier to collapse since Swissair Group and Belgium's Sabena in 2001.
Attendants Hold Out
There will be fewer job cuts for pilots than CAI had originally planned, said Massimo Notaro of the Unione Piloti association. The new proposal includes hiring about 140 part-time pilots and a separate contract for captains, the government said in a faxed statement.
Seven of nine Alitalia unions have now signed the agreement, with Sdl and Avia, representing most of the flight attendants, still considering the latest terms.
Prime Minister Silvio Berlusconi pledged during his election campaign in April to save Alitalia, which employs about 19,000 people. He said Sept. 18 that the carrier ``may be on the edge of the abyss'' after CAI halted negotiations when it failed to win over most of the unions.
CAI, whose investors include the Benetton family, revived its offer Sept. 25 with new concessions, such as more days off for pilots and cabin crews. Berlusconi's government also is trying to entice international airlines to join CAI, in part to help keep the unions in line.
``This agreement allows Berlusconi to fulfill his campaign promise and was possible after better conditions to pilots were offered,'' said Angelo Drusiani, who manages the equivalent of $1.9 billion of bonds at Banca Albertini Syz & C. in Milan, in a Bloomberg Television interview.
Big Names
Colaninno, former chairman of Telecom Italia SpA, has pledged along with at least 16 partners to invest about 1 billion euros ($1.46 billion) to buy Alitalia's commercial flight assets. The group includes Atlantia SpA, the toll-road company controlled by the Benetton family.
The partners intend to return Alitalia to operating profit in two years.
``It's a high-risk investment for the bidders,'' Drusiani said. ``Competition is so strong and they need a very robust industrial plan, boosting long-haul flights, if they want results.''
Fuel costs and slowing traffic growth are forcing many airlines to reduce capacity and slash jobs to bring down costs. The eight largest U.S. carriers plan to cut almost 26,000 workers starting this month as they park 465 airplanes.
Airline Failures
At least 24 airlines have filed for bankruptcy or ceased flying this year, the International Air Transportation Association said in June. Several more have folded since then, including Zoom Airlines, a trans-Atlantic carrier based in Ottawa and at London's Gatwick airport, which failed in August.
Alitalia administrator Augusto Fantozzi met Italian civil aviation authority Enac Sept. 25 and convinced the regulator to allow the carrier to continue to fly. CAI has extended its offer for Alitalia to Oct. 15, Fantozzi said, adding that the Italian airline will not ground additional flights.
Italy has been trying to sell Alitalia for more than two years. Union opposition scuppered an offer from Air France-KLM Group in April. Berlusconi also fought the Air France bid during his election campaign. Upon taking office in May he hired Intesa Sanpaolo SpA, the country's second-biggest bank, to design the rescue and find investors.
Competitor Interest
Air France, Deutsche Lufthansa AG and British Airways Plc have expressed interest in buying a stake in Alitalia, Fantozzi has said. Lufthansa has said it's monitoring the situation, and Berlusconi said last week that the German carrier would be the best partner for Alitalia. Lufthansa Chairman Wolfgang Mayrhuber was in Rome yesterday ``at the request of the Italian government,'' spokeswoman Claudia Lange said.
Lufthansa ``is interested'' in a stake in Alitalia, Luigi Angeletti, leader of the airline's third-biggest union, UIL, said after meeting the German ambassador in Rome yesterday.
Alitalia had originally been due to participate in the 2004 merger of Air France with KLM that formed Europe's biggest airline. Instead, Alitalia was excluded and told to improve its finances. It has lost almost 3 billion euros since then.
Alitalia shares were suspended in June after falling almost 45 percent since the start of the year, leaving the carrier with a market value of 617 million euros. It has one outstanding convertible bond and the government owns most of that debt. The Italian government has a 49.9 percent stake in Alitalia.
To contact the reporters on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net; Steve Scherer in Rome at sscherer@bloomberg.net;
Read more...
Sept. 27 (Bloomberg) -- Alitalia SpA, Italy's national airline, moved a step closer to averting collapse after pilots agreed to a government-backed takeover by a group of business executives.
Unions representing most of Alitalia's 2,500 pilots reached an accord with the CAI group led by Roberto Colaninno early today. The Rome-based carrier's ground staff had already approved the plan to eliminate about 3,000 jobs and impose longer hours for the same pay. Flight attendants unions said they are ``making some progress'' and will meet with CAI again on Sept. 29.
``The agreement with pilots allows us to look at coming days with great serenity,'' Transport Minister Altero Matteoli told Sky TG24 television in an interview broadcast today. ``Now we can let planes take off.''
