Economic Calendar

Thursday, December 22, 2011

KPN to Sell Simyo Virtual Mobile Operation in France to Bouygues Telecom

By Maaike Noordhuis - Dec 22, 2011 3:19 PM GMT+0700

Royal KPN NV (KPN) agreed to sell its KPN France mobile unit to Bouygues Telecom (EN) as competition in the country’s wireless industry grows.

The unit, which runs as a so-called virtual network operator under the Simyo brand serving 180,000 French prepaid customers, will probably be disposed of this quarter, KPN said in a statement today. The Hague-based company didn’t provide financial details.

A fourth mobile operator, Iliad SA, is scheduled to begin service in France next year. Iliad, founded by billionaire Xavier Niel, has pledged to drive down prices in the country, where France Telecom SA (FTE)’s Orange, Vivendi SA’s SFR unit and Bouygues Telecom dominate the industry. The French market is “difficult,” Thorsten Dirks, who run KPN’s international mobile-phone operations, said on Nov. 30.

KPN will remain active in France through its Ortel Mobile brand, which also operates in Belgium, Germany, the Netherlands, Spain and Switzerland, the company said today.

KPN rose as much as 0.7 percent to 9.04 euros and was up 0.6 percent at 9:17 a.m. in Amsterdam. That pared the stock’s decline this year to 17 percent, valuing the phone company at about 13.3 billion euros ($17.5 billion).

To contact the reporter on this story: Maaike Noordhuis in Amsterdam at

To contact the editor responsible for this story: Kenneth Wong at


Workday Is Said to Plan to Raise as Much as $500 Million in a 2012 IPO

By Olga Kharif and Aaron Ricadela - Dec 22, 2011 9:37 AM GMT+0700

Workday Inc., a maker of software that helps companies manage operations, plans to file for an initial public offering next year that would raise as much as $500 million, two people with knowledge of the matter said.

The company would file its plan in the first half and make its debut in the second half, said the people, who asked not to be identified because the plans aren’t public. Workday is likely to hire Allen & Co. to help with the sale, which would raise at least $200 million, the people said. Other banks being considered include Morgan Stanley (MS), Goldman Sachs Group Inc. and JPMorgan Chase & Co., one person said.

Workday software, which handles tasks like payroll and human resources, is delivered through the Internet. The market for such cloud-computing services will surge to $241 billion in 2020 from $40.7 billion this year, according to Forrester Research Inc. (FORR) Workday follows other debuting business-software companies, including Jive Software Inc., which has risen 25 percent since its Dec. 12 IPO.

Dell Inc. (DELL) Chief Executive Michael Dell joined the ranks of Workday investors in a recent round of funding, two people with knowledge of the matter said. Workday raised $100 million, the people said, after initially announcing financing of $85 million on Oct. 24.

Christine Cefalo, a spokeswoman for Pleasanton, California- based Workday, didn’t immediately return a request for comment.

New Investors

Allen & Co. served as financial adviser in the recent funding round, which was led by new investors, including T. Rowe Price (TROW) Group Inc., Morgan Stanley Investment Management, Janus Capital Group Inc. (JNS) and Bezos Expeditions, the personal investment company of Inc. (AMZN) founder Jeff Bezos.

Workday is recruiting a chief financial officer who can help navigate the IPO process and assist in hiring bankers, one person said, without identifying candidates.

As of October, Workday had more than 230 customers, including consumer-goods maker Kimberly-Clark Corp. (KMB), which recently started to deploy the software to manage 57,000 workers in 60 countries, and electronics manufacturer Flextronics International Ltd. (FLEX), which uses the software for managing more than 200,000 workers. Workday’s sales rose more than 160 percent in 2010, according to the company.

Workday was founded in 2005 by co-Chief Executives Dave Duffield and Aneel Bhusri, both veterans of software company PeopleSoft.

Workday would join online-business software companies that have gone public in recent years. SuccessFactors Inc., which is being acquired by SAP AG for $3.4 billion, held its IPO in 2007. NetSuite Inc., majority owned by Oracle Chief Executive Larry Ellison, went public the same year. Inc., the largest seller of online customer management software, went public in 2004.

To contact the reporter on this story: Olga Kharif in Portland at Aaron Ricadela in San Francisco at

To contact the editor responsible for this story: Tom Giles at


TeliaSonera to Buy 49% Stake in Kcell for $1.52B

By Kim McLaughlin - Dec 22, 2011 2:54 PM GMT+0700

TeliaSonera AB (TLSN), Sweden’s largest telephone company, will increase its stake in its unit in Kazakhstan for $1.52 billion before holding an initial public offering next year.

TeliaSonera agreed to buy a 49 percent stake in GSM Kazakhstan LLP, which sells phone services under the Kcell brand, from Kazakhtelecom, the Stockholm-based company said in a statement today. TeliaSonera plans to offer 25 percent of the shares in an initial public offering next year.

“This agreement is another step in the execution of our strategy of increasing ownership in core holdings,” TeliaSonera said in its statement. “Kcell is a clear market leader in Kazakhstan, the largest market in central Asia, and has shown remarkable growth over the years.”

Following the completion of both transactions, TeliaSonera’s effective ownership in Kcell will be 61.7 percent, it said today.

TeliaSonera has cut jobs and trimmed expenses in Sweden and Finland as subscribers shift from fixed-line subscriptions to smartphones, and focused on faster growing areas such as central Asia.

To contact the reporter on this story: Kim McLaughlin at

To contact the editor responsible for this story: Kenneth Wong at


Yahoo Considers Cutting Its 40% Alibaba Stake

By Tom Giles and Douglas MacMillan - Dec 22, 2011 4:04 PM GMT+0700

Yahoo! Inc. is considering cutting its 40 percent stake in Alibaba Group Holding Ltd. to about 15 percent, two people briefed on the matter said.

The Yahoo board is scheduled to meet later today to consider the transaction, said the people, who asked to remain anonymous because the deliberations are private. The deal, which may let Alibaba repurchase the stake in a tax-free manner, values the Asian assets at about $14 a Yahoo share, or more than $17 billion, one of the people said. Yahoo also would sell all of its stake in Yahoo Japan Corp. (4689) in the deal, this person said.

Alibaba stepped up efforts to buy back the stake after the September ouster of Yahoo Chief Executive Officer Carol Bartz, who had opposed a sale. Yahoo, buffeted by user attrition and search-market share losses to Google Inc., is also considering proposals by private-equity firms seeking to buy minority stakes.

