Alcoa to slash 13,500 jobs Alcoa, the largest US aluminium group, said Tuesday it would cut 13,500 jobs, or 13% of its worldwide workforce by the end of 2009, halve capital expenditures and curb production amid the economic downturn. An extra 1,700 contract employees will be laid off and the company has introduced a salary and hiring freeze. Alcoa also announced its third production cut in as many months, reducing smelting output by 750,000 tonnes, or 18% of its annual output. Alcoa also suspended its share repurchase programme and said it would look to sell four non-core businesses valued at up to $100m. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50843/alcoa-to-slash-13500
| BofA to sell China bank stake Bank of America plans to sell up to $2.8bn of China Construction Bank shares, less than a month after scrapping an earlier attempt to raise money from its three-year-old stake, reports Bloomberg. BofA is selling 5.62bn shares in China's second-largest lender at HK$3.92 apiece, a 12% discount to Tuesday's closing price. The largest US bank is trying to take advantage of almost $14bn of paper profits from its CCB stake, after paying about $33bn to take over Merrill Lynch. BofA cancelled a sale of CCB shares in December partly on concern that Chinese law might force it to forfeit any profit. CCB shares fell 5% in Hong Kong Wednesday late morning trade. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50842/bofa-to-sell-china-b
| LyondellBasell seeks cover LyondellBasell, the world's third-largest petrochemicals company, on Tuesday filed to place 79 of its global affiliates under bankruptcy protection after an unsuccessful attempt to restructure its $26bn of debt. The company said last night it had secured $8bn of debtor-in-possession financing, including $3.25bn in new financing, from a group of lenders in order to continue operations. Lyondell Chemical listed assets of $27.1bn and debt of $19.4bn. LyondellBasell, which was created in 2007 when Netherlands-based Basell bought Houston's Lyondell for $12.7bn, did not include several hundred of its affiliates throughout Europe, Asia and other regions in the bankruptcy filing. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50841/lyondellbasell-seeks
| Dow Chemical set to delay deal Dow Chemical is prepared to miss next week's deadline to clinch the $15bn takeover of Rohm & Haas in an effort to raise enough cash to complete the deal without taking on too much debt. Dow announced Tuesday it was suing Kuwait's state-owned oil company for its surprise decision to pull out of a joint venture for the US company's plastics business 10 days ago. Dow planned to use the $9bn it would earn from the joint venture to repay part of a $13bn bridge loan and close the Rohm & Haas deal – which requires payment of $100m more for every month of delay in closing the transaction. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50840/dow-chemical-to-dela
| Lex on 'chemical imbalances' Plastic might be forever; but not the companies that help make it, notes Lex. Two of Europe's biggest chemical companies, LyondellBasell and Ineos, are struggling under huge debts. Meanwhile, Dow Chemical, the top US chemicals group, just had a $17.4bn Middle East joint venture scuppered by Kuwait. Chemicals makers face a horrible chain reaction: The first step is a collapse in demand for the chemicals used in plastics for products that nobody is now buying. The second problem is structural. The final problem is leverage. Germany's BASF has little. But LyondellBasell is in trouble and Dow's leverage ratios look high after the collapse of the Kuwaiti deal. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50839/lex-on-chemical-imba
| Porsche triggers Scania offer Porsche on Tuesday neared its goal of controlling a €130bn ($175bn) European car and truck empire as it increased its stake in Volkswagen to more than 50%, sparking a mandatory takeover offer for the truckmaker Scania. The German sports carmaker, reiterated it had no strategic interest in Sweden's Scania and was likely to make a low offer. VW owns 69% of Scania, and Porsche is now required by Swedish law to make a mandatory offer for the truckmaker. Swedish regulators are expected to name the bid price for Porsche shortly and after a maximum of five weeks, shareholders in Scania should receive the published bid. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50838/porsche-triggers-sca
| Private equity to reveal losses Private equity firms are preparing to notify investors over the next few weeks just how much – or little – the companies they invested in are now worth, with many executives saying the reported fall in value will be 20-30%. Under regulations applied this year for the first time, private equity firms are required to value their companies at current market value rather than to merely disclose the original cost of the investment. By some calculations, the actual losses could far exceed 30%, as many of these companies were bought and taken private at the peak of the buyout boom – sometimes at a 25% premium to public market levels. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50837/private-equity-to-re
| Fed considers inflation target The Federal Reserve is considering establishing a de facto inflation target, minutes of its groundbreaking December policy meeting revealed Tuesday. The idea would be to shore up public expectations of positive inflation and so make it less likely that a deflationary dynamic could take hold as the US recession deepens. The minutes also reveal that Fed economists now expect the US economy to contract in 2009 as a whole, with a sharp decline in the first half and a slow recovery in the second. For full Fed minutes, click here. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50836/fed-considers-inflat
| Millennium appoints independent administrator Millennium Management, the $11bn New York hedge fund run by Izzy Englander, has appointed an independent administrator to provide worried investors with reassurance in the wake of alleged $50bn Bernard Madoff fraud Millennium appointed London-listed GlobeOp to provide independent valuations and checks on its assets, something common among newer funds but rare for the largest, oldest US hedge funds. Investors have become nervous following the arrest of Madoff, who managed money on behalf of some of the biggest hedge fund investors, and many say third-party administration provides an extra layer of protection against fraud. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50835/millennium-appoints-