Colaninno, chairman of scooter maker Piaggio & C. SpA, assembled a group of investors who want to merge Alitalia's flight business with domestic competitor Air One SpA to create an airline that controls more than half of the Italian market. Alitalia was losing $3 million a day when it declared insolvency on Aug. 29 to allow the state-backed rescue plan to begin.
Alitalia's bankruptcy administrator warned this week that the carrier didn't have enough cash to survive beyond this month. The airline, which flew 25 million travelers last year, risked becoming the first major European flagship carrier to collapse since Swissair Group and Belgium's Sabena in 2001.
Attendants Hold Out
There will be fewer job cuts for pilots than CAI had originally planned, said Massimo Notaro of the Unione Piloti association. The new proposal includes hiring about 140 part-time pilots and a separate contract for captains, the government said in a faxed statement.
Seven of nine Alitalia unions have now signed the agreement, with Sdl and Avia, representing most of the flight attendants, still considering the latest terms.
Prime Minister Silvio Berlusconi pledged during his election campaign in April to save Alitalia, which employs about 19,000 people. He said Sept. 18 that the carrier ``may be on the edge of the abyss'' after CAI halted negotiations when it failed to win over most of the unions.
CAI, whose investors include the Benetton family, revived its offer Sept. 25 with new concessions, such as more days off for pilots and cabin crews. Berlusconi's government also is trying to entice international airlines to join CAI, in part to help keep the unions in line.
``This agreement allows Berlusconi to fulfill his campaign promise and was possible after better conditions to pilots were offered,'' said Angelo Drusiani, who manages the equivalent of $1.9 billion of bonds at Banca Albertini Syz & C. in Milan, in a Bloomberg Television interview.
Big Names
Colaninno, former chairman of Telecom Italia SpA, has pledged along with at least 16 partners to invest about 1 billion euros ($1.46 billion) to buy Alitalia's commercial flight assets. The group includes Atlantia SpA, the toll-road company controlled by the Benetton family.
The partners intend to return Alitalia to operating profit in two years.
``It's a high-risk investment for the bidders,'' Drusiani said. ``Competition is so strong and they need a very robust industrial plan, boosting long-haul flights, if they want results.''
Fuel costs and slowing traffic growth are forcing many airlines to reduce capacity and slash jobs to bring down costs. The eight largest U.S. carriers plan to cut almost 26,000 workers starting this month as they park 465 airplanes.
Airline Failures
At least 24 airlines have filed for bankruptcy or ceased flying this year, the International Air Transportation Association said in June. Several more have folded since then, including Zoom Airlines, a trans-Atlantic carrier based in Ottawa and at London's Gatwick airport, which failed in August.
Alitalia administrator Augusto Fantozzi met Italian civil aviation authority Enac Sept. 25 and convinced the regulator to allow the carrier to continue to fly. CAI has extended its offer for Alitalia to Oct. 15, Fantozzi said, adding that the Italian airline will not ground additional flights.
Italy has been trying to sell Alitalia for more than two years. Union opposition scuppered an offer from Air France-KLM Group in April. Berlusconi also fought the Air France bid during his election campaign. Upon taking office in May he hired Intesa Sanpaolo SpA, the country's second-biggest bank, to design the rescue and find investors.
Competitor Interest
Air France, Deutsche Lufthansa AG and British Airways Plc have expressed interest in buying a stake in Alitalia, Fantozzi has said. Lufthansa has said it's monitoring the situation, and Berlusconi said last week that the German carrier would be the best partner for Alitalia. Lufthansa Chairman Wolfgang Mayrhuber was in Rome yesterday ``at the request of the Italian government,'' spokeswoman Claudia Lange said.
Lufthansa ``is interested'' in a stake in Alitalia, Luigi Angeletti, leader of the airline's third-biggest union, UIL, said after meeting the German ambassador in Rome yesterday.
Alitalia had originally been due to participate in the 2004 merger of Air France with KLM that formed Europe's biggest airline. Instead, Alitalia was excluded and told to improve its finances. It has lost almost 3 billion euros since then.
Alitalia shares were suspended in June after falling almost 45 percent since the start of the year, leaving the carrier with a market value of 617 million euros. It has one outstanding convertible bond and the government owns most of that debt. The Italian government has a 49.9 percent stake in Alitalia.
To contact the reporters on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net; Steve Scherer in Rome at sscherer@bloomberg.net;
Read more...
U.K. Banks Seek Government Funding Plan to Help Restart Lending
By Ben Livesey and Poppy Trowbridge
Sept. 27 (Bloomberg) -- British banks are proposing the government help bail them out of losses from the credit crunch so they can resume lending, said four people with knowledge of the discussions.