“Yahoo is probably more determined to find a solution to this,” said Paul Wuh, head of Internet research at Samsung Securities Co. (016360) in Hong Kong. “They obviously changed their CEO, which makes it a bit easier now.”

Yahoo acquired its stake in Alibaba, based in Hangzhou, eastern China, for about $1 billion in 2005. Alibaba Group is China’s biggest e-commerce company.

Tax-Free Structure

Dana Lengkeek, a spokeswoman for Sunnyvale, California- based Yahoo, and Alibaba spokesman John Spelich both declined to comment.

Yahoo rose as much as 9 percent to the equivalent of $16.23 in German trading and was up 8.2 percent as of 9:38 a.m. in Frankfurt. Yesterday, Yahoo gained 5.8 percent in the U.S. after the New York Times initially reported that the company is considering reducing its stake in Alibaba in a tax-free deal valued at about $17 billion. It closed in New York at $15.99. Alibaba’s publicly traded unit Ltd. (1688) fell 0.5 percent to HK$7.76 in Hong Kong trading today.

The transaction has a complicated structure and may take several weeks to complete, a person with knowledge of the matter said. Alibaba and Softbank Corp. (9984), the co-owner of Yahoo Japan, are seeking to repurchase stakes held by Yahoo without triggering taxes associated with the gains on the investments.

To help do that, Alibaba and Softbank each would create a standalone entity, investing cash and operating assets in each, another person said. Yahoo would then exchange all of its stake in Yahoo Japan and most of its stake in Alibaba for those new entities, this person said. Yahoo would retain 15 percent of Alibaba, this person said.

‘Putting Pressure’

“Both Alibaba and Softbank are putting pressure on the company to find a solution,” said Samsung’s Wuh.

Fumihiro Ito, a spokesman for Tokyo-based Softbank, declined to comment.

Yahoo has also considered offers for a minority stake from bidders including TPG Capital and a group led by Silver Lake, people familiar with the matter have said. Silver Lake’s bid valued Yahoo at about $16.60 a share, these people said. TPG Capital’s offer was higher, they said.

Yahoo investors, including Di Zhou, a Santa Fe, New Mexico- based analyst at Thornburg Investment Management, have said they would prefer that the company be sold in its entirety, at a higher price.

In September, Temasek Holdings Pte, Silver Lake and DST Global were among investors that acquired closely held Alibaba Group shares in a transaction that valued the Chinese Internet company at $32 billion, people familiar with the deal said at the time.

Alibaba Group is considering a loan of about $4 billion from a group of banks including Credit Suisse Group AG, DBS Bank Ltd. (DBS) and Deutsche Bank AG, a person familiar with the matter said this month.

The New York Times previously reported that Yahoo is considering reducing its stake in Alibaba in a tax-free deal valued at about $17 billion.

To contact the reporters on this story: Tom Giles in San Francisco at; Douglas Macmillan in New York at

To contact the editor responsible for this story: Tom Giles at


First Solar Never So Cheap in Takeover Boon

By Tara Lachapelle, Christopher Martin and Richard Weiss - Dec 22, 2011 8:27 AM GMT+0700

For acquirers willing to wager on the future of solar power, First Solar Inc. has gotten $22 billion cheaper.

First Solar has tumbled (FSLR) 76 percent this year, the biggest drop in the Standard & Poor’s 500 Index, as the Tempe, Arizona- based company lowered its profit forecast and shifted its focus to large power plants. Once worth $25 billion, First Solar was valued this week as low as $2.64 billion, the steepest discount to net assets since its 2006 initial public offering and cheaper than 94 percent of renewable energy equipment companies greater than $1 billion, according to data compiled by Bloomberg.

The world’s largest maker of thin-film solar panels may now attract takeover interest from General Electric Co. (GE) or Siemens AG (SIE) on the expectation that demand will increase in the $55 billion solar power industry during the next decade as prices become more competitive with fossil fuels and other forms of electricity, according to Robert W. Baird & Co. While short sellers have boosted bearish bets against First Solar to the third highest in the S&P 500, it could command at least a 50 percent premium in an acquisition, said Kaufman Bros. LP.

“Given the pull back in the price, it certainly does make a lot more sense for someone to buy out First Solar,” Jeff Bencik, a New York-based analyst for Kaufman, said in a telephone interview. “At the end of the day, First Solar is still profitable. So you are buying the best in the industry at a discount price. Certainly for both GE and Siemens it would diversify their energy platform.”

First Solar Restructuring

Alan Bernheimer, a spokesman at First Solar, Sean Gannon, a spokesman for Fairfield, Connecticut-based GE, and Philipp Encz, a spokesman for Munich-based Siemens, declined to comment on takeover speculation.

First Solar’s stock has plunged 25 percent since Dec. 14 when it reduced 2011 profit and sales forecasts, projected earnings next year that missed analysts’ estimates and said it will fire about 100 employees in the second restructuring in six weeks. The company is reorganizing to focus on large utility- scale power plants instead of smaller, rooftop installations after ousting its chief executive officer in October and replacing him with Michael Ahearn, the founder and chairman, on an interim basis.

More than 17 million shares, or about 20 percent of First Solar’s outstanding stock, are currently shorted, the third-most in the S&P 500 behind GameStop Corp. and Supervalu Inc., according to data compiled by New York-based Data Explorers. In a short sale, a trader borrows stock and sells it, hoping to profit from a decline by replacing it at a lower price.

‘Bad Neighborhood’

Plunging prices for solar panels have eroded profit margins across the industry as manufacturers ramped up production capacity faster than demand increased, creating a global glut of supply. The spot price of solar panels has fallen 47 percent this year, according to Bloomberg New Energy Finance, while crude oil prices have gained 8 percent in New York.

First Solar uses cadmium-telluride in its thin-film panels, which require less time and energy to manufacture than the more common ones based on silicon semiconductors.

“First Solar is definitely the best company in a bad neighborhood at this point,” Michael Horwitz, a San Francisco- based analyst for Robert W. Baird, said in a phone interview. “Eventually it probably makes sense for them to be part of a larger company.”

The market for solar power surged 67 percent last year to $55 billion on new projects with a capacity to produce about 18,000 megawatts, according to data compiled by Bloomberg. That’s equivalent to adding 18 typical nuclear reactors for electricity production.

