Business News: 2010 Has Been a Year of Spills

Business News: 2010 Has Been a Year of Spills

2010 Has Been a Year of Spills

Posted: 16 Dec 2010 02:00 PM PST

50 People and Things That Took a Spill in 2010

Posted: 15 Dec 2010 02:18 PM PST

For Politicians, Best Stocks Are Local

Posted: 20 Dec 2010 09:01 PM PST

African Gold Rush Kills Children with Lead

Posted: 21 Dec 2010 05:40 AM PST

Special Report: Dark Side of the Gold Boom

Posted: 21 Dec 2010 05:40 AM PST

'The Annoying Orange' Needs More Captions

Posted: 20 Dec 2010 06:47 PM PST

Al-Maliki’s New Iraqi Unity Government Approved by Parliament

Posted: 21 Dec 2010 05:32 AM PST

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By Nayla Razzouk

Dec. 21 (Bloomberg) -- Iraq’s parliament approved Prime Minister Nuri al-Maliki’s nominees for a new Cabinet in a national-unity government today, more than nine months after elections.

To contact the reporter on this story: Nayla Razzouk in Amman at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Heather Langan at hlangan@bloomberg.net

TD Bank to Buy Chrysler Financial for $6.3 Billion

Posted: 21 Dec 2010 05:30 AM PST

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By Sean B. Pasternak and Doug Alexander

(Updates with Cerberus background starting in the eighth paragraph, conference call information at end.)

Dec. 21 (Bloomberg) -- Toronto-Dominion Bank agreed to buy Chrysler Financial Corp. from Cerberus Capital Management LP for $6.3 billion in cash, adding an auto-finance company in its second-largest acquisition.

The purchase includes $5.9 billion in assets and about $400 million in goodwill, Canada’s second-biggest bank said today in a statement. Toronto-Dominion doesn’t intend to issue stock.

Canadian lenders, ranked the soundest by the World Economic Forum, are using their excess capital to expand abroad after asset values plunged following the financial crisis. Bank of Montreal last week made its biggest acquisition, agreeing to pay $4.1 billion for Marshall & Ilsley Corp., Wisconsin’s biggest bank.

Toronto-Dominion is aiming for a profit from its U.S. operations of $1.6 billion a year within three years, up from about $1 billion in the year that ended Oct. 31. The Toronto- based lender owns a consumer bank with 1,300 branches in 16 U.S. states and is the largest shareholder in brokerage TD Ameritrade Holding Corp.

“This is a really good way to put those deposits in the U.S. to work,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto, which manages about C$4 billion ($4 billion), including Toronto-Dominion shares. “This is further execution of their U.S. strategy to touch more clients.”

Stock Declined

Toronto-Dominion fell C$1.68, or 2.3 percent, to C$70.52 in trading yesterday on the Toronto Stock Exchange. The shares have risen almost 7 percent this year.

Three people with knowledge of the matter said Dec. 7 that Toronto-Dominion was in talks to buy the auto-finance company.

Chrysler Financial, based in Farmington Hills, Michigan, has about 1,850 employees and will have about $7.5 billion in loans at the closing of the transaction, according to an investor presentation Toronto-Dominion published today. About 90 percent of the loans are in the U.S., and 10 percent in Canada. Chrysler Financial is not related to Chrysler Group LLC, the company that is now controlled by managers from Fiat SpA.

The transaction is expected to add about $100 million to Toronto-Dominion’s earnings by 2012, and the bank forecasts new loan origination of about $1 billion a month the following year. The purchase will reduce the bank’s Tier 1 capital ratio by about 55 to 60 basis points, the lender said in the presentation.

Auto Lenders

Cerberus, led by founder Stephen Feinberg, wagered on the U.S. auto industry with takeovers of General Motors Corp.’s auto lender in 2006, followed by the Chrysler automaker and lender the following year. The deals preceded a decline in U.S. auto sales that sent both carmakers into bankruptcy.