Industry executives held talks this week about different options, including the establishment of a so-called bad bank, run by the government. It would take over assets including mortgage-backed securities that declined in value with the collapse of the U.S. subprime home-loan market, said the people, who declined to be identified because the negotiations are confidential.
``The economic downturn is gathering momentum,'' George Magnus, senior economic adviser to UBS AG in London, told Bloomberg Television yesterday. ``The mortgage industry is pretty much dead. The government does have to do something.''
The push by U.K. lenders for government money comes as U.S. lawmakers consider a $700 billion rescue plan for the banking system. Prime Minister Gordon Brown backed last week's takeover of HBOS Plc by Lloyds TSB Group Plc to keep the nation's largest mortgage lender from succumbing to the global credit crisis.
Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King have indicated their opposition to using taxpayer money to support bank lending.
``A hundred billion pounds is available to help the banks get through the system,'' Darling said on Sept. 19. ``So we're dealing with the problems, we're doing it slightly differently to the Americans.''
Daily Talks
Government officials from the Treasury, central bank and Financial Services Authority are talking daily with commercial banks about how to preserve the stability of the financial system. None of those authorities would give details of the discussions.
``We're not going to comment on individual institutions,'' Michael Ellam, a spokesman for the prime minister, told reporters traveling yesterday with the U.K. leader in New York.
Bradford & Bingley Plc, the U.K.'s biggest lender to landlords, fell to a record low in London trading yesterday on concern it won't be able to raise money in capital markets. Royal Bank of Scotland Group Plc, Britain's second-biggest bank, has been scaling back lending to shore up capital.
``There is a severe crisis'' in the money markets, said Neil MacKinnon, chief economist at ECU Group Plc in London and a former U.K. Treasury official. ``The U.K. should take a leaf out of the U.S. book and look at a government-backed rescue.''
`Liquidity Scheme'
The so-called tripartite authorities overseeing the U.K. financial system are also considering options including an extension to the ``special liquidity scheme'' set up April 23 to spur interbank lending, according to the people involved in the matter. The emergency lending program lets banks swap mortgage securities shunned by bond investors for government bonds. The plan was due to end next month and will now run until Jan. 30.
FSA spokeswoman Kirsty Clay declined to confirm or deny reports about the plan. She also refused to comment on Bradford & Bingley, citing the regulator's policy of not talking about individual companies.
The financial crisis has triggered the biggest slump in the U.K. housing market in at least 25 years and is threatening to push the economy into recession.
To contact the reporters on this story: Ben Livesey in London blivesey@bloomberg.net; Poppy Trowbridge in London at ptrowbridge@bloomberg.net.
Read more...
Sept. 27 (Bloomberg) -- British banks are proposing the government help bail them out of losses from the credit crunch so they can resume lending, said four people with knowledge of the discussions.
Industry executives held talks this week about different options, including the establishment of a so-called bad bank, run by the government. It would take over assets including mortgage-backed securities that declined in value with the collapse of the U.S. subprime home-loan market, said the people, who declined to be identified because the negotiations are confidential.
``The economic downturn is gathering momentum,'' George Magnus, senior economic adviser to UBS AG in London, told Bloomberg Television yesterday. ``The mortgage industry is pretty much dead. The government does have to do something.''
The push by U.K. lenders for government money comes as U.S. lawmakers consider a $700 billion rescue plan for the banking system. Prime Minister Gordon Brown backed last week's takeover of HBOS Plc by Lloyds TSB Group Plc to keep the nation's largest mortgage lender from succumbing to the global credit crisis.
Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King have indicated their opposition to using taxpayer money to support bank lending.
``A hundred billion pounds is available to help the banks get through the system,'' Darling said on Sept. 19. ``So we're dealing with the problems, we're doing it slightly differently to the Americans.''
Daily Talks
Government officials from the Treasury, central bank and Financial Services Authority are talking daily with commercial banks about how to preserve the stability of the financial system. None of those authorities would give details of the discussions.
``We're not going to comment on individual institutions,'' Michael Ellam, a spokesman for the prime minister, told reporters traveling yesterday with the U.K. leader in New York.
Bradford & Bingley Plc, the U.K.'s biggest lender to landlords, fell to a record low in London trading yesterday on concern it won't be able to raise money in capital markets. Royal Bank of Scotland Group Plc, Britain's second-biggest bank, has been scaling back lending to shore up capital.