Record Low Valuation

New solar installations may reach 24,000 megawatts this year and hold steady at about that rate next year, according to a Nov. 1 report from Jenny Chase, an analyst at Bloomberg New Energy Finance. Annual demand may climb to as much as 34,700 megawatts in 2013, she wrote.

First Solar’s shares closed Dec. 19 at a record low of 0.65 times book value, or the value of its assets minus liabilities, cheaper than every renewable energy equipment maker with a current market value greater than $1 billion except for wind turbine manufacturer Vestas Wind Systems A/S at 0.62 times, data compiled by Bloomberg show.

The combined equity and net debt of First Solar was valued at 0.9 times sales, also a record low, the data show.

‘On the Cheap’

“It would make a lot of sense for somebody to buy First Solar on the cheap while there is significant dislocation in the solar industry,” Michael Obuchowski, chief investment officer at First Empire Asset Management in Hauppauge, New York, which owns shares of First Solar, said in an e-mail. “Acquiring First Solar at the bottom of the market would be a very smart move for a number of large industrial companies.”

GE, the world’s biggest (SPX) maker of power-generation equipment, may be interested in acquiring First Solar to bolster its solar operations and take advantage of the company’s technology for power plants, according to GE investor Huntington Asset Advisors and analysts at Kaufman and Robert W. Baird.

“They could buy First Solar, which already has significant scale and is well ahead of where GE is,” said Horwitz at Robert W. Baird. “It would probably make more sense to buy than build. If you’re GE or Siemens, you already build power plants, you’re already out there talking to their customer base, so this would just be another option to bring to the customer.”

Solar Industry ‘Carnage’

GE, the largest wind turbine supplier in the U.S., bought a closely held thin-film maker this year that uses the same material in its solar panels as First Solar and announced in October plans to build its own solar plant in Colorado. The company is investing $10 billion by 2015 to develop environmentally friendly products across its large-equipment areas, including power generation, jet engines and locomotives.

“There’s a lot of carnage in the solar industry right now,” Jeffrey Immelt, GE’s chief executive officer, said at the company’s annual investor meeting in New York last week when asked about potential deals. He said GE’s preference is to build organically.

“GE loves to buy on the cheap,” Peter Sorrentino, a senior fund manager who helps oversee $14.5 billion, including shares of GE and Siemens, for Huntington in Cincinnati, said in a phone interview. “It’s not something that would be a real super competitive advantage, but at the right price, if it made their life easier, of course they’d do the deal.”

Siemens as Buyer

First Solar may also attract Siemens, the market leader in off-shore wind turbines, according to Horwitz and Kaufman’s Bencik. Siemens, Europe’s largest engineering company, is aiming for 40 billion euros ($52 billion) in sales with “green technologies” by 2014, up from 29.9 billion euros in the fiscal year ended Sept. 30.

“They have next to nothing in photovoltaics, and they may be able to combine their strength in wind power with photovoltaics,” the panels that First Solar makes, Thilo Mueller, who helps manage 100 million euros at MB Fund Advisory in Limburg, Germany, said in a phone interview. “It would make sense for Siemens, and they may be able to get First Solar for a comparatively cheap price.”

His fund owns Siemens shares, and he said he’s considering buying First Solar stock.

Still, Siemens’s solar investments have struggled. The company bought Solel Solar Systems for $418 million in 2009 to try to duplicate its success in wind turbines. Losses accelerated as governments curtailed spending on infrastructure and Solel’s solar thermal technology faced less expensive solar panels, leading Siemens to write down the value of the business.

Walton Family

Deals in the solar power industry reached $3.4 billion this year, the most since $6.1 billion in transactions were announced in 2009, data compiled by Bloomberg show, as targets sought partners to share project costs and acquirers took advantage of a drop in solar stocks.

First Solar shareholders, the largest of whom is the Walton family that founded Wal-Mart Stores Inc. (WMT) and own almost a third of the solar company’s shares, would likely demand at least a 50 percent premium in a takeover, Kaufman’s Bencik said. That would equate to $47.70 a share based on yesterday’s closing price. Total SA (FP) paid a 44 percent premium for a 60 percent stake in First Solar’s rival SunPower Corp. in April.

“Beauty is in the eye of the beholder,” Timothy Arcuri, an analyst for Citigroup Inc. in San Francisco, said in a phone interview. “If you’re bullish on solar and you think there’s ultimately going to be significant demand for these big solar farms around the world, there really is no other company on the planet today that can provision, develop and finance -- or get financed -- for these big solar farms.”

To contact the reporter on this story: Tara Lachapelle in New York at; Christopher Martin in New York at; Richard Weiss in Frankfurt at

To contact the editors responsible for this story: Daniel Hauck at; Katherine Snyder at; Reed Landberg at +44-20-7330-7862 or


Sapporo Prefers Vietnam’s ‘Guzzlers’ Over China

By Shunichi Ozasa and Cheng Herng Shinn - Dec 22, 2011 11:07 AM GMT+0700

Japanese brewers are looking past China’s $57 billion beer market to a country with less than one- tenth the population: Vietnam.

Japan’s oldest beer maker, Sapporo Holdings Ltd. (2501), pulled out of China in 2004 and is boosting production in Vietnam. Rivals Asahi Group Holdings Ltd. (2502) and Kirin Holdings Co. have bought Southeast Asian companies to help offset domestic beer sales that have slumped for at least six years.

The brewers are making the fastest growing major economy, China, a lesser priority because of slowing population growth and strong competition. The Japanese companies’ push to tap younger markets in Southeast Asian countries such as Vietnam may boost sales and margins. It also pits them against global brands including Amsterdam-based Heineken NV (HEIA) and Copenhagen-based Carlsberg A/S.

Vietnam “has 90 million people whose average age is 28 years and love to guzzle beer,” said Yoshiyuki Mochida, who heads Tokyo-based Sapporo’s international business. “It’s an era of the warring states for business in Vietnam. If you fall asleep there, your head will be lopped off.”

Vietnam retail beer sales will probably rise 20 percent to 96 trillion dong ($4.6 billion) this year, or less than a tenth of China’s 360 billion yuan ($57 billion), researcher Euromonitor International estimated. The country’s beer consumption per capita was 27.2 liters last year, trailing China’s 31.5 liters and equivalent to about a third of that in the U.S., according to research by Kirin.

Asahi gained 0.5 percent to 1,703 yen as of 12:43 p.m. in Tokyo trading, Kirin rose 1.6 percent to 938 yen and Sapporo climbed 1 percent to 305 yen.