Feinberg, 50, subsequently lost control of both GMAC and Chrysler and held on to Chrysler Financial. The lender repaid its $1.5 billion in U.S. Treasury Department bailout funds last year and in July sought to return to large-scale lending.

Toronto-Dominion’s deal would be the second-largest U.S. acquisition by a Canadian bank, ranking behind its $8.33 billion deal for Commerce Bancorp Inc. in 2008, according to Bloomberg data.

Toronto-Dominion has spent about C$20 billion ($19.6 billion) over the past six years building a consumer-bank network that spans from Maine to Florida. Acquisitions included Portland, Maine-based Banknorth Group and Commerce Bancorp of Cherry Hill, New Jersey. This year, the bank increased its network in the U.S. Southeast, taking part in Federal Deposit Insurance Corp.-assisted transactions and buying Greenville, South Carolina-based South Financial Group Inc.

‘Large Transactions’

Chief Executive Officer Edmund Clark and Chief Financial Officer Colleen Johnston said as recently as this month that the bank isn’t looking at “large” transactions.

Clark, 63, expressed an interest last month in entering automobile leasing in Canada, which domestic banks have been banned from doing since 1980. The Canadian government has been looking at changing regulations. Bank of Nova Scotia, Canada’s third-largest bank, purchased as much as $20 billion in auto loans from General Motors in 2005.

Other recent takeovers by Canadian banks included Royal Bank of Canada’s announced purchase in October of U.K. fixed- income money manager BlueBay Asset Management Plc for 963 million pounds ($1.53 billion), its biggest takeover in three years.

(Toronto-Dominion will hold an investor call at 8:30 a.m. Toronto time. To listen, dial +1-416-644-3414 or +1-877-974- 0445.)

Iraq Lawmakers Approve Maliki’s National-Unity Political Program

Posted: 21 Dec 2010 05:26 AM PST

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By Nayla Razzouk

Dec. 21 (Bloomberg) -- Iraq’s parliament approved Prime Minister Nuri al-Maliki’s plans for governing with a national- unity Cabinet today, more than nine months after elections. He commented on the plans during a session of parliament at which his Cabinet nominees were presented for approval.

To contact the reporter on this story: Nayla Razzouk in Amman at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Heather Langan at hlangan@bloomberg.net

Cameron, Osborne Back Cable After Infighting Comments

Posted: 21 Dec 2010 05:18 AM PST

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By Robert Hutton

(Adds Osborne offers support from first paragraph.)

Dec. 21 (Bloomberg) -- U.K. Prime Minister David Cameron and Chancellor of the Exchequer George Osborne supported Business Secretary Vince Cable after the Daily Telegraph newspaper quoted him as giving details of Cabinet infighting.

Cable, 67, the No. 2 Liberal Democrat in Cameron’s Conservative-led coalition, said last night he was “embarrassed” by his comments. Asked by reporters in London today whether the prime minister still had confidence in Cable, Cameron’s spokesman Steve Field replied: “Of course.”

“There is a constant battle going on behind the scenes” between the Conservatives and the Liberal Democrats, Cable was quoted as saying by the Telegraph. The newspaper said the comments, including a remark by Cable that his resignation could bring down the government, were taped by journalists who met the minister “undercover” as constituents.

With Cameron and his Liberal Democrat deputy, Nick Clegg, giving a year-end press conference today in London, Cable’s remarks illustrate the struggles of the first coalition government since World War II. The Cabinet’s principle of collective responsibility requires that ministers support each other’s policies in public. This is difficult for colleagues who fought an election eight months ago attacking each other and will contest another in 2015.

‘I Can Walk Out’

“Can I be very frank with you, and I am not expecting you to quote this outside,” Cable was cited as saying by the Telegraph. “I have a nuclear option, it’s like fighting a war. They know I have nuclear weapons, but I don’t have any conventional weapons. If they push me too far then I can walk out of the government and bring the government down and they know that. So it is a question of how you use that intelligently without getting involved in a war that destroys all of us.”

“I am embarrassed by these comments and I regret them,” Cable said in a statement yesterday after the report. “I have no intention of leaving the government.”