``There is a severe crisis'' in the money markets, said Neil MacKinnon, chief economist at ECU Group Plc in London and a former U.K. Treasury official. ``The U.K. should take a leaf out of the U.S. book and look at a government-backed rescue.''
`Liquidity Scheme'
The so-called tripartite authorities overseeing the U.K. financial system are also considering options including an extension to the ``special liquidity scheme'' set up April 23 to spur interbank lending, according to the people involved in the matter. The emergency lending program lets banks swap mortgage securities shunned by bond investors for government bonds. The plan was due to end next month and will now run until Jan. 30.
FSA spokeswoman Kirsty Clay declined to confirm or deny reports about the plan. She also refused to comment on Bradford & Bingley, citing the regulator's policy of not talking about individual companies.
The financial crisis has triggered the biggest slump in the U.K. housing market in at least 25 years and is threatening to push the economy into recession.
To contact the reporters on this story: Ben Livesey in London blivesey@bloomberg.net; Poppy Trowbridge in London at ptrowbridge@bloomberg.net.
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U.K. Officials in Talks on Bradford & Bingley Rescue
By Gonzalo Vina and Poppy Trowbridge
Sept. 27 (Bloomberg) -- The U.K. government is in talks with banking executives over a possible rescue of Bradford & Bingley Plc, the mortgage lender whose shares have tumbled 93 percent this year after late loan payments surged.
Treasury, Financial Services Authority and Bank of England officials are working ``closely'' with the company and executives of other banks, said a Treasury spokesman who asked not to be identified because of ministry policy. The options for Bradford & Bingley include a takeover by the government, acquisition by a rival bank or a break up and purchase by several buyers.
Bradford & Bingley, the U.K.'s largest lender to landlords, may join HBOS Plc and Northern Rock Plc among British banks that couldn't survive the worldwide credit crisis. In the U.S., regulators seized Washington Mutual Inc., America's biggest failed bank, this week and sold assets to J.P. Morgan Chase & Co.
``Nationalization may be more likely,'' said Guy de Blonay, a London-based fund manager at New Star Asset Management, who doesn't hold Bradford & Bingley stock. ``The government is having difficulty in finding any interest from potential buyers.''
The Treasury spokesman didn't identify the banks that are involved in the Bradford & Bingley negotiations.
Late Payments
Tony McGarahan, a Bradford & Bingley spokesman, confirmed that the lender was working with regulators ``to clarify the bank's future.''
``We can assure customers that their deposits are safe with Bradford & Bingley,'' he said, adding that a further statement will be made before financial markets re-open on Sept. 29.
Officials at Barclays Plc, Royal Bank of Scotland Group Plc and Lloyds TSB Group Plc., three of Britain's biggest banks, declined to comment on Bradford & Bingley.
The Bingley, northern England-based bank has 197 branches and almost 3,000 employees. It cut back on lending after funding from credit markets evaporated and late payments climbed.
Almost half of Bradford & Bingley's 42 billion pounds ($77 billion) of loans in the first half were to landlords, and about 17 percent to customers who certify their own income on application and typically have a higher level of default than standard borrowers.
Customers are more than three months late on almost 2.3 percent of the bank's mortgages. That compares with the U.K. average of 0.5 percent, according the Council of Mortgage Lenders.
Bradford & Bingley's market value has fallen to 256 million pounds, less than the 400 million pounds the bank raised in a share sale last month that was snubbed by almost three quarters of the bank's investors.
Next Northern Rock?
Fitch Ratings Service placed the bank's mortgage-backed bonds on negative watch Sept. 24, forcing the bank to call on Barclays Plc to act as a counterparty.
U.K. officials have tried for most of the year to prevent Bradford & Bingley from becoming the next Northern Rock, which ran out of funding and triggered the first bank run in more than a century in Britain. It had about 113 billion pounds of assets before it was forced to borrow about 24 billion pounds in emergency funds from the Bank of England.
The government waived antitrust rules on Sept. 18 to allow Lloyds TSB to acquire HBOS, the nation's largest mortgage lender, in a stock swap valued at about 12 billion pounds. HBOS CEO Andy Hornby said he agreed to the rescue after the company's shares fell 76 percent and he realized that the credit crisis won't be ending any time soon.
``You can't play brinksmanship with any entity that has depositors' money,'' said Mamoun Tazi, a London-based analyst at MF Global Securities Ltd. with a ``neutral'' rating on Bradford & Bingley. ``You have to find a solution before the problem becomes unmanageable.''
To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.netPoppy Trowbridge in London at ptrowbridge@bloomberg.net; Brian Lysaght in London at blysaght@bloomberg.net
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