Beer Prices

While China accounted for 71 percent of the Asia-Pacific region’s beer market by volume last year, it contributed 16 percent of profit, Heineken Chief Executive Officer Jean Francois van Boxmeer said Dec. 8. The average price of beer in China is about 25 euros ($33) per 100 liters, compared with 51 euros in India, 60 euros in Vietnam and 182 euros in Australia, he said.

Asahi is looking at Indonesia, Vietnam, Thailand, the Philippines and Malaysia for potential acquisitions, said company President Naoki Izumiya. China’s beverage market will be hurt from 2015 by slower population growth from the nation’s one-child policy, he said.

Japanese brewers (2503), serving a home market with per-capita consumption of 45.4 liters, need to look to countries such as Vietnam for growth. The Japanese beer industry’s 2010 domestic sales by volume, including lower-malt drinks, is 18 percent lower than a decade ago after sliding for six consecutive years, according to Kirin’s research.

Facing the Facts

“Consumption is tied in with population and we have to face this fact squarely,” Kirin Chief Executive Officer Senji Miyake said.

Kirin has a head start in Southeast Asia, said Akane Nakagawa, an analyst at Mitsubishi UFJ Morgan Stanley, with an “outperform” rating on the stock and a 1,500 yen price target. Sapporo, which started beer production in Southeast Asia last month, is next, she said.

While Asahi lags behind the other two, it may benefit from synergies as it integrates Malaysia’s nonalcoholic drink maker Permanis Sdn., which it acquired in the second half of 2011, Nakagawa said.

Nakagawa has a “neutral” rating on Asahi, which has gained 8.3 percent this year, compared with a 17 percent decline for Sapporo and a 19 percent drop for the broader Topix index. Kirin has declined 18 percent.

Chinese Giants

Southeast Asia offers opportunities because of a relative absence of competition, said Mikihiko Yamato, an analyst at JI Asia who recommends buying Kirin shares. The “best-case scenario” would be for the Japanese companies to buy closely held beverage makers where they can negotiate directly with the owners, he said.

Japanese brewers have found China a tough place to do business because a handful of brands dominate China’s beer industry.

“Their market share there can’t rise,” said Tokushi Yamasaki, an analyst at Daiwa Securities Capital. “Competition is too fierce in China.”

China Resources Enterprise Ltd. (291), the maker of Snow beer with SABMiller Plc., has a 22 percent share, Tsingtao Brewery Co., part-owned by Asahi, has 14 percent, and Anheuser Busch InBev NV (ABI) has 12 percent, according to Euromonitor.

“There are giants in the Chinese beer market and we have no chance to go it alone,” said Kirin’s Miyake. “There is still a chance for us in Vietnam from our market analysis.”

Population Growth

China’s population is also aging. People over 60 years old accounted for 13.3 percent of the population last year, nearly 3 percentage points higher than in 2000, according to government statistics.

The median age of Vietnam’s population is 27.8 years, compared with 35.5 years for China’s 1.3 billion people, according to the CIA World Factbook. Vietnam’s population will grow 1.2 percent to 90.4 million next year, according to International Monetary Fund estimates compiled by Bloomberg.

Government estimates in China, which put in place a one- child policy in 1979, show population growth slowing in the decade through 2010, compared with the previous 10-year period.

The total population of Indonesia, the Philippines, Vietnam, Thailand and Malaysia will expand to 553 million in 2016 from 519 million this year, according to IMF estimates compiled by Bloomberg. Japan’s will probably contract 1.1 percent to 127 million in the same period, the data show.

Higher Margins

Southeast Asia also offers the potential for higher beer margins. Asahi’s operating margin of 9.7 percent in the third quarter compares with 27 percent for the Philippines’ San Miguel Brewery Inc. (SMB) and 22 percent for PT Multi Bintang Indonesia, according to data compiled by Bloomberg. Kirin owns about 48 percent of San Miguel Brewery, which dominates the Philippine beer market.

Vietnam may be an easier market to break into because the beer market isn’t dominated by a few low- and mid-priced brands. Saigon Beer-Alcohol Beverage Corp.’s Saigon has the biggest market share of 33 percent, according to Euromonitor, while the Heineken brand has 7.7 percent.

Carlsberg’s namesake has 1.1 percent and other brands it sells, including Huda and Tuborg, have at least 8 percent. Japanese brewers’ shares were too small to be tracked by the researcher.

Vietnam, which has become a production hub for companies from Intel Corp. to Honda Motor Co., is aiming for 6 percent gross domestic product growth next year, Prime Minister Nguyen Tan Dung has said. Japan’s economy is set to expand 1.66 percent next year, according to the median of nine economist forecasts compiled by Bloomberg.

‘No Cultural Walls’

The chances of Japanese brewers succeeding in Southeast Asia are high, said Mitsubishi UFJ’s Nakagawa. “Vietnamese have no problems consuming Japanese products and there are no cultural walls.”

Local and global competitors may be pressured as the Japanese brewers come in. “Among the imported beer makers, Carlsberg and Heineken will see a hit with the Japanese brewers coming in,” said Mizuho Securities analyst Hiroshi Saji. “But the market as a whole will expand, so everyone should gain.”

Heineken “welcomes competition” and is already competing with Japanese companies in other Asian markets, John-Paul Schuirink, a spokesman, said by e-mail. The company has been gaining market share in Southeast Asia, he said.

Asahi, which entered China in 1994, bought about 20 percent of Tsingtao (168) after facing competition from local brands. Kirin, which faced similar difficulties, formed a soft-drink venture with China Resources Enterprise.

Sapporo pulled out of China after about eight years and exports small amounts from Japan. It intends to increase beer production as much as fivefold in Vietnam by 2019. Mochida said his company will now “go hunting and be concentrating on Southeast Asia for the next 10 years.”

To contact the reporter on this story: Shunichi Ozasa in Tokyo at

To contact the editor responsible for this story: Frank Longid at


House Republicans Left With Few Options to Resolve Fight Over Payroll Tax

By Laura Litvan and James Rowley - Dec 22, 2011 12:00 PM GMT+0700

House Republicans have few options in the U.S. payroll tax cut fight as they face party pressure to accept the Senate’s short-term reduction and Democrats dig in against immediate compromise on a longer extension.