Osborne, who didn’t escape criticism in Cable’s remarks, offered his support in a Parliament appearance today.

“The business secretary is a powerful ally in the government in promoting growth,” he told lawmakers in response to a question from the opposition’s finance spokesman, Alan Johnson, known as the shadow chancellor. “And, frankly, has forgotten more about economics than the shadow chancellor ever knew.”

Sterling weakened 0.3 percent to $1.5471 at 1:15 p.m. in London after Britain’s budget deficit swelled to a record in November.

Party’s Identity

The episode may help maintain the junior governing partner’s distinctive identity, said Steven Fielding, Director of the Centre for British Politics at Nottingham University.

“What he’s done is say things that everybody really knew he thought,” Fielding said. “He’s ended up giving a justification for the coalition from the Liberal Democrat perspective. It’s short-term embarrassment, but in the long- term, it’s education of the voters.”

Cable, for example, said there was a “big battle going on about the banks,” with “our Conservative friends” resisting his and Clegg’s call for “a very tough approach.” Cable has led calls for banks to show restraint in bonus payments.

He described the execution of a plan to cut welfare payments to parents as “cack-handed” and said “we should be putting a brake on” other projects in areas such as the health service and local government.

“It’s the standard Liberal Democrat private discussion of their position,” said Philip Cowley, the co-author of “The British General Election of 2010.” “They all say privately that as the election approaches, you’ll hear more of this. They know they need to show what they’ve been doing.”

Coalition Struggles

Twenty-one of the 57 Liberal Democrat lawmakers voted Dec. 9 against an increase in college tuition fees, though the party’s ministers supported the policy. Cable, who sponsored the legislation, initially suggested he might abstain.

Among Conservatives, there’s opposition to proposals for a referendum on changing the voting system, which Liberal Democrats made a condition of joining the coalition.

--Editors: James Hertling, Eddie Buckle

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Portugal May Be Cut by Moody’s on ‘Sluggish’ Growth

Posted: 21 Dec 2010 05:05 AM PST

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By Joao Lima

(Updates with strategist’s comment in sixth paragraph, budget figures in last two paragraphs.)

Dec. 21 (Bloomberg) -- Portugal’s bond rating may be downgraded one or two levels by Moody’s Investors Service because of concerns that budget cuts will worsen the country’s ‘“sluggish” economic growth.

“Portugal’s solvency is not in question,” Anthony Thomas, Moody’s London-based lead analyst for Portugal, said in a statement today. “But the likely deterioration in debt affordability over the medium term and ongoing concerns about the economy’s ability to withstand fiscal consolidation and private-sector deleveraging mean its outlook may no longer be consistent with an A1 rating.”

The European Commission, the International Monetary Fund and the Organization for Economic Cooperation and Development forecast that Portugal’s economy will contract next year. Moody’s cut Portugal’s credit rating two steps to A1 on July 13. Standard & Poor’s also said on Nov. 30 it may lower the country’s rating, having already cut it to A- from A+ in April.

The Portuguese government plans to cut state workers’ wages and raise taxes to convince investors it can narrow the euro region’s fourth-biggest budget gap after Greece’s debt crisis led to a surge in borrowing costs for high-deficit nations. Ireland became the second euro country to seek a bailout, after Greece, and the first to request aid from the European Financial Stability Facility last month.

‘Doing the Rounds’

Moody’s doesn’t know if Portugal will ask for a bailout and doesn’t see any move to tap the European Financial Stability Facility as “negative,” Kathrin Muehlbronner, an analyst at Moody’s, said in a telephone interview today. Moody’s will evaluate the situation if Portugal does request a bailout, she said.

“It’s not entirely a surprise,” Orlando Green, assistant director of capital-markets strategy at Credit Agricole Corporate & Investment Bank in London, said about the Moody’s announcement today. “Moody’s, S&P have been doing the rounds. It’s generally been negative news for the euro zone,” he said in an interview on Bloomberg Television’s “The Pulse” with Andrea Catherwood.

