Europe - Stocks (General News)

[millionairemind]

Another Northern Rock in the making?? Poor Gordon Brown

Bradford & Bingley shares crash
By Philip Aldrick and Katherine Griffiths
Last Updated: 1:59am BST 08/07/2008

Bradford & Bingley shares crashed 16pc to 42p yesterday, dropping further below the 55p-a-share price of its £400m rights issue, as the City speculated that the buy-to-let lender is worthless.

Pali International, a stockbroker, cut its target price for the bank to "zero" and calculated B&B's "net present value" to be -14p. In a separate note, banking specialist Fox-Pitt, Kelton said: "We cannot rule out the possibility of an effective failure with shareholders receiving little or nothing for their shares."

This came in the wake of last week's Moody's downgrade and decision by TPG to pull its planned £179m investment. In frantic efforts to keep B&B's capital raising on track, four of its core shareholders stepped in to support an enlarged £400m rights issue alongside the six largest high street banks.

Leigh Goodwin, an analyst at Fox-Pitt, reduced his share price target to 43p, is "forecasting losses by 2010" and raised questions about whether "B&B is going to be Northern Rock in slow motion".

He added: "The downgrades and publicity surrounding the stock will almost certainly lead to increased funding and liquidity pressures."

B&B, which declined to comment, has stressed it is not another Northern Rock as it has funding in place until early 2009.

Bruce Packard at Pali said: "We believe deposit holders' money is safe but from a shareholder perspective... the investment is unattractive." B&B has about £21bn of retail deposits.
Moody's heaped more woe on the bank yesterday by demanding remedial action over its £13bn securitised funding vehicle, Aire Valley Master Trust. The measures taken are expected to reduce annual cash flow by up to £50m, eating into last year's £407m positive cash flow from operating activities.

Bankers said the rescue rights issue was little more than a "sticking plaster" and that a permanent solution would either involve B&B's sale to a rival or being put into "run-off" and the £40bn mortgage book gradually sold off. Mr Packard expects the book to be shrunk by 5pc a year until 2012, to around £30bn.

HSBC, Lloyds TSB, HBOS, Barclays, Abbey and Royal Bank of Scotland are likely to end up with a combined 33pc stake in B&B after committing to sub-underwrite £230m of the rights issue.

Standard Life, Legal & General, Prudential and Insight - B&B shareholders that own 13pc of the lender - are stepping up for £120m.

In a circular to investors, B&B stressed that, unlike last time, the contract with the underwriters "does not give [them] an express right to terminate the agreement if there is a credit rating downgrade".

The underwriting group, led by Citigroup and UBS, will be paid £19m at a fee of 4.75pc - the same as the previous rights issue. It added that "there has been no material change in the current trading and outlook of the company since [updating the market for the] first four months of 2008 on June 2, 2008".

[kennynah]

now our otiose housewife, lena, is faster than news....she is the news...she posted this well before official news site put it up for the world... we need more otiose housewives....the mountains

*************

Siemens to eliminate 16,750 jobs to cut costs and increase efficiency - Update 1
7/8/2008 9:17 AM ET

(RTTNews) - German engineering conglomerate Siemens AG said Tuesday morning that it plans to cut a total of 16,750 jobs as part of its cost-cutting and restructuring efforts. The move is aimed at streamlining operations in order to weather the current economic slowdown.

The firm said it will eliminate about 12,600 jobs worldwide, including some 3,500 in Germany, as part of its transformation program. The company added that an additional 4,150 jobs will be affected by the restructuring measures at selected business units.

The 16,750 total jobs slated to be eliminated represents 4% of the firm's global workforce. The planned cutbacks primarily impact its administration-related functions, as the firm aims to cut costs and increase efficiency.

Additionally, Siemens said it plans to sell its Segment Industrie Montage Services or SIMS, in order to ensure the continuation of the unit's service and assembly activities on a competitive basis. The sale of the segment is expected to affect some 1,200 employees at 35 locations in Germany.

The company noted that it would only terminate employment contracts as a last resort. Siemens intends to make the cuts in a socially responsible way by starting negotiations with its employees immediately. It plans to offer employees transfers to other companies and early retirement packages.

The Munich, Germany-based Siemens AG, which has significant presence in electronics and electrical engineering, operates in the industrial, energy and healthcare sectors. The company has around 400,000 employees working to develop and manufacture products, design and install complex systems and projects, for individual requirements.

Commenting on the job cuts, Siemens president and chief executive officer, Peter Löscher said, "The speed at which business is changing worldwide has increased considerably, and we're orienting Siemens accordingly. Against the backdrop of a slowing economy, we have to become more efficient."

[millionairemind]

Looks like both sides of the Alantic are being hit badly..