With the 2-percentage-point tax cut due to expire Dec. 31, President Barack Obama told House Speaker John Boehner yesterday the “only option” is to allow a vote on the Senate’s two-month extension to buy time for negotiations on a one-year tax cut. Senate Republicans, including John McCain of Arizona and Richard Lugar of Indiana, are calling on House Republicans to give up their insistence on a one-year extension now.

“They’re going to have to back down,” said Tom Mann, a congressional scholar with the Brookings Institution, a policy center in Washington. “There’s no real possibility of cutting a deal on a one-year extension before the end of the year. It’s foolish to think otherwise.”

A Senate Republican leadership aide said Boehner will have to cave in and allow a vote on the Senate legislation, or let the 2-percentage-point tax cut expire Dec. 31 and hand Democrats an issue they can use in 2012 elections. Democrats have the upper hand politically, said the Republican aide, and Senate Majority Leader Harry Reid, a Nevada Democrat, has little incentive to bring the chamber back from a month-long recess to negotiate.

‘No Other Options’

Adam Jentleson, a Reid spokesman, reiterated that senators won’t be called back to Washington.

“There are no other options,” Jentleson said. “We are not discussing any alternative strategies.”

Take-home pay for 160 million Americans will decrease in January unless Congress approves some kind of extension of this year’s cut in the payroll tax that funds Social Security. A worker earning $50,000 a year would see take-home pay drop by $1,000 over the year. For those paid biweekly, each paycheck would be $38.46 smaller.

Lawmakers in both parties say they want to extend the tax cut through next year, while disagreeing over how to pay for it. Senate Democrats sought a surtax on millionaires, while House Republicans voted for such measures as freezing federal civilian workers’ pay.

Those disagreements exploded into a partisan fight that threatens economic growth and may worsen already low disapproval ratings for both parties.

Holidays Ahead

Mann said that to resolve the dispute this month, Reid would have to bring the Senate back into session after both parties agreed to leave Washington and return for work Jan. 23. There isn’t much time with holidays looming for both sides to find a way to pay for a one-year extension, he said.

A House Republican leadership aide, who wasn’t authorized to speak publicly, said one option floated by Republican aides - though not embraced by party leaders - is to approve a two-month extension binding the Senate to negotiations in January to set up a Feb. 1 vote on a full year’s extension.

Asked about such an idea yesterday, Boehner said House Republicans are “ready to work” and said Senate Democrats should return “to have that conversation.” An aide to Boehner said after the speaker’s call with Obama that the speaker made clear he’s not budging.

Democrats said they were wary of any proposal to set up a conference committee before Congress extends the payroll tax cut for two months.

No Fingerprints

“You know the old saying in Washington, when you want to kill something and not leave your fingerprints on it, appoint a committee,” said Senator Charles Schumer of New York, the third-ranking Democratic leader.

New poll results show that Republicans are losing ground with the public after a year of government shutdown fights and a battle over increasing the U.S. debt limit that risked a default on obligations to bondholders.

A Dec. 16-18 CNN poll found that by a 50 percent to 31 percent margin, adults surveyed said they had more confidence in the president than in congressional Republicans to take on big issues facing the nation. Obama had a smaller 44 percent to 39 percent margin in March.

In an editorial yesterday, the Wall Street Journal called the Republican standoff a “fiasco” and said Boehner may be helping re-elect Obama because the Democratic president gets to look more like a tax-cut proponent than he’s been and they look like obstructionists.

‘Right on the Mark’

“Republicans would do best to cut their losses and find a way to extend the payroll holiday quickly,” the editorial said.

McCain, the Republican presidential candidate in the 2008 elections, circulated the editorial on Twitter, saying, "WSJ is right on the mark here.”

Former House Speaker Newt Gingrich, seeking the Republican presidential nomination, told reporters in Des Moines, Iowa, yesterday that while he isn’t trying to “second-guess the Congress,” presidents typically have the upper hand in these types of policy standoffs with lawmakers.

Michael Franc, vice president for government relations at the Heritage Foundation, said it’s apparent to him that Republicans are losing the political battle in the payroll tax battle. The Heritage Foundation is a Washington group that supports limited government.

“It’s coming across like the Democrats want to cut taxes and Republicans don’t,” Franc said. “It looks like Republicans are the scrooges.”

To contact the reporters on this story: Laura Litvan in Washington at; James Rowley in Washington at

To contact the editor responsible for this story: Mark Silva at


England’s Morgan Revives Three-Wheeler for China

By Steve Rothwell - Dec 22, 2011 7:01 AM GMT+0700

In a red-brick shed at the foot of England’s Malvern Hills, Morgan Motor Co. is preparing an unusual assault on the growing Chinese auto market.

Managing Director Charles Morgan said the 100-year-old company has created a model that will stand out from the crowd in Asian showrooms. That’s partly because the M3W is hand-built, wood-framed and based on a 50-year-old design -- and mainly because it has three wheels.

“Try to sell a Ferrari and you’re up against Lamborghini, the Audi R8, Lotus, McLaren,” he said. “Send a Morgan three- wheeler there and they’ll know the difference.”

Morgan, known for retro designs harking back to the England of local composer Edward Elgar, is betting on the M3W to spur Asian demand as slowing economies crimp European and U.S. sales. The company said it has been approached by 20 potential Chinese dealers this year for the 25,000-pound ($39,000) successor to a series of three-wheel models it stopped making in 1952.

Other top-end automakers are also targeting China, where luxury sales may jump 39 percent in 2011 to 939,000, surpassing Germany as the No. 2 market after the U.S., said Jenny Gu, a Shanghai-based analyst at research firm LMC Automotive. British sports-car brand Lotus, a unit of Malaysia’s Proton Holdings Bhd, added its first Beijing dealership in October, even as Chinese consumer demand is forecast to slow as the economy grows less quickly.

‘Automotive Theater’

Founded by Charles Morgan’s grandfather, Morgan said the company seeks to create a sense of “automotive theater” around its models.

“Products that combine design and authenticity are very attractive to the connoisseur, and Morgan appeals to somebody who wants those real materials,” Morgan said in an interview at the company’s base in Malvern Link. The family-owned company has chosen to remain a niche manufacturer and avoided overreaching to chase higher volumes, he said, something that led to the collapse of other U.K. carmakers.

The M3W, unveiled at the Geneva Motor Show in March, has just entered production with a backlog of 800 orders and reaches dealers next year. The open-top two-seater is powered by a two- liter Harley Davidson (HOG) motorcycle engine made by S&S Cycle Inc. of Wisconsin, and will reach 60 miles per hour in 4.5 seconds before topping out at 125 mph, all at 50 miles to the gallon.

