Business News: Driving in India: Cars, Corruption, Collisions

Business News: Driving in India: Cars, Corruption, Collisions

Driving in India: Cars, Corruption, Collisions

Posted: 09 Dec 2010 02:00 PM PST

Archive: The Trouble with India

Posted: 15 Dec 2010 05:10 AM PST

Online Rental Markets Are Thriving

Posted: 09 Dec 2010 02:00 PM PST

San Diego's Tough-Love Pension Proposal

Posted: 09 Dec 2010 02:00 PM PST

Pixie Dust Wears Off in Disney Town

Posted: 13 Dec 2010 09:21 PM PST

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By Kathleen M. Howley

Dec. 14 (Bloomberg) -- Walt Disney Co. built Celebration, Florida, as an idealized version of a circa-World War II small town, where litter-free streets are lined with white picket fences and front porches entice neighbors to sit after dinner.

Now, there’s trouble in the 16-year-old paradise set within earshot of the nightly fireworks at Walt Disney World Resort.

Celebration’s foreclosure rate is about double the state’s pace as homeowners who paid a premium for a vision of utopia fall behind on their mortgages. Earlier this month, a resident on the verge of losing his house shot himself after a 14-hour standoff with police. Three days before that, the town had its first murder when a man was bludgeoned with an ax.

“A lot of people bought homes in Celebration thinking Tinker Bell had sprinkled the town with pixie dust,” said Michael Olenick, chief executive officer of mortgage-data firm Legalprise Inc., referring to the character in Disney’s “Peter Pan” movie whose magical dust allows people to fly as long as they think happy thoughts. “Reality is hitting hard.”

The foreclosure rate in Celebration since the beginning of 2009, based on notices of so-called lis pendens that initiate a case, is one for every 20 residents, compared with one per 48 people in Florida as a whole, according to Legalprise, in West Palm Beach. Celebration home values have dropped as much as 60 percent from the 2006 peak, while statewide values are down 51 percent, data from Seattle-based research firm Zillow Inc. show.

‘Fantasyland’ Premium

Celebration foreclosures are happening at a faster pace in part because property owners in financial trouble are walking away from vacation homes in the town, where real estate sells for about 30 percent more than surrounding communities, said Olenick. Before the recession, people were willing to pay more for living in a Disney “fantasyland,” he said.

“The harsh reality is, bad things happen in Celebration too, both in real estate and in life,” Olenick said.

Craig Foushee, 52, barricaded himself in his home on Dec. 2, shooting at sheriff’s deputies and members of a SWAT team before turning the gun on himself. No law enforcement officers were injured. Foushee’s home had been in foreclosure since October 2009, according to legal filings.

The Osceola sheriff’s department said there was no connection between Foushee’s death and the murder of Matteo Giovanditto, 58, who was found in his home by a neighbor on Nov. 29. On Dec. 6, David-Israel Zenon Murillo, an acquaintance of Giovanditto, was arrested and confessed to killing him, according to a statement on the website of the sheriff’s office.

Different Movie Set

Residents are “in shock” after the deaths, said Angela Sessoms, who has lived in Celebration for 10 years. In the past, visitors have commented the town looks like the set of a Disney movie, she said. She heard a similar description with a dark twist last week, as word of the killings spread.

“With the SWAT team, the roads barricaded, and the school in lockdown, it was like a different kind of movie set,” Sessoms said. Before the deaths, a stolen bicycle was considered Celebration’s biggest crime, said Sessoms, a real estate agent at Century 21 Premium Properties’ downtown office.

The community has marked the events by tying yellow ribbons to the oak trees that edge its quiet streets, as a memorial.

Disney started building Celebration in 1994, and the first residents arrived in 1996. Located on the southern border of Disney World, 25 miles south of Orlando, it was designed by Robert A.M. Stern, dean of the Yale University School of Architecture, and Jaquelin Robertson, a founding partner at Cooper, Robertson & Partners in New York. The style of the development is called New Urbanism, also known as neotraditionalism, emulating 1950s mixed-use neighborhoods where it was easier to walk than to drive.

Kilwin’s, Woof Gang

In the center of town, bordering a lake constructed by Disney, stores include Kilwin’s, a seller of ice cream and fudge, and the Woof Gang Bakery, where dog owners buy gourmet treats. At the Market Street Cafe, there’s an old-fashioned soda counter where diners can order the restaurant’s specials: meat loaf and chicken pot pie, followed by apple or pecan pie.

Lexin Capital, a New York-based private real estate investment firm, bought the 18-acre Celebration downtown from Disney in 2004. Mike Nunez, a spokesman for the company, didn’t return calls seeking comment. Disney still owns some commercial property in the town, according to Marilyn Waters, a spokeswoman for the Burbank, California-based company.