Moody’s said on Dec. 15 it may cut Spain’s Aa1 credit rating and on Dec. 16 said it placed Greece’s Ba1 bond ratings on review for a possible downgrade. Ireland’s credit rating was cut five levels by Moody’s on Dec. 17.

Widening Spreads

The difference in yield between Portuguese 10-year bonds and German bunds, Europe’s benchmark, reached a euro-era record of 483 basis points on Nov. 11. The spread was at 356 basis points today. The cost of insuring Portuguese government debt rose 6 basis points to 482, according to CMA prices for credit- default swaps.

“The markets have remained open to the Portuguese government, but it is having to pay an elevated price, which if sustained will increase substantially its debt service costs over time,” Moody’s Thomas said.

Portugal doesn’t face any bond redemptions until April and has completed this year’s sales of debt. Borrowing costs rose at a Dec. 15 sale of 500 million euros ($658 million) of three- month bills.

The government is counting on exports such as paper and wood products to support economic expansion as it cuts spending. The budget forecasts GDP growth of 0.2 percent in 2011, slower than this year’s estimated 1.3 percent pace. Portugal’s economic growth has averaged less than 1 percent a year in the past decade, one of Europe’s weakest growth rates.

“In addition to fiscal austerity, at least a moderate pace of nominal GDP growth will be needed to stabilize and eventually reverse the currently adverse debt trajectory,” Moody’s said in the statement.

Contraction Forecast

The Paris-based OECD sees GDP growth of 1.5 percent this year, with the economy contracting 0.2 percent in 2011, as austerity measures kick in. The European Commission last month predicted a contraction of 1 percent.

Jorg Decressin, head of the IMF’s world economic studies division, said on Oct. 6 that the Portuguese economy may contract 1.4 percent next year if new deficit-cutting measures are taken into account.

Portugal’s 2011 budget includes the deepest spending cuts in more than three decades. In September, the government said it would trim the wage bill by 5 percent for public-sector workers earning more than 1,500 euros a month, freeze hiring and raise the value-added tax by 2 percentage points to 23 percent to help narrow a deficit that amounted to 9.3 percent of gross domestic product in 2009.

Deficit Reduction

Portugal aims to cut its budget deficit to 7.3 percent of GDP this year and 4.6 percent in 2011, and to reach the EU limit of 3 percent in 2012.

The central government’s budget deficit narrowed in the 11 months through November, the first annual reduction in the shortfall this year, the Finance Ministry said yesterday. The gap narrowed 0.8 percent to 12.94 billion euros, as spending rose 2.6 percent and revenue rose 4 percent.

The deficit has narrowed at a faster pace since the start of the second half, shrinking 9.8 percent from a year earlier in the July-November period, as spending increased 0.6 percent and revenue gained 4.6 percent.

--Editors: Jim Silver, James Hertling.

To contact the reporters on this story: Joao Lima in Lisbon at jlima1@bloomberg.net.

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net.

Spain Sells 3.9 Billion Euros of Bills as Yields Jump

Posted: 21 Dec 2010 04:59 AM PST

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By Emma Ross-Thomas

(Adds budget data, Ocana comments in fifth paragraph.)

Dec. 21 (Bloomberg) -- Spain sold 3.88 billion euros ($5.1 billion) of three- and six-month Treasury bills, near the maximum target, as borrowing costs rose amid lingering concern the nation will struggle to fund its deficit.

The Treasury auctioned 3 billion euros of 84-day bills at an average yield of 1.804 percent, the Bank of Spain said today in Madrid. That compares with 1.743 percent when the securities were last issued on Nov. 23. The government sold 876.7 million euros of 175-day debt at 2.597 percent, up from 2.111 percent last month. It aimed to sell a maximum of 4 billion euros from the two sales.

“The result looks good, especially considering the current difficult environment for periphery and the negative rating drift we have observed over the last week,” Chiara Cremonesi, a fixed-income strategist at UniCredit SpA in London, wrote today in a report. The six-month yield was “lower than the secondary market ahead of the auction,” while the three-month yield was “slightly higher than the market,” she said.