‘Large Dose of Nostalgia’

Morgan said it is targeting 1,500 deliveries in 2012, 50 percent from the three-wheeler; it said it expects to sell almost 1,000 this year, including 100 M3ws. The model joins four-wheeled designs that include the 125,000 pound AeroMax, which has a 367 horsepower V8 engine and can reach 170 mph, and the “Classic” range of 1930s-styled roadsters.

“They’re moving a little bit more towards the 21st century while retaining an extremely large dose of nostalgia to ensure that their products remain unique,” said Andrew Jackson, an analyst at Datamonitor in London. “It’ll certainly produce an interesting offering for China, where there seems to be quite an appetite for vehicles with a strong brand identity.”

The company will open its first Chinese dealers in Beijing and Shanghai next year and will also offer the three-wheeler via a Harley Davidson Inc. outlet in Hong Kong with the aim of selling at least 50 cars in the first year and 150 after three.

The push in emerging economies amounts to a “contingency plan” for coping with the weakness of traditional markets, with sales slow in the U.S. and “worse than flat” in Europe, said Morgan, 60, who joined the firm in 1986, when it was making 450 cars a year, after 10 years as a TV cameraman specializing in war reports. He succeeded his father Peter as chief in 1999.

Europe’s Woes

“At least in China and India you know they’ve got money,” he said. “We’ve got a dealer in Greece, but I don’t think we’ve sold a car this year. If Greece expands into Italy, into Spain, into France, then we’ve got problems. Europe is on its knees and anything could happen. People could just stop buying.”

Morgan is also counting on the M3W to spur sales in the U.S., where it will be sold as a motorized tricycle to avoid a car import license.

The sales pitch to China will play on Morgan’s Englishness and dedication to traditional craftsmanship.

Ash frames, which the company said are best at absorbing energy, are built by carpenters at a site across the road from that founder Henry Frederick Stanley Morgan established in 1909, a mile from the house where Elgar wrote the Enigma Variations a decade earlier.

The company contracts tasks it’s not expert at, Morgan said, sourcing engines from Bayerische Motoren Werke AG and Ford Motor Co. (F) and gearboxes from Mazda Motor Corp. (7261), as well airbags and brakes and from Continental AG (CON) and Robert Bosch GmbH.

“A product like the AeroMax or the three-wheeler has an immediate visual appeal,” Morgan said. “Some would argue that they’re really beautiful. And unlike most cars that are interesting for six months, when you come back from paying for the petrol the interest remains.”

To contact the reporters on this story: Steve Rothwell in Malvern Link via

To contact the editor responsible for this story: Chad Thomas at


Greece’s Creditors Resist Push From IMF for More Losses

By Christos Ziotis, Marcus Bensasson and Jesse Westbrook - Dec 22, 2011 7:01 AM GMT+0700

Greece’s creditors are resisting pressure from the International Monetary Fund to accept bigger losses on holdings of the indebted nation’s government bonds, said three people with direct knowledge of the discussions.

Lenders want the 70 billion euros ($91 billion) of new bonds the government will issue in return for existing securities to carry a coupon of about 5 percent, said the people, who declined to be identified because the negotiations are private.

The IMF is pushing for creditors to accept a smaller coupon in order to reduce Greece’s debt-to-gross domestic product ratio to 120 percent by 2020, a key element of the Oct. 27 agreement by European Union leaders, the people said.

Greece’s debt will balloon to almost twice the size of its economy next year without a write-off accord with investors, the IMF said on Dec. 13. The IMF and EU leaders are trying to bring the country’s debt down to a sustainable level.

As part of Greece’s 130 billion-euro second bailout, investors would take a 50 percent hit on the nominal value of 206 billion euros of privately owned debt. Exchanging bonds for securities with a 5 percent coupon would leave investors with a 65 percent loss in the net present value of their holdings of Greek government debt, the people said.

Seniority Agreement

Both sides have agreed that the new bonds should be governed by British law and that private bondholders should have the same seniority after the swap as the IMF and the European Financial Stability Facility, two of the people said.

The sides have also agreed that the deal should include collective action clauses that would ensure lenders participate in the swap, the people said.

Vega Asset Management LLC resigned this month from a committee of Greek creditors negotiating the debt swap with European authorities, because the Madrid-based hedge fund refused to accept a net present value loss exceeding 50 percent, according to a Dec. 7 e-mail sent to other panel members, which was obtained by Bloomberg News.

The committee includes representatives of AXA SA (CS), Commerzbank AG (CBK), ING Groep NV (INGA) and the National Bank of Greece SA.

“Vega needs to start considering all available legal options to refuse and challenge any exchange” that leads to a loss of more than 50 percent, Vega wrote in the e-mail. “Vega wants to avoid any conflicts of interest where its own legal strategy could compromise the ability of other members of the committee to reach an agreement.”

Vega Chief Executive Officer Ian Shackleton declined to comment on the hedge fund’s resignation from the committee.

To contact the reporters on this story: Christos Ziotis in Athens at; Marcus Bensasson in Athens at; Jesse Westbrook in London at

To contact the editors responsible for this story: Craig Stirling at; Edward Evans at


Asian Equities Snap Two-Day Rally as European Banks Rush ECB’s Cash Offer

By Jonathan Burgos and Yoshiaki Nohara - Dec 22, 2011 2:17 PM GMT+0700

Dec. 22 (Bloomberg) -- Alan Oster, chief economist at National Australia Bank Ltd., talks about Europe's sovereign debt crisis. The European Central Bank will lend euro-area banks a record amount for three years in its latest attempt to keep credit flowing to the economy during the debt crisis. Oster speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Dec. 22 (Bloomberg) -- Curtis Freeze, founder of Honolulu-based Prospect Asset Management Inc., talks about the outlook for Japan stocks and his investment strategy. Freeze speaks with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)

Asian stocks dropped, snapping a two-day rally, as European lenders sought record loans from the central bank and U.S. home sales missed forecasts, damping the earnings outlook for exporters.

Li & Fung Ltd. (494), a supplier of toys and clothes to Wal-Mart Stores Inc., dropped 2.1 percent in Hong Kong. Tokio Marine Holdings Inc. slid 1.7 percent on concern the insurer may be paying too much for a $2.7 billion acquisition. OneSteel Ltd. jumped 10 percent in Sydney after saying it’s not considering a debt or share sale.