Twice the Value

Living 12 minutes from Disney World’s Magic Kingdom, with a backdoor access road, comes at a price. Buying in the 10,000- person town requires paying what locals call the “Celebration Premium.” The median home value, including single-family properties and condominiums, was $250,800 in October, almost twice the $127,300 for the entire state, according to Zillow.

Properties in Celebration are priced as high as $3.9 million for a six-bedroom, 8,000-square-foot (743 square-meter) mansion on a three-quarter-acre lot, according to Realtor.com. At $529,000, buyers could get a four-bedroom, 2,800-square-foot home with a wrap-around porch on about a sixth of an acre.

For condominiums, $90,000 will buy a two-bedroom, 1,000- square-foot unit, according to Realtor.com. At the top of the market, a five-bedroom, 3,400-square-foot, townhouse-style condo is priced at $675,000.

Four years ago, at the height of the real estate boom, the least expensive single-family house in the June to December period sold for $350,000, according to Kathleen Carlson, owner of Imagination Realty in the town’s center. In the same period this year, it was $210,000, she said.

The lowest condominium sale in the boom was $193,000, compared with a sale at $70,000 for the 2010 period, she said.

Town Maintenance

All owners pay about $860 a year for private trash pickup and recreational facilities, including parks, community pools and baseball fields. Condo owners pay an additional maintenance fee that varies depending on location.

The town’s Architectural Review Committee maintains strict control over the appearance of properties, dictating paint colors, regulating holiday decorations and overseeing the size of political signs that can only be posted in the 45 days leading up to an election.

Most residents see the rules as “protection,” said Carlson, who lives in a Celebration home with a wide front porch where she drinks coffee with neighbors on Sunday mornings.

“Most of us came here not because of Disney -- we came because we wanted that type of control over our neighborhood,” Carlson said, “You don’t have to worry that your neighbor will suddenly start parking an old pickup on his front lawn.”

Six Acceptable Styles

Like Carlson’s house, most properties have front porches that encourage neighborliness. There are six accepted historical architectural styles for homes: Victorian, Classical, Colonial Revival, Mediterranean, French, and Coastal.

While white picket fences outline most front yards, not everyone is allowed to have them. That would look too fake, said Laura Poe, a spokeswoman for the town. The architectural committee decides who can have the old-fashioned fences and who must have short, trimmed hedges.

The town shows its Disney heritage in annual seasonal shows, each with special effects originally designed by the entertainment company. In October, leaf-shaped confetti shoots out of lamp posts in the village center to simulate colorful falling foliage. During the month of December, the posts emit what locals call snoap -- soap suds that look like snow.

Unlike in real life, the snow falls four times a night, on schedule, and dissipates without shoveling.

“Two of my grandchildren think we live inside Disney World, with Mickey Mouse,” said Celebration resident Sessoms, referring to a four-year-old and a five-year-old. “Except for the recent violence, I can understand why they would think that.”

--Editors: Kara Wetzel, Rob Urban

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

Census: New York Area Has Longest Commutes

Posted: 14 Dec 2010 10:47 AM PST

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By John McCormick and Tim Jones

(Updates with gasoline and mass transit data starting in the fourth paragraph)

Dec. 14 (Bloomberg) -- The New York City metropolitan area is home to the three-longest average commutes among U.S. mainland counties, U.S. Census Bureau estimates show.

Residents living in Richmond, Queens and Kings counties recorded one-way commutes to work of more than 40 minutes, with Richmond County’s 42.5 minutes being the longest. The estimates are a five-year average compiled from 2005-2009 surveys, according to the Census Bureau. The data, released today, is the last measure of the American lifestyle by the federal government before the 2010 census count is released.

King County in Texas recorded the nation’s shortest average commute at 3.4 minutes, the estimates show. The national average for workers 16 years and older was 25.2 minutes.

The five-year period covered in the survey saw the average price of gasoline fluctuate and more than double from January 2005 to June 2008, according to the U.S. Energy Information Administration.

“It seemed that $3 was a real price point, enough to convince people to change their behavior,” said Virginia Miller, spokeswoman for the American Public Transportation Association, a Washington-based advocacy group.

$1.83 a Gallon

The average retail price of gasoline in January 2005 was $1.83 per gallon, according to the agency. It topped $3 a gallon in May 2007 and exceeded $4 a gallon in June 2008.

During that time period, public transit agencies initially reported ridership increases. As unemployment increased, the number of passenger trips dropped 3.8 percent between 2008 and 2009, the public transportation association’s data shows. The national unemployment rate rose from 5 percent in January 2008 to 10 percent in December 2009.