RBS shares hit by global economy gloom
By Katherine Griffiths
Last Updated: 11:40pm BST 11/07/2008

Royal Bank of Scotland shares fell 9pc after a swathe of bad news about the global economy and a setback to the sale of its insurance business hit the banking giant.

Sentiment was also affected by whether the US administration would have to bail out Freddie Mac and Fannie Mae, which stand behind many US mortgages.

Many banks, including UK lenders, have invested in American mortgages backed by the two. A bail-out might not hit the value of these investments but would probably damage sentiment further among investors.

Amidst a sea of red in the banking sector, RBS was hit the hardest, closing down 17.2p at 182.7p and below the 200p a share its record £12bn rights issue was priced at.
Analysts said yesterday RBS faced the prospect of not being able to sell its insurance division, whose flagship brand is Direct Line.

Zurich Financial Services, seen as the front runner, pulled out of the auction on Thursday. That leaves just Allstate of the US and Germany's Allianz out of a list of eight potential trade buyers.

RBS put its insurance business up for sale when it announced its rights issue in April. Sir Fred Goodwin, RBS's chief executive, only wanted to part with the business, which also includes Churchill and Privilege, at a price of between £6.5bn and £7.5bn.

Sandy Chen of Panmure Gordon yesterday said RBS was more likely to get £5bn to £5.5bn if it does press ahead with a sale. This would net between £1.5bn and £2bn in capital gains, compared to the £4bn RBS was hoping for.

RBS is progressing with other disposals. It is about to sell the Australian business it picked up as part of the ABN Amro buyout. National Australia Bank yesterday announced it was close to striking a deal with RBS. The price could be about £216m.

[LenaHuat]

What's happening at Barclays:

Qataris are now Barclays' largest shareholders, after the majority of existing investors snubbed the bank's £4.5 billion cash call. New Asian and Middle East investor now own 16 per cent of Britian's third largest bank.

The Qatar Investment Authority (QIA) and Challenger, an offshore investment vehicle set up by Qatar's Prime Minister to invest family wealth, own a combined stake of almost 8 per cent in the British bank following the capital raising.

Barclays chose to raise cash from strategic investors after watching the share prices of rivals HBOS, Royal Bank of Scotland (RBS) and Bradford & Bingley fluctuate wildly during their rights issues.

Sumitomo Mitsui Banking Corporation, the Japanese bank, agreed to pay £500 million for a guaranteed 2.1 per cent stake in the bank. The QIA, Challenger, China Development Bank (CDB) and Temasek, the Singaporean wealth fund, said that they would take up whatever was left over from the remaining £4 billion worth of stock after existing shareholders were given an opportunity to buy in.

Shareholders took up just 19 per cent of the 1.5 billion new shares on offer. As a result, the QIA will hold 6 per cent of Barclays and Challenger just under 2 per cent. CDB, which was already a shareholder in Barclays, will retain its 3.1 per cent share in the bank and Temasek, the Singaporean wealth fund, will take its stake from about 2 per cent to between 2.5 per cent and 3 per cent.

[kennynah]

the beginning of the demise of the old european/western glory....hail the east....the rising new world....all hail....to the east we go....

joke lah...but really...see the shift of wealth in the last decade primarily to our side of the woods...

life is a cycle...and wealth rotates...

[iam802]

will the EU block 'cracks' under all these inflation, interest rates etc?

It is a tough job managing such diverse economies.

Yes, this is the beginning of the rise of the East.

[winston]

BCA Research: European equities – Near-term bounce?

“European equity investors should stay on the sidelines for now, but short-sellers are at risk of a bear squeeze.

“We would not be surprised to see the near-term bounce in European stocks continue. Bearishness has hit extremes: individual investors have been withdrawing holdings from equity mutual funds and institutions have become more pessimistic than at any time during the last thirteen years (even when the March low and the 1998 and 2002 bottoms are included).

“A record number of asset allocators are overweight cash and underweight equities, according to the most recent Merrill Lynch Portfolio Manager (MLPM) survey. Europe is also the most underweight region and a net 85% of European investors expect the domestic economy to slow (regional MLPM survey).

“In addition, the selloff has left valuations cheap across the board: P/E multiples are low even if one assumes that earnings decline by 20% (clearly a worst-case scenario) and relative to bond yields, earnings yields are at their lowest level since the secular bull market started in the early 1980s.

Finally, although the broad indices are not at technical extremes, breadth has become deeply oversold. In this environment, there is no doubt that some value exists. Consequently, investors should become more discriminating.

Hedge funds may wish to begin covering shorts in securities that have massively underperformed and have depressed earnings expectations.”

[winston]

Mike Lenhoff (Brewin Dolphin): Value in UK stocks

“There are signs that value is returning to the UK equity market, argues Mike Lenhoff, chief strategist at Brewin Dolphin Securities.