“The ECB doesn’t seem to have stepped up to the plate for bond buying, which I think is negative,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages about $100 billion. “At least they are acting as a lender of last resort for banks.”

The MSCI Asia Pacific Index slid 0.5 percent to 112.68 as of 3:26 p.m. in Tokyo, with almost three shares falling for every two that rose. The gauge slid to a three-week low on Dec. 19 after North Korean leader Kim Jong Il died and Fitch Ratings said it may cut credit ratings of European nations. Trading volume was below the 30-day average in all of Asia’s major markets except China, according to data compiled by Bloomberg.

Japan’s Nikkei 225 Stock Average (NKY) fell 0.8 percent before a public holiday tomorrow. South Korea’s Kospi Index lost 0.1 percent. Australia’s S&P/ASX 200 declined 1.2 percent and Hong Kong’s Hang Seng Index slid 0.3 percent. China’s Shanghai Composite Index gained 0.3 percent, reversing losses of as much as 1.9 percent.

Default Risks

Futures on the Standard & Poor’s 500 Index (SPX) lost 0.2 percent today after the gauge added 0.2 percent yesterday, lifted by gains in energy and consumer shares. U.S. equities fell earlier after the ECB offered 489 billion euros ($645 billion) in 1,134- day loans to banks, the most ever in a single operation and more than economists’ estimates. The increased funding sought by lenders may indicate institutions are wary of lending to each other amid a heightened risk of government and bank defaults.

Exporters to the U.S. declined after sales of existing homes in the world’s biggest economy missed economists’ estimates. A report by the National Association of Realtors revised down the number of existing home sales in the U.S. by an average of 14 percent since 2007, indicating the depth of the slump that contributed to the last recession.

Li & Fung dropped 2.1 percent to HK$14.26 in Hong Kong. Nissan Motor Co., which depends on North America for a third of its sales, lost 0.9 percent to 692 yen in Tokyo. Toshiba Corp. (6502), a maker of home appliances, medical equipment and power plants, fell 1 percent to 309 yen.

‘Negative Impact’

The MSCI Asia Pacific Index slumped 18 percent this year through yesterday, heading for its worst performance since 2008. Utilities posted the biggest decline among the 10 industry groups in the gauge as Japanese utilities tumbled after meltdowns at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. It was the worst nuclear accident in 25 years.

The regional benchmark index’s drop this year compared with a 1.1 percent decline by the S&P 500 and a 14 percent slide by the Stoxx Europe 600 Index. Stocks in the Asian gauge were valued at 12.7 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.3 times for the Stoxx 600, according to data compiled by Bloomberg.

Tokio Marine dropped 2 percent to 1,707 yen after it agreed to buy Delphi Financial Group Inc. for $2.7 billion in cash. acquisition comes amid waning demand in Japan, where the population is declining.

“The premium paid in this acquisition may have a negative impact on the company’s shares in the short term,” Wataru Otsuka, an analyst at Nomura Securities Co. said in a report.

Among stocks (MXAP) that advanced, OneSteel jumped 10 percent to 75 Australian cents, the most on the MSCI Asia Pacific Index. The company said it’s not considering a debt or share sale, rejecting speculation it may need to raise capital. Deutsche Bank AG said last month there’s a “significant risk” the steelmaker may have to raise funds due to a likely breach of financial covenants.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at; Jonathan Burgos in Singapore at

To contact the editor responsible for this story: Nick Gentle at


IPad Beat on Power, Speed by New Non-Clones: Rich Jaroslovsky

By Rich Jaroslovsky - Dec 22, 2011 4:00 AM GMT+0700
Bloomberg Opinion

The Droid Xyboard. Photographer: David Paul Morris/Bloomberg

Rich Jaroslovsky, tech columnist with Bloomberg News. Photographer: Andrew Harrer/Bloomberg

We’re finally beginning to see some distinctive 10-inch Android tablets that are more than iPad knockoffs.

Earlier this year, Sony released its wedge-shaped Tablet. Now, two more entries provide features and functionality beyond Apple Inc. (AAPL)’s offerings: Asustek Computer Inc. (2357)’s Eee Pad Transformer Prime and the Droid Xyboard 10.1 from Motorola Mobility Holdings Inc. and Verizon Wireless.

Granted, every Android tablet comes at an automatic disadvantage to the iPad: Unlike in wireless phones, where the Google Inc. (GOOG) operating system is attracting a rapidly growing number of applications, the marketplace for tablet apps remains thin. Meanwhile, the iPad has more than 140,000 apps, and they tend to be higher-quality.

A prerequisite for luring developers is getting more Android tablets into users’ hands. And that means giving customers more reasons to buy them.

The Transformer Prime offers several. It is as pretty a tablet as you’re likely to find anywhere. It weighs about 1.3 pounds and measures less than a third of an inch thick, making it marginally thinner and lighter than the iPad 2. The metallic back has a cool, spun finish marred only by the ill fit of the Apple-style multipin cable used for charging the device. The tablet’s angled edges leave even more of the connector’s metal exposed than does the iPad’s, which has a similar issue.

Paperclip Rescue

My time with the Transformer Prime didn’t start auspiciously. The unit from Asus appeared to charge normally but refused to boot. Eventually, with the help of a handy paperclip, I was able to reset it.

Under the hood, the Prime is powered by Nvidia Corp. (NVDA)’s Tegra 3 quad-core microprocessor. A chip that powerful is overkill for many tablet tasks, like reading e-books. But if you play games, you’ll quickly gain an appreciation, as I did through many sets of Zen Pinball and frantic races in Riptide GP. The play was fast and fluid and graphics on the 10.1-inch screen were little short of stunning.

All that, of course, requires battery power and a lot of it. The Transformer does pretty well on that score. I got more than seven hours on a charge, using it to surf the Web, check e- mail and watch a movie. While that’s considerably less than on an iPad, the Transformer also offers an option to downshift the computer into two lower-power modes to extend battery life.

Transforming the Transformer

There’s one other way to keep things going: buying and attaching the optional $150 metallic keyboard that gives the Transformer Prime its name, converting it into a netbook-PC replacement. The keyboard has its own six-hour battery, plus an SD expansion-card slot and a USB port. Using the keyboard and intense battery management, Asus claims you can coax up to 18 hours of use between charges.