The commuting times comes from the American Community Survey, which is being used to replace the so-called long-form census questionnaire that had asked detailed questions every decade.

Other mainland U.S. counties with average one-way commutes of more than 40 minutes include Pike County, Pennsylvania; Craig County, Virginia; Bronx County, New York; Elbert County, Colorado; Park County, Colorado; Charles County, Maryland; and Catahoula Parish, Louisiana.

Los Angeles County

Los Angeles County, California, home to the nation’s second-largest city by population, recorded an average of 29 minutes, while Cook County, Illinois, home to the third-largest city, Chicago, averaged 31.9 minutes.

It is often the counties outside the central-city counties that record the longest commutes. For example, McHenry County, Illinois, outside Chicago, averaged 33.7 minutes.

Counties outside Washington also recorded some of the longest commutes in the nation. The average commute in Calvert County, Maryland, was 39.3 minutes, while Prince William County, Virginia, recorded 39.1 minutes.

The American Community Survey is designed to complement the decennial count and provide more timely annual data. The data released today included smaller geographic areas and covered topics ranging from commute times to languages spoken at home to housing values. The questionnaire and results are on the bureau’s website.

The census estimates come with varying margins of error for each county, so the exact order of any rankings could be slightly different.

Today’s data is being released a week ahead of the official national and state counts from the 2010 census that will be used to redistribute seats in Congress and influence how $4 trillion in government funds are distributed over 10 years.

--Editors: Christine Spolar, Carlos Torres

To contact the reporters on this story: John McCormick in Chicago at jmccormick16@bloomberg.net; Tim Jones in Chicago at tjones58@bloomberg.net.

To contact the editor responsible for this story:

Europe Stocks Fall on Spain Rating; Futures Drop, Dollar Gains

Posted: 15 Dec 2010 05:04 AM PST

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By Paul Armstrong

Dec. 15 (Bloomberg) -- European stocks snapped a seven-day rally and U.S. equity futures declined after Moody’s Investors Service said it may cut Spain’s credit rating. The dollar index rose the most in a week and oil and cotton fell.

The Stoxx Europe 600 Index slipped 0.6 percent while futures on the Standard & Poor’s 500 Index fell 0.3 percent and Spain’s IBEX 35 tumbled 1.8 percent. The Dollar Index gained 0.2 percent, the most since Dec. 8, while the Swiss franc strengthened to a record against the euro. The 10-year Treasury rebounded from a decline that pushed the yield to a seven-month high yesterday. Crude oil fell 0.8 percent.

Moody’s placed Spain’s Aa1 debt rating on review for a possible downgrade, citing the 170 billion euros ($226 billion) the nation needs to raise next year and fueling concern that Europe’s debt crisis is spreading even after Greece and Ireland got bailouts. The Federal Reserve said yesterday it won’t slow record stimulus amid a “disappointingly slow” recovery, while today it’s due to release data that economists forecast will show industrial production rose for the first time in three months in November.

“One trend which is going to go into at least the first quarter of next year is going to be further downgrades of the obvious countries under pressure,” Bob Parker, a senior adviser at Credit Suisse Asset Management in London, said in “On the Move With Francine Lacqua” on Bloomberg Television. “Markets are acting very rationally. If one looks for example at the performance of the Spanish and Italian markets versus the German equity market this year, you’ve actually got an outperformance of Germany by close to 30 percent.”

Portugal Bill Auction

Portuguese bonds fell after the southern European nation sold 500 million euros of 91-day bills at a yield of 3.403 percent, more than the 1.818 percent at an auction in November. The yield on Portugal’s 10-year note rose for an eighth day, climbing 6 basis points to 6.61 percent. The spread with German bunds climbed 10 basis points to 345, Bloomberg generic prices show.

Spanish 10-year bonds were little changed after falling earlier, while the 10-year U.S. Treasury yield fell 9 basis points to 3.40 percent, after surging 22 basis points yesterday to the highest level since May 18.

Franc Strengthens

The Swiss franc strengthened as much as 0.6 percent to a record 1.2759 per euro before trading 0.2 percent up at 1.2813, while the euro weakened 0.1 percent to $1.3364. The euro-region currency was unchanged at 111.92 yen. The dollar gained 0.1 percent to 83.74 yen. South Korea’s won lost 1.3 percent to 1,154.8 per dollar, the biggest drop in a week, on concern authorities will step up measures to curb capital inflows after the nation’s National Assembly moved closer to revising a tax on foreign investor’s bond holdings.

