UK revives 'bad bank' idea UK chancellor Alistair Darling on Tuesday admitted that a "bad bank" scheme may have to be added to the government's plans to insure banks against unexpected losses. Darling said the bad bank approach might be necessary with "one or two institutions" – qualifying his Jan 19 statement that the government favoured a "back stop" insurance scheme, under which banks would pay for a guarantee against future losses on loans, over a bad bank that would buy the loans outright. The government is drawing up an insurance scheme for state-controlled lender RBS which is likely to be a template for negotiations with other banks. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52011/uk-revives-bad-bank-
| US to cap pay for bail-out execs The Obama administration is expected to impose a cap of $500,000 for top executives at companies that receive large amounts of bail-out money, reports the NYT. Executives would also be barred from receiving any bonuses above their base pay, except for normal stock dividends. The new rules, to be announced Wednesday morning, would be far tougher than any restrictions imposed during the Bush administration, and could force executives in coming months to accept deep reductions in their current pay. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52010/us-to-cap-pay-for-ba
| Asian growth outlook slashed The IMF on Tuesday virtually halved its 2009 growth forecast for Asia, slashing its estimate to 2.7% from 4.9% just two months ago. The move came as both Australia and Japan took steps to boost their flagging economies. In Australia, the government unveiled a A$42bn ($26.5bn) fiscal stimulus and the central bank cut interest rates to 3.25%, the lowest since the 1960s. In Tokyo, the Bank of Japan said it would spend up to Y1,000bn ($11.2bn) to buy shares owned by banks to help offset the impact of falling stock prices on the financial system. But news of the scheme failed to lift the stock market. See Lex on Asia's role in the 'new world order'. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52009/asian-growth-outlook
| US entertainment giants to merge Ticketmaster Entertainment and Live Nation are close to a merger that would combine two of the most powerful forces in the music industry, reports the WSJ. The newly created company would be called Live Nation Ticketmaster, and would combine the world's biggest concert promoter with the world's dominant ticketing and artist-management company. The boards of both companies have yet to approve any merger and sticking points remain, including antitrust issues.However, the deal, which would not entail an exchange of cash, could be announced as early as next week. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52008/us-entertainment-gia
| Dow fans Rohm dispute Dow Chemical on Tuesday reported a substantial quarterly loss as it stepped up its argument that its agreed $15.4bn takeover of Rohm & Haas has become unworkable. Dow decided not to close the takeover as scheduled last month as its targeted Kuwaiti joint venture, slated to generate $9bn to help pay for the acquisition, fell apart. Rohm and Haas has sued to force Dow to complete the deal. Dow said Tuesday that under the circumstances, forcing a merger would "cause irreparable harm" to both sides. Lex concludes that Dow's CEO Andrew Liveris has some grim choices to make. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52007/dow-fans-rohm-disput
| BofA's Asia chief to leave Nelson Chai, a close ally of former Merrill Lynch chief executive John Thain, is leaving his new post as president of Bank of America's Asia Pacific operations - even before he moves to Asia to take up the job. Chai, whose departure comes just a month after BofA completed its purchase of Merrill, was Merrill's CFO before being appointed to the BofA post last month. His exit comes less than two weeks after Thain was ousted by BofA chief executive Ken Lewis. Insiders say Chai is likely to be replaced by Kim Hong, BofA's chief risk officer in the region, who had held the president's title last year. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52012/bofas-asia-chief-to-
| TPG ends talks on stake sale TPG has broken off talks to sell a stake in itself to investors including the Kuwait Investment Authority and two California state pension funds, highlighting the difficulties facing big buyout firms. The talks, which have limped along for two years, broke down over the issue of valuing TPG, say insiders. TPG has also given up any thoughts of an IPO, at least for the time being, they said. TPG had hoped to be valued in line with rivals such as Blackstone Group, which listed in 2007. But potential investors – including KIA and US pension fund Calpers - say 2007 valuations are no longer relevant. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52006/tpg-ends-talks-on-st
| UK lenders borrow £185bn UK banks and building societies borrowed £185bn through the Bank of England's emergency support facility, created last March in an attempt to help banks with their holdings of mortgage-backed debt. Initially, demand for the special liquidity scheme – to run for six months from last April - was expected to reach about £50bn. But the Bank extended the scheme to Jan 30 and created a permanent successor, the discount window, introduced in October. Through the scheme, banks can swap illiquid bonds for UK Treasury bills, to use as collateral for borrowing in the money markets. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52005/uk-lenders-borrow-18
| Aviva cuts £1bn pay-out Aviva, the UK's biggest insurer, is to cut a promised £1bn pay-out for more than 1m policyholders, blaming sharp falls in stock markets. The company said in July that policyholders would receive an average of £1,000 under a plan to free up surplus capital in its life fund, built up over decades. But Aviva will say Wednesday the offer is no longer tenable following financial market turmoil. While it will not abandon the pay-out, it will begin the process of trying to arrive at a lower figure. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52004/aviva-cuts-1bn-pay-o