The Transformer Prime comes in two Wi-Fi-only models, one with 32 gigabytes of storage for $500, the other with 64 gigabytes for $600 -- both $100 cheaper than the comparable iPads. They run “Honeycomb,” Google’s first-generation tablet operating system. An upgrade to the new version of Android, “Ice Cream Sandwich,” is promised. If you’re looking for an iPad alternative, you can’t do much better.

Speed Demon

Unless, that is, your most important criterion for a tablet is how fast it connects to the Internet when you’re on the move or don’t have a Wi-Fi connection. In that case, the Droid Xyboard 10.1 -- known outside the U.S. as the Xoom 2 -- is the way to go.

The Droid Xyboard runs on Verizon (VZ)’s LTE 4G network, the fastest wireless data network out there, and it is mighty swift: Using Ookla’s SpeedTest app, I regularly registered download speeds of 10 to 20 megabits per second in the San Francisco Bay Area.

That’s faster than many home broadband connections, and it makes the Xyboard roar when it’s engaged in Internet-intensive tasks like surfing the Web, downloading apps or streaming movies and videos. Unlike some LTE phones, battery life isn’t terrible.

I got about six hours of continuous use on the high-speed Verizon network. You can expect to do better in normal use, since I was deliberately trying to stress the battery by doing things like streaming videos and not taking advantage of Wi-Fi networks. And at 1.3 pounds, the Xyboard is right in line with the Transformer Prime and iPad 2.

Unfortunately, several other aspects of the Xyboard are less satisfying. Although it also runs the Honeycomb operating system (and will be upgradeable), it feels noticeably more sluggish than the Transformer when it comes to things like scrolling through apps or even waiting for the screen to reorient itself when you turn the unit sideways.

Tacky to Touch

Perhaps some of the difference stems from its less powerful dual-core processor -- but I’ve used plenty of tablets with dual-core processors that felt zippier than this.

Matters aren’t helped by a water-repellent coating Motorola has added to the Xyboard’s touchscreen. It’s supposed to help protect against accidental spills, but I found it a little tacky to the touch.

Then there’s the price. The Xyboard starts at $530 for a 16-gigabyte version, up to $730 for 64 gigabytes. At first glance, that seems to be $100 cheaper than the comparable iPad 2 models. But there’s a big difference: While Verizon and AT&T Inc. (T) allow users of 3G-equipped iPads to decide month by month whether they want service, Verizon requires Xyboard buyers to sign a two-year contract. Otherwise, the price zooms to an uncompetitive $700 for even the least expensive model.

At those prices, the Droid Xyboard’s appeal may be limited to those with a real need for speed. Still, being the fastest tablet -- or in the case of the Transformer Prime, the most powerful -- counts for something.

(Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the reporter on this story: Rich Jaroslovsky in San Francisco at

To contact the editor responsible for this story: Manuela Hoelterhoff at


Stocks in Europe Advance With U.S. Futures as Dollar Weakens; Oil Rallies

By Shiyin Chen and Monami Yui - Dec 22, 2011 3:13 PM GMT+0700

Dec. 22 (Bloomberg) -- Masafumi Yamamoto, chief currency strategist in Tokyo at Barclays Bank Plc, talks about the outlook for global currencies. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Dec. 22 (Bloomberg) -- Alan Oster, chief economist at National Australia Bank Ltd., talks about Europe's sovereign debt crisis. The European Central Bank will lend euro-area banks a record amount for three years in its latest attempt to keep credit flowing to the economy during the debt crisis. Oster speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

European stocks and U.S. equity- index futures gained and the dollar weakened before data that may signal the world’s largest economy is recovering. Oil climbed for a fourth day after supplies in the world’s largest consumer of crude sank the most in a decade.

The Stoxx Europe 600 Index jumped 0.9 percent as of 8:06 a.m. in London. Standard & Poor’s 500 Index futures added 0.3 percent, reversing an earlier drop of 0.3 percent. The MSCI Asia Pacific Index lost 0.5 percent, retreating from a one-week high. Oil climbed 0.6 percent in New York, while copper advanced a third day. The Dollar Index declined 0.3 percent.

Data today may show U.S. consumer confidence improved this month, before a report tomorrow that may show personal spending grew at a faster pace in November. European Central Bank President Mario Draghi is scheduled to speak today after 523 euro-area lenders took a record 489 billion euros ($638 billion) in loans from the Frankfurt-based central bank yesterday.

“We’ve been seeing good data coming out of the U.S. and that indicates the economy is better than we had thought,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., a unit of Japan’s biggest publicly traded bank.

About eight shares rose for every one that declined on the Stoxx 600. The gauge has dropped 13 percent this year, compared with a decline (MXAP) of 1.1 percent in the S&P 500 and an 18 percent slump in the MSCI Asia Pacific.

U.S. Economy

S&P 500 futures expiring in March fluctuated after the U.S. stock gauge completed a two-day, 3.2 percent advance. Treasury 10-year yields were little changed at 1.96 percent. The Thomson Reuters/University of Michigan final index of consumer sentiment probably increased to 68 this month from a preliminary reading of 67.7 and from 64.1 at the end of November, according to the median estimate of economists in a Bloomberg News survey. That would be the strongest level in six months.

A separate survey showed the number of initial jobless claims climbed to 380,000 in the week ended Dec. 17, after applications fell to 366,000 last week, the fewest since May 2008.

The dollar weakened 0.4 percent to $1.3095 against the euro, after rising yesterday when European banks took larger-than- forecast loans from the central bank. The borrowings equal about 63 percent of the European bank debt maturing in 2012, according to Goldman Sachs Group Inc.

Draghi will hold a media briefing in Frankfurt today after a meeting of the European Systemic Risk Board. He said on Dec. 19 that lenders in the euro region will experience “very significant” funding constraints next year and that there are “substantial downside risks” to the economy.

Crude for February delivery climbed as much as 0.6 percent to $99.28 a barrel on the New York Mercantile Exchange, extending a three-day advance. Figures from the Energy Department yesterday showed U.S. stockpiles declined 10.6 million barrels last week to 323.6 million, the largest drop since Feb. 16, 2001. They were forecast to decrease 2.13 million barrels, according to a Bloomberg News survey. Imports slipped to a three-year low.

To contact the reporters on this story: Shiyin Chen in Singapore at; Monami Yui in Tokyo at

To contact the editor responsible for this story: Alexander Kwiatkowski at