The ruble closed at 46.3405 per 10 Chinese yuan in the currencies’ first day of trading on Moscow’s Micex exchange, after opening at 46.35. Policy makers in China and Russia are promoting greater use of their currencies in regional trade as they seek to reduce reliance on the dollar.

The Stoxx 600 ended its longest stretch of gains in almost six months as more than three companies fell for every one that rose, with banks leading the selloff. Banco Santander SA, Spain’s largest lender, lost 2.8 percent, while Barclays Plc fell 3.4 percent. Healthcare stocks limited the decline, as Novartis AG rallied 7.5 percent after agreeing to pay $12.9 billion to take full control of Alcon Inc. Atos Origin SA rose 11.4 percent after Siemens AG said it will take a 15 percent stake in the company.

Asian Stocks

The MSCI Asia Pacific Index slid 0.8 percent, retreating from a 2 1/2-year high. PetroChina Co., China’s largest oil company, fell 3.6 percent in Hong Kong. Industrial & Commercial Bank of China Ltd., the world’s No. 1 bank by market value, sank 1.9 percent on concern China will act further to slow inflation. Billabong International Ltd. dropped 8.9 percent in Sydney after the surfwear maker lowered its profit forecast.

The decline in U.S. futures indicated the S&P 500 may end a six-day advance. The nation’s consumer-price index increased 0.2 percent for a second month in November, according to the median forecast of economists surveyed before a Labor Department report due at 8:30 a.m. in Washington. A separate report from the Fed is forecast to show industrial production rose 0.3 percent last month.

The MSCI Emerging Markets Index dropped 0.5 percent, the first decline this week. The Hang Seng China Enterprises Index of Hong Kong-traded shares sank 2.2 percent, the most in three weeks, after the Chinese central bank said consumers are more concerned about inflation than at any time in the past decade, boosting speculation policy makers will raise interest rates.

Crude oil declined 67 cents, or 0.8 percent, to $87.61 a barrel after the American Petroleum Institute reported rising heating oil and gasoline inventories. Cotton fell 3.14 cents to $1.4135 a pound, the first drop in six trading sessions.

--With assistance from David Merritt, Claudia Carpenter, Emma Charlton, Matthew Brown, Michael Patterson, Abigail Moses and Steve Voss in London. Editors: Mark Gilbert, Paul Sillitoe

To contact the reporter on this story: Paul Armstrong in London at Parmstrong10@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net

Dollar Rises Before Reports on Industrial Production, Inlfation

Posted: 15 Dec 2010 05:03 AM PST

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By Allison Bennett and Lucy Meakin

Dec. 15 (Bloomberg) -- The dollar rose against the pound and Australia’s dollar before data forecast to show growth in U.S. industrial production and higher consumer prices.

The euro slumped earlier against the dollar after Moody’s Investors Service said Spain’s debt rating is on review for a possible downgrade. European Union leaders will meet this week amid discord about how to stem a debt crisis that’s caused Greece and Ireland to accept bailouts. The Swiss franc appreciated to a record against the euro.

“With Moody’s you can argue it’s not a surprise because Standard & Poor’s already did it so they would follow suit,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “The last couple of days we’ve seen headlines come out that we thought should have pushed the euro lower, but coming in to yearend with light flow, it’s momentum and stop triggers and technical levels.”

The dollar strengthened 0.1 percent to $1.3367 per euro at 7:46 a.m. in New York, from $1.3378 yesterday. It rose 0.1 percent to 83.75 yen from 83.66.

Economic Data

The consumer-price index increased 0.2 percent for a second month, according to the median forecast of economists surveyed by Bloomberg News before a Labor Department report. The so- called core measure, which excludes more volatile food and energy costs, may have increased 0.6 percent from November 2009, matching a record low. Another report may show industrial production increased in November by the most in four months.

Moody’s said Spain’s credit rating may be cut from Aa1 as the government prepares its final bond sale of the year tomorrow amid concern it may follow Greece and Ireland in seeking a bailout.

Spain has to raise 170 billion euros next year, while refinancing needs for its regions total 30 billion euros and for banks around 90 billion euros, Moody’s estimates. It doesn’t see a bailout as “likely.”

--Editors: Paul Cox

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

Simon Bids More Than $4 Billion for Capital Shopping

Posted: 15 Dec 2010 04:58 AM PST

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By Brian Louis and Peter Woodifield

(Updates with investments in U.K. malls in 10th paragraph.)

Dec. 15 (Bloomberg) -- Simon Property Group Inc., the largest U.S. mall owner, made an offer for Capital Shopping Centres Group Plc that values the U.K. company at 2.9 billion pounds ($4.6 billion).