“He notes that the forward price/earnings ratio for the FTSE 100 has dropped to around 9.5, similar to levels seen at the end of 1990, at the time of the last major UK recession.

“But he says that with corporate earnings heading downward and estimates being cut, there is distrust in the p/e ratios.

“‘Better then to trust the dividend yield,’ Mr Lenhoff says. ‘Dividends are vulnerable to cuts too but they are far less volatile than earnings.’

“Having fluctuated less than earnings in the bad times as well as in the good times, dividend growth has been half as volatile as earnings growth, he says.

“‘The prospective dividend yield for the FTSE 100 is higher now than the yield on 10-year conventional gilts, suggesting value is returning to the UK equity market. The dividend yield you see may not be quite the dividend yield you get, but it is still likely to be a good guide to value.’

“However, Mr Lenhoff points out that value is seldom a good guide to market timing.

“‘There may be better buying opportunities. But buying opportunities only look like buying opportunities well after the event. What matters is whether an investment in the UK equity market at dividend yields available today will prove rewarding eventually. We think it will.’”

Source: Mike Lenhoff, Brewin Dolphin (via Financial Times), July 16, 2008.

[millionairemind]

Wonder if it will tank like Blackstone??

KKR is finally ready to go public with tag of up to $15bn
By James Quinn, Wall Street Correspondent
Last Updated: 1:56am BST 28/07/2008

Global private equity giant Kohlberg Kravis Roberts is finally set to go public, in spite of the depressed state of the financial markets and a year after first signalling its intention to do so.

KKR, best known in the UK for its controversial highly leveraged acquisition of Alliance Boots last year, was last night preparing the final details of a complex transaction which will facilitate the listing of its business while rescuing its Euronext-listed private equity investment fund.

The deal will see KKR Private Equity, which listed on Euronext in April 2006, merge with KKR.

KKR’s current shareholders, basically its staff led by co-founders and cousins Henry Kravis and George Roberts, will own approximately 79pc of the enlarged company, with KPE investors owning the remaining 21pc, valuing the entire business in the region of $12bn-$15bn (£6bn-£7.5bn), some 10-12 times 2009 earnings.

After the merger takes place, KPE will eventually delist in Amsterdam and relist in New York, a process likely to take place towards the tail-end of this year given the various regulatory approvals that will be required.

The move will guarantee a listing for KKR, which first registered its "S-1" intention to float documentation with the US Securities and Exchange Commission last summer.

It will also bail out KPE, whose shares have fallen from an initial price of $25 to $10.50 on Friday night as investors became wary of private equity investments as the credit crisis took hold.

KPE investors will be given what is to be termed a “contingent value right”, which will entitle them to extra shares if the value of the merged company’s shares does not reach a certain level within three years.

Existing KKR partners and senior managers will be locked in for six to eight years, and approximately 16pc of the total value of the firm is to be set aside to be distributed to future partners and employees, so as to avoid a “them and us” mentality in the future.

The company’s float will allow it to speed the transformation of turning perhaps the world’s best-known buy-out shop into a fully-fledged alternative asset manager, moving into infrastructure investing and real estate funds.

As reported in The Daily Telegraph earlier this month, KKR has also made significant hirings in the past year, appointing former Republic National Committee chairman Ken Mehlman as head of public affairs as part of its efforts to prepare itself for life as a public company.

Others to have been recruited included KKR's long-term lawyer David Sorkin, formerly of Simpson Thatcher & Bartlett, and chief compliance officer H J Wilcox, formerly with private equity rival Silver Lake Capital.

But, despite the excitement surrounding the prospect of KKR floating, it comes at an interesting time in the financial markets.

Markets in both New York and London remain highly volatile on real concerns that the global credit crisis is far from over, despite a number of interventions from central banks.

As a result, the prospect for KKR's future stock market performance remains uncertain.. Rival Blackstone has lost 46pc of its value since it floated at $31 a share last summer, closing on Friday night at $17.01-a-share.

However, whatever the share price, by floating KKR will be able to access a pool of permanent capital, something which unlisted rivals, like TPG and the Carlyle Group, will not. KKR's move will heightening speculation that its rivals will have to follow suit at a time when access to money tight.

KKR is being advised by Goldman Sachs and Morgan Stanley on the transaction.

[winston]

Aviva posts first-half loss as value of stock investments falls

Aviva, the UK's second-largest insurer, posted a first-half loss after stock-market declines eroded the value of investments.

The net loss was 1.35 billion pounds (HK$20.95 billion) compared with a profit of 1.38 billion pounds a year earlier, the London-based company said.

Operating profit rose 12 percent to 1.72 billion pounds, meeting the average estimate of seven analysts surveyed by Bloomberg. Separately, the company said it would reattribute 1 billion pounds of surplus funds to policyholders.

BLOOMBERG