Spain is seeking to convince investors it won’t need to follow Ireland in needing a European bailout. Moody’s Investors Service said on Dec. 15 it may lower the nation’s Aa1 rating as the 290 billion euros it estimates banks, the government and regional administrations must raise next year make it “susceptible to further episodes of funding stress.”

Costs ‘In Line’

The rising borrowing costs remain “in line” with what the Treasury estimated at the start of the year, Deputy Finance Minister Carlos Ocana said today as he released data showing the central government’s budget deficit narrowed 46 percent from a year earlier in the first 11 months of the year, to 3.68 percent of gross domestic product. The central government targeted a full-year shortfall of 6.7 percent.

The overall Spanish budget-deficit target of 9.3 percent will be met this year as the better-than-targeted central government result offsets possible slippage in local administrations or the social-security system, he told a news conference in Madrid.

The yield on Spanish 10-year bonds rose four basis points to 5.57 percent at 11:03 a.m. in London. The difference in yield, or spread, between the securities and benchmark German bunds rose four basis points to 257 basis points, compared with a euro-era high of 298 basis points on Nov. 30.

Demand for the Spanish three-month bills was 2.14 times the amount sold, compared with 2.34 at the last auction, the Bank of Spain said. The bid-to-cover ratio for the six-month bills was 5.15 times, compared with 2.65 times.

The government is pre-funding for 2011 as this year’s needs have already been met, Finance Minister Elena Salgado said on Nov. 26. Spain’s average cost of financing its outstanding debt is just over 3.6 percent and the country won’t face refinancing problems next year, Salgado said today.

--With assistance from Manuel Baigorri in Madrid. Editors: Daniel Tilles, James Hertling

To contact the reporters on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

Bank of America, UBS Assets Seized in Italy Swap Probe

Posted: 21 Dec 2010 04:55 AM PST

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By Elisa Martinuzzi

(Adds details from second paragraph.)

Dec. 21 (Bloomberg) -- Italy’s finance police seized 22 million euros ($29 million) from six lenders including Bank of America Corp. amid allegations of fraud in a probe focusing on the sale of derivatives to five municipalities in central Italy.

Police said they took 15 million euros from Bank of America, and 1.7 million euros each from Deutsche Bank AG and UBS AG, according to an e-mailed statement. The remainder was seized from Natixis SA, Dexia Crediop SpA and Banca Monte Paschi di Siena SpA.

The amount represents the alleged illicit profit the banks made from selling derivatives to the city of Florence, the region of Tuscany and three other municipalities in the region, the police said. The local governments have lost about 123 million euros on the swaps that adjusted payments on 1.4 billion euros of debt, the police said.

Losses on derivatives from Puglia, on the heel of Italy, to Liguria, the region that borders France along the Mediterranean, are prompting local governments to review their arrangements, while lawmakers have proposed rules that limit the use of swaps. Four banks are on trial in Milan for alleged fraud in the sale of derivatives to the city.

A spokesman for Bank of America in London and a spokeswoman for Deutsche Bank in Milan declined to comment, while a spokeswoman for UBS in Milan didn’t have an immediate comment. Officials for Natixis, Monte Paschi, and Dexia couldn’t be reached immediately.

The banks misled the municipalities by saying that the deals would be economically advantageous, Florence’s finance police said. The homes of some bankers and council officials were also searched today, the police said.

The city of Florence on Dec. 9 suspended payments to Bank of America, UBS and Dexia on swaps in a separate measure led by the local government. In that case, the municipality is using a clause that enables public administrations to cancel contracts without seeking legal recourse.

--With assistance from Marco Bertacche and Jerrold Colten in Milan. Editors: Edward Evans, Anthony Aarons.

To contact the reporter on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

SEC Said Probing Mark Hurd's HP Departure

Posted: 20 Dec 2010 09:02 PM PST

I'm Expecting An Old Friend May Drop by for Q4 - Higher EPS Due To Share Count Reduction

Posted: 20 Dec 2010 10:00 AM PST