Simon would pay 425 pence a share in cash for London-based Capital Shopping, the U.K.’s biggest retail landlord, according to a statement today. That’s 26 percent more than Capital Shopping’s closing share price on Nov. 24, the day before Simon’s interest was disclosed. Capital Shopping has so far refused to cooperate with the Indianapolis-based company.

Capital Shopping owns four of the U.K.’s 10 biggest malls, including the Manchester Arndale and the Lakeside Shopping Centre in Essex. Simon said its bid is conditional on Capital Shopping not completing the acquisition of Trafford Centre also in Manchester. The British company agreed last month to pay 1.6 billion pounds in shares and assumed debt for the mall in what would be the U.K.’s biggest property transaction.

“This is still a ‘phony war’ and inadequate,” Mike Prew, a London-based analyst at Nomura International, said in a note to investors today. “It is not a knockout blow.”

Simon’s proposed offer is 13 percent higher than Capital Shopping’s net asset value of 377 pence a share as of Nov. 1. Land Securities Group Plc, the U.K.’s largest real estate investment trust, closed yesterday at 9.4 percent below its net asset value as of Sept. 30 and British Land Co., the second- largest REIT, was 2.6 percent lower.

Shares Climb

Capital Shopping gained as much as 3.9 percent to 411.9 pence in London trading. The shares were priced at 407 pence at 12:05 p.m., bringing this year’s gain to 2.4 percent. Simon said Dec. 8 that it owned 5.1 percent of the stock.

Capital Shopping is considering Simon’s latest proposal at a board meeting today, according to a separate statement. The U.K. company disclosed Simon’s interest last month while announcing the agreement to buy the Trafford Centre from closely held Peel Group.

To help with financing, Capital Shopping raised about 221 million pounds from selling the equivalent of 9.9 percent of its outstanding equity to investors. The deal would give Peel as much as 25 percent of Capital Shopping. Shareholders are scheduled to vote on the proposal on Dec. 20.

In the same statement, Capital Shopping said it rejected Simon’s request to delay the purchase and share sale to give the U.S. landlord time to prepare an offer. Capital Shopping refused last week to provide Simon with information it said it needed to evaluate a possible takeover bid.

‘Attractive to Shareholders’

“Our proposed offer is highly favorable and attractive to CSC shareholders,” Simon said. “We are enthusiastic about this opportunity and committed to dedicating substantial time and financial resources with a view to concluding a transaction as soon as possible.”

Investment in U.K. retail properties is at a four-year high, with spending this year set to top 5 billion pounds, including the Trafford deal. Investors are attracted by better income returns than they can get from cash or government bonds, according to property brokers including Cushman & Wakefield Inc.

The proportion of real estate investment across Europe allocated to buying malls and shopping centers is at its highest for more than a decade, Cushman said in a report last month.

Capital Shopping is considering Simon’s latest proposal at a board meeting today, it said in a statement.

No ‘Buy’ Ratings

Capital Shopping is the only company in the benchmark FTSE 100 Index without a single “buy” recommendation from any of the analysts covering it. The average 12-month price estimate for the stock is 364.2 pence, 8.1 percent lower than yesterday’s closing price. That’s based on 14 estimates.

Of the 19 analysts covering the stock, 10 rate it “hold” or “neutral,” while seven have a “sell,” “reduce,” or “underweight” rating. Two others are “restricted” because of their involvement in the Peel transaction.

The company hasn’t had a “buy” rating since it spun off Capital & Counties Properties Plc in May. None of the analysts covering the company had a “buy” recommendation at the time of the demerger.

David Fischel, Capital Shopping’s 52-year-old chief executive officer, has run the company since 1992, making him the second-longest-serving CEO in Britain’s 100 largest companies after WPP Plc’s Martin Sorrell.

Simon Property’s chairman and chief executive officer is David Simon, the 49-year-old son of the founder, Melvin. Simon has run the company since 1998. The mall owner was valued at $28.6 billion at the close in New York Stock Exchange composite trading yesterday.

European Retreat

Simon cut its European holdings this year with the sale of its interest in a joint venture that owned seven shopping centers in France and Poland. It recorded a gain on the sale of $281 million, according to a regulatory filing.

Simon gets 3.5 percent of its net operating income from international operations, according to a third-quarter supplemental report. The company also owns outlet shopping centers in Japan, Mexico and South Korea.

Earlier this year, Simon unsuccessfully bid $6.5 billion for U.S. rival General Growth Properties Inc., which emerged on Nov. 9 from the largest-ever U.S. real estate bankruptcy.