| SEB considers rights issue SEB, the second-largest Swedish bank, said it is considering a rights issue to boost its capital base as losses on loans mount at its Baltic operations. Local media reported Tuesday that SEB would announce a rights issue of up to SKr20bn at its Q4 results presentation next week. SEB's shares, which were briefly suspended before the bank's announcement, initially fell more than 7% but bounced back 2.6% to SKr36.2 after Stockholm said it would inject as much as SKr50bn into Sweden's banking system. SEB's shares have more than halved in value over the past three months. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52003/seb-considers-rights
| BHP upbeat despite profit drop BHP Billiton, the world's biggest mining group, highlighted the strength of its balance sheet compared with debt-strapped rivals on Wednesday when it said cash flows of $13.1bn in the first-half to December had reduced gearing to less than 10%. Marius Kloppers, chief executive, said the group was in a position to buy international mining assets "as others falter" and reiterated interest in buying joint venture projects BHP operates with Rio Tinto, which it failed to buy last year for $62bn. BHP reported a 57% drop in first-half profits to $2.62bn while revenues rose 17% to $29.8bn for an overall 2% yoy increase in net profit to $6.13bn, in line with analysts' estimates. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52002/bhp-upbeat-despite-p
| Qantas plans A$500m share issue Qantas, Australia's largest airline, is expected Wednesday to announce plans to raise at least A$500m ($326m) in a share issue to bolster its balance sheet. Details of the placement, expected to be led by UBS and Macquarie Group, and the likely early release of Qantas's first-half profits on the same day come as more Australian companies issue shares to boost finances. Among them, Westfield, the world's largest shopping-mall owner, said Tuesday it would raise A$2.9bn in an underwritten equity issue to help pay down debt and provide funds for future acquisitions. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52001/qantas-plans-a500m-s
| Dimon hits back In Categories: People Posted at 05:20 by Gwen Robinson Attacks by US politicians on bankers' bonuses should spare institutions that have escaped the worst of the crisis, said Jamie Dimon, chief executive of JPMorgan Chase, which has outperformed most of its rivals. Dimon told a New York conference on Tuesday that politicians should make distinctions when criticising executive compensation and should differentiate between well-run banks and troubled institutions, according to Bloomberg. The JPMorgan chief, who did not receive a bonus in 2008, has made similar remarks in the past but his latest comments come amid heightened political scrutiny of bankers' pay. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/52000/dimon-hits-back
| Adapt or die, says Kravis Henry Kravis, one of private equity's best-known bosses, on Tuesday said his industry must adapt or become irrelevant in the wake of the financial crisis that has thrust the leveraged buy-out business into turmoil. "We can adapt, be part of the solution, or fold up our chairs and exit stage left," said Kravis, co-founder of KKR. Like other big buy-out groups, KKR will have to do smaller deals, use less debt, and diversify into areas such as infrastructure and corporate lending, Kravis told the inaptly-named Super Return private equity conference in Berlin. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/51999/adapt-or-die-says-kr
| News Corp to cut newspaper jobs News Corp is expected to cut jobs at its UK and US newspapers in coming weeks, as a steep decline in print advertising has forced sharp cost reductions. News International, whose papers include The Times and The Sun, is in the final stages of an efficiency review by Boston Consulting Group and could cut up to 50 jobs, or some 2.5% of its staff. The Wall Street Journal, which has so far avoided deep cuts, is expected to axe about 25 positions, or 3% of editorial jobs, through attrition and possible lay-offs. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/51998/news-corp-to-cut-new
| McKillop exits early from RBS Sir Tom McKillop on Tuesday stepped down as chairman of Royal Bank of Scotland two months ahead of schedule, bringing a premature end to his calamitous tenure at the state-controlled lender. The move allows Sir Philip Hampton, chairman of J Sainsbury and currently RBS's deputy chairman, to replace Sir Tom immediately rather than waiting until the bank's annual meeting in April. Sir Tom had been expected to step down after RBS accepted a £20bn capital injection from the government last October, leading to the state taking a 70% stake in the group, but stayed on to ensure continuity on the board. See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/51997/mckillop-exits-early
| Overnight Markets: And up again Asian stocks rose for a second day Wednesday as the region's automakers strengthened their market share in the US and memory-chip prices advanced. Futures on the S&P500 Index added 0.3% after rising 1.6% Tuesday as US Treasury secretary Tim Geithner said the government would step up efforts to fight the recession. Asian markets (Wed)
05:05am GMT
Nikkei up 259.46 (3.32%) to 8,084.97
Topix up 20.68 (2.67%) 794.47
Hang Seng: up 322.71 (2.53%) at 13,099.60 US markets (Tues)
DJIA up 141.53 (1.78%) at 8,078.36
Nasdaq up 21.87 (1.46%) at 1,516.30
S&P500 up 13.07 (1.58%) at 838.51 European markets (Tues)
FTSE100 up 86.68 (2.13%) at 4,164.46
Eurofirst 300 up 14.62 (1.88%) at 791.90 Currencies
05:07 GMT
€/$ 1.3019 (1.2876)
$/¥ 89.58 (89.65)
£/$ 1.4403 (1.4227) Commodities
05:10 GMT
Brent Crude (Mar09) up $0.75 at $44.57
Light Crude (Mar09) down $0.47 at $40.55
100 Oz Gold (Feb09) down $7.00 at $900.20
Copper (Mar09) down $25.00 at $3,240.00 10-year government bond yields (%)
US 2.86 (2.75)
UK 3.74 (3.69)
Germany 3.35 (3.26)
Japan 1.33 (1.29) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/02/04/51992/overnight-markets-an
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