| Chrysler arm seeks US relief funding Chrysler's financing unit is in talks with the US government to change its status so it can tap into the federal Tarp scheme and other sources of credit. The Detroit carmaker, which received $4bn in government aid on Friday, said Monday that Chrysler Financial first applied three years ago to be classified as an "independent lending corporation" and that the talks have recently intensified. Unlike GMAC, GM's financing arm, which received $5bn last month, Chrysler Financial is not seeking a bank charter. Even so, the proposed new status would give Chrysler "multiple sources of funding and cheaper sources of funding for the finance company", said CFO Ron Kolka. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50834/chrysler-arm-seeks-u
| Merkin to step down as GMAC chair Ezra Merkin, a US money manager whose funds have been among the casualties of Bernard Madoff's alleged $50bn "Ponzi" scheme, is set to step down as chairman of GMAC, the financing arm of General Motors. His departure is likely to be linked to conditions set under last month's $6bn government aid package for GMAC. The bail-out requires the company to appoint an independent chairman. Merkin, who is being sued by several investors after his Ariel fund placed their money with Madoff, continued to deal Tuesday with the legal fallout when a federal judge extended an order preventing Merkin from withdrawing or liquidating assets from the funds that invested with Madoff. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50833/merkin-to-step-down-
| Iceland drops legal threat over bank Britain has fended off the threat of a politically charged London lawsuit over its use of anti-terror powers to freeze billions of an Icelandic bank's assets. Reykjavik conceded Tuesday that a High Court challenge to the freezing order made against Landsbanki in October stood scant success. But it said it would back a separate legal challenge brought against London related to Kaupthing, one of three Icelandic banks nationalised last year to stave off collapse. Iceland's decision to refrain from action in London over Landsbanki suggests that Britain's unprecedented use of the freezing powers in a non-terror case could be hard to challenge domestically, potentially clearing the way for similar action by the Treasury against other failing financial institutions. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50832/iceland-drops-legal-
| Japan eyes tax change for foreign investors The Japanese government will seek to scrap capital gains taxes for foreigners that hold stakes in Japanese companies through investment funds, the Nikkei business daily reports Tuesday. Many overseas investors buy into Japanese companies via funds, but Japan levies corporate tax of about 40% on capital gains when funds sell shares. Foreign investors account for only 4% of fund investment in Japan, far below the 75% rate in the UK. Bloomberg adds that the government plans to submit a bill to the current Diet session that would apply a tax benefit to many funds that have held stakes in Japanese companies for at least a year. The benefit would apply to investment limited liability partnerships, said to make up about 80% of funds in Japan and abroad. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50831/japan-eyes-tax-chang
| McCann exit casts doubt on Merrill's 'herd' In Categories: People Posted at 05:27 by Gwen Robinson Executives at Bank of America and Merrill Lynch are bracing themselves for a cultural clash now the merger deal between the two groups is final, amid fresh questions about the stability of Merrill's 16,000-plus "thundering herd" of financial advisers. A key reason that Ken Lewis, BofA chief executive, agreed to pay a premium in September for Merrill was its dominant position in the financial advisory business. But the surprise departure on Monday of Robert McCann, head of Merrill's financial advisers, has sent tremors through the group, even though Merrill moved quickly to name McCann's deputy, Dan Sontag, a 30-year Merrill veteran, as new head of global wealth management. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50830/mccann-exit-casts-do
| China in renewed Reits push Chinese officials on Tuesday indicated that the government is moving towards implementing a long-awaited plan to allow mainland property developers to raise capital through real estate investment trusts. Qi Ji, vice-minister of housing, said that banking regulators were working on a plan to introduce Reits to stimulate the sagging Chinese property market, part of a larger effort by Beijing to support the domestic economy. Depending on their legal structures, the Reits could appeal to local retail or institutional investors, or potential foreign investors, and attract significant capital into the sector. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50829/china-in-renewed-rei
| Billionaire Merckle commits suicide In Categories: People Posted at 05:23 by Gwen Robinson Adolf Merckle, one of Germany's wealthiest and most powerful industrialists, committed suicide after weeks of talks with creditors aimed at saving his businesses after disastrous investments and the global financial crisis. The billionaire, 74, was said by his family to have been "broken" by the sight of his business empire, which ranged from pharmaceuticals to cement, crumbling. He died Monday night, apparently hit by a train near his home in southern Germany. The publicity-shy billionaire built his family's small pharmaceutical business into a 120-firm conglomerate employing 100,000 people. Yet he was seen as a modest man who was known to bicycle to work. Full obit here. See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50828/billionaire-merckle-
| Overnight markets: Continued hope Asian shares rose Wednesday, following a slight rise in US stocks overnight, driving up the Asian benchmark index by the most in three weeks, on speculation US President-elect Barack Obama's stimulus plan and tax cuts will revive growth in the region's largest export market. Oil rose briefly above $50 a barrel and the dollar rose for a sixth day against the yen, the longest run of gains in two years.
Asian markets (Wed)
05:20am GMT
Nikkei up 164.70 (+1.81%) to 9,245.54
Topix up 12.54 (+1.43%) to 888.75
Hang Seng down 82.20 (-0.53%) at 15,427.31 US markets (Tues)
DJIA up 62.21 (+0.69%) at 8,015.10
Nasdaq up 24.35 (+1.5%) at 1,652.38
S&P500 up 7.25 (+0.77%) at 934.70 European markets (Tues)
FTSE100 up 59.28 (+1.29%) at 4,638.92
Eurofirst 300 up 16.56 (+1.90%) at 889.57 Currencies
05:22GMT
€/$ 1.3494 (1.3546)
$/¥ 93.86 (93.07)
£/$ 1.4888 (1.4611) Commodities
05:24 GMT
Brent Crude (Feb09) down $0.10 at $50.43
Light Crude (Feb09) up $0.10 at $48.68
100 Oz Gold (Feb09) down $7.00 at $859.00
3M 24HR Copper up $60.00 at $3,550 10-year government bond yields (%)
US 2.46 (2.49)
UK 3.26 (3.15)
Germany 3.14 (3.01)
Japan 1.26 (1.25) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/07/50827/overnight-markets-co
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