Simon’s announcement today doesn’t constitute a firm offer for Capital Shopping and there can be no certainty that any bid will ultimately be made, the company said. Any offer is also conditional on due diligence and Simon arranging debt finance.

Simon appointed Citigroup Inc., Lazard Ltd. and Evercore Partners Inc. as financial advisers and Freshfields and Wachtell Lipton as its legal advisers.

--Editors: Andrew Blackman, Ross Larsen.

To contact the reporters on this story: Brian Louis in Chicago at blouis1@bloomberg.net; Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

Spain Rating on Review by Moody’s Before Bond Sale

Posted: 15 Dec 2010 04:51 AM PST

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By Paul Tobin and Emma Ross-Thomas

(Adds comment from deputy finance minister in ninth paragraph.)

Dec. 15 (Bloomberg) -- Spain’s credit rating may be cut from Aa1, Moody’s Investors Service said, as the government prepares its final bond sale of the year tomorrow amid concern it may follow Greece and Ireland in seeking a bailout.

Spain has to raise 170 billion euros ($226 billion) next year, while refinancing needs for its regions total 30 billion euros and for banks around 90 billion euros, Moody’s estimates.

“Spain’s substantial funding requirements, not only for the sovereign but also for the regional governments and the banks, make the country susceptible to further episodes of funding stress,” Kathrin Muehlbronner, an analyst at Moody’s, said in a report today.

Spain lost its top rating at Moody’s in September as euro- region leaders struggled to contain the debt crisis. Spain is raising taxes, slashing wages and privatizing state industries to persuade investors it can avoid a rescue. Ireland last month became the second euro nation to get a bailout.

The rating will probably remain in the “Aa” range, Moody’s said. The company doesn’t see a bailout as “likely,” even though it “can’t rule it out,” Muehlbronner said.

The euro fell and the extra yield that investors demand to hold Spanish 10-year bonds over German bunds widened to as much as 257 basis points after the Moody’s report, less than 30 basis points shy of a euro-era closing record. The spread eased to 250 basis points at 12:30 p.m. in London.

Bond Auction

The move may further increase Spain’s financing costs at tomorrow’s bond sale, when the Treasury plans to auction 3 billion euros of 10- and 15-year securities. Surging yields already prompted the Treasury to reduce planned proceeds from the usual target of around 4 billion euros, Finance Minister Elena Salgado said Nov. 26. Portugal’s borrowing costs almost doubled at a sale of three-month bills today compared with the last auction in November.

“The news is another negative for Spain, and only makes tomorrow’s Spanish bond auctions even more tricky,” said Niels From, chief analyst at Nordea Bank AB in Copenhagen. “Spain is already struggling to convince market participants that the country can put its own house in order by itself.”

Regional Borrowing

Spanish Deputy Finance Minister Jose Manuel Campa said he doesn’t foresee any lack of demand for Spanish sovereign debt next year nor does he expect private issuers to have problems raising financing. Moody’s analysis of the regional governments’ finances isn’t “sufficiently careful,” he told reporters in Madrid today, as those administrations are meeting their budget targets and will continue to do so next year.

Spain, reeling from the collapse of a debt-fueled housing boom, has the highest unemployment rate in Europe at more than 20 percent. The budget deficit, which at 11 percent of gross domestic product last year was the third-biggest in the euro region. Its borrowing costs have surged and the gap between its 10-year yields and those of Germany are 17 times the average in the first decade of monetary union.

Also weighing on Spanish debt are plans to make private investors contribute to the costs of future debt crises after 2013. German Chancellor Angela Merkel said today ahead of a European summit that “strict conditions” will be tied to future aid and any help will be “a last resort.”

Banks’ Needs

Moody’s said Spanish lenders may need 25 billion euros for recapitalizations, of which 10.5 billion euros has already been provided by the state’s FROB bank-rescue fund. In a more stressed scenario, that could rise to as much as 90 billion euros, the company said. The FROB was created with an initial 9 billion euros and has the capacity to take on as much as 90 billion euros of debt. Ireland will spend as much as 83 billion euros, more than half its gross domestic product, rescuing its lenders, according to the government.

“Given the nervousness of the markets, given the situation after Ireland where the banks will have to be recapitalized to a much higher capital level, to a core Tier 1 ratio of 12 percent, we ran stress tests to see what that would mean in the context of Spain,” Muehlbronner said in a telephone interview. If Spanish lenders had to be similarly capitalized, to “retain market confidence and absorb potentially higher loan losses,” the figure would be 80 billion euros to 90 billion euros, she said.

‘Relatively Poor’

Moody’s said it’s confident the government is committed to cutting the budget deficit and expects the shortfall to be close to 6 percent of GDP in 2011, compared with 11 percent in 2009. Still, Muehlbronner said the regional governments have a “relatively poor” track record on budget cutting.

The ratings company lowered Spain to Aa1 from Aaa in September. Spain lost its top grade at Fitch Ratings in May and at Standard & Poor’s in January 2009. S&P currently rates Spain AA while Fitch has a AA+ grade. Moody’s said that Spain’s position is “much stronger” than “other stressed euro-zone countries.” A one step cut to Aa2 by Moody’s would leave Spain in line with Italy’s rating and two notches above Portugal.

--With assistance by Paul Dobson in London. Editor: James Hertling, Andrew Davis

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

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

Spanish Lenders May Need $120 Billion, Moody’s Says

Posted: 15 Dec 2010 04:50 AM PST

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By Charles Penty and Emma Ross-Thomas

(Updates with comment from business school professor in seventh paragraph.)

Dec. 15 (Bloomberg) -- Spanish banks that helped spur the country’s property boom with mortgages and loans to developers may need another 90 billion euros ($120 billion) in capital, Moody’s Investors Service said.

That estimate is based on a scenario in which lenders would need a Tier 1 capital ratio, a measure of their financial strength, of as much as 12 percent to tap funding, Moody’s said in a statement. Spanish banks declined today, led by Banco Santander SA, the country’s biggest.

“Given the situation after Ireland where the banks will have to be recapitalized to a much higher capital level, to a core Tier 1 ratio of 12 percent, we ran stress tests to see what that would mean in the context of Spain, if Spanish banks had to be recapitalized to a higher level in order to retain market confidence,” Kathrin Muehlbronner, an analyst at Moody’s, said in a phone interview.

The calculations by Moody’s show the gap opening up between analysts and Spanish officials over estimates for the size of the lenders’ possible capital needs. Bank of Spain Governor Miguel Angel Fernandez Ordonez said two days ago he didn’t see any need for lenders to tap more funds from a bank-rescue facility in 2011 beyond the 11 billion euros already committed and that investors’ perceptions of the industry’s health were “much worse than reality itself.”

Under its “base case” scenario, Moody’s expects “relatively moderate” recapitalization needs of 25 billion euros, if the lenders are to retain a Tier 1 ratio of 8 percent, according to the ratings firm. That figure and the larger estimate both include the sum provided by the bank-rescue fund.

Credit Rating

Spain has set up a fund, known by its acronym FROB, that can take on as much as 90 billion euros in debt to speed up mergers and help the banking system get new capital.

“Everyone has to play out their role and the day that the governor of the Bank of Spain says that Spanish banks need 90 billion euros and FROB isn’t big enough, we’ll be lost,” Juan Jose Toribio, a professor at IESE business school and a former head of financial policy in the country’s finance ministry, said at a news conference today.

Moody’s also said Spain’s credit rating may be cut from Aa1 on concern about mounting borrowing costs, potential losses in the banking system and the deficits of regional administrations. The refinancing needs of Spanish lenders may come on top of the 170 billion euros the country’s treasury needs to raise, the ratings firm said.

Santander dropped 2.8 percent to 8.13 euros at 1:23 p.m. in Madrid trading, while Banco Bilbao Vizcaya Argentaria SA, the country’s second-biggest bank, fell 2.3 percent to 7.80 euros.

--Editors: Christiane Lenzner, James Amott

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net; Emma Ross-Thomas at erossthomas@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

Icahn Enterprises to Buy Dynegy for $665 Million

Posted: 15 Dec 2010 04:49 AM PST

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By Jessica Resnick-Ault

(Adds information on deal terms beginning in second paragraph.)

Dec. 15 (Bloomberg) -- Dynegy Inc., the third-largest U.S. independent power producer, said its board has unanimously approved a $665 million offer to be acquired by Icahn Enterprises LP after the company’s shareholders rejected a lower bid from Blackstone Group LP.

Icahn Enterprises’ offer of $5.50 a share represents a 10 percent premium over Blackstone’s offer of $5 a share, Dynegy said in a statement today. The agreement also allows Dynegy to continue pursuing a better offer until January 24. Icahn has agreed not to oppose another buyer if Dynegy receives a higher bid.

Carl Icahn and hedge fund Seneca Capital, Dynegy’s largest shareholders, opposed Blackstone’s offer to acquire the Houston- based company. A majority of Dynegy’s shareholders voted to reject the deal last month.

Sale of the company at more than $4.50 a share within 18 months of Blackstone’s November offer will trigger a $16.3 million payment to Blackstone, according to an agreement with Dynegy.

NRG and Calpine Corp. are the two largest U.S. independent power producers.

Editors: Susan Warren,

To contact the reporter on this story: Jessica Resnick-Ault in New York at jresnickault@bloomberg.net.

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

ICC Prosecutor Names Six Suspects in Kenyan Violence

Posted: 15 Dec 2010 04:45 AM PST

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By Jurjen van de Pol and Sarah McGregor

(Updates with comment by Kibaki in sixth paragraph; Kenyatta in 11th.)

Dec. 15 (Bloomberg) -- The International Criminal Court requested charges of crimes against humanity be filed against six Kenyans, including Finance Minister Uhuru Kenyatta, over their alleged role in post-election violence in 2008.

Other summoned include Industrialization Minister Henry Kosgey and suspended Higher Education Minister William Ruto, ICC Chief Prosecutor Luis Moreno-Ocampo told reporters today at the court in The Hague. Cabinet Secretary Francis Muthaura, former police chief Mohammed Hussein Ali and Joshua Sang, a radio presenter, were also identified as suspects, he said.

“The post-election period of 2007-2008 was one of the most violent periods of the nation’s history,” Moreno-Ocampo said. “These were not just crimes against innocent Kenyans. They were crimes against humanity as a whole.”

Fighting flared between ethnic groups in Kenya following a disputed December 2007 presidential vote, leaving 1,500 people dead and forcing 300,000 to flee their homes. The worst of the clashes abated after President Mwai Kibaki, an ethnic Kikuyu, signed a power-sharing accord in February 2008 with then- opposition leader Raila Odinga, of the Luo group, who was installed as prime minister.

The Kenyan shilling weakened as much as 1.1 percent after the announcement and was trading at 80.75 per dollar at 3:32 p.m. in Nairobi, the Kenyan capital. A close at that level would be the weakest since Dec. 1, according to Bloomberg data.

Increased Security

Kenyan security forces have stepped up patrols across the country and residents of the East African nation should “remain calm,” Kibaki said in statement e-mailed by the presidency today. The ICC’s call for actions to be taken against the six suspects are “prejudicial, preemptive and against the rules of natural justice, he said.

“The people who have been mentioned have not yet been fully investigated as the pre-trial process in The Hague has only but began,” Kibaki said. “They therefore cannot be judged as guilty until the charges are confirmed by the court.”

Kenya is East Africa’s biggest economy. Growth slowed to 1.7 percent in 2008, from 7.1 percent a year earlier, as tourism, agricultural output and investment declined because of the violence. The country is the world’s biggest exporter of black tea and Europe’s largest source of cut flowers.

Political Tension

Today’s announcement may ratchet up political tension in the country, though it is unlikely to trigger new conflict, Macharia Munene, professor of history and international relations at the U.S. International University in Nairobi, said in a phone interview yesterday.

“It’s possible there could be some tensions” and isolated incidents of violence, Munene said. “Kenya will not collapse: investors who are serious will still come, visitors will still know they are safe.”

ICC judges will now review evidence submitted by the prosecutors, the court said in a statement. If they determine there are grounds for charges to go ahead, they will “decide on the most appropriate way to ensure their appearance in court,” it said

Kenyatta, who is the son of Jomo Kenyatta, leader of the country’s independence struggle against Britain, called for the ICC process to be “free and fair” and said he would prove his innocence. “We await the decision of the judges,” he told reporters in Nairobi.

Muthaura rejected proposed ICC charges. “The suggestion that I have done anything to warrant criminal investigation is manifest nonsense,” he told reporters in the city.

Domestic Tribunal

Kibaki said the government remains committed to establishing a domestic tribunal to deal with suspects linked to the 2008 violence. The government’s attempts to handle cases within Kenya have been blocked by lawmakers, who rejected two proposed laws to create a domestic tribunal. That inspired Moreno-Ocampo to open an investigation.

The Kenya National Commission on Human Rights released a report two years ago naming 219 suspects of post-election violence including members of parliament and Cabinet ministers.

Kenya is due to hold its next general elections in 2012. Former United Nations Secretary-General Kofi Annan, who mediated a peace accord that ended the 2008 violence and is monitoring its implementation, has said bringing instigators of the fighting to trial is necessary to avoid a repeat of the clashes during the 2012 vote.

--With assistance from Eric Ombok in Nairobi. Editors: Paul Richardson, Karl Maier.

To contact the reporters on this story: Jurjen van de Pol in Amsterdam at jvandepol@bloomberg.net; Sarah McGregor in Nairobi at smcgregor5@bloomberg.net.

To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net; Paul Richardson at pmrichardson@bloomberg.net.